Interest Rates Not Changing for Final Quarter of 2006 | AccountingWEB

Interest Rates Not Changing for Final Quarter of 2006

The Internal Revenue Service (IRS) recently announced in Rev. Rule 2006-49, there will be no change in the interest rates for the fourth quarter of 2006 which begins October 1, 2006. The announced interest rates are computed from the federal short-term rate based on daily compounding determined during July 2006.


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The rates for the fourth quarter are:

  • 8 percent for overpayments [7 percent in the case of a corporation];
  • 8 percent for underpayments;
  • 10 percent for large corporate underpayments; and
  • 5.5 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.

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