The IRS has announced that interest rates for over and under-payments will be decreased beginning on October 1^st. The new rates will be as follows:

-3% for overpayments and 2% for corporations;

-3% for underpayments;

-5% for large corporate underpayments; and

-0% and 0.5% for the portion of a corporate overpayment that exceeds $10,000.

In the Internal Revenue Code, the interest rate is figured quarterly. For individual taxpayers the rate for overpayment and underpayment is the federal short-term rate plus 3%. For corporations, the rate for underpayment is the federal short-term rate plus 3% and the rate for overpayment is the federal short-term rate plus 2%.

For underpayments in large corporations, it is the federal short-term rate plus 5%. A portion of the corporations overpayment that exceeds $10,000 is the federal short-term rate plus 0.5%.

These interest rates were calculated for the federal short-term rate in July and they were implemented on August 1^st. The rates are compounded daily.

Revenue Ruling 2011-18 states the interest rates and will appear in the Internal Revenue Bulletin No. 2011-39 on September 26^th.

Daniel Stoica Accounting Professional