Interest Rates Increase for Fourth Quarter 2023
In late August 2023, the IRS announced that interest rates will increase for the fourth quarter of 2023, which begins October 1, 2023. The new rates will be as follows:
- For individuals, 8% per year for overpayments (payments made in excess of the amount owed) and underpayments (taxes owed but not fully paid), compounded daily.
- 7% for overpayments for corporations.
- 5.5% for the portion of a corporate overpayment exceeding $10,000.
- 8% for corporate underpayments.
- 10% for large corporate underpayments.
The interest rate is determined on a quarterly basis under the Internal Revenue Code. The recently-announced rates were computed from the federal short-term rate that was determined during July 2023.
For corporations, the underpayment rate is generally the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. For large corporate underpayments, the interest rate is the federal short-term rate plus 5 percentage points. For the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period, the rate is the federal short-term rate plus half a percentage point.
For all other taxpayers, the overpayment and underpayment rates are the federal short-term rate plus 3 percentage points.