IRS Interest Rates Q3 2011: Rates for Overpayments & Underpayments

The IRS has announced that interest rates for the third quarter of 2011 will remain unchanged from the second quarter’s rates. According to the IRS website, interest rates will be as follows:

• four (4) percent for overpayments [three (3) percent in the case of a corporation];
• four (4) percent for underpayments;
• six (6) percent for large corporate underpayments; and
• one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

How Rates are Determined

According to IRS code interest rates are computed and can change on a quarterly basis. Rates are different only for corporations, all other tax payers interest rates are the same.

Rates for All Taxpayers Except Corporations

Underpayments and overpayments are calculated the same for non corporation tax payers. The amount to be paid is calculated using the short term federal rate and then adding three percentage points.

Rates for Small Corporations

Small corporations, according to the IRS website, are calculated differently for overpayments and underpayments. Underpayments are determined by using the federal short-term rate and adding three percentage points. The overpayment rate is less using again, the federal short-term rate but then adding just two percentage points.

Rates for Large Corporations

Large corporations pay more for underpayments. Underpayments for large corporations are calculated using the federal short term rate and then adding five percentage points. Overpayments are lower using the federal short term rate and adding just one half of a percentage point.