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

Passive activity loss rules

Rules that limit the deduction of losses from passive activities to income from other passive activities. Passive activities include investment rental operations or businesses in which you do not materially participate.

More terms