IRS Interest Rates for the Fourth Quarter of 2026: What the 7% Rate Means for Refunds and Tax Debts

• For the fourth quarter of 2026, the IRS individual overpayment and underpayment interest rate is 7% annually, compounded daily.
• The rate applies from October 1 through December 31, 2026, while interest from earlier quarters remains based on the rate in effect during those periods.
• Interest is separate from penalties. Unpaid tax generally continues accruing interest until the balance is paid, while refund interest depends on timing rules and the IRS's 45-day administrative period.

IRS fourth-quarter 2026 interest rates at a glance

The IRS has confirmed that the interest rate for individual tax overpayments and underpayments will be 7% annually, compounded daily, for the calendar quarter beginning October 1, 2026. The rate applies through December 31, 2026.

That means the same 7% rate generally applies whether you owe the IRS money or the IRS owes you interest on an eligible overpayment. The rate is not a flat fee and does not replace penalties, payment-plan terms, or other tax rules.

The IRS sets these rates quarterly under the Internal Revenue Code. For taxpayers other than corporations, the standard formula is generally the federal short-term rate plus three percentage points.

What 7% compounded daily means for an unpaid IRS balance

If you owe federal tax and do not pay the full amount by the payment deadline, the IRS generally charges interest from the due date until the balance is paid. An extension to file your return does not generally extend the deadline to pay the tax itself.

Because interest compounds daily, each day’s calculation is based on the previous balance plus any interest already added. The actual amount depends on the balance, the number of days involved, payments made, adjustments, and any penalties or other charges on the account.

For example, a $10,000 balance at a 7% annual rate would represent roughly $700 over a full year before considering the effect of daily compounding and changes to the balance. A shorter period would produce a smaller amount, while late payments or added penalties could increase the total.

The 7% interest rate is not the same as the IRS failure-to-pay penalty. Penalties may apply separately, and the IRS can also charge interest on certain penalties. Paying as much as possible sooner can reduce the amount that continues to accrue.

What if you cannot pay the full balance?

Paying the balance in full stops future underpayment interest on the amount paid. If you cannot pay everything immediately, the IRS says you should pay what you can and review its payment-plan options. Interest generally continues on the unpaid portion while a payment plan is in place.

How the 7% rate affects IRS refunds

The IRS may pay interest when it holds an eligible tax overpayment beyond the applicable period. For individuals, the overpayment rate for the fourth quarter of 2026 is also 7% annually, compounded daily.

Refund interest is not automatically paid on every refund. The IRS generally has an administrative period of up to 45 days to issue a refund without paying interest. If interest is due, the starting date is generally the later of the return’s due date, the date a late return was received, the date the IRS received a processable return, or the date the payment was made.

Interest generally stops on the date the IRS issues the refund and interest or offsets the overpayment against another liability. The amount shown on a refund may therefore include tax, refund interest, or both, depending on the circumstances.

Checking a refund’s status can help you see whether the return has been received or processed, but the status tool does not by itself calculate what refund interest may be owed.

Why your refund interest may not equal 7% of the refund

The 7% figure is an annual rate, not a guaranteed payment on the full refund amount. The IRS may use different quarterly rates during a longer delay, and the interest period may begin later than the date you expected if the return was filed late or was not initially processable.

Refund delays caused by missing information, amended returns, special credits, identity verification, or other review issues can also affect when the IRS determines the overpayment and whether interest is payable.

2026 quarterly rates and why earlier periods still matter

The IRS does not retroactively apply the fourth-quarter rate to the entire year. Interest is calculated using the rate in effect during each applicable quarter.

This matters if a tax debt or refund spans more than one quarter. The IRS may apply one rate before October 1 and another rate afterward, rather than using 7% for the entire period.

Estimated tax payments can involve additional rules

People with self-employment income, investment income, rental income, or other income without enough withholding may face estimated-tax requirements. The IRS calculates an underpayment-of-estimated-tax penalty using the amount underpaid, the period of the underpayment, and the applicable quarterly rates.

Estimated-tax calculations can differ from the ordinary interest calculation on a regular unpaid balance. If you receive an IRS notice, use the figures and payment dates shown there rather than relying on a simple annual-rate estimate.

What taxpayers should do next

If you owe the IRS, review your account balance, notice, and payment history before deciding how much to pay. The IRS Online Account can show balances by tax year, payment activity, available notices, and payment-plan information.

If you are expecting a refund, keep records of when you filed, when payments were made, and any IRS correspondence. Those dates can matter if you later need to question the amount of refund interest paid.

The fourth-quarter rate is confirmed for October 1 through December 31, 2026. The IRS will set later quarterly rates separately, so taxpayers with balances extending into 2027 should not assume that 7% will continue after December 31.

Helpful Links

• IRS announcement for fourth-quarter 2026 interest rates – Read the IRS announcement confirming the 7% individual overpayment and underpayment rate for October through December 2026.
• IRS quarterly interest rates – Compare current and prior quarterly rates for individual, corporate, overpayment, and underpayment situations.
• IRS interest rules – Review when the IRS charges underpayment interest, when it pays refund interest, and how payment timing affects accrual.
• IRS payments – Review official ways to pay a tax balance, make estimated payments, or manage a payment plan.
• Online account for individuals – Official page referenced in the article.
• Refunds – Official page referenced in the article.

Frequently Asked Questions

Q. Does the IRS 7% rate apply for all of 2026?

A. No. The 7% rate applies to the fourth quarter, from October 1 through December 31, 2026. Different rates applied during some earlier quarters, and the IRS will set rates for 2027 separately.

Q. Does an IRS payment plan stop interest from accruing?

A. No. Interest generally continues to accrue daily on the unpaid balance while a payment plan is active. Making larger or earlier payments can reduce the balance on which future interest is calculated.

Q. Will the IRS pay interest on every tax refund?

A. No. Refund interest depends on when the overpayment arose and how long the IRS held it. The IRS generally has up to 45 days to issue a refund without paying interest under the applicable administrative-period rules.

Q. Is IRS interest separate from the failure-to-pay penalty?

A. Yes. Underpayment interest and late-payment penalties are separate charges. Both may apply to an unpaid tax balance, and interest may also accrue on certain penalties.