In case your finance team had been in cruise control heading into year-end because IRS’s quarterly interest rates hadn’t changed since the beginning of 2023 – surprise! There are new rates as of October 1, 2023.
IRS Rev. Ruling 2023-17 is setting Q4 2023 interest rates at:
- 7% for corporate overpayments of tax (up from 6%)
- 5.5% for the portion of a corporate overpayment that exceeds $10,000 (up from 4.5%)
- 8% for underpayments (taxes owed but not fully paid) – a 1% increase, and
- 10% for large corporate underpayments (up from 9%).
What’s behind the interest rate change?
According to the revenue ruling, interest rates were computed from the federal short-term rate, rounded to the nearest full percent and based on daily compounding determined during the month of July 2023. That rate is 5%.
The underpayment rate for corporations is generally the rate plus three percentage points, and the overpayment rate is the rate plus two percentage points. Five percentage points are added to the federal short-term rate to create the rate for large corporate underpayments, and half a percentage point is added to this rate to come up with the rate on corporate overpayments of taxes that exceed $10,000.
Update on disaster area tax relief
Businesses in most of California, and in parts of Alabama and Georgia, that were granted natural disaster-related filing extensions for their TY 2022 tax returns need to file by October 16 – a deadline that’s fast approaching.
Taxpayers affected by flooding in Illinois that were supposed to file returns on or after June 29 now have until Oct. 31.
Companies disrupted by flooding in Alaska also have an extended Oct. 31 deadline for federal filing that was due on or after May 12.
Those affected by flooding in Vermont have until Nov. 15 to file returns that were originally due July 7 and after.
For the areas of Maine and Massachusetts slammed by Hurricane Lee, time has been granted to file anything due on or after Sept. 15 by Feb. 15, 2024.
IRS also extended relief to those impacted by the Hawaiian wildfires in Maui and Hawaii counties. The deadline is Feb. 24, 2024 for what was originally due to be filed on or after Aug. 8.
That Feb. 24, 2024 extension also applies to the Hurricane Idalia-hit areas of:
- Florida (for filing deadlines originally between Aug. 27, 2023 and Feb. 15, 2024)
- South Carolina (filing deadlines originally between Aug. 29, 2023 and Feb. 15, 2024), and
- Georgia (filing deadlines originally between Aug. 30, 2023 and Feb. 15, 2024).
