The IRS has announced the interest rates for underpayment and overpayment of taxes for the second quarter of 2024. These rates are calculated based on the federal short-term rate determined in January 2024. For individual taxpayers, the rate for overpayments and underpayments will be 8 percent per year, compounded daily. For corporations, the rate for overpayments will be 7 percent, dropping to 5.5 percent for the portion of a corporate overpayment exceeding $10,000. Large corporate underpayments will carry an interest rate of 10 percent.
This announcement comes after the IRS held rates steady for most of 2023 and then raised rates for the final quarter of the year. The recent announcement carries those same rates over to the first and second quarters of 2024.
In addition to the interest rate announcement, the IRS has waived failure-to-pay penalties for approximately 4.7 million taxpayers who did not receive automated collection reminder notices. This penalty relief, totaling around $1 billion, applies to certain individual taxpayers, businesses, and tax-exempt organizations for the taxable years 2020 and 2021. The relief is automatic but only applies to eligible taxpayers who owe less than $100,000 in back taxes. The failure-to-pay penalty will resume on April 1, 2024, for those eligible taxpayers.
While some taxpayers receive penalty relief, others face increased scrutiny from the IRS. The agency has announced that it will launch tax audits involving personal use of business aircraft. Corporate aircraft often serve both business and personal travel purposes, and personal use can impact eligibility for certain deductions. The IRS believes that there hasn’t been enough scrutiny regarding the proper allocation of jet use between business and personal reasons and will ramp up enforcement in this area.
Furthermore, the IRS has recently received a funding boost of $60 billion, allowing for a “sweeping, historic” tax enforcement initiative. This initiative will utilize artificial intelligence (AI) and other cutting-edge technologies to crack down on non-compliant taxpayers. The agency plans to hire more examiners and increase enforcement efforts, including targeting high-income, high-wealth individuals, and large corporations.
A recent report from the Treasury Inspector General for Tax Administration revealed that the IRS collected a record $4.9 trillion in taxes from Americans in the last fiscal year. This achievement was largely due to automated collections processes and aggressive audits. The IRS intends to continue increasing its reliance on automated systems while also hiring an additional 3,700 tax enforcers and allocating $46 billion of the funding boost to enforcement.
Overall, the IRS’s recent announcements regarding interest rates, penalty relief, and enforcement efforts highlight the agency’s commitment to ensuring tax compliance and maximizing tax revenue. Taxpayers should be aware of these updates and take the necessary steps to fulfill their tax obligations accurately and timely.
