IRS Interest Rates Q4 2026: What the IRS Announced
Quick answer: The IRS announced that interest rates will remain the same for the calendar quarter beginning Oct. 1, 2026. For individuals, the rate on both overpayments and underpayments will be 7% per year, compounded daily (IR-2026-98, Aug. 21, 2026).
The IRS interest rates for Q4 2026 (Oct. 1–Dec. 31, 2026) are unchanged from the prior quarter: 7% per year compounded daily for individual overpayments and underpayments, 6% for corporate overpayments, 4.5% on corporate overpayment portions exceeding $10,000, and 9% for large corporate underpayments, per Rev. Rul. 2026-15.
By Adham Abadier, CPA — Licensed in California, License #158599. In this article, we break down the IRS interest rates Q4 2026 announcement, who each rate applies to, and what Inland Empire business owners should do before the quarter begins on October 1. If you carry a balance with the IRS or are reviewing your estimated tax position, our tax and accounting services for Inland Empire businesses team can help you plan around these rates.
⚠️ The Oct. 15 extended filing deadline — date reminder
Form 1040 individual returns on extension (plus C-Corp Form 1120 on extension and FinCEN 114 FBARs) are due Oct. 15, 2026. Balances unpaid after filing accrue interest at the quarterly rate — currently 7% per year for individuals, compounded daily. Filing but not paying stops the late-filing penalty clock, not the interest clock.
Key Takeaways
- Interest rates remain unchanged for the quarter beginning Oct. 1, 2026, per IRS news release IR-2026-98 (Aug. 21, 2026).
- For individuals: 7% per year, compounded daily, on both overpayments and underpayments.
- Corporate rates: 6% for corporate overpayments generally; 4.5% on the portion of a corporate overpayment exceeding $10,000; 7% for corporate underpayments; and 9% for large corporate underpayments.
- The rates are computed from the federal short-term rate determined during July 2026, which was 4% (rounded, daily compounding) under Rev. Rul. 2026-13.
- The rates are announced in Revenue Ruling 2026-15, appearing in Internal Revenue Bulletin 2026-36, dated Aug. 31, 2026.
- The same 7% underpayment rate applies to estimated tax underpayments under IRC §§6654 and 6655 for the quarter beginning Oct. 1, 2026.
- Interest is set quarterly under IRC §6621, so rates can change again on Jan. 1, 2027.
IRS Interest Rates Q4 2026: The Complete Rate List
The IRS announced on Aug. 21, 2026 (IR-2026-98) that interest rates will remain the same for the calendar quarter beginning Oct. 1, 2026. Here is the complete list as published by the IRS:
| Rate Category | Q4 2026 Rate (per year, compounded daily) |
|---|---|
| Individual overpayments (payments exceeding the amount owed) | 7% |
| Individual underpayments (taxes owed but not fully paid) | 7% |
| Corporate overpayments (general) | 6% |
| Portion of a corporate overpayment exceeding $10,000 | 4.5% |
| Corporate underpayments (general) | 7% |
| Large corporate underpayments | 9% |
| Interest on §6603 deposits | 4% |
These rates apply to amounts bearing interest during the calendar quarter beginning Oct. 1, 2026, and ending Dec. 31, 2026, per Revenue Ruling 2026-15.
How the Rates Are Calculated
Under IRC §6621, the overpayment and underpayment rates are built from the federal short-term rate. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. For corporations, the underpayment rate is generally the federal short-term rate plus 3 percentage points, and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points, and the rate on the portion of a corporate overpayment exceeding $10,000 is the federal short-term rate plus one-half (0.5) of a percentage point.
For Q4 2026, the federal short-term rate determined during July 2026 — published in Revenue Ruling 2026-13 and effective beginning Aug. 1, 2026 — is 4% when rounded to the nearest full percent based on daily compounding. That 4% base is why the individual rate lands at 7% (4% + 3 points), the general corporate overpayment rate at 6% (4% + 2 points), the large corporate underpayment rate at 9% (4% + 5 points), and the large-corporate-overpayment-excess rate at 4.5% (4% + 0.5 points).
Under Notice 88-59, the IRS uses the federal short-term rate based on daily compounding, consistent with IRC §6622, which subjects these rates to daily compounding. Daily compounding means interest accrues on interest, so the effective annual cost slightly exceeds the stated nominal rate.
IRS Interest Rates Q4 2026: Why These Rates Matter for Unpaid Balances and Refunds
Interest runs in both directions. If you owe tax and don’t pay in full, underpayment interest accrues from the due date of the return until the balance is paid. If the IRS owes you a refund, overpayment interest accrues on the excess.
