The bad economic times are not only effecting U.S. citizens, it  is effecting IRS interest rates. Starting on January 1, 2009 the IRS will drop interest rates for underpayments and overpayments by one full point.

The new rates will be:
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.

The Internal Revenue Code interest rate is recalculated quarterly.  That rate is calculated using the federal short-term rate plus 3 percentage points for overpayments and underpayments for everyone except corporations.

For corporations 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 2009 IRS interest rates are calculated from the federal short-term rate during October 2008 to take effect Nov. 1, 2008, based on daily compounding.

Revenue Ruling 2008-54, announcing the new rates of interest, is attached and will appear in Internal Revenue Bulletin No. 2008-52, dated Dec. 29, 2008.

The impact of this measure means less the IRS will recoup less money as it means less for the American citizen.

For more info log onto www.irs.gov