Underpayment rate by quarter (individuals)
| Year | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2026 | 7% | 6% | 7% | TBA (Nov 2026) |
| 2025 | 7% | 7% | 7% | 7% |
| 2024 | 8% | 8% | 8% | 8% |
| 2023 | 7% | 7% | 7% | 8% |
| 2022 | 3% | 4% | 5% | 6% |
| 2021 | 3% | 3% | 3% | 3% |
| 2020 | 5% | 5% | 3% | 3% |
| 2019 | 6% | 6% | 5% | 5% |
| 2018 | 4% | 5% | 5% | 5% |
| 2017 | 4% | 4% | 4% | 4% |
| 2016 | 3% | 4% | 4% | 4% |
Source: IRS quarterly interest-rate announcements (irs.gov/payments/quarterly-interest-rates). The same rate applies to individual overpayments (refund interest) and to ordinary corporate underpayments.
How the rate is set
By statute (IRC §6621), the underpayment rate is the federal short-term rate, rounded to the nearest whole percent, plus 3 points, redetermined every calendar quarter. That's why it tracks the Fed cycle at a lag: 3% through the low-rate 2021 era, 8% at the 2024 peak, 7% today.
Corporate cases add wrinkles: corporate overpayments earn less (short-term + 2, and only +0.5 above $10,000), and "large corporate underpayments" over $100,000 accrue hot interest at short-term + 5 after an IRS notice.
Why "7%" is more than 7%
IRS interest compounds daily (IRC §6622). A $10,000 balance at a nominal 7% grows by 7.25% over a full year. And because interest also accrues on late-filing and accuracy penalties from the return's original due date, real balances climb faster than the headline rate suggests. Unlike penalties, interest has no cap and generally can't be waived (removing an underlying penalty via abatement also removes the interest on that penalty).