Interest Is Separate From Penalties
Interest on underpayments is not a penalty — it is compensation for the government’s time value of money, set by statute under IRC §6621. Penalties (such as failure-to-file or failure-to-pay penalties) are separate charges that can apply alongside interest. Interest generally continues to accrue until the underlying tax and, in most cases, the penalties are paid off.
For Moreno Valley and Riverside County business owners already juggling payroll, sales tax remittances, and estimated payments, a 7% daily-compounded federal rate on top of any penalties is a real carrying cost. Paying down an IRS balance before Oct. 1 doesn’t change the rate — it simply shortens the period over which interest accrues.
Carrying an IRS balance at 7% compounded daily while also trying to close the books for Q3? Interest is accruing whether or not you’ve filed your extension yet. Adham Abadier, CPA, will personally review your balance, your payment options, and what the October 15 deadline means for your bottom line.
📞 (951) 223-1826 | Book a free 30-min diagnostic →
How the Q4 2026 Rates Compare to Earlier 2026 Quarters
Interest rates moved during 2026, which is why verifying the current quarter’s rate matters. Under Revenue Ruling 2026-5, for the calendar quarter beginning April 1, 2026, the underpayment rate was 6% for both corporations and non-corporations, the non-corporate overpayment rate was 6%, and the corporate overpayment rate was 5% — a decrease from the previous quarter, per the Federal Register notice published by U.S. Customs and Border Protection.
By the quarter beginning July 1, 2026, rates had risen: Revenue Ruling 2026-10 (Internal Revenue Bulletin 2026-22, May 26, 2026) set the rates at 7% for overpayments (6% for corporations), 7% for underpayments, 9% for large corporate underpayments, and 4.5% on corporate overpayment portions exceeding $10,000.
The Q4 2026 rates (Rev. Rul. 2026-15) hold steady at those same levels. The driver is the federal short-term rate: it was 3% for the April quarter and 4% as determined in July 2026.
What the 7% Rate Means for Estimated Tax Underpayments
Here’s a point many taxpayers miss: the quarterly §6621 rate doesn’t just apply to balances due with a return. Under IRC §§6654(a)(1) and 6655(a)(1), the underpayment rate established under §6621 applies in determining the addition to tax for failure to pay estimated tax. Rev. Rul. 2026-15 confirms that the 7% rate also applies to estimated tax underpayments for the fourth calendar quarter beginning Oct. 1, 2026.
A Practical Illustration (All Inputs Supported)
Suppose a sole proprietor in Temecula underpays an estimated tax installment during the quarter beginning Oct. 1, 2026. The applicable underpayment rate under §§6621 and 6654 is 7% per year, compounded daily, for that quarter. Interest factors for daily compound interest at annual rates of 4.5%, 6%, 7%, and 9% are published in Tables 14, 17, 19, and 23 of Rev. Proc. 95-17. The exact dollar addition depends on the underpaid amount, the number of days, and the applicable factor from those tables — a calculation we perform for clients when reviewing estimated tax exposure.
For the many family-owned distribution, construction, and professional-services firms across the Inland Empire, this is one more reason accurate quarterly estimated tax calculations matter. Clean, current numbers from monthly bookkeeping make it far easier to project taxable income and avoid underpayment exposure in the first place.
Interest on §6603 Deposits
If a taxpayer makes a deposit under IRC §6603 to stop the running of interest on a potential underpayment, the rate of interest paid on those deposits is 4% for the fourth calendar quarter of 2026, per Rev. Rul. 2026-15 (citing §6603(d)(4)).
What Q4 2026 Rate Stability Means for Your Planning
Rate stability through Dec. 31, 2026 gives you a known cost of carrying an IRS balance for the rest of the year. A few practical points:
- Confirm your rate category. Individuals pay 7% on over- and underpayments; corporations face different rates on overpayments (6% general, 4.5% on amounts exceeding $10,000) and 9% on large corporate underpayments.
- Remember quarterly resets. Under IRC §6621(b), the rate is determined on a quarterly basis from the federal short-term rate for the first month of each calendar quarter. A new rate takes effect Jan. 1, 2027, and the IRS typically announces it in late the prior quarter.
- File on time even if you can’t pay. Filing stops late-filing penalty exposure; interest at 7% (for individuals) continues on any unpaid balance regardless.
- Check refund positioning. If you’re due a refund, the 7% overpayment rate applies to individuals — the same rate as underpayments for non-corporate taxpayers this quarter.
