|
|
Frequently Asked Questions
1. When does interest start running?2. Is Inter-Est Y2K compliant?3. What is the difference between the federal.it4 interest table and the federal2.it4 interest table?4. Current Inflation Rates5. Recent Federal Interest Rate Changes
When does interest start running?This question comes up when the due date falls on a weekend or holiday. People get confused because if the due date is Saturday and the payment is made on Monday, it is not treated as a late payment (Sec. 7503 of the IRC). This question was answered by Rev. Rul. 74-235 which states that interest runs from the prescribed date for filing. Instead of moving the due date to Monday, when we compute interest we just pretend that the payment on Monday was made on Saturday. Is Inter-Est Y2K compliant?Our programs have no problem in this regard. At present we store all dates as Julian Date Numbers. The routines we used until 6/15/98 were accurate from March 1, 1900 to February 28, 2100. Our old routines were based upon an algorithm used by Hewlett-Packard in some of their calculator routines. While not accurate past 2/28/2100, they are quite satisfactory for a current tax program. Our tax tables, etc. will not work for dates of death prior to 1952 so there was no need to enter dates prior to 3/1/1900. We have obtained some routines that are accurate between 1583 A.D. and 3300 A.D. and have started using these routines. The new routines are taken from the W3LIB FORTRAN package. These routines were published on the internet as part of the National Centers for Environmental Prediction Y2K Project. This project also supports the National Weather Service and other parts of the National Oceanic and Atmospheric Administration. We have tested these new routines against our old routines. Both sets of routines get the same answer within the range of the old routines. This gives us confidence that the new routines are at least as good as our old ones. Our input routines input these numbers in a manner different from our storage method. (No one wants to input a Julian Day Number.) The current input routine accepts years as entered if the number entered is greater than 1900. If the year entered is less than 1900, 1900 is added if the input number is greater than 50 and 2000 is added if the input number is less than 50. This makes two digit input years satisfactory from 1950 to 2050. This should be satisfactory. We can update this input routine as we approach the year 2050. This would not affect the stored dates, as they will continue to be stores as Julian Day Numbers. Some actions of Inter-Est are dependent upon the system date of the computer (to initialize interest period dates, etc.) but these can be manually overridden if they are in error. Therefore Inter-Est should run satisfactorily even if the computer system date is off, but some additional input action might be required to override some dates that are automatically inserted. A few return dates are entered and stored in a different format (i.e.: gift tax return for Worksheet TG). These should not present any problem. What is the difference between the federal.it4 interest table and the federal2.it4 interest table?When the IRS went to compound interest from simple interest, we developed an interest table to compute compound interest with daily compounding accurately. When the IRS came out with Rev. Proc. 83-7 we found that we did not get the same answer and this Rev. Proc. The interest tables in Rev. Proc. 83-7 had a truncation error that caused the factors to be a little low. We developed a new method of computing interest factors that duplicated the math error in Rev. Proc. 83-7. This interest table was called federal2 to distinguish it from the more accurate table in our original federal interest table. We did not eliminate the old table because some states might use the federal rates but not use the new federal method. This problem was eliminated in 1995 when the IRS issued Rev. Proc. 95-17. This revenue procedure dropped the comptation method with the truncation error built in and changed to the standard accurate method used in our federal interest table. The change was effective for all computations made after 1/1/95. Starting with that date, all computations should stop using the federal2 interest table and switch the the federal interest table. We have left the federal2 table in the package because someone might need it to verify an old computation. Without the old table you could not tell if a slight difference was an input error or the difference in the interest tables. Just remember not to use this table for normal computations. Current Inflation RatesThe inflation rate factors we have inserted into Inter-Est to date are: Recent Federal Interest Rate ChangesRemember to keep you interest tables current. The last few federal rate changes
are:
Cammack Computations Co. P. O. Box 725, Cleburne, TX 76033 Voice: 1 (800) 594-5826 Email: cammack@inter-est.com Price Information |
