If you lend money and fail to charge interest at a rate at least equal to the applicable federal rate (AFR) for the term of the loan, you may be subject to below-market loan rules. These rules require the lender to report phantom (“imputed”) interest-the amount of interest that should have been charged but was not.
If the loan is a demand loan that is outstanding for all of 2011 and the loan balance does not fluctuate, a so-called “blended rate” fixed by the IRS applies. The IRS recently announced the blended rate for 2011: 0.40%, which is even lower than the blended rate of 0.59% last year.
Exception: If you make certain gift loans (e.g., a loan to a relative below $10,000, or below $100,000 in some cases), there is no imputed interest.
Source: Rev. Rul. 2011-14
Advance payment of current tax liability based either on wage withholdings or installment payments of your estimated tax liability. To avoid penalties, you generally must pay to the IRS either 90% of your final tax liability, or either 100% or 110% of the prior year’s tax liability, depending on your adjusted gross income.