You may be charged interest by the IRS if you have underpaid the tax due. The interest rate, which equals the federal short-term rate plus 3%, is determined every quarter. Interest begins to accrue from the due date of the return. Interest is compounded daily except for estimated tax penalties. If you relied on IRS assistance in preparing a return, and taxes are owed because of a mathematical or clerical error, interest does not begin to accrue until 30 days from a formal demand by the IRS for the payment of additional taxes.
IRS interest rates on taxes owed are as follows:
From— | To— | Underpayment Rate— |
10/1/2011 | 12/31/2012 | 3% |
4/1/2011 | 9/30/2011 | 4 |
1/1/2011 | 3/31/2011 | 3 |
4/1/2009 | 12/31/2010 | 4 |
1/1/2009 | 3/31/2009 | 5 |
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