- Watch the Jan. 1 announcement. The Q4 rates were computed from the federal short-term rate determined during July 2026; the Q1 2027 rates will be computed from the rate determined during October 2026.
One caution: the IRS notes that news items may not be updated after release, so always verify the current rates before relying on them — rates can change each quarter.
IRS Interest Rates Q4 2026: Frequently Asked Questions
What are the IRS interest rates for Q4 2026?
For the calendar quarter beginning Oct. 1, 2026, the rates per Rev. Rul. 2026-15 are: 7% for individual overpayments and underpayments, 6% for corporate overpayments, 4.5% on the portion of a corporate overpayment exceeding $10,000, 7% for corporate underpayments, 9% for large corporate underpayments, and 4% on §6603 deposits. All rates are per year, compounded daily.
When do the new IRS interest rates take effect?
The rates announced Aug. 21, 2026 apply to amounts bearing interest during the calendar quarter beginning Oct. 1, 2026, and ending Dec. 31, 2026. Under IRC §6621, interest rates are determined quarterly, so a new rate applies beginning Jan. 1, 2027.
How is the IRS interest rate calculated?
The rate is the federal short-term rate plus a statutory add-on under IRC §6621: plus 3 percentage points for non-corporate overpayments and underpayments, plus 2 points for corporate overpayments, plus 5 points for large corporate underpayments, and plus 0.5 points on corporate overpayment portions exceeding $10,000. For Q4 2026, the federal short-term rate determined in July 2026 was 4% (rounded, daily compounding), yielding the 7%, 6%, 9%, and 4.5% rates respectively.
Does the 7% rate apply to estimated tax underpayments?
Yes. Under IRC §§6654 and 6655, the §6621 underpayment rate applies in determining the addition to tax for failure to pay estimated tax. Rev. Rul. 2026-15 confirms the 7% rate applies to estimated tax underpayments for the quarter beginning Oct. 1, 2026.
Is IRS interest compounded daily?
Yes. Under IRC §6622 and Notice 88-59, the quarterly interest rates are subject to daily compounding, and the IRS publishes daily compound interest factors in Rev. Proc. 95-17 for the applicable annual rates.
Do I still owe interest if I file an extension?
An extension of time to file is not an extension of time to pay. If you file by the extended deadline but don’t pay in full, underpayment interest continues to accrue on the unpaid balance — at 7% per year compounded daily for individuals during Q4 2026.
Can the IRS interest rate change again before the end of 2026?
No. The rates in Rev. Rul. 2026-15 apply for the entire quarter beginning Oct. 1, 2026, through Dec. 31, 2026. A new rate determined from the federal short-term rate for October 2026 takes effect for the first calendar quarter of 2027.
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Adham Abadier, CPA, will personally review your unpaid balances, estimated tax position, and the October 15 extension deadline, and map out exactly where the 7% quarterly rate affects you — before the next rate reset on Jan. 1, 2027.
Work With a CPA Who Tracks These Rates for You
The IRS interest rates for Q4 2026 are unchanged — but quarterly resets mean today’s 7% individual rate is never guaranteed to be next quarter’s rate. If you’re a Moreno Valley, Riverside, or greater Inland Empire business owner carrying an IRS balance, facing an estimated tax underpayment, or simply want your estimated payments calculated correctly the first time, our full-service CPA practice serving the Inland Empire can help. Call Catalyst CPA Corporation at (951) 223-1826 or book a free 30-minute strategy call today.
About the Author
By Adham Abadier, CPA — California CPA License #158599
Adham Abadier, CPA, is the founder of Catalyst CPA Corporation, serving small businesses and family-owned firms in Moreno Valley and throughout the greater Inland Empire. He focuses on small-business tax planning, monthly bookkeeping, and helping owners manage IRS balances and quarterly estimated tax obligations.
Credentials: QuickBooks Gold ProAdvisor, AICPA member, and California Society of CPAs (CalCPA) member.
Phone: (951) 223-1826 | Email: adham@catalyst-cpa.com
Office: 13114 Yellowwood St, Moreno Valley, CA 92553
Disclaimer
This article is for general informational purposes only and reflects IRS guidance published as of the dates cited above (IR-2026-98, Rev. Rul. 2026-13, and Rev. Rul. 2026-15). Interest rates are set quarterly and can change, and news items may not be updated after release, so always verify current rates before relying on them. This content does not constitute tax, legal, or accounting advice for your specific situation, and reading it does not create a CPA-client relationship. Consult a licensed CPA about your circumstances before acting on any information in this post.
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