IRS Announces Interest Rates for the Second Quarter of 2025: What It Means for Taxpayers
IR-2025-29, March 6, 2025
The Internal Revenue Service (IRS) has announced that interest rates for the second quarter of 2025 will remain unchanged. This decision affects overpayments and underpayments for both individuals and corporations, with rates set to remain stable for the calendar quarter beginning April 1, 2025.
Interest Rates Overview
For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily. For corporations, the rate is slightly different, with the overpayment rate set at 6% and the underpayment rate at 7%. Large corporations with substantial underpayments will face a higher rate of 9%.
Here is a breakdown of the new rates:
- 7% for overpayments (payments made in excess of the amount owed) for individuals
- 6% for overpayments by corporations
- 4.5% for the portion of a corporate overpayment exceeding $10,000
- 7% for underpayments (taxes owed but not fully paid)
- 9% for large corporate underpayments
The IRS calculates these rates based on the federal short-term rate for January 2025, adding a specific number of percentage points depending on the taxpayer type.
What Does This Mean for Taxpayers?
If you overpaid your taxes in 2024, you can expect a 7% interest rate on your refund for the second quarter of 2025, assuming you are an individual. If you’re a corporation and your overpayment exceeds $10,000, your refund will earn interest at 4.5%.
On the flip side, if you have an outstanding balance with the IRS, underpayments will incur a 7% interest rate for individuals and a 9% rate for large corporations. These interest rates apply to both late payments and the portion of unpaid taxes that accumulate over time.
These interest rates, which are determined quarterly, can significantly impact businesses and individuals who are either expecting a refund or owe money to the IRS. It’s important to stay updated on these rates to avoid unnecessary penalties and interest.
Why It Matters for Your Tax Planning
Understanding IRS interest rates is a critical component of effective tax planning. If you’re anticipating a refund or need to make payments on taxes owed, knowing how interest accrues will help you make better financial decisions. It’s also important to work with a trusted tax advisor who can guide you in optimizing your financial strategies and ensuring compliance with IRS regulations.
At Velin & Associates, Inc., we stay updated with IRS announcements and can provide you with the expertise you need to navigate these changes. Whether you’re looking to understand how these rates impact your personal tax situation or need assistance with corporate taxes, our team is here to help.
For more information or personalized tax advice, give us a call at (323) 902-1000, visit our website at LosAngelesCPA.org, or email Dmitriy at dmitriy@losangelesCPA.org.