IRS interest rates increase for the third quarter of 2022

 The Internal Revenue Service today announced that interest rates will increase for the oncalendar quarter beginning July 1, 2022. The rates will be:  

• 5% for overpayments [4% in the case of a corporation]. 
• 2.5% for the portion of a corporate overpayment exceeding $10,000. 
• 5% for underpayments. 
• 7% 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, in the case of 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 are computed from the federal short-term rate determined during April 2022 to take effect May 1, 2022, based on daily compounding.  

Based upon the FED’s plans to increase interest rates to curb the programmed inflation rates, interest rates relating to the IRS will increase each quarter going forward until such time the economy falls into forced recession.