The Internal Revenue Service announced on August 21, 2026 that the interest rate it charges on unpaid taxes and pays on delayed refunds will stay at 7 percent for the calendar quarter beginning October 1, 2026, the same individual rate that has applied for most of the year. That rate compounds daily, so it behaves less like a flat penalty and more like a running balance that grows the longer a bill or a refund sits unresolved. For a retiree still waiting on a refund the IRS took months to issue, or carrying an unpaid balance from an earlier tax year, this quarterly announcement is the number that determines how fast that balance moves in either direction over the next three months.
How the Rate Is Set Each Quarter
Interest rates on IRS overpayments and underpayments are recalculated every quarter under the Internal Revenue Code rather than reset once a year the way many benefit figures are. For individuals, the rate for both overpayments and underpayments is the federal short-term rate plus 3 percentage points, and that short-term rate is pulled from the market in the month before the new quarter begins, according to the IRS’s announcement of the fourth-quarter rates. Because the short-term rate used for this announcement was determined during July 2026 and came in essentially unchanged from the prior quarter, the resulting individual rate held at 7 percent rather than moving up or down.
The formal legal notice that makes the rate official is Revenue Ruling 2026-15, which is set to appear in Internal Revenue Bulletin 2026-36, dated August 31, 2026, according to the published revenue ruling. The plain-language news release most taxpayers see is a summary of that ruling rather than a separate decision, and the bulletin version is what tax professionals cite when advising a client on exactly how a balance or a delayed refund will be calculated for the quarter.
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What 7 Percent Means for Individuals vs. Businesses
For individuals, the IRS pays and charges the same 7 percent rate whether the taxpayer overpaid or underpaid, compounded daily. Corporations are treated differently: a normal corporate overpayment draws 6 percent, but the portion of a corporate overpayment above $10,000 draws only 4.5 percent, while a corporate underpayment draws 7 percent, the same rate that applies to an individual. Large corporate underpayments, generally balances that remain unpaid well after a formal notice and demand for payment, draw the steepest rate in the schedule at 9 percent.
All of these figures, along with the rates for every prior quarter, are tracked on the IRS’s quarterly interest rates page, which the agency updates each time a new rate is announced. Anyone trying to estimate how much a tax debt has grown, or how much interest is owed on top of a delayed refund, can use that page to confirm the exact rate that applied during any specific quarter rather than relying on a single announcement in isolation.
Why the Rate Held Steady Instead of Dropping
Because the individual rate is pegged directly to the federal short-term rate rather than set by a fixed annual formula, it can move every three months if market conditions shift enough. This quarter, the underlying short-term rate stayed close enough to its prior level that the IRS arrived at the same 7 percent figure for another consecutive quarter, which the agency’s release reflects by stating the rates “remain the same” rather than announcing a change. That also means the rate is not guaranteed to hold for the first quarter of 2027, since it will be recalculated again from scratch using data available later this year.
For anyone who owes the IRS money or is waiting on a refund, the practical takeaway is that nothing changes for now, but the rate itself remains higher than what most savings accounts or short-term CDs currently pay. That gap is part of why tax professionals often describe an unpaid IRS balance as one of the more expensive debts a taxpayer can carry, and why a delayed refund, while frustrating to wait on, at least continues to accrue interest at a rate most everyday bank accounts cannot match.
Why Retirees Making Estimated Payments Should Watch This Number
The underpayment rate is not only relevant to someone who missed a filing deadline. Retirees who make quarterly estimated tax payments on pension income, required minimum distributions, or investment gains are held to the same rate when the IRS calculates a penalty for paying too little during the year, since the underpayment interest rate is the mechanism behind that calculation. A retiree who underestimates a fourth-quarter payment tied to income received between October and December would have any shortfall measured against this same 7 percent figure.
Because the rate is published quarterly rather than once a year, it can catch someone off guard if they set an estimated payment schedule in January and never checked whether the underlying rate changed by the time a later quarter’s payment came due. Checking the current rate before sending an estimated payment, rather than assuming it matches an earlier quarter, is a small step that can avoid an unnecessary penalty calculation months later.
This article was produced with AI assistance and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
