Interest rates to remain the same for the 4th quarter of 2020
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Monday, September 21, 2020

Interest rates to remain the same for the 4th quarter of 2020

By Payroll and Entitlements Editorial Staff

The Internal Revenue Service has announced that interest rates will remain the same for the calendar quarter beginning October 1, 2020. The rates will be:

  • three (3) percent for overpayments [two (2) percent in the case of a corporation];
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • three (3) percent for underpayments; and
  • five (5) percent for large corporate underpayments.

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 three percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points and the overpayment rate is the federal short-term rate plus two percentage points. The rate for large corporate underpayments is the federal short-term rate plus five 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 one-half (0.5) of a percentage point.

The interest rates are computed from the federal short-term rate determined during July 2020 to take effect August 1, 2020, based on daily compounding.

Revenue Ruling 2020-18, announcing the rates of interest, will appear in Internal Revenue Bulletin 2020-39, dated September 21, 2020 (IRS News Release, IR-2020-202, September 3, 2020).

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