IRS Drops Interest Rates
Effective January 1, 2003, the Internal Revenue Service will drop interest rates by one percentage point. The following new rates will apply:
- 5% interest on tax overpayments
- 5% interest on tax underpayments
- 7% interest on tax underpayments by large corporations
- 2 1/2% interest on the portion of a corporate overpayment exceeding $10,000
These rates will apply for the first quarter of 2003. These are the lowest rates since 1975.
The interest rates are computed from the federal short-term rate based on daily compounding determined during October 2002.
A complete summary of the new rates is described in IRS Revenue Ruling 2002-70.