IRS: Individual and Corporate Underpayment Interest Rates Staying the Same for Q4 2025

The Internal Revenue Service (IRS) has announced that the federal individual and corporate underpayment interest rates are staying the same for the fourth quarter of 2025. This means that they have remained unchanged for the entirety of the year. What do you need to know if you owe interest to the IRS? Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

The IRS’ Underpayment Interest Rates for Past-Due Tax Liabilities

The IRS’ underpayment interest rates apply to all past-due tax-related liabilities. As the IRS explains, “[w]e charge interest when a taxpayer has an unpaid liability comprised of tax, penalties, additions to tax, or interest.” Interest begins to accrue immediately, and it accrues daily until a taxpayer has either fully satisfied its outstanding liability or reached an alternate resolution with the IRS.

For the full 2025 calendar year, the IRS’ underpayment interest rates are as follows:

• Individual Underpayments: 7 percent
• Small Corporate Underpayments: 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.

Underpayments Can Trigger Both Interest and Penalties

In addition to triggering interest, underpayments can also trigger penalties. Examples of IRS-imposed penalties for individual and corporate taxpayers include:

• Accuracy-related penalties
• Dishonored check penalties
• Failure to deposit penalties
• Failure to pay penalties
• Underpayment of estimated tax penalties

The IRS imposes a failure-to-file penalty as well. While specific penalty amounts vary, IRS penalties can also continue to accrue over time, and, as noted above, the IRS charges interest on unpaid penalties. As a result, when taxpayers are behind on their federal filing and/or payment obligations, their outstanding liability can increase substantially—and they can end up owing far more than they would have had they paid on time.

Resolving Outstanding Tax Debts with the IRS

While paying the full amount due is one option, individual and corporate taxpayers will often have other options for resolving their outstanding tax debts with the IRS as well. A few examples of potential options include:

• Filing an appeal (or challenging the IRS’ determination of liability in the U.S. Tax Court)
• Negotiating an offer in compromise
• Negotiating a settlement agreement

In all cases, it is critical to make an informed decision about how best to proceed, and taxpayers should work with experienced tax counsel to make an informed decision before their delinquency triggers an audit, investigation or collection action. If you have questions about your options for resolving your (or your business’) outstanding federal tax debt, we encourage you to contact us promptly for more information.

Schedule a Confidential Consultation with Virginia Tax Lawyer Kevin E. Thorn

To learn more about the options for resolving your (or your business’) outstanding federal tax debt, contact us today. Call 703-752-3752 or tell us how we can reach you online to schedule a confidential consultation with Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.