Interest rates remain the same for the fourth quarter of 2018

Written on Sep 17, 2018

The IRS has announced that interest rates will remain the same for the calendar quarter beginning Oct. 1. The rates will be:

  • 5% for overpayments (4% in the case of a corporation).
  • 2.5% for the portion of a corporate overpayment exceeding $10,000.
  • 5% for underpayments.
  • 7% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined quarterly. 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.

The interest rates are computed from the federal short-term rate determined during July to take effect Aug. 1, based on daily compounding.

Revenue Ruling 2018-25, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2018-39, dated Sept. 24.

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