IRS to raise interest rates in April: What to know
IRS sets a new rate of interest every quarter
Tips for first time self-employed filers
Interest rates will rise for the calendar quarter beginning April 1, the IRS has said, an increase that could have important consequences for late tax filers.
The IRS sets a new rate of interest every quarter under the Internal Revenue Code.
TAX SEASON BEGINS: WHAT YOU NEED TO KNOW BEFORE FILING
As of Friday – April 1 – the rate will climb to 4% for overpayments and 3% for corporations, 1.5% for the portion of a corporate payment exceeding $10,000, 4% for underpayments and 6% for corporate underpayments.
IRS headquarters in Washington, D.C., Feb. 25, 2022. (Al Drago/Bloomberg via Getty Images / Getty Images)
For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate, plus 3 percentage points.
Americans owe interest on any unpaid tax from the due date of the return until the payment date. Interest is compounded daily.
Individuals also accrue interest on late-filing penalties.
If you file your taxes on time but do not pay the total amount due, you will likely have to pay a late-payment penalty, which is generally 0.5% of the tax you owe per month or part of a month until the tax is paid in its entirety.
The tax-filing season began Jan. 24 this year and will end April 18 rather than the usual deadline of April 15 because that's when Emancipation Day will be observed in Washington, D.C.
Charles P. Rettig, commissioner of the IRS, testifies during a Senate Finance Committee hearing on the IRS budget request on Capitol Hill in Washington, D.C., June 8, 2021. (Tom Williams/Pool/AFP via Getty Images / Getty Images)
Experts have urged taxpayers to file their tax returns as soon as possible, noting that individuals do not need previous returns in order to submit their 2021 returns. Americans are encouraged to file electronically with direct deposit in order to avoid potential delays and receive returns within 21 days.
You can start tracking the status of your tax refund within 24 hours of filing using the IRS' Where’s My Refund tool.
This April 13, 2014, file photo shows the IRS headquarters building in Washington. (AP Photo/J. David Ake, File / AP Newsroom)
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Taxpayers can request an extension online by filling out Form 4868 using the IRS’ "Free File" tool. They need to submit the form by April 18 or print the form and mail it to the IRS address for their state, making sure it's postmarked by April 18.
The tax-collecting agency said last week it has issued more than 45 million refunds worth a collective $152 billion as of March 11. The average payment so far is $3,352, much larger than last year's average of about $2,800, though it may change by the April 18 deadline.