Full Disclosure: To be fair, you may owe more if you pay too little…
As part of their never ending quest to motivate everyone to file on time and full pay their taxes on time, the IRS recently announced that their prescribed interest rates will not change for the 4th Quarter of 2017.
The rates will remain at:
- 4% for overpayments (3% for corporations)
- 1-½% for the portion of corporate overpayments exceeding $10,000
- 4% for underpayments (6% for underpayments by large corporations)
Every quarter the IRS revisits their rates. This quarter they have chosen not to make a change. These rates are determined using the federal short-term rate. In this case, they were set as of July 2017 and took effect August 1st, 2017.
To understand how the IRS thinks, here is a direct quote from the IRS on how the interest rates were determined:
“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.”
The IRS will make a detailed announcement regarding rates on September 25th, 2017. In the meantime, if you are the type of person who enjoys researching the details, you can find the complete story here: Revenue Ruling 2017-18.