IRS Interest Rates Rise for the Second Quarter of 2011

The interest rate that individuals will pay on underpayments rises to 4% starting on April 1, 2011; it was just 3% in the first quarter of 2011. A 4% interest rate had been effective from April 1, 2009, through December 31, 2010.

The interest rate that the IRS will pay on overpayments (tax refunds) will also rise to 4%. Most ordinary tax refunds do not earn interest. The IRS does not have to pay interest on tax refunds made within 45 days of the return’s original (unextended) due date. If the return is filed after the due date, then no interest has to be paid on refunds made within 45 days after the filing date. Typically, refunds on returns filed electronically are made within 10 days of e-filing.

The IRS can reset the interest rate on overpayments and underpayments starting on July 1, 2011.

Source: IR-2011-17, Feb. 17, 2011