The IRS will cut taxpayers a bit of a break in the second quarter of 2023.
The agency announced Feb. 13 that the interest rates it charges for underpayments in the second quarter — April 1 through June 30 — will remain the same as they are for the first quarter of the year. This news comes after multiple increases in these rates last year.
The rates the IRS pays for overpayments also will remain the same in the second quarter as the first. (Yes, if you pay more in federal income taxes than you owed, the government owes you interest on the excess.)
In the case of individual taxpayers, the rate for both underpayments and overpayments in the second quarter of 2023 will be 7% per year, compounded daily. Again, that’s the same as the first quarter but compares with 6% in the last quarter of 2022.
In the case of corporations, the rates will remain as follows in the second quarter:
- Corporate underpayment: 7% (compared with 6% in the last quarter of 2022)
- Large corporate underpayment: 9% (compared with 8%)
- Corporate overpayment: 6% (compared with 5%)
- The portion of a corporate overpayment exceeding $10,000: 4.5% (compared with 3.5%)
The IRS adjusts these rates every quarter.
Inthe case of individuals, the interest rate that is assessed for both underpayments and overpayments is the federal short-term rate plus 3 percentage points.
Generally, in the case of corporations, the underpayment rate is the federal short-term rate plus 3 percentage points, while the overpayment rate is the federal short-term rate plus 2 percentage points.
Large corporate underpayments garner a higher charge, 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 charge is the federal short-term rate plus one-half of a percentage point.