Todd S Unger, Tax Attorney has written: According to the New Jersey Division of Taxation Technical Bulletin TB-21, the rate of interest on underpayments of New Jersey taxes remains at 6.25% compounded annually for the 2013 calendar year. Under the Taxpayers’ Bill of Rights, interest assessed on outstanding tax balances is the prime rate plus 3%; accordingly, the rate is calculated as follows: Prime Rate (3.25%) + 3% = 6.25%, compounded annually. This rate has remained constant since the 2009 tax year. At the end of each calendar year any tax, penalties, and interest remaining due (unpaid) will become part of the balance on which interest is charged.
On Jan. 1, 2013, the Federal tax rates on underpayments are three (3) percent for overpayments, [two (2) percent in the case of a corporation]; three (3) percent for underpayments; five (5) percent for large corporate underpayments; and one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000. The interest rates are computed from the federal short-term rate compound daily. If you have a back tax problem and can afford to pay it, then it makes financial sense. In this economic environment, unless your financial planner is Madoff, would be difficult, if not near impossible, to beat that rate. Furthermore, I would have to suspect that these rates, which are at historic lows, will rise in the near future.
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