Interest rate on unpaid state taxes and overdue refunds stays the same for 2011

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Minnesota Department of Revenue Commissioner Ward Einess announced this week that in 2011, taxpayers will pay a 3 percent interest rate on delinquent state tax payments. This is the same as 2010, the lowest rate in the department’s history.

The department calculates interest from the date the tax is due until it is paid in full. By law, a person or business with delinquent taxes must pay interest on the amount of the penalty owed, as well as on the amount of tax owed.

Likewise, the state must pay taxpayers the same 3 percent rate on tax refunds not issued within the allotted time frame.

To determine the 2011 interest rate, the department used the average short-term interest rate commercial banks charged large-business customers between April 1, 2010 and September 30, 2010, as required by law. The Federal Reserve Board determines the average prime rate banks charged.

The interest rate has fluctuated from a previous low of 4 percent in 2005 to a high of 20 percent in 1982. Since 1983, the interest rate has been based on adjusted prime rate.

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