A Partial End To Interest Rate Differentials On Tax Underpayments And Overpayments

Since the mid-1980s, the Internal Revenue Code has provided that when you owe money to the IRS, you pay the IRS 1% more in interest than the IRS would pay you if it owed you a refund. Currently, for most taxpayers this means that you pay the IRS 8% interest on tax underpayments, while the IRS pays you 7% interest on tax overpayments.

For corporations, the interest rate differentials can be worse. Currently, corporations that have large tax underpayments (i.e., over $100,000) must pay the IRS 10%. Currently, corporations that have tax overpayments exceeding $10,000 receive 5.5% from the IRS on the amount exceeding $10,000.