HIGHER INTEREST RATES HIT TENNESSEE TAXPAYERS

NASHVILLE, Tennessee – The Tennessee Department of Revenue has announced that they will be raising both the prevailing and the installment payment agreement interest rates effective July 1, 2023.

The rates will be shooting up to 12.25% as the prevailing interest rate charged to Tennessee tax payers who either owe past due balances to the State or who fail to make estimated quarterly payments as required. Tennessee charges an additional 1% for Tennessee taxpayers who pay past-due taxes through an installment agreement. The total interest rate for installment payment agreements will increase to 13.25%

“The state has raised rates to keep pace with the raise the Prime Interest Rate,” said Nashville-based tax attorney Charles Frazier. “The Prime Rate is directly attached to the FED Funds rate and the discount rate which is established by the Federal Reserve.”

The raise of these interest rates will have an impact on Tennessee taxpayers who owe balances to the state. “While the rise of interest rates are not surprising, many of taxpayers who owe balances are generally struggling small businesses,” said CPA Rick Miller. “It is important that all businesses have a plan for paying all of their State tax balances on time to avoid these rising rates.”

Miller also pointed out that these expenses are generally not deductible to taxpayers. “Punitive interest and penalties on past due or unpaid tax balances are generally not deductible,” said Miller. “It may be better to borrow these funds from a bank or other capital source then to borrow from the State.”

The previous prevailing interest rate of 8% for tax balances and 11% for installment payment agreements will expire on June 30.

Charles R Frazier, JD, LLM, MTax is a Nashville-area tax and estate planning attorney who assists clients with tax issues and tax planning services. He has represented hundreds of taxpayers before the IRS and state department of revenue. More information can be found online at frazier.law.

Rick Miller, CPA MBA is a Nashville-area Certified Public Accountant who prepares Tennessee and federal tax returns for business owners and individuals.

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