IRS move could carry hefty cost for some taxpayers – By Eric Revell (FOX Business) / Dec 3, 2023
The Internal Revenue Service raised the interest penalty on the underpayment of estimated taxes to 8%
The Internal Revenue Service (IRS) is raising the stakes for those who underpay their taxes by ratcheting up the interest penalty that will be assessed in next spring’s tax filing season.
Earlier this fall, the IRS increased its interest penalty on estimated tax underpayments to 8% – a notable jump from 3% just two years ago. The IRS is required by law to recompute the interest rate penalty every quarter and for taxpayers other than corporations the assessed rate is the federal short-term rate plus three percentage points.
Self-employed workers and independent contractors, including many gig workers, will be at risk of being hit with the underpayment penalty if they fail to pay the amount the IRS believes they owe. Taxpayers don’t face an interest penalty for underpayment if the balance due is under $1,000 after their credits and other tax account information is factored in.