The Internal Revenue Service recently announced that interest rates would remain the same for the 2012 calendar quarter beginning on April 1st.
What are these rates?
In 2012, these rates will remain as:
- 3.0% for overpayments (2% for a corporation)
- 3.0% for underpayments
- 5.0% for large corporate underpayments
- 0.5% for the portion of a corporate overpayment exceeding $10,000
The 3% rate also applies to estimated tax underpayments for the first calendar quarter in 2012 and for the first 15 days in April 2012.
How are these rates determined?
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.
How is this different for large corporations?
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Further, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the fourth month following the taxable year.
These interest rates are computed from the federal short-term rate during January 2012 to take effect Feb. 1, 2012, based on daily compounding.
Need more information regarding these IRS interest rates and their impact on both individual and corporate payments in 2012?
