IRS Interest Rates Remain Unchanged for Q4 2025

The IRS’ interest rates remain unchanged for Q4 2025. These are the interest rates that apply to both overpayments and underpayments—so they are pertinent to a wide range of taxpayers. In this article, New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, provides an overview of the IRS’ current interest rates and what taxpayers need to know if they are behind on their federal tax obligations.

Federal Tax Interest Rates Stay Consistent Throughout 2025

Since dropping on January 1, the IRS’ interest rates have stayed consistent throughout 2025. For all four calendar quarters, the IRS’ interest rates have remained as follows:

• Individual Overpayment Rate: 7 percent
• Corporate Overpayment Rate: 6 percent (4.5 percent for overpayments exceeding $10,000)
• Underpayments (Individual and Corporate): 7 percent
• Large Corporate Underpayments: 9 percent

A “large corporate underpayment” is defined as an underpayment of tax exceeding $100,000. This applies to C-corporations only. Overpayment interest only begins to accrue if the IRS fails to issue a refund within 45 days of when it is due.

Interest on Underpayments Begins to Accrue (and is Due) Immediately

Underpayment interest, however, begins to accrue immediately. If a taxpayer misses a quarterly or annual tax payment, this automatically triggers liability for interest (and any relevant penalties). This is true even if the taxpayer timely requests an extension, as IRS extensions apply to filing obligations only.

The IRS makes this clear, stating, “interest on underpayments start[s accruing] on the due date of the amount you owe and will continue to accrue until the balance is paid in full.” As the IRS also makes clear, “[i]nterest is due as it accrues.”

Filing and Payment Deficiencies Can Also Trigger Significant Penalties

Along with immediately triggering liability for interest, underpayments can also immediately trigger significant penalties. Filing deficiencies can trigger immediate penalties as well. Penalties also accrue interest daily while they remain unpaid.

How Can Taxpayers Prevent Their Liability from Continuing to Grow?

With all of this in mind, how can taxpayers prevent their liability from continuing to grow? While one option is to simply pay what the IRS says they owe, this will not be the best option in all cases. From disputing their tax liability to negotiating settlement agreements and offers in compromise, taxpayers with outstanding obligations may have a variety of other (and better) options available.

If you (or if your business) is in debt to the IRS, you should consult with an experienced New Jersey tax lawyer about your options—and you should do so sooner rather than later. If the IRS opens an audit or investigation, this can eliminate options that would otherwise be available, and it can lead to additional liability as well.

Request a Confidential Consultation with New Jersey Tax Lawyer Kevin E. Thorn

Do you need to know more about your options for mitigating your (or your business’) liability to the IRS? If so, we encourage you to get in touch. To request a confidential consultation with New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 201-842-7696 or contact us confidentially online today.