Interest Rates for Taxpayers in 2024
The Internal Revenue Service (IRS) has released the interest rates for the third quarter of 2024. These rates apply to both overpayment and underpayment of taxes. The IRS is required by law to calculate and publish these rates every quarter based on the federal short-term rate determined in January of that year.
For individual taxpayers, the interest rate for both overpayments and underpayments will be 8 percent per year, compounded daily. For corporations, the rate for overpayments will be 7 percent, which drops to 5.5 percent for any overpayment exceeding $10,000. Large corporate underpayments will carry an interest rate of 10 percent. In general, the rates for non-corporate taxpayers are the federal short-term rate plus three percentage points, while the rates for large corporate underpayments are the federal short-term rate plus five percentage points.
This announcement follows the IRS’s decision to raise rates for the final quarter of 2023. These rates have now been carried over to the first, second, and now third quarters of 2024.
Unclaimed Refunds for the 2020 Tax Year
In addition to interest rates, the IRS has also revealed that there are still over $1 billion in unclaimed funds for the 2020 tax year. Approximately 940,000 taxpayers across the United States have until May 17 to submit their 2020 returns and claim these funds. The deadline was extended to May 17, 2024, due to the pandemic and falls exactly three years after the original filing deadline.
To file a 2020 return, taxpayers will need to gather the necessary documents for that year, including a Form W-2 from their employer. Other documents may include Form 1099 for reporting various types of income sources.
It’s worth noting that unclaimed funds become the property of the government if not claimed by taxpayers. A similar situation occurred for the 2019 tax year, where around 1.5 million taxpayers had approximately $1.5 billion in unclaimed tax refunds that they could still claim by filing a tax return for that year.
Record Tax Intake and Enforcement Efforts
In the last fiscal year, the IRS collected nearly $5 trillion in taxes from Americans, a significant increase from previous years. This increase was made possible by a $78 billion funding boost that allowed the IRS to hire more enforcement personnel and invest in advanced technologies like artificial intelligence.
The IRS expanded its workforce by approximately 5 percent, adding around 5,800 new employees, many of whom were dedicated to enforcement activities. This included examining tax returns, collecting balances due, and settling taxpayer appeals. The agency also increased spending on enforcement, particularly in examinations and collections.
The IRS’s investment in technology and data analytics has also played a crucial role in detecting and resolving potential noncompliance. By leveraging new technologies, the IRS can more effectively enforce tax laws and ensure that taxpayers meet their obligations.
Overall, these efforts have resulted in the processing of 271.4 million tax returns and other forms, including over 163.1 million individual income tax returns. The IRS paid out $659 million in refunds, representing a 2.7 percent increase compared to the previous fiscal year.
Conclusion
As taxpayers prepare for the third quarter of 2024, it’s important to be aware of the interest rates set by the IRS for overpayments and underpayments of taxes. Additionally, taxpayers should take advantage of the opportunity to claim unclaimed funds from previous tax years, such as the $1 billion still available for the 2020 tax year.
The IRS’s record tax intake in the last fiscal year highlights the agency’s commitment to enforcing tax laws and ensuring compliance. With increased funding and advanced technologies, the IRS has been able to hire more enforcement personnel and leverage data analytics to detect noncompliance effectively. These efforts ultimately benefit both the government and taxpayers by ensuring a fair and efficient tax system.
