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IRS announces interest rate increases for the fourth quarter of 2022; 6% rate applies to most taxpayers starting Oct. 1

The Internal Revenue Service today announced that interest rates will increase for the calendar quarter beginning Oct. 1, 2022.

For individuals, the rate for overpayments and underpayments will be 6% per year, compounded daily, up from 5% for the quarter that began on July 1. Here is a complete list of the new rates:

• 6% for overpayments [5% for corporations]. (payments made in excess of the amount owed)• 3.5% for the portion of a corporate overpayment exceeding $10,000.

• 6% for underpayments. (taxes owed but not fully paid)• 8% for large corporate underpayments.

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 percentage points.

Generally, for a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points, and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage 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 one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during July 2022. See the revenue ruling for details.

Revenue Ruling 2022-15, https://www.irs.gov/pub/irs-drop/rr-22-15.pdf

SOURCE: IRS.gov