Illinois Administrative Code › Title 86 - REVENUE › Part 700 - UNIFORM PENALTY AND INTEREST ACT › Subpart B - INTEREST › Section 700.210 - Interest Rate Calculation (UPIA Section 3-2)

Current through Register Vol. 48, No. 28, July 12, 2024
a) For periods prior to January 1, 2004, and
				periods after December 31, 2013, the rate of interest to be paid to taxpayers
				and to be charged taxpayers is
the underpayment rate established
				under
IRC section 6621. For periods after December 31, 2003, and prior
				to January 1, 2014, the rate of interest to be paid to taxpayers and to be
charged taxpayers is, for the one-year period beginning with the date
				of underpayment or overpayment, the federal short-term rate established under
				IRC section 6621, and, for the period beginning the day after that one-year
				period, the underpayment rate established under IRC section 6621
.
				(UPIA Section 3-2(a))
b) This
				Section may be illustrated by the following examples:
EXAMPLE 1: Taxpayer is an individual whose taxable year is
				  the calendar year. On April 15, 2003, Taxpayer timely filed her 2002 Illinois
				  income tax return, but did not pay the tax shown due on the return. Under this
				  subsection, interest on Taxpayer's underpayment for the period April 16, 2003
				  through December 31, 2003 is charged at the underpayment rate established under
				  IRC section 6621. With respect to any portion of the underpayment that remains
				  unpaid as of January 1, 2004, interest is charged at the federal short-term
				  rate established under IRC section 6621 through April 15, 2004, one year after
				  the April 15, 2003 date of underpayment. With respect to any portion of the
				  underpayment that remains unpaid as of April 16, 2004, interest is charged at
				  the underpayment rate established under IRC section 6621.
EXAMPLE 2: Corporation failed to pay its Illinois income tax
				  liability for its calendar 2001 taxable year, due on March 15, 2002, before
				  January 1, 2004. Under this subsection, for any portion of Corporation's
				  underpayment that remains unpaid on and after January 1, 2004, interest is
				  charged under this subsection at the underpayment rate established under IRC
				  section 6621 because January 1, 2004 is more than one year after the March 15,
				  2002 date of underpayment.
EXAMPLE 3: Taxpayer is an individual who timely filed her
				  calendar 2003 Illinois income tax return on the April 15, 2004 unextended due
				  date, but did not pay the tax shown due on the return. Under this subsection,
				  interest on the unpaid balance of Taxpayer's underpayment accrues for the
				  period from April 16, 2004 through April 15, 2005 at the federal short-term
				  rate established under IRC section 6621. With respect to any portion of the
				  underpayment that remains unpaid on and after April 16, 2005, interest is
				  charged at the underpayment rate established under IRC section 6621.
EXAMPLE 4. Taxpayer is an individual who timely filed his
				  calendar 2004 Illinois income tax return on the April 15, 2005 unextended due
				  date, showing an overpayment of $400. Taxpayer requested a refund of the
				  overpayment, which was paid on May 2, 2005. As the result of an audit by the
				  Internal Revenue Service that was completed in 2007, Taxpayer's adjusted gross
				  income for 2004 was increased, causing Taxpayer's Illinois income tax liability
				  to increase by $500. $100 of Taxpayer's deficiency was unpaid as of April 15,
				  2005 and accrues interest at the federal short-term rate established under IRC
				  section 6621 for the period from the April 16, 2005 date of underpayment
				  through April 15, 2006. The remaining $400 of the deficiency did not become
				  unpaid until the refund was issued on May 2, 2005 and accrues interest at the
				  federal short-term rate established under IRC section 6621 for the period from
				  the May 3, 2005 date of underpayment through May 2, 2006.
EXAMPLE 5: Corporation failed to timely pay its Illinois
				  income tax liability for its calendar 2012 taxable year, due on March 15, 2013.
				  Under this subsection, the underpayment accrues interest at the federal
				  short-term rate through December 31, 2013. For any portion of Corporation's
				  underpayment that remains unpaid on and after January 1, 2014, interest is
				  charged at the underpayment rate established under IRC section 6621 because
				  interest is not computed using the federal short-term rate established under
				  IRC section 6621 for any period after December 31, 2013.
c) The underpayment rate is the sum of the
				federal short-term rate plus 3 percentage points. The federal short-term rate
				is the rate determined by the Secretary of the Treasury based upon the average
				market yield (during any one month period selected by the Secretary of the
				Treasury and ending the calendar month in which the determination is made) on
				outstanding marketable obligations of the United States with remaining periods
				of maturity of 3 years or less. (See IRC section 6621.)
d)
The interest rate shall be
				adjusted on a semiannual basis, on January 1 and July 1, based upon the
				underpayment rate or short-term federal rate going into effect on that January
				1 or July 1 under
IRC section 6621. (UPIA Section 3-2(b))
e) The Department will announce the interest
				rate and the semiannual adjustments of the interest rate to the public by
				publication on the Department's web site (
www.iltax.com
). Taxpayers may also contact the
				Department's Taxpayer Information Division for interest rate
				information.