The IRS currently charges about 0.5% per month in interest on unpaid taxes for individuals, based on an annual underpayment rate of 6% that compounds daily. That is the rate in effect for the second quarter of 2026 (April through June). On a $10,000 balance, interest runs roughly $1.64 per day, or about $49 in the first month, and the amount grows slightly each month because yesterday’s interest is added to the balance that today’s interest is calculated on.
The monthly figure is not fixed. The IRS resets its rate every quarter, and penalties almost always stack on top of interest, so the total monthly cost of carrying a tax debt is usually higher than the interest number alone.
The Current Rate and How the IRS Sets It
For the second quarter of 2026, the underpayment interest rate for individual taxpayers is 6% per year, compounded daily. The rate was 7% for all of 2025 and 8% throughout 2024, so it has been trending downward as short-term federal borrowing rates have dropped.
The IRS doesn’t choose the rate. It is tied by statute to the federal short-term rate, which reflects the average yield on U.S. Treasury securities maturing in three years or less. Each quarter, the IRS takes the federal short-term rate from the first month of that quarter, rounds it to the nearest whole percent, and adds three percentage points. That sum becomes the underpayment rate for the following quarter. For Q2 2026, the federal short-term rate determined in January 2026 was 3%, so the underpayment rate came to 6%. The quarterly rate is published through a Revenue Ruling in the Internal Revenue Bulletin; the Q2 2026 rate was announced in Rev. Rul. 2026-5.
Recent Quarterly Rates
If your balance has been sitting for a while, the IRS applies the rate that was in effect during each quarter rather than a single blended rate. Here is where the individual underpayment rate has been:
- Q2 2026 (Apr–Jun): 6%
- Q1 2026 (Jan–Mar): 7%
- All of 2025 (Q1–Q4): 7%
- All of 2024 (Q1–Q4): 8%
So a tax debt from April 2024 that is still unpaid in May 2026 has been accruing at 8% for all of 2024, 7% for all of 2025 and the first quarter of 2026, and 6% beginning in April 2026.
How Daily Compounding Changes the Monthly Figure
The IRS quotes 6% as an annual rate, but interest accrues and compounds every single day. At 6% annual, the daily rate is roughly 0.0164% (6% divided by 365). Each day, that daily rate is applied to the full outstanding balance, including all interest that has already accrued, and the result is added to what you owe.
On a $10,000 balance, day one is about $1.64 in interest. By the end of the first month, you’d owe approximately $49. Month two is a little more than month one, month three a little more than month two, and so on. Over a few months the compounding effect is modest. Over several years of non-payment, the total interest ends up noticeably higher than if you simply multiplied 6% by the number of years.
There is no grace period and no cap on total interest. The clock stops only when the IRS receives payment in full of the tax, the penalties, and the interest itself.
One point of confusion worth clearing up: interest starts on the original due date of the return, not the extended due date. Filing Form 4868 gives you more time to file, not more time to pay. For most individual returns, interest begins running on April 15 even if you have until October 15 to send in the paperwork.
Penalties Stack on Top of Interest
Interest alone understates the monthly cost of owing the IRS, because penalties usually apply as well, and the IRS charges interest on the penalties too.
The two main penalties for individual taxpayers:
- Failure to file: 5% of the unpaid tax for each month or partial month the return is late, up to a maximum of 25%.
- Failure to pay: 0.5% of the unpaid tax for each month or partial month the balance remains unpaid, also up to 25%.
When both apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay amount. In practice that means a combined 5% per month (4.5% late filing plus 0.5% late payment) for the first five months, then just the 0.5% failure-to-pay penalty going forward.
Once a penalty is assessed and a notice is sent, interest begins compounding daily on the penalty balance in addition to the tax. A $5,000 tax debt that triggers $1,250 in penalties will accrue 6% interest, compounded daily, on the full $6,250.
If the IRS later removes a penalty, through First-Time Abate for taxpayers with a clean compliance history or reasonable-cause relief for serious illness, natural disaster, or reliance on bad professional advice, it also reduces the interest that had been running on that penalty. Requesting penalty abatement when you have grounds for it can meaningfully lower the total balance.
Installment Agreements Don’t Pause Interest
Setting up a payment plan with the IRS does not reduce or pause interest. The 6% rate continues to compound daily on whatever balance remains throughout the life of the agreement.
The one benefit of an installment agreement on the monthly cost side is a lower penalty rate. The failure-to-pay penalty drops from 0.5% per month to 0.25% per month if you filed your return on time and have an approved installment agreement. That cuts the penalty in half but leaves the interest untouched.
The practical takeaway is that paying as much as possible as early as possible is the only reliable way to cut your monthly cost. Every dollar paid stops accruing 6% annual interest and, if a penalty applies, 0.25% or 0.5% per month in penalty charges.
Narrow Ways to Stop Interest
The interest rate itself is not negotiable. It is set by statute and applies to everyone equally. A few specific situations do allow interest to be reduced or stopped.
IRS Errors
The IRS can abate interest if it resulted from unreasonable errors or delays by IRS employees performing routine administrative tasks, such as losing a file, failing to process a payment, or sitting on a case for months. Delays caused by legal disagreements about how much tax you owe do not qualify. To request abatement, file Form 843 identifying the specific IRS error, the period of interest you want abated, and why the delay was unreasonable. Interest abatement is available only for certain tax types, including income taxes and estate taxes, and does not apply to employment taxes or most excise taxes.
Cash Deposits During a Dispute
If you’re disputing a potential tax bill that hasn’t been formally assessed, during an audit for example, you can make a cash deposit with the IRS that stops the interest clock on the date the IRS receives it. The deposit must be accompanied by a written statement identifying it as a deposit and estimating the disputed tax amount. If the dispute goes your way, the IRS returns the deposit. If not, it is applied to your tax bill, and you’ve avoided interest that would have accumulated during the fight.
Disaster Areas and Combat Zones
When the President declares a federal disaster area, the IRS has authority to postpone filing and payment deadlines for affected taxpayers, typically for up to one year, and interest and penalties do not accrue during the postponement period. Military members serving in a designated combat zone or contingency operation have their tax deadlines suspended for the entire period of service, plus any continuous hospitalization from injuries sustained there, plus 180 additional days after leaving the zone or being discharged from the hospital. No interest or penalties accrue on the service member’s tax obligations during that window.