CRA and IRS Interest Rates For Small Business

by L. Kenway BComm CPB


The Bookkeeper's Handy Reference to IRS interest rates for loans to shareholders, installment sales, and underpayment or overpayment of taxes; and CRA prescribed interest rates for shareholder loans, spousal loans as well as employee loans.


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Canadian (CRA) Prescribed Interest Rates

Released Quarterly

These are the rates used for amounts owed to CRA. These are also the rates CRA pays when they owe you or your corporation.

Taxable Benefits refers to interest-free and low-interest loans for shareholders, spousal and employees.

Overdue and ovepaid taxes includes income taxes, CPP contributions, EI premiums, GST/HST, Excise tax / duties ... basically any kind of federal tax.

Period Overdue Taxes Overpaid Taxes Taxable Benefits
Jan 1 2014 to
Dec 31 2016
5% 1% corporate
3% others
1%
Oct 1 2013 to
Dec 31 2013
6% 2% corporate
4% others
2%
Jul 1 2010 to
Sep 30 2013
5% 1% corporate
3% others
1%
Apr 1 2009 to
Jun 30 2010
5% 3% 1%
Jan 1-Mar 31 2009 6% 4% 2%
Jul 1-Dec 31 2008 7% 5% 3%
Jan 1-Jun 30 2008 8% 6% 4%


While looking for something else, I came across a KN&V CAs (www.knv.com) rate sheet ... and learned something new. Did you know that the overpaid taxes rate (amounts owing from the federal government) is always 2% point more than the taxable benefits rate? ... and that overdue taxes rates (basically the rate for all other purposes) is 4% points more than the taxable benefits rate? I just never noticed before ... scary how unobservant I am at times!



Prescribed Interest Rates
Coporate Taxpayer Loans or Indebtedness

Period Corporate
Loans
Period Corporate
Loans
Oct 1 2016 to
Dec 31 2016
4.49%
Apr 1 2016 to
Jun 30 2016
4.45% Jul 1 2016 to
Sep 30 2016
4.50%
Oct 1 2015 to
Dec 31 2015
4.52% Jan 1 2016 to
Mar 31 2016
4.41%
Apr 1 2015 to
Jun 30 2015
4.75% Jul 1 2015 to
Sep 30 2015
4.61%
Oct 1 2014 to
Dec 31 2014
4.94% Jan 1 2015 to
Mar 31 2015
4.89%
Apr 1 2014 to
Jun 30 2014
4.89% Jul 1 2014 to
Sep 30 2014
4.93%
Oct 1 2013 to
Dec 31 2013
5.02% Jan 1 2014 to
Mar 31 2014
4.94%


IRS Prescribed Interest Rates

Source: IRS Newsroom
Released Quarterly - latest release September 14, 2016
Reference: Revenue Ruling 2016-23

These are the interest rates used by the IRS when assessing interest amounts. Under payment refers to overdue taxes while over payment refers to or over paid taxes.

There are three categories:

  • Taxpayers other than corporations - under and overpayment rate is the federal short-term rate plus 3% points.
  • Corporations - underpayment rate is the federal short-term rate plus 3% points and the overpayment rate is the federal short-term rate plus 2% points.
  • Large Corporations - underpayment rate is the federal short-term rate plus 5% points and the overpayment rate over $10,000 is the federal short-term rate plus 0.5% points.


Over Payment of Taxes Interest Rates

Period Non-Corporate Corporate Corporate
Over $10K
Apr 1 2016-
Mar 31 2017
4% 3% 1.5%
Oct 1 2011-
Mar 31 2016
3% 2% 0.5%
Apr 1-Sep 30 2011 4% 3% 1.5%
Jan 1-Mar 31 2011 3% 2% 0.5%
Jul 1-Dec 31 2010 4% 3% 1.5%

Under Payment of Taxes Interest Rates

Period Non-Corporate Corporate Large Corporate
Apr 1 2016-
Mar 31 2017
4% 4% 6%
Oct 1 2011-
Mar 31 2016
3% 3% 5%
Apr 1-Sep 30 2011 4% 4% 6%
Jan 1-Mar 31 2011 3% 3% 5%
Apr 1-Dec 31 2010 4% 4% 6%

IRS Applicable Federal Rates (AFR)

Source: www.irs.gov/app/picklist/list/federalRates.html

Released Monthly

AFRs are the IRS imputed interest rates. This small business tax information is useful as the rates are used for corporate loans to shareholders. They are also used for installment sales where a customer purchase is extended credit for more than 6 months ... and no interest rate was stated.

Short term is 3 years or less, mid-term is over 3 years up to 9 years, and long-term is over 9 years.

The rates are usually available the 3rd or 4th week of the preceding month.

 Short-Term   Annual   Semi 
 Annual 
 Quarterly   Monthly 
December 0.74% 0.74% 0.74% 0.74%
November 0.68% 0.68% 0.68% 0.68%
October 0.66% 0.66% 0.66% 0.66%
September 0.61% 0.61% 0.61% 0.61%
August 0.56% 0.56% 0.56% 0.56%
July 0.71% 0.71% 0.71% 0.71%
June 0.64% 0.64% 0.64% 0.64%
May 0.67% 0.67% 0.67% 0.67%
April 0.70% 0.70% 0.70% 0.70%
March 0.65% 0.65% 0.65% 0.65%
February 0.81% 0.81% 0.81% 0.81%
January 0.75% 0.75% 0.75% 0.75%
December 0.56% 0.56% 0.56% 0.56%
 Mid-Term   Annual   Semi 
 Annual 
 Quarterly   Monthly 
December 1.47% 1.46% 1.46% 1.46%
November 1.33% 1.33% 1.33% 1.33%
October 1.29% 1.29% 1.29% 1.29%
September 1.22% 1.22% 1.22% 1.22%
August 1.18% 1.18% 1.18% 1.18%
July 1.43% 1.42% 1.42% 1.42%
June 1.41% 1.41% 1.41% 1.41%
May 1.43% 1.42% 1.42% 1.42%
April 1.45% 1.44% 1.44% 1.44%
March 1.48% 1.47% 1.47% 1.47%
February 1.82% 1.81% 1.81% 1.80%
January 1.81% 1.80% 1.80% 1.79%
December 1.68% 1.67% 1.67% 1.66%
 Long-Term   Annual   Semi 
 Annual 
 Quarterly   Monthly 
December 2.26% 2.25% 2.24% 2.24%
November 2.07% 2.06% 2.05% 2.05%
October 1.95% 1.94% 1.94% 1.93%
September 1.90% 1.89% 1.89% 1.88%
August 1.90% 1.89% 1.89% 1.88%
July 2.18% 2.17% 2.16% 2.16%
May&June 2.24% 2.23% 2.22% 2.22%
April 2.25% 2.24% 2.23% 2.23%
March 2.33% 2.32% 2.31% 2.31%
February 2.62% 2.60% 2.59% 2.59%
January 2.65% 2.63% 2.62% 2.62%
December 2.61% 2.59% 2.58% 2.58%

Historical section 7520 interest rates for 1997 to 2015 can be found on the IRS website under Small Businesses & Self Employed> Section 7520 Interest Rates for Prior Years.

An historical index of the AFR on the IRS website at irs.gov/app/picklist/list/federalRates.html .




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