IRS to Hike Interest Rates for Q1

By Melanie Waddell

News November 29, 2022 at 02:34 PM

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The Internal Revenue Service said Tuesday that it plans to hike interest rates for the first quarter, beginning Jan. 1.

For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily, up from 6% for the quarter that began on Oct. 1.

Other new rates, announced in Revenue Ruling 2022-23, are:

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); and
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," the IRS explained.

Generally, according to the IRS, 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 IRS said.

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 IRS states.

The interest rates announced Tuesday, the IRS said, are computed from the federal short-term rate determined during October 2022.

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