The IRS announced that interest rates will increase for the calendar quarter beginning April 1, an increase that could have significant consequences for late tax filers. Under the Internal Revenue Code, the IRS establishes a new rate of interest each quarter.
As of Friday – April 1 – the rate will increase to 4% for individuals and 3% for corporations, 1.5 percent for the portion of a corporate payment exceeding $10,000, 4% for individuals, and 6% for corporations.
For non-corporate taxpayers, the overpayment and underpayment rates are equal to the federal short-term rate plus three percentage points.
Americans owe interest on any unpaid taxes from the return’s due date to the payment date. Daily interest is compounded.
Individuals also accrue interest on penalties for late filing. If you file your taxes on time but do not pay the full amount due, you will almost certainly be subject to a late payment penalty of 0.5 percent of the tax owed per month or a portion of a month until the tax is paid in full.
This year’s tax season began on Jan. 24 and will conclude on April 18, rather than the customary deadline of April 15, to coincide with Washington, D.C.’s celebration of Emancipation Day.
Experts have urged taxpayers to file their tax returns as soon as possible, noting that individuals do not need to submit prior years’ returns to file their 2021 returns. Americans are encouraged to file electronically with direct deposit to avoid possible delays and to receive their returns within 21 days.
Individuals may request an extension online by completing Form 4868 and submitting it through the IRS’s “Free File” tool. They must submit the form by April 18 or print it and mail it to their state’s IRS address, ensuring that it is postmarked by April 18.
The revenue agency announced last week that it had issued more than 45 million refunds totaling $152 billion as of March 11. The average payout thus far is $3,352, far more than the average of roughly $2,800 last year, but that figure may alter before the April 18 deadline.