How IRS Interest Rates Work

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If you fail to pay all the taxes you owe when they are due, you may owe interest and penalties on the shortfall. The amount of interest expense you pay depends on how long you owe the IRS money, and the current IRS interest rate on underpayment of taxes.

How are IRS interest rates determined?

The IRS publishes interest rates on underpayments and overpayments for every quarter. You can find the rates on the IRS website www.irs.gov.

The rate for individual taxpayers is generally the federal short-term rate plus 3 percentage points. The rate is rounded to the nearest percentage point.

What is the current IRS interest rate?

The IRS interest rate on underpayments and overpayments by individuals is 3% for all of 2013. It remains at 3% for the first quarter of 2014. The rate is the same for all individual taxpayers.

Don't forget the penalty

If you pay less than the required amount in estimated taxes, or if you pay taxes late, you may also owe a Failure to Pay Penalty. This penalty may be .5% per month. For example, if you owe $1,000 in back taxes, you may owe a penalty of $5 for every month your payment is late. This is in addition to interest.

The IRS sometimes forgives or "abates" a penalty if you can show good cause for paying less than the required amount or paying late. You will still owe interest, however.

Can the IRS actually pay me interest?

The IRS doesn't pay you interest for holding your money all year if you have too much withheld, or if you pay too much in estimated tax. However, the IRS may pay you interest if they send your refund later than 45 days from the filing deadline for your return. If you file your return before it is due, the IRS still has 45 days from the deadline - generally April 15. If you file after the deadline of April 15, then the 45-day period begins the date on which you filed.

You may also get interest payments from the IRS if the agency assesses taxes on your return by amending it, and you later show the assessment is too high.

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Upcoming Tax Dates

January 1 — Everyone
Federal Holiday (New Year's Day) Details

January 10 — Employees who work for tips
If you received $20 or more in tips during December, report them to your employer Details

January 15 — Individuals
Make a payment of your estimated tax for 2018 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES Details

January 15 — Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in December 2018

January 15 — Farmers & fishermen
Pay your estimated tax for 2018 using Form 1040-ES Details

January 21 — Everyone
Federal Holiday (Martin Luther King, Jr. Day) Details

January 31 — All Employers
Give your employees their copies of Form W2 for 2018. If an employee agreed to receive Form W2 electronically, have it posted on a website and notify the employee of the posting.

January 31 — Individuals who must make estimated tax payments
If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040) for 2017 by January 31. Filing your return and paying any tax due by January 31 prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by January 31, file and pay your tax by April 15.

January 31 — Payers of gambling winnings
If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W2G.

January 31 — Social Security, Medicare, and withheld income tax
File Form 941 for the fourth quarter of 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until 02-10 to file the return.

January 31 — Certain small employers
File Form 944 to report social security and Medicare taxes and withheld income tax for 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more for 2018 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

January 31 — Farm employers
File Form 943 to report social security and Medicare taxes and withheld income tax for 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

January 31 — Federal unemployment tax
File Form 940 for 2018. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

January 31 — All businesses
Give annual information statements to recipients of certain payments you made during 2018 Details

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