This is a great follow-up to my post last week about NOT panicking when you receive a letter from the IRS. Even in the case of overlooking some dividend income or whatnot, the interest rates are very modest. No one likes to pay avoidable penalties and interest, however, the interest rates charged by the IRS will not break your back.
The Internal Revenue Service announced a few weeks ago that interest rates for the calendar quarter beginning Oct. 1, 2009, will remain the same. The rates will be:
four (4) percent for overpayments [three (3) percent in the case of a corporation];
- four (4) percent for underpayments;
- six (6) percent for large corporate underpayments; and
- one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
"Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points." The rules for corporations are a little different. Check the link to the revenue ruling below for details regarding corporations.
For example, if you forgot to report your 1099-B dividend income totaling $1000 and you owe $150 in tax on that income, the annual interest on that underpayment is only $6 ($150 * 4%).
Revenue Ruling 2009-27, announces the rates of interest if you are a tax junkie and want all the details.
Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.