On November 28, 2011, the IRS announced that interest rates will remain the same beginning Jan. 1, 2012 for the calendar quarter. According to the IRS website, the interest rates will be:

• 3% for overpayments; 2% in the case of a corporation
• 3% for underpayments
• 5% for large corporate underpayments
• 1/2% for the portion of a corporate overpayment that exceeds $10,000

The 3% interest rate also applies to estimated tax underpayments for the first calendar quarter in 2012 as well as the first 15 days in April 2012.

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. In the case of a corporation, the underpayment rate generally is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.

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 October 2011 to take effect Nov. 1, 2011, based on daily compounding.

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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.

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More than half of the people who filed their taxes got refunds this year, a little more than usual, but the amount of those refunds has surged over the last ten years. Many Americans have overpaid on their taxes throughout the year to get a larger refund at tax time.

Last year’s refunds averaged over $3,000, and this year’s average is not far behind, according to the Internal Revenue Service. This is nearly twice as much as the $1,700 average from 1999.

Current tax data from the IRS shows the growth in refunds hasn’t been limited to any one income level. People who suffered job or investment losses during the recession overpaid inadvertently, giving them bigger refunds.  The past decade also brought short-lived tax benefits where many taxpayers may not have adjusted their withholdings. A few examples include: the American Opportunity Education Credit; the Home-Buyer Credits; and the Expanded Child Credit.

Tax professionals and other financial advisors often frown on large tax refunds because they add up to interest-free loans to the government, thereby reducing investment capital in the same amounts. Many advise that it’s better to have the money in hand every month and invest it, spend it or just let it earn interest.  To many Americans, thought, a $3,000 check looks a lot better than $3,000 coming out of their paychecks over the year.

If your refund seems too big or too small, fixing it usually means making changes to your W-4. It’s the form your employer uses to figure withholdings on your paycheck. Amending it involves three worksheets and two tables, which is sometimes overwhelming to the average person.

The W-4 can be a headache even for people familiar with the 1040. A withholding allowance isn’t the same thing as an exemption. It’s intimidating for even the most seasoned taxpayers. If you aren’t comfortable filling out your own W-4, don’t try. It’s better to hire a tax professional.

If you pay a professional to do your taxes, he or she will most likely give you free help with your W-4. Most accountants do offer it. H&R Block doesn’t charge to fill out your W-4, if you are using them to prepare your taxes. Turbotax has a W-4 feature as part of its software program. The IRS also offers a withholding calculator at the IRS website. Make sure you have your paycheck and your tax return when you have this done to avoid any complications or delays.

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Every year an estimated 60% of taxpayers use a tax preparer to complete their federal and state income tax returns. You can deduct tax preparation fees for the year in which you pay them. On your 2011 return, you will be able to deduct the fees you paid in 2011 for the preparation of your 2010 return. These include the cost of tax software and publications. It also includes any fee you paid if you electronic filed of your return.

According to the IRS, expenses for a tax professional or expenses paid for the preparation of your return are deductible. This is true for federal, state or city taxes and if the tax is income, estate, gift, property or any other tax.

The fee you pay a tax preparer to file your returns is deductible as a Miscellaneous Expense on Schedule A. You can also deduct the cost of any fees you have to pay for filing electronically, as well as “convenience fees” that are charged when you pay by credit or debit card for any taxes you owe. There is a valid reason why you may not want to pay by this method. Credit card companies and banks tend to charge high interest rate fees and you could spend years paying these taxes off.

Tax deductions reduce your gross taxable income. Deductions are valuable because they can bring income down to a lower tax bracket and reduce your tax liability. If you pay fees for a tax preparer, you can deduct those fees. The deduction may be small, but that small deduction can bring you down one or two tax brackets and save you money.

Write down all of the fees you paid for tax preparation by a professional, any software, if you used that, and e-File fees. Add up all of the fees to get your total, and then round down to a whole dollar amount.

Put the dollar amount on Line 22 of Schedule A, if you are preparing your own taxes. If you are using tax software, then find the category under Deductions and enter the dollar amount in the section labeled “Tax Preparation Fees.” If you are using a tax professional, take your calculations and supporting documents to him or her to finish filing your return.

It is very important that you have all receipts and forms available, no matter what method you use to file your taxes. It is recommended that you seek the advice of a tax professional for more complicated tax filings so there is no mistake with the calculations. Electronically filing on the IRS website is your best alternative to software if you can’t afford to hire an accountant.

Daniel Stoica Accounting Professional