Rev. rul. -18 Form 2020-2024

Rev. rul. 2020-18 Form: What You Should Know

Interest on underpayments of tax is set to the rate set in Revenue Procedure 2011-38. Interest on underpayments of tax is not set in Revenue Procedure 2011-38. Interest on federal income tax underpayments and federal income tax overpayments, including federal income taxes underpayments and underpayments, and interest on federal income tax overpayments, is calculated in accordance with the formulas set in Revenue Procedure 2011-38 on a quarterly basis. Tax Notes from the IRS (Treas. Reg. Sec. 1.666-2(d) and Revenue Procedure 2011-38) provide the interest rate on the underpayments of tax and the corresponding percentage rate on the overpayments of tax, including an annual adjustment in Rev. Run. 2009-14 for any federal income tax underpayment of tax or federal income tax overpayment. Interest is the difference between the amount received before the tax was underpaid and the amount received after the tax was paid (and does not include any amounts from prior tax years). It is measured in percentage points. The annual percentage rate is multiplied by 100 percent. The annual interest rate is set to the lowest of the following rates: On an underpayment of tax, the interest is 2.5 percent. On an overpayment of tax, the interest is 2.5 percent. For tax underpayments and overpayments that are not covered. This term is used to describe underpayments of tax if the total tax due for the year is more than what was paid, but not more than the tax rate for the year. For example, say a tax return for 2024 is filed, and 1,000 is paid in taxes. There is an overpayment of tax of 300. The following year, tax is paid, and 1,000 is received as a penalty, which is not part of the tax underpayment. In such a case, the annual interest rate is not the base case rate, and it is calculated from the base case rate. The base case rate is 2 percent. The total tax underpayment is 300 multiplied by the 2.5 percent annual underpayment penalty rate. Interest is calculated as 1 percent of the 300 overpayment after all penalties and interest have been paid, or 0.5 percent of the overpayment. Example: In 2015, a tax return for 2024 is filed. A penalty of 300 is assessed.

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