October 2, 2017 2:04 am

IRS Interest Rates Stay at 4% for the Fourth Quarter

Interest rates may inch up next year, but for the last quarter of 2017 (October 1 through December 31), IRS interest rates on individual tax refunds and tax underpayments are holding steady at 4%(Rev. Rul. 2017-18). The IRS rate has been 4% since April 1, 2016. Before that, the rate had been 3% for 18 straight calendar quarters, from October 1, 2011, through March 31, 2016. For individuals, the IRS interest rate for a quarter is based on the federal short-term rate determined in the first month of the previous quarter, plus 3%. Since the federal short-term rate determined in July was 1%, the rate for the fourth quarter starting October 1 is 4% (1% plus 3%).

For corporations, the fourth quarter IRS interest rate on underpayments is generally 4% (same as for individuals), but for large corporate underpayments, the rate is 6% (5% more than the 1% federal short-term rate). For corporate overpayments, the interest rate generally is 3% (2% more than the 1% federal short-term rate), but on the portion of a corporate overpayment exceeding $10,000 for the calendar quarter, the rate is limited to 1.5% (0.5% plus 1% federal short-term rate).

Tax Glossary

Ordinary and necessary

A statutory requirement for the deductibility of a business expense.

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