Interest Rates the Same for 2021’s First Quarter
While it seems our world is on the edge of big changes for the coming year, the IRS is keeping some things status-quo for now. The Internal Revenue Service says interest rates will be the same for the calendar quarter that starts Jan. 1, 2021.
Those rates will be:
- 3% for overpayments (2% in the case of a corporation);
- 5% for the portion of a corporate overpayment exceeding $10,000;
- 3% for underpayments; and
- 5% for large corporate underpayments.
The Internal Revenue Code mandates the rate of interest to be 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.
In most cases, the corporate underpayment rate is the federal short-term rate plus 3 percentage points. 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 that exceeds $10,000 for a taxable period is the federal short-term rate plus one-half (.05) of a percentage point.
These new interest rates are calculated from the federal short-term rate that was determined during October 2020 that took effect Nov. 1, 2020, based on daily compounding.
Revenue Ruling 2020-28, announcing the interest rates, will appear in Internal Revenue Bulletin 2020-52 when it is posted later this month.