Overpayment and underpayment rates decrease for the first quarter of 2011

We have been recommending since the beginning of the recession that based on the interest rate charged as an underpayment penalty, it may be cheaper to pay the penalty then borrow funds to pay your tax.  Well the IRS has just made this advantage, even better.

IRS has announced that the interest rates for tax overpayment and underpayments for the calendar quarter beginning Jan. 1, 2011, will decrease by a full percentage point.

For non-corporate taxpayers, the rate for both underpayments and overpayment for the first quarter of 2011 will be 3% (down from 4% for the fourth quarter of 2010).

For corporations, the overpayment rate for the first quarter of 2011 will be 2% (down from 3% for the fourth quarter of 2010). Corporations will receive .5% (down from 1.5% for the fourth quarter of 2010) for overpayment exceeding $10,000. The underpayment rate for the first quarter of 2011 for corporations will be 3% (down from 4% for the fourth quarter of 2010), but will be 5% (down from 6% for the fourth quarter of 2010) for large corporate underpayments.

We continue to recommend that you look at the cost of money when making decisions with regards to when to pay your current tax liability.  Careful consideration is needed in this matter, so please do not hesitate to contact us if you need assistance.

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