The Internal Revenue Service has raised interest rates for the first quarter of 2023.

interest rate increased

The Internal Revenue Service has raised interest rates for the first quarter of 2023.

Individuals will face a 7% annual penalty for overpayments and underpayments, up from 6%.

On November 29th, the IRS announced that interest rates will rise for the calendar quarter beginning January 1, 2023.

Individual overpayment and underpayment rates will increase from 6% for the fiscal quarter that started on October 1 to 7% annually, compounded daily. The new rates are detailed below:

  • 6% for businesses, 7% for overpayments (payments made in excess of what is owed).
  • For any corporate overpayment that is greater than $10,000, the tax rate is 4.5%.
  • 7% for any underpayments (taxes owed but not fully paid).
  • 9% for large-scale corporate 

The rate of interest is decided on a quarterly basis in accordance with the Internal Revenue Code. The overpayment and underpayment rate for non-corporate taxpayers is equal to the federal short-term rate plus 3 percentage points.

In the case of a corporation, the underpayment rate is typically equal to the federal short-term rate plus 3 percentage points, and the overpayment rate is equal to the federal short-term rate plus 2 percentage points. The federal short-term rate plus five percentage points is the rate for large corporate underpayments. The federal short-term rate plus half (0.5) of a percentage point applies to the portion of a corporate overpayment of tax that exceeds $10,000 for a tax period.

The federal short-term rate established in October served as the basis for the interest rates announced. More information can be found in Revenue Ruling 2022-23.

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[…] Individuals will face a 7% annual penalty for overpayments and underpayments, up from 6%. On November 29th, the IRS announced that interest rates will rise for the calendar quarter beginning January 1, 2023. Individual overpayment and underpayment rates wil  […]

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