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Valor Tax Relief Team
Professional Tax News & Analysis
Summary
The IRS is maintaining the same interest rates for Q4 2025 (effective October 1–December 31, 2025). For individuals, the interest rate on both overpayments and underpayments remains at 7% (daily compounding). Corporate rates remain segmented, including a 9% rate for Large Corporate Underpayments (LCU).
Current IRS Interest Rates (Q4 2025)
Individuals
- • Overpayments: 7% (daily compounding)
- • Underpayments: 7% (daily compounding)
Corporations
- • Underpayments: 7% (daily compounding)
- • Overpayments: 6% (daily compounding)
- • Overpayment > $10,000: 4.5% (daily compounding)
- • Large Corporate Underpayment (LCU): 9% (daily compounding)
How the IRS Calculates Rates
Rates are set quarterly based on the federal short‑term rate, plus a margin (generally three percentage points for most taxpayers). Corporate rules add distinctions for large corporate underpayments and large overpayments.
Daily Compounding Matters
Interest accrues every day, so delaying payment—even briefly—can meaningfully increase balance growth over time.
Financial Implications
If You Owe
- • 7% daily‑compounded underpayment can add up quickly
- • Consider an Installment Agreement
- • For hardship, review CNC status
If You’re Due a Refund
- • Individuals: 7% on overpayments
- • Corporations: 6% on overpayments; 4.5% above $10K
- • Accuracy and timely filing still matter
Planning Strategies
Pay Sooner
Daily compounding rewards prompt action. Even partial payments reduce interest.
Choose a Plan
Set up an Installment Agreement that fits your cash flow.
Consider Relief
If eligible, explore an Offer in Compromise to settle for less.
Have an IRS Balance Accruing Interest?
We’ll help you choose the most cost‑effective strategy and stop the balance from snowballing.
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