The Internal Revenue Service (IRS) will be raising interest rates for the second quarter and the new rates will go into effect come April 1, 2011. According to the IRS website, the new rates will be as follows:
The IRS has not raised their interest rates in quite some time and these new rates will most likely hurt those who owe the government money, as well as those that are currently in taxes owed payment plans to pay back money that they owe.
If you are in either of these categories, it will be important for you to take note of the interest hikes and do what you can to avoid having to pay them.
If you are an individual or any other entity that is not considered a corporation the new tax rates will affect you as follows. Interest rates, according to the Internal Revenue code are factored quarterly. Both underpayments and overpayments for non corporations will be calculated using the same formula. For all taxpayers that are not a corporation the rate of interest paid is calculated by factoring the federal short term interest rate and then adding three percentage points.
Interest rates for corporations are figured a bit differently. The underpayment rate is the same and uses the federal short term rate and then adds in three percentage points. The overpayment rate however, is calculated using the federal short term rate and then adding in just two more percentage points.
Large corporations pay even more for underpayments. For them, underpayments are determined by using the federal short term rate and then adding in five percentage points.
Also for corporations, an overpayment of tax that exceeds $10,000 during any given taxable period is charged the federal short term and an additional .5 percent. Also, for corporations that fail to pay their estimated tax during the first fifteen days of the month of April 2011, there will be a 4% interest rate that will be applied to all underpayments of taxes for the first quarter of 2011.
This post was published on March 15, 2011