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IRS Interest Rates Q4 (2023) and Q1 (2024)

The Internal Revenue Service announced that interest rates have increased for the calendar quarter beginning October 1 ,2023, resulting in a 1% increase across all categories.  Under the Internal Revenue Code, the rate of interest is determined quarterly.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

These rates are also effective for the first quarter of 2024.

  • 8% for overpayments (payments made in excess of the amount owed), 7% for corporations.
  • 5.5% for the portion of a corporate overpayment exceeding $10,000.
  • 8% for underpayments (taxes owed but not fully paid).
  • 10% for large corporate underpayments.

If you owe tax:

Generally, interest accrues on any unpaid tax from the due date of the return until the date of payment in full. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest compounds daily.

If you are due a Refund, how is the interest calculated:

In general, the IRS pays interest on the amount you overpay starting from the later of the:

  • Tax return filing due date
  • Late filed tax return received date
  • Date the IRS gets your return in a format they can process
  • Date the payment was made
  • The IRS stops paying interest on overpayments on the date they refund your overpayment (and interest) or offset it to an outstanding liability.

NOTE:   The IRS does allow “administrative time” (typically 45 days) to issue your refund without paying interest on it.   So if the refund is issued within a month and half of filing, there will be NO interest added to your refund.

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