Debts with the IRS: confirm interest rates if you owe them money

The IRS announced that interest rates will remain the same for the calendar quarter beginning October 1, 2021. These rates will be:

–3% for overpayments (2% in the case of a corporation)

–0.5% for the portion of a corporate overpayment in excess of $ 10,000

–3% percent for underpayments

–5% percent for underpayments from large corporations.

As you well know, the IRS charges underpayment interest when you don’t pay your taxes, penalties, tax additions, or interest before the due date. Underpayment interest applies even if you file an extension.

If you pay more taxes than you owe, the IRS pays you interest on the amount of the overpayment.

According to the Internal Revenue Code, the interest rate is determined quarterly. For non-corporation taxpayers, the overpayment and underpayment rate is the short-term federal rate plus 3 percentage points.

Generally, for a corporation, the underpayment rate is the short-term federal rate plus 3 percentage points, and the overpayment rate is the short-term federal rate plus 2 percentage points.

The rate for large business underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate tax overpayment that exceeds $ 10,000 during a taxable period is the short-term federal rate plus one-half (0.5) of a percentage point.

The interest rates announced last week are calculated from the federal short-term rate determined during July 2021 to become effective on August 1, 2021, based on daily capitalization.

The 2021-17 Revenue Resolution, which announces interest rates, will appear in the 2021-37 Internal Revenue Bulletin, dated September 13, 2021.

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