Tax news: IRS holds Q4 2026 interest rates steady at 7%
In IR-2026-98 on August 21, 2026, the IRS kept interest rates on individual tax overpayments and underpayments at 7% for the fourth calendar quarter of 2026.
The news: In tax news, IRS officials announced on August 21, 2026 (IR-2026-98) that interest rates on tax overpayments and underpayments would stay unchanged for the calendar quarter running October 1 through December 31, 2026. Individuals will continue to pay 7% a year on unpaid taxes and receive 7% on overpayments, compounded daily.
Why it matters: These rates determine how quickly an unpaid tax bill grows and how much the IRS adds to a delayed refund. At 7%, carrying a balance owed to the IRS is a significant cost, and it comes on top of any failure-to-pay penalties.
By the numbers (Q4 2026):
- 7%: individual overpayments
- 7%: individual underpayments
- 6%: corporate overpayments
- 4.5%: portion of a corporate overpayment exceeding $10,000
- 9%: large corporate underpayments
How it’s set: For taxpayers other than corporations, the rate equals the federal short-term rate plus 3 percentage points. Corporations pay the short-term rate plus 3 points on underpayments, plus 5 points on large underpayments, and receive the short-term rate plus 2 points on overpayments, or plus 0.5 points on the portion above $10,000. The fourth-quarter rates are based on the federal short-term rate determined in July 2026 and are formally published in Revenue Ruling 2026-15, in Internal Revenue Bulletin 2026-36 dated August 31, 2026.
The big picture: Because the formula is tied to short-term market rates, IRS interest moves only when those rates shift enough to change the rounded result. Holding at 7% means no relief for people with balances due, but also no reduction in the interest added to late refunds.
Who feels it most: Taxpayers who underpaid estimated taxes, those on extension who owe, and anyone with an open balance from a prior year. On the other side, people waiting on a delayed refund continue to earn 7% interest, which partly offsets the wait.
What’s next for households: Anyone who filed an extension and still owes should consider paying the balance as soon as possible to limit interest. Those who cannot pay in full can look at IRS payment options, keeping in mind that interest continues to accrue on unpaid amounts. The next quarterly rate announcement will set rates for the first quarter of 2027.
Prepared with AI assistance from public sources and reviewed under our editorial policy. Not investment advice.