Owe the IRS Back Taxes? Prepare to Owe Them Even More. Does the IRS Owe You? Prepare to See a Larger Refund: IRS Interest Rates on Overpayments and Underpayments are Increasing!
Section 6621 of the Internal Revenue Code sets the IRS interest rates on overpayments and underpayments of tax. The IRS calculates their interest rates quarterly by adding a set number of percentage points to the federal short-term rates. IRS interest rates are subject to daily compounding. Effective April 1, 2018, the IRS will be increasing the annual interest rates they charge/owe to Taxpayers as follows:
- 5% for overpayments (4% for corporations)
- 2.5% for the portion of a corporate overpayment exceeding $10,000
- 5% for underpayments
- 7% for large corporate underpayments
When do you owe the IRS interest on underpayments?
Generally, interest is charged on any underpaid tax from the original payment due date to the date of payment.
When does the IRS owe you interest on overpayments?
Typically, if the IRS does not issue your tax refund within 45 days of accepting your tax return/the April tax deadline (whichever is later), you are owed interest for each additional day. The IRS should automatically add this interest to your refund. This interest IS taxable.