States decrease third quarter interest rates for underpayments

States decrease third quarter interest rates for underpayments

Several state tax departments have lowered the interest rate calculated on the underpayment, and in some cases the overpayment, of sales and other taxes.

Interest rates for the third quarter (July 1–September 30, 2020) are dropping from 5% to 3% in the following states:

• Alabama
• New Mexico
• South Carolina: The Department of Revenue is directed to reduce the interest rate on eligible refunds by 3% of the listed rate during the 2020–2021 fiscal year, bringing the interest rate on overpayments to 0% for the third quarter.

The interest rate in Virginia is dropping from 7% to 5% for both underpayments and refunds. Additional details are available at the Department of Taxation.

This trend is visible at the federal level, too, as the Internal Revenue Service has dropped interest rates for the third quarter.

Automating tax compliance helps ensure payments are made on time, so you don’t need to worry about interest rates.