IRS announces interest rate update
The Internal Revenue Service announced an interest rate update for the quarter starting Oct. 1.
Each quarter, the IRS sets interest rates for overpayments and underpayments based on federal short-term determined by the U.S. Treasury. For individuals, underpayment and overpayment rates is the federal short-term rate for the first month of the previous quarter plus 3 percentage points, compounded daily.
The formula is more complicated for corporations.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
For the quarter starting Oct. 1, the interest rate will remain the same.
For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily. Other newly announced rates are:
- 7% for overpayments by individuals (payments made in excess of the amount owed)
- 6% for overpayments by corporations
- 4.5% for the portion of a corporate overpayment exceeding $10,000
- 7% for underpayments (taxes owed but not fully paid)
- 9% for large corporate underpayments.
The interest rates are the federal short-term rate determined during July 2026.