The penalty for underpaying your taxes is about to sting a bit more than in the past.

The IRS announced last week that the interest rates it charges for underpayments will rise for the last quarter of 2022 — Oct. 1 through Dec. 31.

The rates the agency pays for overpayments also will rise. (Yes, if you pay more in federal income taxes than you owed, the government owes you interest on the excess.)

For individuals, the rate for both underpayments and overpayments will rise one percentage point from where it is now. That means the rate for the fourth quarter will be 6% per year, compounded daily.

For companies, the rates for the fourth quarter will be as follows:

• Corporate underpayment: 6% (up from 5% this quarter)
• Large corporate underpayment: 8% (up from 7%)
• Corporate overpayment: 5% (up from 4%)
• The portion of a corporate overpayment exceeding $10,000: 3.5% (up from 2.5%)

The IRS adjusts these rates every quarter.

For individuals, the interest rate that is assessed for both underpayments and overpayments is the federal short-term rate plus three percentage points.

For corporations, the underpayment rate is generally the federal short-term rate plus three percentage points.

Large corporate underpayments garner a higher charge, the federal short-term rate plus five percentage points.

The overpayment rate for corporations is generally the federal short-term rate plus two percentage points.

For the portion of a corporate overpayment of tax that exceeds $10,000 for a taxable period, the charge is the federal short-term rate plus one-half of a percentage point.

Contact our team for additional information or assistance.