As you know, interest rates are always subject to change, but it is important to stay up-to-date with changes so that you know what rates you must pay. Keeping up-to-date with IRS changes is the responsibility of every tax-paying American.
Earlier this week, the Internal Revenue Service (IRS) has announced the interest rates for the next calendar quarter (starting on April 1) will remain the same. Rate will remain at the following:
- 3 percent for overpayments [2 percent in the case of a corporation];
- 0.5 percent for the portion of a corporate overpayment exceeding $10,000.
- 3 percent for underpayments; and
- 5 percent for large corporate underpayments.
IRS Code has determined that interest rates must be announced on a quarterly basis. The rates are subject to change each quarter, however, they do not always change.
Taxpayers outside of corporations pay the federal short-term rate plus 3 percentage points for overpayment and underpayment. If a corporation has underpaid, the rate is the federal short-term rate plus 3 percentage points. The overpayment rate for corporations is the federal short-term rate plus 2 percentage points. Large corporate underpayments must pay the short-term rate plus 5 percentage points. Corporate overpayments over $10,000 will receive the short-term rate plus 0.5 of a percentage point.
Interest rates by the IRS are computed by the federal short-term rate that is decided in January of each year to take affect in February of each year. These rates are based on a daily compounding. This yearly number is adjusted for inflation and cost-of-living.
Rates are also discussed each year at year’s end for individual taxpayers, married couples, couples filing separately and heads of households. The biggest change moving into 2016 were tax brackets and rate changes. However, for corporations, there will be no rate changes in the next quarter.
If these tax rate changes affect you or your company, you should make sure to keep up-to-date with the IRS rate changes. Rates for companies can change up to four times every year. However, these rate changes will not affect every American, so be sure to know what each tax change means to you.
Other rates that continue to change are mileage rates approved by the IRS, tax rates for property, tax rates for small business and items eligible for deduction. Before you file your taxes for 2015, make sure you review the 2015 tax rates, allowances and deductions to make sure that you are paying the correct amount (or getting the right amount back).
If you have a question about filing your taxes, paying taxes or receiving returns, you can always call your tax preparer. If you prepare your taxes yourselves, you can also call the IRS. Be prepared for a longer-than-usual hold in the phone if you call though. It is tax season and the phone lines will be busy.
Photo: Flickr: GotCredit