How the IRS sets its rate
The IRS charges interest on unpaid tax at the federal short-term rate, rounded to the nearest whole percent, plus 3 percentage points. The rate resets every calendar quarter. Here's 2026:
- January through March: 7%
- April through June: 6%
- July through September: 7%
- October through December: 7%
Because it's tied to short-term rates, it tracks the Fed's rate cycle with a lag. It sat at 3% from mid-2020 to early 2022, then peaked at 8% from late 2023 through 2024. The full quarterly table goes back to 2016.
Daily compounding
IRS interest compounds every day. Each day's interest is added to the balance, and the next day's interest is figured on the new total. So a 7% rate costs a little more than 7% over a year: a $10,000 balance at 7% grows by 7.25% over a full year.
This calculator applies the actual rate for each quarter your balance was unpaid, compounds daily, and rounds the way IRS transcripts do. If your dates run past the latest announced rate, it uses the most recent one and says so.
Interest on penalties
Interest on unpaid tax runs from the original due date. But tax isn't the only thing that collects interest. Late-filing and accuracy-related penalties do too, starting from the return's due date, including extensions. File five months late without paying, and the late-filing penalty reaches 22.5% of the tax, so interest is figured on a base 22.5% bigger than the tax alone. Many calculators skip this. Here's why most penalty calculators are wrong.
One exception: the per-owner penalties on late S corporation and partnership returns don't build interest until the IRS sends notice and demand. The S corp and partnership calculator handles those.
Reading the quarter-by-quarter breakdown
After you calculate, open the breakdown under your result. The interest table has one row for each quarter, or part of a quarter, that your balance was unpaid. Each row shows the dates, the number of days, that quarter's annual rate, and the interest it added. The first and last rows are usually partial quarters, since due dates and payment dates rarely land on a quarter's edge.
A note above the table says what the interest was charged on: the tax alone, or the tax plus penalties. Paying over time instead of all at once? The payment plan calculator shows how monthly payments change the interest.
Questions people ask
What is the IRS interest rate right now?
It's 7% a year for October through December 2026. It was also 7% for July through September. The rate resets every quarter.
Does IRS interest compound?
Yes, daily. That's why a $10,000 balance at 7% grows by 7.25% over a full year, not 7%.
Can the IRS waive interest?
Generally no. Interest goes away only when the penalty it accrued on is removed. Interest on the tax itself stays.
Is the estimated tax penalty figured the same way?
No. The estimated tax penalty is simple interest, not compounded, on each quarter's shortfall. Use the estimated tax penalty calculator for that.