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

Written on Aug 26, 2022

The IRS 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.

Revenue Ruling 2022-15, announcing the rates of interest, will appear in Internal Revenue Bulletin 2022-35, dated August 29, 2022.