Hey guys, it’s Bette Hochberger, CPA, CGMA here, and today, I’m going to give you guys a quick update on some recent IRS news.

The Internal Revenue Service (IRS) has announced that interest rates will remain unchanged for the fourth quarter of 2024, marking a period of stability as we approach the end of the year. Effective October 1, 2024, these rates will impact both overpayments and underpayments of taxes, with implications for individuals and corporations alike.

Key Interest Rates for the Fourth Quarter of 2024

Individuals:

  – Overpayments (payments made in excess of the amount owed): 8% per year, compounded daily.

  – Underpayments (taxes owed but not fully paid): 8% per year, compounded daily.

Corporations:

  – Overpayments: 7% per year, compounded daily.

  – Overpayments exceeding $10,000: 5.5% per year, compounded daily.

  – Underpayments: 8% per year, compounded daily.

  – Large Corporate Underpayments: 10% per year, compounded daily.

These rates are determined quarterly under the Internal Revenue Code, calculated from the federal short-term rate established in July 2024. For non-corporate taxpayers, the interest rates for both overpayments and underpayments are set at the federal short-term rate plus three percentage points. For corporations, the underpayment rate also follows this formula, while the overpayment rate is set at the federal short-term rate plus two percentage points. Notably, large corporate underpayments incur a higher rate, calculated at the federal short-term rate plus five percentage points.

What Does This Mean for Taxpayers?

Now, I’m sure you’re wondering what this means for you! For individuals and businesses managing their tax obligations, these interest rates are crucial. The 8% rate for underpayments serves as a reminder for taxpayers to make sure their taxes are fully paid to avoid accruing additional costs. On the flip side, individuals who have overpaid will benefit from the 8% interest on their overpayments, a slight advantage in a stable rate environment.

Corporations, particularly those handling large sums, should be mindful of the 10% interest rate on large corporate underpayments, which could significantly impact their financial planning if taxes are not managed correctly. Additionally, the reduced rate of 5.5% for corporate overpayments exceeding $10,000 highlights the IRS’s approach to handling substantial corporate tax credits.

Stay Informed and Prepared!

The IRS’s decision to maintain these interest rates underscores the importance of staying informed and proactive in tax planning. Whether you’re an individual or a business, understanding how these rates affect your tax situation is essential. As we move into the fourth quarter, now is an excellent time to review your tax status and ensure you’re on track to meet your financial goals.

I hope you all learned something new today. As always, stay safe, and I will see you next time.