The penalty for negligence is 20% of the underpayment amount as well as interest on the total amount for each month you delay the payment. If your underpayment amount is $500, then you’ll have to pay the underpaid amount ($500) and the penalty amount ($100), which brings your total to $600.
The interest rate is usually between 0% and 8%, depending on individual factors like your business status and whether you have an
LLC, sole proprietorship, a
C-corporation or an
S-corporation. It also depends on which quarter of the year you're in, as you can see below. Interest on underpayment 2022:
Interest on underpayment 2022:
Categories
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Underpayment (corporate and self-employed)
3%
4%
5%
6%
Underpayment (large corporate units)
5%
6%
7%
8%
Be careful not to delay your underpayment for the first quarter, or you will be required to pay 3% interest, which will keep increasing by 1% every quarter.
Interest on overpayment 2022:
Categories
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Self-employed Overpayment
3%
4%
5%
6%
Corporate Overpayment
2%
3%
4%
5%
GATT Overpayment exceeding $10,000
0.5%
1.5%
2.5%
3.5%
Internal Revenue Code (IRC) 6603 Deposit (Federal Short-term Rate)
0%
1%
2%
3%