IRS Announces Q3 Interest Rates

by Mike Godfrey, for LawAndTax-News.com, Washington

13 June 2008

The US Internal Revenue Service (IRS) recently announced that interest rates for the calendar quarter beginning 1st July 2008, will drop by one percentage point.

The new rates will be:

• 5% for overpayments, 4% in the case of a corporation;
• 5% for underpayments;
• 7% for large corporate underpayments; and
• 2.5% for the portion of a corporate overpayment exceeding USD10,000.

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.

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 USD10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates just announced are computed from the federal short-term rate based on daily compounding determined during April 2008.

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