The IRS announced that interest rates will increase for the calendar quarter beginning October 1, 2022.
For individuals, the rate for overpayments and underpayments will be 6% per year, compounded daily, up from 5% for the quarter that began on July 1. The new rates are:
- 6% for overpayments (5% for corporations). (payments made in excess of the amount owed)
- 3.5% for the portion of a corporate overpayment exceeding $10,000.
- 6% for underpayments. (taxes owed but not fully paid)
- 8% for large corporate underpayments.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, for a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points, and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate determined during July 2022.
The best way to avoid the pain of higher interest rates is to have your taxes prepared accurately along with a prompt payment to the IRS. Contact us if you’re tired of being stressed and want to keep your money in your pocket!