Notes on Calculations

This section describes the codes used by Instant Interest and the calculations by which interest is derived.

Coding Structure for Calculation Method

The Calculation Method follows the following convention:

   SIM        means that simple interest was applied against the amount of tax due;

   ANN        means the interest is compounded annually;

   DAI        means the interest is compounded daily.

   MON means the interest is compounded monthly;

   QTR        means the interest is compounded quarterly;

The formulas used for the different methods of calculation are as follows:

   SIM - Simple

   Note: See the section below on the Coding Structure for Basis of Calculating Days for Exceptions

  ANN - Annual

         Same as simple except that interest is compounded every January 1.

  QTR - Quarterly

+

  MON - Monthly

+

  DAI - Daily

Number of days in calendar year

Certain tax jurisdictions base their interest calculations on calendar years of other than 365 days. By default, Instant Interest calculates daily interest based on the number of days actually in the calendar year (365 or 366). In cases where C&C Software is aware of a tax jurisdiction using a different number of days for a calendar year, Instant Interest will display this on the State Rate Display (View) Screen.

Coding Structure for Basis of Calculating Days

By default Instant Interest calculates daily interest by dividing the tax jurisdiction's annual rate by the number of days in the tax jurisdiction's calendar year. Some jurisdictions, however, figure interest as follows:

 Interest rate applied =

In cases where C&C Software is aware of this practice, the State Rate Display (View) Screen will show `M/D' under the Basis column.

Notes on Federal Interest Calculation

Special logic is included in Instant Interest to make the calculation of interest on federal corporate income taxes as accurate as possible. Since January 1, 1983, federal interest rates have been based upon a daily rate calculated as:

 truncated to 9 decimal places.

Prior to 1995, this rate was compounded daily and then truncated to 9 decimals each day that it is compounded. Since 1995, only the final compounded rate is so truncated.