The IRS warned in January that tax refunds could be delayed due to staff shortages and processing delays. Explaining how it arrived at interest rates for corporations, the IRS said: Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points, and the overpayment rate is the federal short-term rate plus two percentage points. If you are being paid interest on a delayed refund, you can expect to receive Form 1099-INT from the IRS, which should be included in your tax return, he said. Interest is a daily compound annual rate, which means that the 6% rate is divided by 365, explained Tommy Lucas, certified financial planner and registered agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
Often, you can borrow the funds needed to pay your taxes at an effective rate lower than the combined IRS interest and penalty rate. He said that delays in tax refunds and interest payments demonstrate the importance of filing a return without errors to avoid processing delays. In a statement on Friday, the IRS said that the new rates for delayed refunds, considered overpayments by the IRS, will be 4% for businesses starting July 1.
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