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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