http://www.accountingtoday.com/news/IRS-Lowers-Interest-Rates-Fourth-Quarter-59598-1.html
Washington, D.C. (August 18, 2011)
By Michael Cohn, Accounting Today
The Internal Revenue Service said Thursday that interest rates will decrease in the fourth quarter for tax underpayments and overpayments by a full percentage point.
For the calendar quarter beginning Oct. 1, 2011, the IRS is lowering the interest rate to 3 percent for overpayments, or 2 percent in the case of a corporation. That’s a percentage point lower than the rates in the third quarter for corporations and other taxpayers.
For underpayments, the interest rate will be 3 percent in the fourth quarter, down from 4 percent in the third quarter.
For large corporate underpayments, the interest rate will be 5 percent in the fourth quarter, down from 6 percent in the third quarter.
For the portion of a corporate overpayment exceeding $10,000, the interest rate in the fourth quarter will be 0.5 percent, down from 1.5 percent in the third quarter.
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Under the Tax 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.
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 half a percentage point. The interest rates are computed from the federal short-term rate during July 2011 to take effect Aug. 1, 2011, based on daily compounding.
The IRS describes the interest rates in more detail in Revenue Ruling 2011-18.
