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Federal Interest Rates on Under/Overpayments Continue to Rise

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The IRS has announced that the interest rates for underpayments and overpayments for the first quarter 2023 will again increase by 1% [IR 2022-206Rev Rul 2022-23, 2022-51 IRB].

Beginning January 1, 2023, the interest rates will be:

  • 7% (up from 6%) for overpayments (6% (up from 5%) for corporate overpayments);
  • 7% (up from 6%) for underpayments; and
  • 9% (up from 8%) for large corporate underpayments.

In addition, the interest rate on the portion of a corporate overpayment exceeding $10,000 will be 4.5% (up from 3.5%).

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3% points.

Generally, for a corporation, the underpayment rate is the federal short-term rate plus 3% points, and the overpayment rate is the federal short-term rate plus 2% points. The rate for large corporate underpayments is the federal short-term rate plus 5% points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus a 0.5% point.

The interest rates for the first quarter 2023 are computed from the federal short-term rate determined during October 2022.

 

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