The IRS has announced that interest rates on tax overpayments and underpayments will remain unchanged for the fourth quarter of 2026.
The rates will apply from October 1 through December 31, 2026. For individual taxpayers, the most important number to know is 7%.
IRS Interest Rates for Q4 2026
For the fourth quarter of 2026, the IRS interest rates are:
| Type of Balance | Interest Rate |
|---|---|
| Individual tax underpayments | 7% |
| Individual tax overpayments | 7% |
| Corporate tax overpayments | 6% |
| Corporate overpayments exceeding $10,000* | 4.5% |
| Large corporate underpayments | 9% |
*The 4.5% rate applies to the portion of a corporate overpayment exceeding $10,000.
For individuals, both underpayments and overpayments will continue to accrue interest at 7% annually, compounded daily.
What Does the 7% IRS Interest Rate Mean?
If you owe federal taxes and don’t pay the balance by the applicable due date, the IRS generally charges interest on the unpaid amount.
At a 7% annual rate, a $10,000 unpaid tax balance would generate roughly $700 of interest over a year if the balance remained unchanged. Because IRS interest is compounded daily, the actual amount would be slightly higher.
And interest isn’t necessarily the only additional cost.
Depending on the circumstances, taxpayers with unpaid taxes may also face penalties. This means waiting to address an IRS balance can make the total amount owed grow over time.
What About Estimated Taxes?
The 7% underpayment rate is also relevant to taxpayers who don’t pay enough estimated tax during the year.
Revenue Ruling 2026-15 confirms that the 7% underpayment rate also applies when determining the addition to tax for estimated tax underpayments during the fourth quarter of 2026.
This can be especially important for self-employed taxpayers, business owners, investors, and others whose income isn’t fully covered by paycheck withholding.
What If the IRS Owes You Money?
Interest can work in the taxpayer’s favor as well.
When an individual taxpayer has an eligible tax overpayment, the IRS interest rate for the fourth quarter is also 7%.
However, this doesn’t mean every tax refund automatically earns interest. Whether the IRS pays interest on a refund depends on the circumstances and timing of the refund.
How Does the IRS Determine These Rates?
IRS interest rates aren’t permanently fixed.
Under the Internal Revenue Code, the IRS determines its interest rates quarterly. For individual taxpayers, the overpayment and underpayment rates are generally based on the federal short-term rate plus three percentage points.
For the fourth quarter of 2026, the applicable federal short-term rate used in the calculation was 4%, resulting in the 7% individual underpayment and overpayment rates.
The IRS reviews the rates every quarter, so they may increase, decrease, or remain unchanged in future quarters.
Why This Matters for Taxpayers
A 7% interest rate makes unresolved tax balances more expensive over time.
If you know you owe taxes but can’t pay the entire balance immediately, ignoring the balance generally doesn’t stop interest from accumulating. Understanding your balance, available payment options, and any applicable penalties can help you determine how quickly the amount may grow.
Taxpayers who make quarterly estimated payments should also review their withholding and estimated tax payments before year-end. If your income has increased during 2026—particularly from self-employment, investments, or other income without withholding—you may want to determine whether your payments are keeping pace with your expected tax liability.
The Bottom Line
The IRS interest rate for individual tax underpayments and overpayments will remain at 7% for October through December 2026.
For taxpayers who owe the IRS, the key takeaway is simple: an unpaid tax balance can become more expensive the longer it remains outstanding.
Reviewing your tax situation before the end of the year can help you identify potential underpayments early and avoid unnecessary surprises when it’s time to file.
Source: Internal Revenue Service, IR-2026-98, Interest rates remain the same for the fourth quarter of 2026, Aug. 21, 2026; Revenue Ruling 2026-15.
Disclaimer: This article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules can vary based on individual circumstances. Consult a qualified tax professional regarding your specific situation.
Leave a Reply