Between January 1, 1985 and December 31, 1988, the interest rate for tax-motivated underpayments on Federal income tax is 20% higher than on underpayments for other reasons. If you select Option C and the State ID is `FED’ you will see the following prompt:
If you select “Yes” the interest on underpayments will be calculated at 120% of the normal interest rate beginning January 1, 1985. If you select “No” the interest will be calculated at the normal rate. If you select “Cancel” the data entry form will be redisplayed without calculating and interest schedule.