Retirement Money Brief

The 7% tax clock

Unpaid IRS balances keep growing daily. Three moves can limit the damage.

By Ellen Marsh · August 25, 2026

An unpaid tax bill is not sitting still. The good news is that even when you cannot erase it today, you can stop treating it like a problem that has only one solution.

The IRS just confirmed the rate it will charge through year-end. Know what that daily meter costs, then use the smallest move that keeps more of your money from disappearing into interest and penalties.

TAXES

A $10,000 tax balance can add $725 in a year

The IRS announced on August 21 that interest on individual tax underpayments will remain 7% a year, compounded daily from October 1 through December 31. The same 7% rate already applies in the current quarter, so anyone carrying an unpaid federal balance should not wait for autumn relief that is not coming.

At a 7% daily-compounded rate, a $10,000 balance left unchanged for a full year grows by about $725 in interest alone. That estimate assumes the rate stays at 7%; the IRS resets it quarterly. It also leaves out the separate failure-to-pay penalty that may apply, so the real cost can be higher.

My protective read is simple: owing the IRS is not a moral failing, and panic is expensive. The agency offers ways to pay over time. But a payment plan is not a pause button—interest keeps running on what remains. The fastest safe improvement is usually to reduce the principal now, formalize the rest, and challenge only the part that is actually wrong.

What the meter includes

The IRS generally starts charging underpayment interest from the due date, even when you received an extension to file. It can charge interest on unpaid tax, penalties, and prior interest until the balance is paid. If a notice gives you a “pay by” date, paying the stated amount in full by that date prevents additional interest on that amount.

There may also be a failure-to-pay penalty. It is normally 0.5% of unpaid tax for each month or part of a month, up to 25%. For an individual who filed on time and has an approved payment plan, that monthly penalty drops to 0.25%. The 7% interest does not disappear, but cutting the penalty and preventing collection trouble still matters.

Use the route that matches the problem:

You agree and can pay: Pay the balance through IRS Direct Pay or your IRS online account. There is no reward for leaving cash idle while a 7% charge compounds against you.
You agree but need time: Pay what you safely can now, then request a plan. Most individuals current on their filings can use the IRS's Simple Payment Plan when assessed tax, penalties, and interest total $50,000 or less. A longer term lowers the monthly payment but raises the total interest.
The balance or penalty is wrong: Call the number on the notice with your records in hand. If tax or penalties are reduced, related interest falls automatically. Some penalties may qualify for reasonable-cause or first-time relief, but the IRS generally does not remove correctly charged interest merely because payment was difficult.

Do not borrow at an even higher rate just to make the letter disappear. Compare the full cost first, protect money needed for housing, food, medicine, and insurance, and get help from a credentialed tax professional if the notice involves several years or a levy warning. Then make one verified payment or plan request through IRS.gov—not through a caller, text, or email.

MONEY YOU'RE OWED

A $44 million Chantix claim closes September 14

If you paid any amount out of pocket for brand-name Chantix in the United States or its territories from September 29, 2015, through September 17, 2021, you may qualify to claim part of a proposed $44 million settlement. The lawsuit alleged that some Chantix contained an undisclosed nitrosamine; Pfizer denies wrongdoing, and the court has not decided who was right.

The date matters now: a consumer claim must be submitted online or postmarked by September 14, 2026. The settlement covers retail purchases during the stated period, including the amount you paid through a copay, coinsurance, or deductible. It does not promise that every person who ever took a smoking-cessation medicine qualifies; the claim is for branded Chantix and your own out-of-pocket spending.

What to gather

The consumer form asks for the number of prescriptions and the total amount you paid. You do not have to attach documents when you file, but the administrator may later request support. Before estimating from memory, check:

Pharmacy history: Ask the pharmacy that filled the prescription for a purchase record covering the settlement dates.
Insurance records: Look for an explanation of benefits showing your Chantix copay, coinsurance, or deductible.
Prescription records: Keep copies of records showing Chantix was prescribed, especially if the pharmacy has closed or changed systems.

Payment amounts are not fixed. Consumer claims are paid proportionally, cannot exceed what each claimant spent, and collectively are capped at 20% of the available settlement fund. The court's final-approval hearing is scheduled for October 13, so a valid claim is an opportunity—not a guaranteed check.

File through the official consumer claim form by September 14, save the confirmation, and pay no one to submit it for you. The administrator lists 1-877-354-3912 for questions.

MEDICARE

September's plan letter can expose next year's costs

Medicare Advantage and stand-alone drug plans send an Annual Notice of Change each fall. It explains changes in coverage, costs, provider networks, service area, and other plan rules that take effect in January. Medicare says it should arrive in September; if it does not, contact the plan.

This is not junk mail and it is not a sales brochure. It is the contract-change warning for the plan you already have. Keeping the same card in your wallet does not freeze this year's premium, copays, drug coverage, doctors, pharmacies, or extra benefits.

Read these four parts first

Total cost: Mark changes to the premium, deductible, copays, coinsurance, and maximum out-of-pocket limit—not just whether the premium still says $0.
Every prescription: Check whether each drug remains covered, whether its tier changed, and whether new prior-authorization, quantity-limit, or step-therapy rules appear.
Doctors and pharmacies: Confirm the plan's network separately. The notice may flag broad network changes, but a current provider directory and a direct call to the office are better checks for the names you rely on.
Benefits you use: Compare dental, vision, hearing, transportation, meal, and allowance rules by what is actually covered, not the headline dollar amount.

One limitation is worth keeping straight: the notice tells you what your current plan is changing. It does not tell you whether another plan is better. That comparison belongs in Medicare's annual Open Enrollment, which runs October 15 through December 7, with changes effective January 1.

When the envelope arrives, circle every change that affects a prescription, clinician, hospital, or monthly bill. Make one list of the medications and providers you expect to use next year. Then compare the full yearly cost—not simply the premium—when 2027 plans are available. If the language is unclear, call 1-800-MEDICARE and ask the representative to walk through the line you marked.

RETIREMENT ROUNDUP

A verified tax report is now available online: The IRS launched a digitally authenticated Tax Compliance Report inside Individual Online Account. It can be downloaded when a lender, government-benefit program, employer, or other organization asks for proof of tax compliance; the built-in certificate lets the recipient verify that the file is genuine.
A second Blueprint to Wealth payment is arriving: The Federal Trade Commission is sending 2,005 payments totaling more than $333,000 to people who accepted an earlier refund tied to the business-opportunity scheme. Cash a Blueprint to Wealth check within 90 days or accept a PayPal payment within 30 days. This is an automatic second payment, not a new claim window.

QUICK CHECK

If you keep your current Medicare plan, must it keep the same costs and coverage next year?

ANSWER

No. A plan can change costs, coverage, provider networks, service area, and other rules for January. Your Annual Notice of Change is the early warning. Read it even if you expect to stay put, because doing nothing accepts the new terms; it does not preserve the old ones.

Written by Ellen Marsh