IRS Interest Rates Hold Steady for Q1 2026: What Taxpayers Should Know

The IRS has announced that interest rates will remain unchanged for the first quarter of 2026, giving taxpayers clarity as they plan for the new year. According to IR-2025-112, the rates for overpayments and underpayments will stay at the levels set in late 2025, continuing into the quarter beginning January 1, 2026.

Stable rates mean individuals and businesses can approach the 2026 filing season with predictable calculations for refunds, amended returns, estimated taxes and corporate liabilities.

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IRS Interest Rates for January 1 – March 31, 2026

The IRS confirmed the following rates, all compounded daily:

• 7% for individual overpayments

• 6% for corporate overpayments

• 4.5% for the portion of a corporate overpayment exceeding $10,000

• 7% for underpayments

• 9% for large corporate underpayments

The corrected figure, 4.5% on corporate overpayments over $10,000, reflects the proper calculation under the Internal Revenue Code.

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How the IRS Calculates Quarterly Interest Rates

IRS interest rates are set using formulas under Internal Revenue Code §6621, applied each quarter.

The base input is the federal short-term rate (determined monthly), with additional percentage points added depending on the category:

• Individual overpayments: Federal short-term rate + 3

• Corporate overpayments: Federal short-term rate + 2

• Corporate overpayments > $10,000: Federal short-term rate + 0.5

• Underpayments: Federal short-term rate + 3

• Large corporate underpayments: Federal short-term rate + 5

For Q1 2026, the formula used the October 2025 federal short-term rate, which rounded to 4%, leading to the finalized interest rates listed above.

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Why These Rates Matter for 2026 Tax Planning

1. Estimated Tax Penalties

Underpayment penalties accrue at the 7% rate for individuals and corporations. Even taxpayers expecting refunds can still owe interest if estimated payments were too low during the year.

2. Refund Interest on Amended or Corrected Returns

If the IRS owes you money, refund interest accrues at:

• 7% for individuals

• 6% for corporations

• 4.5% for the portion of corporate refunds over $10,000

That reduced corporate rate is particularly relevant for large amended returns or audit adjustments.

3. Corporate Underpayment Exposure

Corporations with substantial tax underpayments, generally those exceeding $100,000, face the 9% large corporate underpayment rate, which can significantly impact cash flow and audit strategy.

4. Section 6603 Deposits

Taxpayers using §6603 deposits to stop interest on potential underpayments earn interest at 4%, consistent with the underlying short-term rate.

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Looking Ahead

The IRS will continue updating interest rates on a quarterly basis. While Q1 2026 rates remain unchanged, future adjustments will depend on shifts in federal interest rates and economic conditions.

For now, taxpayers, corporations and advisors have a clear, stable set of rates to use for planning estimated payments, forecasting refund interest and assessing audit exposure throughout early 2026.

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How Margen Helps You Navigate IRS Interest Rate Rules

IRS interest rate rules affect refunds, amended filings, underpayment calculations, and corporate audit exposure. Margen helps you apply these rules to your specific situation by answering questions like:

"How much interest will I owe if I underpaid in 2024 but settle in 2026?"

"Does my company qualify for the 4.5% corporate refund interest rate?"

"What rate applies if I amend multiple prior-year returns?"

Margen calculates the correct interest automatically, using the latest IRS bulletins and revenue rulings, so you can plan ahead with confidence.