IRS Announces Interest Rates for Payments Due in the Second Quarter

The interest rate charged by the agency gets compounded on a daily basis.

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The U.S. Internal Revenue Service (IRS) announced details of interest rates it will charge for underpayment and overpayment of dues for the second quarter of this year, opting to keep it at the same level as the prior quarter.

When taxpayers do not pay taxes, penalties, and other charges by the due date, the IRS charges an underpayment interest. When they pay more taxes than what’s owed, the agency pays back interest on the overpaid amount. The rate of interest for both underpayments and overpayments is determined every quarter. For the second quarter of 2025 beginning April 1, interest rates will remain unchanged for individuals and corporations, the IRS said in a March 6 statement.

For individuals, the rate of underpayment and overpayment interest continues at 7 percent.

For corporations, underpayments have an interest rate of 7 percent, and for large corporate underpayments (LCUs), the rate is 9 percent. LCU is applicable when the underpaid taxes for a period exceed $100,000.

For corporate overpayments, the rate is set at 6 percent. The rate on the portion of overpayments exceeding $10,000 is lower, at 4.5 percent.

“Interest will accrue on any unpaid tax, penalties, and interest until the balance is paid in full,” the IRS said.

“The interest rates we charge and pay on overpayments and underpayments are compounded daily. This means the interest is assessed on the previous day’s balance plus the interest.”

Interest on individual taxpayers is calculated by adding the federal short-term rate plus three percentage points for both underpayments and overpayments.

Interest on a corporation is calculated by adding three percentage points to the federal short-term for underpayment of taxes. For tax overpayments, two percentage points are added instead of three. The calculation differs for LCU and overpayments exceeding $10,000.

The interest rate for the second quarter is calculated by considering the federal short-term rate during January 2025, which was determined to be at 4 percent.

Interest Adjustments, 2025 Updates

Taxpayers can dispute the interest they owe with the IRS. The agency may agree to reduce it, but “only if the interest is applied because of an unreasonable error or delay by an IRS officer or employee.” Neither the taxpayer nor their representative should have contributed to the delay or error.

In case a taxpayer is able to reduce the amount of tax owed, such as by filing an amended return, the IRS automatically lowers the interest due.

For overpayment of taxes, if a taxpayer believes the IRS has not paid sufficient interest, they can file an informal claim or complete and send Form 843 for the IRS to consider allowing additional overpayment interest, the agency said. The applicant must mention the reason for requesting additional interest as well as their computation on the matter.

Meanwhile, the IRS has made updates to the 2025 tax year income tax brackets. The base threshold of all seven brackets has been raised for the year.

For instance, in the 2024 tax year, the lowest 10 percent tax was applied to individuals who made $11,600 or less, which has been raised to $11,925 or less in 2025.

Similarly, the highest tax rate of 37 percent is now applicable to those making more than $626,350, up from $609,351 in 2024.

As a result of these adjustments, “taxpayers will not be adversely impacted by inflation in determining their tax obligations,” Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, told The Epoch Times in an email.

“Also, taxpayers with the same income in 2025 as in 2024 will see their taxes lowered due to expanded tax rate brackets, a higher standard deduction, and other inflation-adjusted provisions.”

The IRS kicked off the tax year 2024 filing season on Jan. 27, with the final deadline to submit taxes set on April 15. The agency is expecting more than 140 million individual tax returns to be filed this time around.

“Taxpayers residing in a federally declared disaster area may have additional time to file and pay federal taxes,” the agency said. For instance, tax deadlines for victims of California wildfires have been shifted to Oct. 15, including the April 15 deadline to file the 2024 returns.

Zachary Stieber contributed to the report.