Interest rates will increase for the calendar quarter beginning October 1
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The Internal Revenue Service has recently announced that interest rates will increase for the calendar quarter beginning October 1, 2023.
For individuals, the interest rate for both overpayments (when payments exceed the owed amount) and underpayments (when taxes are not fully paid) will be set at 8% per annum, with daily compounding. The new rates are as follows:
- 8% for overpayments by individuals.
- 7% for overpayments by corporations.
- 5.5% for the portion of a corporate overpayment exceeding $10,000.
- 8% for underpayments by all taxpayers.
- 10% for large corporate underpayments.
The Internal Revenue Code mandates that interest rates are determined on a quarterly basis. For taxpayers other than corporations, the interest rates for overpayments and underpayments is the federal short-term rate plus 3 percentage points.
Typically, for corporations, the interest rate for underpayments is determined by adding 3 percentage points to the federal short-term rate, while the interest rate for overpayments is set by adding 2 percentage points to the federal short-term rate. Large corporate underpayments incur a higher interest rate, consisting of the federal short-term rate plus 5 percentage points. Additionally, when a corporate overpayment of tax exceeds $10,000 for a taxable period, the rate applied is the federal short-term rate plus half a percentage point (0.5).
These interest rates announced today are based on the federal short-term rate determined in July 2023.
Source: https://www.irs.gov/newsroom/interest-rates-increase-for-the-fourth-quarter-2023