Washington (March 3, 2004) -- The Internal Revenue Service said that interest rates will rise by 1 percentage point for the calendar quarter beginning April 1, 2004.

The interest rates, which are computed from the federal short-term rate based on daily compounding determined during January 2004, are as follows:

• 5 percent for overpayments (4 percent in the case of a corporation);
• 5 percent for underpayments;
• 7 percent for large corporate underpayments; and,
• 2.5 percent for the portion of a corporate overpayment exceeding $10,000.

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 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 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 of a percentage point.

-- WebCPA staff

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