If you are hunting for an IRS interest calculator, the good news is that the number you want comes out of a formula the IRS publishes openly. Interest on unpaid federal tax is charged at the federal short-term rate plus 3 percentage points for individuals, it is compounded daily, and the rate is reset every quarter.

For the quarter beginning October 1, 2026, that underpayment rate is 7% for non-corporate taxpayers. So the quick version: take the unpaid balance, apply 7% a year, compounded daily, for every day the balance sits there. Below is the actual math, the penalties that run alongside the interest (they usually cost more than the interest does), and the narrow circumstances in which any of it comes back off.

How the IRS calculates interest

Three rules drive the whole calculation, and all three come straight from the IRS.

  • The rate is tied to the federal short-term rate. For underpayments, the IRS charges the federal short-term rate plus 3 percentage points for non-corporate taxpayers. Large corporate underpayments are charged the federal short-term rate plus 5 percentage points.
  • The rate changes quarterly. The IRS sets interest rates every quarter and publishes them in the Internal Revenue Bulletin. A new rate does not reach backwards – as the IRS puts it, changes “don’t affect the interest rate charged for prior quarters or years.”
  • Interest compounds daily. Each day’s interest is assessed on the previous day’s balance plus the interest already added. That is why a balance left alone for two or three years grows faster than a simple annual percentage would suggest.

The quarterly reset is the detail most estimates get wrong. A balance that has been outstanding since 2023 has not accrued at one rate – it has accrued at whatever rate applied in each quarter along the way.

The current IRS interest rate

For the fourth quarter of 2026 (October 1 through December 31), the IRS has set these underpayment rates, published in Internal Revenue Bulletin 2026-36:

  • Non-corporate underpayments: 7%
  • Corporate underpayments: 7%
  • Large corporate underpayments: 9%

Interest also runs the other way in certain situations. The IRS publishes overpayment rates on the same quarterly schedule, in the same table, so if you are asking whether the IRS pays interest as well as charges it, the answer is that it does in defined circumstances – and the rate for that is set quarterly too. You can check both in the IRS’s quarterly interest rates table.

How to estimate IRS interest yourself

Step 1: Start with the unpaid tax, not the notice total

The balance printed on an IRS notice usually bundles tax, penalties and interest together. Interest and penalties are calculated on the underlying tax, so separate the tax out first. Your IRS account transcript breaks the balance into its parts.

Step 2: Use the right rate for each quarter

If the debt spans several quarters, split the time period at each quarter boundary and apply that quarter’s published rate to each segment. Using today’s rate for the whole period will understate or overstate the figure depending on which way rates have moved.

Step 3: Compound daily, not annually

For a single quarter at a single rate, the daily-compounded balance is approximately the starting balance multiplied by (1 + rate divided by 365), raised to the power of the number of days. Carry the result forward as the opening balance for the next quarter and repeat.

Step 4: Remember that penalties accrue interest too

The IRS charges interest on penalties as well as on tax. The date interest starts varies by penalty type, which is one more reason a hand calculation lands close rather than exact.

Treat anything you work out this way as an estimate. The IRS’s own computation is the one that governs, and it appears on your notice and on your account transcript.

The penalties usually cost more than the interest

People searching for an IRS interest calculator are often really trying to understand a balance that grew much faster than 7% a year would explain. The penalties are normally why.

Failure to pay

The failure-to-pay penalty is 0.5% of the unpaid tax for each month or part of a month it stays unpaid, and it will not exceed 25% of the unpaid tax. If you filed your return on time as an individual and you have an approved payment plan, the IRS reduces that penalty to 0.25% per month for the duration of the plan.

Failure to file

The failure-to-file penalty is far steeper: 5% of the tax due for each month or partial month the return is late, up to a maximum of 25%. If a return is more than 60 days late, a minimum penalty applies – for 2025 returns, the lesser of $510 or 100% of the underpayment. Filing on time matters even when you cannot pay.

