Hey everyone, I’m Bette Hochberger, CPA, CGMA. In a recent update, the IRS announced that interest rates will remain the same for the third calendar quarter of 2024, beginning on July 1. This decision keeps the rates steady for both overpayments and underpayments, impacting individuals and corporations alike.
Interest Rates Overview
For individuals, the interest rate for overpayments and underpayments will remain at 8% per year, compounded daily. For corporations, overpayments will be subject to a rate of 7% per year, and underpayments will be subject to 8%.
Understanding the Interest Rates
The interest rates set by the IRS are determined on a quarterly basis under the Internal Revenue Code. For individuals, the rate for both overpayments and underpayments is the federal short-term rate plus 3 percentage points. For corporations, the calculation differs slightly. The underpayment rate is also the federal short-term rate plus 3 percentage points, while the overpayment rate is the federal short-term rate plus 2 percentage points.
Quarterly Interest Rate Determination
The interest rates announced for the third quarter of 2024 are computed based on the federal short-term rate determined during April 2024. This quarterly determination helps maintain a fair and transparent system for calculating interest on tax payments and refunds.
Importance for Taxpayers
Maintaining awareness of these rates are essential for both individuals and businesses. Timely tax payments are incentivized by knowing these rates, as it helps taxpayers avoid the accrual of interest on underpayments. And for those expecting refunds, being aware of the overpayment interest rate can influence decisions on how quickly to file for returns, ensuring efficient use of refunds.
The IRS’s decision to keep interest rates unchanged for the third quarter of 2024 provides stability for taxpayers in terms of financial planning and tax obligations. By understanding these rates and their application, individuals and corporations can better manage their tax-related financial activities.
For more information, visit the official IRS website or schedule a meeting with us to learn more.
As always, stay safe, and I will see you next time!
