2019 First Quarter IRS Interest Rates Increase | Tax Lawyers MN
On December 6, 2018, the IRS announced that the 2019 First Quarter IRS interest rates for the underpayment and overpayment purposes will increase again. The increase in the 2019 First Quarter IRS interest rates follows the recent increases in interest rates by the Federal Reserve.
After the new increase, the 2019 First Quarter IRS interest rates will be as follows:
six (6) percent for overpayments (five (5) percent in the case of a corporation);
six (6) percent for underpayments;
eight (8) percent for large corporate underpayments; and
three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000.
The Internal Revenue Code requires that the rate of interest be determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The 2019 First Quarter IRS interest rates were computed based on the federal short-term rate determined during October of 2018 to take effect on November 1, 2018, based on daily compounding.
The 2019 First Quarter IRS interest rates have widespread impact beyond just the calculation of the interest rates that the IRS will calculate on the underpayments and overpayments of federal tax liability, as determined on an amended tax return or as a result of an audit. These rates will be used to determine the total amount due for any additional tax return liability that arose as result of filing under Streamlined Domestic Offshore Procedures.
Moreover, the 2019 First Quarter IRS interest rates are directly relevant the calculation of PFIC (Passive Foreign Investment Company) tax liability. In particular, these rates are used to determine the PFIC interest on PFIC tax imposed on “excess distribution” under the default IRC Section 1291 PFIC calculation method.
Sherayzen Law Office continues to watch the increase in IRS interest rates to properly adjust its interest calculation spreadsheets.