IRS announces drop in interest rates
The Internal Revenue Service has announced that interest rates for the calendar quarter beginning July 1, 2008, will drop by one percentage point. The new rates will be:
Five percent for overpayments [four percent in the case of a corporation];
Five percent for underpayments;
Seven percent for large corporate underpayments; and
Two and one-half (2.5) 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.
These interest rates are computed from the federal short-term rate based on daily compounding determined during April 2008.
Revenue Ruling 2008-27, announcing the new rates of interest, will appear in Internal Revenue Bulletin No. 2008-26, dated June 30, 2008.