The Internal Revenue Service has announced interest rates for tax underpayments and overpayments for the fourth quarter of 2026, keeping them at 7 percent for individual taxpayers.
When taxpayers do not pay taxes, penalties, and other charges on time, the IRS charges interest on the underpayment. Conversely, when taxpayers pay more tax than they actually owe, the agency pays interest on the overpayment. Those rates are determined quarterly. The 7 percent rate for overpayments and underpayments takes effect Oct. 1, according to the IRS.
For corporations, the overpayment rate is 6 percent, while the rate on the portion of a corporate overpayment exceeding $10,000 is 4.5 percent. The underpayment rate is 7 percent, the same as for individual taxpayers, while large corporate underpayments carry a 9 percent rate. All of the rates are unchanged from the third quarter.
According to an April 26 IRS update cited by The Epoch Times, interest on underpayments begins accruing on the due date of the amount owed and continues until the balance is paid in full.
Interest on overpayments is calculated based on factors including the tax filing due date, payment dates, and when the IRS receives a return in a format it can process.
Taxpayers can file claims if they believe the amount of overpayment interest they received was insufficient.
The rates were announced based on the federal short-term rate for July, which was determined to be 4 percent.
For taxpayers other than corporations, the overpayment and underpayment rates are calculated by adding 3 percentage points to the federal short-term rate.
For corporations, the underpayment rate is the federal short-term rate plus 3 percentage points. The corporate overpayment rate adds 2 percentage points, except for the portion of an overpayment exceeding $10,000, for which only 0.5 percentage point is added.