Corporations and individuals who have underpaid federal income taxes will be paying higher interest rates for the fourth quarter (Q4) of 2022 that begins Oct. 1, the IRS announced this week.
For most taxpayers, the IRS will charge a 6% interest rate on overdue taxes, compounded daily, and an 8% interest rate on large corporate underpayments, the IRS said in a statement Monday.
These Q4 interest rates represent a 1% increase from the Q3 rates that took effect on July 1.
In cases where a taxpayer has paid more than the amount owed to the IRS, the interest rate will be 6% on the overpayment refunded to the taxpayer. The interest rate is 5% for corporate overpayments.
Interest rates are set quarterly and the Q4 rates are computed based on the federal short-term rate determined during July 2022, which was 3%.
For taxpayers other than corporations, the rate for overpayments and underpayments is the federal short-term rate plus 3 percentage points.
For most corporations, the underpayment rate is the federal short-term rate plus 3 percentage points. The interest rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.
The interest rate on refunds of corporate overpayments is the federal short-term rate plus 2 percentage points. The rate on the portion of a corporate overpayment exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The new Q4 interest rates will appear in Internal Revenue Bulletin 2022-35, dated Aug. 29.