IRS News Release  
December 02, 2002

Interest Rates Drop for the First Quarter of 2003

WASHINGTON The Internal Revenue Service today announced that the interest rates for the calendar quarter beginning January 1, 2003, will drop by one percentage point in each category to:

  • five (5) percent for overpayments [four (4) percent in the case of a corporation];
  • five (5) percent for underpayments;
  • seven (7) percent for large corporate underpayments; and
  • two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.

These are the lowest rates since a 1975 tax law change provided that interest rates would be adjusted based on money market rates.

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 based on daily compounding determined during October 2002.

Rev. Rul. 2002-70, announcing the new rates of interest, is attached and will appear in Internal Revenue Bulletin No. 2002-50, dated December 16,

2002.

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