The Internal Revenue Service (IRS) has announced that interest rates for the calendar quarter beginning April 1, 2011, will increase by one percentage point. The rates will be:
- 4 percent for overpayments (3 percent in the case of a corporation);
- 4 percent for underpayments;
- 6 percent for large corporate underpayments; and
- 1.5 percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is 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.
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 exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point. Additionally, the rate for determining the addition to tax for failure to pay estimated tax for the first 15 days in April 2011 is the 4 percent rate that applied to underpayments of tax during the first calendar quarter in 2011.
These new interest rates are computed from the federal short-term rate during January 2011 to take effect February 1, 2011, based on daily compounding.
Revenue Ruling 2011-5 contains the official announcement of the rate increase as well as historical data on previous interest rates.