The IRS has announced an increase in interest rates for over-payments and under-payments falling within the 2nd quarter. This change – scheduled to take effect on April 1st, 2018 – will apply to those corporations with erroneous tax payments, while non-corporate taxpayers will continue to pay the federal short-term rate (currently 2.10%), plus 3 percentage points.
This year’s 2nd quarter interest rates will be as follows:
- 5% for non-corporate over-payments, and 4% for corporate ones.
- 2.5% for any over-payment amount made by a corporation that exceeds $10,000.
- 5% for average under-payments (both corporate and non-corporate).
- 7% for large corporate under-payments that exceed $100,000.
As the IRS announces over-payment and under-payment interest rates every tax quarter, some may find the constant change stressful – especially if those interest rates apply to them. Thankfully, however, according to the Internal Revenue Code, there is a method to the madness.
To predict interest estimates, the first step is to understand that typically all corporate quarterly interest numbers are determined by calculating the nation’s federal short-term rates, and then adding on an additional percentage, depending on the erroneous payment amount.
For corporations with an average under-payment, the interest is an extra 3% added onto the federal short-term rate, while for over-payments, it’s an additional 2%. For under-payments over $100,000, the interest rate is 5% on top of the federal short-term rate, while for over-payments exceeding $10,000, it’s only an extra 0.5%.
Want help avoiding interest charges altogether? Let us handle your bookkeeping so you can rest easy knowing that you’ll never pay too much or too little for your payroll taxes! Call us during business hours at (310)534-5577 or send an email to [email protected] to schedule your free consultation to get started.
