As we head into a new tax year, the first bit of news has dropped from the Internal Revenue Service (IRS). Beginning on the first calendar quarter on Jan. 1, 2023, the interest rates will increase. For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily, which is up from 6% for the quarter that started Oct. 1.
Here’s a rundown of the complete list of new rates:
- 7% for overpayments (payments made in excess of the amount owed), 6% for corporations
- 4.5% for the portion of a corporate overpayment exceeding $10,000
- 7% for underpayments (taxes owed but not fully paid)
- 9% 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.
For a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points, while 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.
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