While it seems our world is on the edge of big changes for the coming year, the IRS is keeping some things status-quo for now. The Internal Revenue Service says interest rates will be the same for the calendar quarter that starts Jan. 1, 2021.
Those rates will be:
- 3% for overpayments (2% in the case of a corporation);
- 5% for the portion of a corporate overpayment exceeding $10,000;
- 3% for underpayments; and
- 5% for large corporate underpayments.
The Internal Revenue Code mandates the rate of interest to be 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.
In most cases, the corporate underpayment rate is the federal short-term rate plus 3 percentage points. 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 (.05) of a percentage point.
These new interest rates are calculated from the federal short-term rate that was determined during October 2020 that took effect Nov. 1, 2020, based on daily compounding.
Revenue Ruling 2020-28, announcing the interest rates, will appear in Internal Revenue Bulletin 2020-52 when it is posted later this month.
Source: IR-2020-270
Patricia Parrilla Tax Services