The IRS today announced that interest rates will remain the same for the calendar quarter beginning January 1, 2017. The interest rates will remain at 4% for overpayments (3% in the case of a corporation) and underpayments, 6% for large corporate underpayments and 1.5% for the portion of a corporate overpayment exceeding $10,000. The interest rates are computed by using the federal short-term rate based on daily compounding determined during October 2016. The rate of interest is determined on a quarterly basis. (Rev. Rul. 2016-28, IR-2016-121, IRB 2016-51, December 19, 2016.)
The states of Alabama and South Carolina follow the federal underpayment rate. Pennsylvania follows the federal rate in effect as of January 1 of the calendar year, without regard to quarterly changes. Illinois follows the federal underpayment rate as of January 1 and July 1 of the calendar year. Additionally, Virginia’s interest rate on tax underpayments is the federal interest rate plus 2%, while Arizona’s is the federal short-term rate plus three percentage points.
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