The IRS raised interest rates again this year for the fourth quarter, effective October 1, 2022.
The rate for underpaid taxes went up from 5% to 6%. Interest on overpayments also went up to 6% beginning October 1, 2022.
Interest rates are adjusted on a quarterly basis and are determined by the federal short-term rate plus three percentage points. Interest paid on late tax payments is not deductible.
2022 Q4 interest rates are:
- 6% for overpayments (5% for corporations)
- 5% for the portion of a corporate overpayment exceeding $10,000
- 6% for underpayments
- 8% for large corporate underpayments
Arizona is among the many states that follow the federal interest rate. The Arizona Department of Revenue applies interest, compounded annually, in the same manner and at the same time as the Internal Revenue Code.
With inflation still in the news and the Federal Reserve not quiet about their plans to keep hiking rates, the moral of the story is pay your taxes on time. It’s getting more and more expensive to not.
If you have questions on why the IRS raised interest rates and how it may affect you, please contact your Henry+Horne advisor.
Melinda Nelson, CPA