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IRS Announces Interest Rates for Underpayment of Taxes for Q1 2024

By TaxWealth -

Source: Epoch Times

The Internal Revenue Service (IRS) has announced what its various interest rates will be for the first quarter of 2024, which includes the rate applied for underpayment of taxes.

Under the Internal Revenue Code, the IRS is required to determine the rate of interest for overpayment and underpayment of taxes on a quarterly basis. The IRS said in a Nov. 17 notice that, for the calendar quarter beginning on Jan. 1, 2024, the interest rates will remain the same as for the prior quarter.

Specifically, for individuals, the rate for overpayments (payments made in excess of the amount owed) and underpayments (taxes owed but not fully paid) will be 8 percent per year, compounded daily.
For corporations, the rate for overpayments will be 7 percent, dropping to 5.5 percent for the portion of a corporate overpayment exceeding $10,000. Large corporate underpayments will carry an interest rate of 10 percent.

The interest rates announced by the IRS are calculated from the federal short-term rate determined during October 2023, as per the latest revenue ruling.  Generally, for taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points.

For large corporate underpayments, the rate is the federal short-term rate plus five percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 is the federal short-term rate plus one-half of a percentage point.

After holding rates steady for most of 2023, the IRS announced in August that it would raise rates for the final quarter of the year, starting on Oct. 1, 2023. The latest announcement carries those same rates over to the first quarter of 2024.

COVID Stimulus Cash
In 2020 and 2021, the federal government issued $931 billion in stimulus payments to Americans in order to help ease the financial stress due to the COVID-19 pandemic.
According to IRS records, however, some eligible individuals and families didn’t end up collecting economic impact payments—also known as stimulus payments or stimulus checks—that were issued in 2020 and 2021.
But while some Americans who were eligible to receive pandemic-era stimulus checks didn’t apply for them, there’s a way they can still claim the money.

The way to do so is through the “recovery rebate credit.” This is a refundable credit that either reduces the amount of taxes owed, is included in a tax refund, or is simply paid out by the IRS to eligible taxpayers if—after claiming the credit—it turns out they overpaid on their taxes.

In order to claim the 2020 and 2021 recovery rebate credits, a taxpayer must meet several criteria.

For the 2020 credit, they must have been a citizen of the United States or a U.S. resident alien in 2020. Also, they must not have been a dependent of another taxpayer for 2020 and possess a valid Social Security number issued before the due date of the tax return that is valid for employment in the United States.

For the 2021 recovery rebate credit, eligibility criteria include being a U.S. citizen or U.S. resident alien in 2021, not being a dependent of another taxpayer for 2021, and having a Social Security number issued by the due date of the tax return.

Alternatively, for the 2021 credit, a person can claim a dependent with a Social Security number issued by the due date of the tax return or claim a dependent with an Adoption Taxpayer Identification Number.
In order to claim the recovery rebate credit, taxpayers must first file a tax return—even if they didn’t have any income from a job, business or other source.
To claim the 2020 recovery rebate credit, individuals must file a tax return (or amend one already filed) for the 2020 tax year. The deadline to do so is May 17, 2024. For the 2021 recovery rebate credit, the deadline for filing (or amending) a tax return is April 15, 2025.

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