By Payroll and Entitlements Editorial Staff
The IRS has announced that interest rates will increase for the first quarter of 2019, beginning January 1, 2019. The interest rates will be 6% for overpayments (5% in the case of a corporation) and underpayments, 8% for large corporate underpayments and 3.5% for the portion of a corporate overpayment exceeding $10,000. The interest rates are computed by using the federal short-term rate based on daily compounding determined during October 2018. The rate of interest is determined on a quarterly basis. (IRS News release IR-2018-244 Rev. Rul. 2018-32, December 6, 2018; IRB 2018-51, dated 12/17/2018.)
The states of Alabama and South Carolina follow the federal underpayment rate. Pennsylvania follows the federal rate in effect as of January 1 of the calendar year, without regard to quarterly changes. Illinois follows the federal underpayment rate as of January 1 and July 1 of the calendar year. Additionally, Virginia's interest rate on tax underpayments is the federal interest rate plus 2%, while Arizona's is the federal short-term rate plus three percentage points.
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