IRS Increases Interest Rates for First Quarter 2023
In late November 2022, the IRS announced the interest rates that will go into effect for the first quarter of 2023, which begins January 1, 2023. The new rates, which have increased over the previous quarter, will be as follows:
- For individuals, 7% per year for overpayments (payments made in excess of the amount owed) and underpayments (taxes owed but not fully paid) (up from 6% in the fourth quarter of 2022).
- 6% for overpayments for corporations.
- 4.5% for the portion of a corporate overpayment exceeding $10,000.
- 9% 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 in October.
Corporate Underpayment Rate
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 rate is the federal short-term rate plus 3 percentage points.
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©2022 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and should not be construed as accounting, tax, or financial advice. Please consult your tax advisor concerning your specific situation