The Internal Revenue Service has announced that interest rates will increase for the calendar quarter beginning October 1, 2022. These rate hikes are tied directly to the Federal Reserve’s fight against inflation. Unfortunately if you owe money to the IRS you’re a casualty of this fight — because your payments will be going up along with credit card rates and mortgage rates.
This is why you should consider a Fresh Start Initiative or Offer In Compromise program to remove some or even all your IRS debt. Call us for a free consultation.
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.
The interest rates announced are computed from the federal short-term rate determined during July 2022. Unfortunately since the Federal Reserve is still raising interest rates you should expect higher interest charges from the IRS. So starting an Offer In Compromise or Fresh Start program now really can save you money.