When both penalties apply

In a month where both run, the failure-to-file penalty is reduced by the failure-to-pay penalty for that month. After five months the failure-to-file penalty maxes out, but the failure-to-pay penalty keeps accruing – alongside interest – until the balance is cleared.

Does a payment plan stop the interest?

No. The IRS is explicit that interest and some penalty charges continue to be added until the balance is paid in full. What a plan does change is the failure-to-pay rate, which drops to 0.25% per month while an approved plan is in effect for a taxpayer who filed on time.

The current setup fees are worth knowing before you apply, because how you apply changes what you pay:

  • Short-term plan (paying in 180 days or less): $0 setup fee, online or by phone, mail or in person.
  • Long-term plan with direct debit: $29 applying online, $107 by phone, mail or in person.
  • Long-term plan without direct debit: $69 applying online, $178 by phone, mail or in person.
  • Revising an existing plan: $6 online, $89 by phone, mail or in person.

Individuals can apply online for a long-term plan owing $50,000 or less in combined tax, penalties and interest, or for a short-term plan owing less than $100,000. Fee waivers and reimbursements are available to individual taxpayers with adjusted gross income at or below 250% of the applicable federal poverty level, claimed on Form 13844. Businesses cannot apply online and must call the IRS.

When the interest and penalties have outgrown the tax itself, the question stops being arithmetic and starts being strategy – see our IRS tax debt relief overview.

Can IRS interest be removed?

Interest on the underlying tax is not waived the way a penalty can be – it is the statutory cost of holding money that was due. Penalties are a different matter, and because the IRS charges interest on penalties, penalty relief carries interest relief with it.

The IRS offers three routes to penalty relief: first-time penalty abatement and administrative waiver, reasonable cause, and statutory exception. Relief may be available where you “tried to comply with tax laws but were unable due to circumstances beyond your control.” And when it is granted, the IRS states plainly: “We’ll automatically reduce or remove the related interest if any of your penalties are reduced or removed.”

Note the word related. What comes off is the interest attached to the penalties that were removed, not the interest on the tax itself. Whether any particular set of facts supports relief is a case-by-case question, and the IRS decides it.

Frequently asked questions

How much interest does the IRS charge?

For non-corporate taxpayers, the underpayment rate is the federal short-term rate plus 3 percentage points, compounded daily. For the quarter beginning October 1, 2026, that works out to 7%.

What is the current IRS interest rate?

7% for non-corporate and corporate underpayments in the fourth quarter of 2026, and 9% for large corporate underpayments. Because the IRS resets rates quarterly, check the current quarter before relying on any figure.

Is there a free IRS penalty and interest calculator?

The authoritative figure is the IRS’s own: it appears on your notice and on your IRS account transcript, already computed. Any outside calculator – including the method set out above – produces an estimate, because it cannot see every date and adjustment on your account.

Does the IRS charge interest on penalties?

Yes. The IRS charges interest on penalties, and the date from which interest starts varies by penalty type.

How much interest does the IRS charge on unpaid taxes?

The same underpayment rate applies whether the balance came from a return you filed, an amended return or an examination. What changes the total is how long it has been outstanding and which quarterly rates applied during that time.

Does the IRS ever pay interest to me?

In defined circumstances, yes. The IRS sets overpayment interest rates quarterly, on the same schedule and in the same published table as the underpayment rates.

Before you rely on the number

Check it against the notice itself. The notice or letter number sits in the top right corner, and the IRS keeps a searchable database of what each one means. If a letter does not turn up in that search, or if something about it looks off, the IRS directs taxpayers to call 800-829-1040 before acting on it – a useful habit given how often IRS correspondence is imitated.

An interest figure is only ever one input. The more useful question is usually which resolution path fits the balance, the timeline and the facts – and that is a conversation, not a calculation. If you want a second set of eyes on an IRS balance, get in touch with our team.

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