2021 First Quarter Interest Rates

 

On December 3, 2020 the IRS sent out two emails updating the profession on the interest rates for first quarter 2021:

RR-2020-28: Determination of Rate of Interest 

Revenue Ruling 2020-28 provides the interest rates for the first quarter of 2021. The rates for interest determined under Section 6621 of the code for the calendar quarter beginning January 1, 2021, will be 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments, and 5 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 0.5 percent.

Revenue Ruling 2020-28 will be in IRB: 2020-52, dated December 21, 2020.

 

Interest Rates Remain The Same For The First Quarter Of 2021

WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2021.  The rates will be: 

  • three (3) percent for overpayments [two (2) percent in the case of a corporation];
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • three (3) percent for underpayments; and
  • five (5) percent for large corporate underpayments. 

Under the Internal Revenue Code, the rate of interest is 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 interest rates announced today are computed from the federal short-term rate determined during Oct. 2020 to take effect Nov. 1, 2020, based on daily compounding.

Revenue Ruling 2020-28, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2020-52, dated Dec. 21, 2020.