What are current IRS interest rates for underpayments?

1. What the number means: 7% and daily compounding

The 7% figure cited by the IRS is an annual interest rate applied to unpaid federal tax balances and is compounded daily — meaning interest accrues each day on the unpaid balance plus prior days’ interest — so the effective finance cost over time is slightly higher than 7% annual simple interest (IRS quarterly rate page and IRS newsroom release) ^{[5] [1]}.

2. Who pays what: individuals vs. corporations vs. large corporate underpayments

For taxpayers other than corporations (including individuals, partnerships, estates, trusts), the underpayment rate is the federal short‑term rate plus 3 percentage points; for most corporations the overpayment rate is federal short‑term plus 2 points and underpayment plus 3 points, producing the commonly reported 6% corporate rate in early 2025; “large corporate underpayments” — a statutory category — are charged federal short‑term plus 5 points (resulting in 9% for early 2025) ^{[3] [4]}.

3. How the IRS sets these quarterly rates

Under IRC §6621 the IRS determines quarterly interest rates by taking the federal short‑term rate (based on a specified month’s determination), rounding to the nearest whole percent for some calculations, and then adding the statutory spread (e.g., +3 points for underpayments). The agency publishes the computations and Revenue Rulings that fix the rates for each calendar quarter ^{[3] [4]}.

4. Recent trajectory and context (late 2024 into 2025)

In November 2024 the IRS announced a one‑percentage‑point decrease effective Jan. 1, 2025 — cutting the rate from 8% to 7% for individuals and non‑corporate taxpayers — tied to a lower federal short‑term rate determined in October 2024 ^{[1] [4]}. Several tax‑industry outlets and practitioner alerts tracked the change and reiterated the 7% underpayment and 6% corporate numbers for Q1–Q3 2025 ^{[6] [2]}.

5. Practical implications for taxpayers and advisers

A sustained 7% daily‑compounded underpayment cost can be significant for larger balances and may exceed some investment returns; tax firms advised reassessing whether to pay balances now or compare the IRS rate to alternative borrowing/investment rates when deciding whether to carry tax debt ^{[7] [8]}. Law and accounting sources emphasize that interest accrues on tax, penalties and prior interest until paid, increasing long‑term costs ^[5].

6. Where to check for the current quarter and calculations

The authoritative source for current and prior quarterly rates, the IRS posts a running table and quarterly newsroom releases and Revenue Rulings — these pages list the specific percentages, statutory basis, and compounding method ^{[5] [1] [3]}. For official legal detail and definitions (e.g., “large corporate underpayment”), consult the Revenue Rulings and Internal Revenue Bulletins referenced by the IRS ^[3].

7. Limits of available reporting and alternative viewpoints

Available sources uniformly report the IRS figures and statutory methods; independent commentators (accounting firms, tax blogs) emphasize planning responses but do not dispute the IRS math ^{[6] [7] [8]}. If you are asking about a specific period after mid‑2025 or a special program (e.g., estimated‑tax rules or customs duty rates tied to IRC §6621), available sources do not mention any differing figures beyond the quarters cited and you should check the IRS quarterly page or the latest Revenue Ruling for updates ^{[5] [3]}.

8. Quick takeaway and action items

If you owe federal tax now, interest charged at 7% (daily compounding) applied to unpaid tax and penalties increases your balance continuously; consider paying promptly or consulting a tax professional to evaluate payment plans, abatement options, or whether borrowing at a lower interest cost makes sense — and verify the current quarter’s published IRS rate before making decisions ^{[5] [1] [7]}.