The Internal Revenue Service said Tuesday that interest rates for tax overpayments and underpayments would remain the same in the first quarter of the year.
For the calendar quarter beginning Jan. 1, 2012, the rates will be 3 percent for overpayments, or 2 percent in the case of a corporation; 3 percent for underpayments; 5 percent for large corporate underpayments; and 0.5 percent for the portion of a corporate overpayment exceeding $10,000.
The 3 percent rate will also apply to estimated tax underpayments for the first calendar quarter in 2012 and for the first 15 days in April 2012, the IRS noted.
The interest rate on underpayments and overpayments is determined on a quarterly basis, under the Tax Code. 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 that exceeds $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point. In addition, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the fourth month following the taxable year.
The interest rates that the IRS announced Tuesday are based on the federal short-term rate during October 2011 to take effect Nov. 1, 2011, based on daily compounding.
Revenue Ruling 2011-32 provides further details.
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