Case Studies
Interest Rates & Return of Overpayments: What the IRS Rates Mean for Late Filers and Refund Seekers
IRS confirmed that interest rates for overpayments and underpayments will stay **constant** going into 2026 – what that means for you if you owe or are due money.
By NomadicTax Research Team • 5-8 min read • December 25, 2025
## Interest Rates Remaining Stable into Q1 2026
The IRS announced that for the calendar quarter beginning **January 1, 2026**, interest rates for overpayments and underpayments will **not change** from current levels. ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai))
Key rates include:
- **7%** per year for individual overpayments; **6%** for corporations.
- **7%** per year for individual underpayments.
- **9%** for **large corporate underpayments**.
- Overpayment portions of corporate refunds exceeding $10,000 stay at the same lowered rate. ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai))
## Why This Matters: Practical Scenarios
| Situation | Impact | Action Example |
|---|---|---|
| **You expect a refund** | No rush—waiting a bit longer doesn’t escalate interest owed back to government. But don’t delay too long if filing late, as timeline still counts. | Sara mailed in her return in late December; because overpayment rates stay at 7%, she knows her refund interest won’t be penalized by increased rates just after New Year. |
| **You owe taxes** | Underpayment penalties won’t get more expensive in Q1 2026—though interest will accrue daily as usual. | John had a tax bill from 2025 due in early 2026; knowing rate is fixed at 7% helps budget his payment. |
| **Large corporate responsibilities** | Corporations facing large underpayments should still keep an eye—rate is already higher and non-individual underpayment dynamics may vary. | A corporation with $1M underpayment could incur interest at 9%; avoiding underpayments or filing extensions may help mitigate. |
## Strategies to Manage Financial Exposure
- **Prepay when possible**: If you expect liability, paying estimated installments before due dates avoids underpayment interest.
- **File returns or extensions on time**: Delays can increase exposure to interest even if rates remain steady.
- **For corporations**: Monitor liabilities carefully, as higher underpayment rates apply.
- **Review refunds**: For sizable refunds, make sure tracking or bank details are correct so interest is not delayed or disrupted.
## Additional Context
These interest rates are computed using the **federal short-term rate plus fixed percentage points**. For instance, overpayments for individuals are short-term rate +3 points; overpayments of corporations are short-term +2 (unless over $10,000) etc. The IRS publishes these rates quarterly via Revenue Rulings. ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai))
Also, remember that in some cases interest rates change based on ownership type (corporate vs individual), amount owed, and whether underpayment vs overpayment.
## Bottom Line
While a flat line on rates may feel like “status quo,” it gives taxpayers certainty entering 2026—key for planning payments, refunds, or avoiding surprises. If you’re expecting to owe, consult with a tax advisor; if expecting a refund, be thorough and prompt in filings, and ensure all forms reflect accurate information.