IRS Raises Interest Rates On July 1
The Internal Revenue Service announced about a month ago on May 20, 2022, that interest rates will be increasing for the calendar quarter beginning July 1, 2022, which is coming around the corner rather soon here, for overpayments and underpayments of quarterly taxes.
IRS Reveals New Increased Interest Rates
The new rates will be:
5% for overpayments
4% in the case of a corporation
2.5% for the portion of a corporate overpayment exceeding $10,000.
5% for underpayments.
7% for large corporate underpayments.
How Interest Rates Affect Individuals/Businesses
These changes generally apply to businesses, 1099 independent contractors, and self-employed individuals who must make quarterly anticipated tax payments. Interest rates are calculated on a quarterly basis based on the federal short-term rate.
The law requires taxpayers to pay a specific percentage of their taxes each quarter except for W-2 employees who have payroll taxes automatically withdrawn from their paychecks. However, independent contractors are liable for paying their fair amount of taxes throughout the year annually.
If sole proprietors, partners in a business, or a business owner who files as an S-Corporation anticipates having a tax liability of at least $1,000 in April, they are required to pay quarterly taxes. As for C-Corporations, the amount would be $500.
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