2023 IRS Quarterly Interest Rates on Overpayment/Underpayment of Tax
The 2023 IRS quarterly interest rates IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. First, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second, the 2023 IRS quarterly interest rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended under the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the 2023 IRS quarterly interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the 2023 IRS quarterly interest rates.
Below, I lay our the 2023 IRS quarterly interest rates for each quarter.
How the 2023 IRS quarterly Interest Rates Are Calculated
Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
2023 First Quarter IRS Interest Rates
On November 29, 2022, the IRS announced another increase in the IRS interest rates on overpayment and underpayment of tax.
This means that, effective on January 1, 2023 the First Quarter 2023 IRS interest rates are as follows:
seven (7) percent for overpayments (six (6) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
four and a half (4.5) of a percent for the portion of a corporate underpayment exceeding $10,000.
2023 Second Quarter IRS Interest Rates
On February 13, 2023, the Internal Revenue Service announced that interest rates would remain the same for the calendar quarter beginning April 1, 2023. In other words, the first quarter and the second quarter IRS interest rates were exactly the same.
2023 Third Quarter IRS Interest Rates
On May 22, 2023, the Internal Revenue Service announced that interest rates would remain the same for the calendar quarter beginning July 1, 2023. In other words, the IRS interest rates remained the same for the first three quarters of 2023.
2023 Fourth Quarter IRS Interest Rates
On August 25, 2023, the Internal Revenue Service announced that it would increase the interest rates for the calendar quarter beginning October 1, 2023.
- This means that, the Fourth Quarter 2023 IRS interest rates are as follows:
- eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
- eight (8) percent for underpayments;
- ten (10) percent for large corporate underpayments; and
- five and a half (5.5) of a percent for the portion of a corporate underpayment exceeding $10,000.