IRS Maintains Tax Interest Rates at 7% for Q4 2025

The IRS has announced that interest rates for tax overpayments and underpayments will remain stable for the fourth quarter of 2025, with individual taxpayers facing a 7% rate for both categories, compounded daily. Corporate rates vary, with a 6% rate for overpayments, 4.5% for overpayments exceeding $10,000, and 9% for large corporate underpayments. These rates are determined quarterly based on the federal short-term rate plus set percentage points, as outlined in Revenue Ruling 2025-18 and computed from July 2025's federal short-term rate. The IRS also clarified that refunds for overpayments are issued without interest if paid within 45 days, after which interest accrues, and penalties for underpayments can be reduced or waived due to circumstances such as illness, disaster, or age. Taxpayers can request credits to be applied to future taxes, and specific rules exist to avoid penalties if certain payment thresholds are met. These updates provide taxpayers and corporations with important guidance on managing tax payments and refunds in the upcoming quarter.