The IRS has announced a reduction in interest rates for tax overpayments and underpayments for the first quarter of 2025.
Starting on Jan. 1, 2025, the annual interest rate for individual overpayments and underpayments will decrease to 7 percent, compounded daily, according to a Nov. 18 announcement from the tax agency. This marks a drop from the 8 percent rate that has been in effect in recent quarters.
Corporate taxpayers will see their overpayment rate set at 6 percent, while the portion of corporate overpayments exceeding $10,000 will accrue interest at 4.5 percent. The rate for large corporate underpayments will be 9 percent.
Interest rates for tax overpayments and underpayments are tied to the short-term applicable federal rate (AFR) plus a set number of percentage points. According to an IRS notice, the latest drop in rates is due to the recent reduction in the short-term AFR to 4 percent….