Does the IRS charge interest?
Yes! The IRS charges underpayment interest when taxpayers don’t pay their tax, penalties, additions to tax, or interest by its due date. Generally, this interest accrues from the due date until the balance is paid in full.
Does the IRS pay interest?
Yes! The IRS pays overpayment interest when taxpayers pay too much money.
(There is an exception for administrative time – typically 45 days – during which the IRS can issue a refund without paying interest on it.)
On August 15, 2022, the IRS announced a 6% rate to apply to most taxpayers starting Oct. 1
For individuals, this is a 1% jump from 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.
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Sources:
Interest | Internal Revenue Service
Revenue Ruling 2022-15 PDF, announcing the rates of interest, will appear in Internal Revenue Bulletin 2022-35, dated August 29, 2022.