PHOENIX – The Internal Revenue Service issued a correction today saying that interest rates have increased after all for the calendar quarter beginning April 1, 2016.
The rates will be:
- 4 percent for overpayments [three percent in the case of a corporation];
- 1.5 percent for the portion of a corporate overpayment exceeding $10,000
- 4 percent for underpayments; and
- 6 percent for large corporate underpayments.
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 0.5 of a percentage point.
The interest rates announced today are computed from the federal short-term rate determined during January 2016 to take effect Feb. 1, 2016, based on daily compounding. The federal short-term rate has increased from 0 percent to 1 percent. This is the first change to the interest rates since the fourth calendar quarter of 2010 when the federal short-term rate decreased from 1 percent to 0 percent.
Revenue Ruling 2016-06, announcing the rates of interest is available online at https://www.irs.gov/pub/irs-drop/rr-16-06.pdf and will appear in Internal Revenue Bulletin 2016-14, dated April 4, 2016. The Revenue Ruling provides interest rates for the second quarter (April to June 2016).