The numbers are out for 2019’s first quarter, that begins on January 1st, and the IRS has reported a rise in interest rates.
As detailed by the tax service, the new rates will be:
• 6% for overpayments, or 5% if a corporation;
• 3.5% for any corporate overpayment that is more than $10,000;
• 6% for underpayments; and
• 8% for a corporation’s large overpayments.
As dictated by the Internal Revenue Code, interest rates are traditionally determined on a quarterly basis, while it’s typical for any non-corporate taxpayer interest rate to be the federal short-term rate plus 3%, for both underpayments and overpayments.
For a corporation, on the other hand, underpayment rates are 3% plus the federal short-term rate, while overpayments are plus 2%. For large underpayments by a corporation, it’s the federal short-term rate plus 5%, while large overpayments above $10,000 is the federal short-term rate plus only 0.5%.
All of the current interest rates are based off daily compounding and were determined by the federal short-term rate that was decided during October 2018, and took effect on November 1st of this year.
For more information or to read up on the full IRS notice, check out Revenue Ruling 2018-32 and Internal Revenue Bulletin 2018-51.
(Special thanks to this article by CPA Practice Advisor for the research!)