A tax balance left unpaid past its due date keeps growing every single day, not just every quarter, and the growth rate for the final three months of 2026 will not change from where it sat over the summer. The Internal Revenue Service has confirmed that the rate charged on individual underpayments — and paid out on individual overpayments — holds at 7% a year for the quarter that opens October 1, 2026. That number decides how quickly either side of the ledger moves, whether a household is carrying an unresolved balance with the agency or waiting on a refund that has not yet arrived. Compounding, not just the sticker rate, is what turns a modest gap into a larger one over months of delay.
Why the Individual Rate Holds at 7% Through December
The announcement came in IR-2026-98, issued August 21, 2026, stating that interest rates would remain the same for the calendar quarter beginning October 1. For individuals, both the underpayment rate — what is owed on a balance still due — and the overpayment rate — what the agency pays on money it is holding past a refund’s normal processing time — stay at 7% a year, compounded daily.
Individual rates are not set arbitrarily each quarter. Under the formula in the IRS’s fourth-quarter announcement, the rate equals the federal short-term rate plus three percentage points, recalculated from the short-term rate determined during July 2026. The full rate table for the fourth quarter appears in Revenue Ruling 2026-15, published ahead of its appearance in Internal Revenue Bulletin 2026-36, dated August 31, 2026.
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How Daily Compounding Changes the Math
A 7% annual rate sounds like a fixed cost, but the daily-compounding mechanism means it is not applied once at year’s end. Under the statute governing compounded interest%20OR%20(granuleid:USC-prelim-title26-section6622)&f=treesort&edition=prelim&num=0&jumpTo=true), the agency assesses interest on the previous day’s balance plus whatever interest has already accrued, then repeats that calculation every day the balance remains open. Over a single quarter that produces a slightly larger total than a simple annual rate would suggest, and the gap widens the longer a balance goes unresolved.
The mechanism runs in both directions. A refund the IRS is late releasing earns the same daily-compounding treatment at the overpayment rate, which is why the underpayment and overpayment figures for individuals are identical this quarter — both are pegged to the same short-term rate plus three points.
The Same Rate Has Applied for Most of 2026
Individual filers paid or earned 7% in the first quarter of 2026, saw the rate dip to 6% for the second quarter, then watched it climb back to 7% for the third quarter and now the fourth. The IRS’s quarterly interest rate history shows the full run: a brief dip tied to a lower federal short-term rate in the spring, then a return to the higher figure that has held since midyear. For a household comparing a bill from earlier in the year against one arriving now, the rate itself is unchanged from three months ago, but not from six. The pattern makes clear that fourth-quarter rates track short-term borrowing costs from the prior summer, not a fixed annual figure.
What a $5,000 Balance Would Cost Over the Quarter
The compounding effect is easiest to see with a concrete example. A household carrying a $5,000 unpaid balance for the entire fourth quarter — all 92 days from October 1 through December 31 — would see that balance grow by roughly $89 in interest alone under daily compounding at 7%. A flat, non-compounded calculation using the same rate and time period would produce a slightly smaller number, since it does not account for interest accruing on interest already added to the balance. The same math runs in reverse for an overpayment sitting with the agency past normal processing time — a $5,000 refund held for the same 92 days would earn interest under the same 7% formula, since the individual overpayment and underpayment rates match this quarter.
What Corporations and Larger Balances Pay Instead
The fourth-quarter rates are not uniform across every category of taxpayer. Corporations owe 7% on underpayments, the same as individuals, but the corporate overpayment rate sits a point lower at 6%, since the formula for corporate refunds subtracts a percentage point from the individual formula. A narrower category — the portion of a corporate overpayment above $10,000 — earns interest at 4.5%, and large corporate underpayments carry a steeper 9% rate. All of those figures come from the same revenue ruling that sets the individual rate, since one document covers every category for the quarter.
Interest Keeps Accruing Separately From Any Penalty
The 7% figure is strictly an interest charge, authorized under Internal Revenue Code Section 6621%20OR%20(granuleid:USC-prelim-title26-section6621)&f=treesort&edition=prelim&num=0&jumpTo=true), and it runs independent of whatever separate penalties may also apply to a balance. Interest continues to accrue on the full unpaid amount until the balance reaches zero, with no cap tied to how long the debt has been outstanding. For anyone tracking what a delayed payment or a delayed refund is actually costing or earning, the fourth-quarter figure published in IR-2026-98 is the number that applies through the end of December. That figure sits in the newsroom release the agency dated August 21, 2026, and nothing published since has changed it.
Tracking a Refund Notice That Cites Interest
The same 7% rate that governs an unpaid balance also determines what the IRS owes when a refund sits unprocessed past normal timing, and a delayed refund often arrives with a notice that cites an interest figure without much explanation of what generated it. A notice referencing an adjusted refund amount, a lost check, or a return still working through a manual review leaves most recipients without a clear next step for resolving it.
The 13-page kit includes a notice decoder for interpreting that kind of letter, the refund-trace steps for filing Form 3911, a refund status tracker spreadsheet for following a claim to resolution, and an explanation of the 3-year refund deadline.
See the notice decoder and refund-trace steps in The IRS Refund Recovery Kit.
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