IRS Tax Rates Are Dropping!

Today the IRS announced that interest rates for the calendar quarter beginning July 1, 2008, will drop by one percentage point. The new rates are as follows:

Five (5) percent for overpayments [four (4) percent in the case of a corporation];

Five (5) percent for underpayments;

Seven (7) percent for large corporate underpayments

Two and one-half (2.5) percent for the portion of a corporate overpayment exceeding
$10,000.

The Internal Revenue Code states that the interest rate is determined every quarter. Usually, for taxpayers that aren’t corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. If the case involves a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points but 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 (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during April 2008.