For the second quarter of 2026, the IRS charges interest on unpaid taxes at roughly 0.5% per month, based on an annual rate of 6% that compounds daily. So the answer to how much interest the IRS charges per month is: about half a percent of your balance, growing a little each day because yesterday’s interest gets added to the balance before today’s interest is figured. The rate was 7% throughout 2025 and 8% throughout 2024, so if your debt spans those years, each quarter carries its own rate.1Rev. Rul. 2026-5
What 6% a Year Actually Costs You Each Month
The IRS quotes an annual rate, but interest accrues and compounds every day. Each day, the IRS recalculates interest on your entire outstanding balance, including interest that has already been added, and tacks the new amount on.
At 6% a year, the daily rate is about 0.0164% (6 divided by 365). On a $10,000 balance, day one costs about $1.64. By the end of the first month, you would owe roughly $49 in interest. Each following month runs a little higher because the balance itself is a little higher. Over a few months the compounding effect is modest. Over several years of non-payment, it adds up to noticeably more than a simple 6% per year would.
One narrow exception: the penalty for underpaying quarterly estimated taxes uses the same 6% rate as its starting point, but it is not compounded daily.
Recent Quarterly Rates
The IRS adjusts the underpayment rate every quarter and announces it through a Revenue Ruling. If you owe for a period covering multiple quarters, the IRS applies each quarter’s rate to that quarter, not a single blended rate for the whole span.
- Q2 2026 (April–June): 6%
- Q1 2026 (January–March): 7%
- All four quarters of 2025: 7%
- All four quarters of 2024: 8%
A higher rate applies to C corporations that owe more than $100,000 for a tax period. That surcharge does not reach individuals or pass-through entities no matter how much they owe.
When the Clock Starts
Interest begins on the original due date of the return, which for most individuals is April 15. Filing Form 4868 for an automatic extension buys you time to file, not time to pay. If you extend to October 15 and end up owing, interest has been running since April 15.
The clock keeps running every day until the IRS receives full payment of the tax, all penalties, and all accrued interest. There is no grace period, no cap, and no natural stopping point. Paying in full is the only thing that turns it off.
Amended Returns
If you file Form 1040-X for a prior year and it shows more tax owed, interest runs from that prior year’s original due date, not from the date you filed the amendment. A 2023 amendment filed in 2026 that adds $5,000 in tax carries interest all the way back to April 15, 2024.
Missed Estimated Payments
The estimated tax penalty is figured separately for each installment date. You can owe a penalty on a short Q1 payment even if you overpay in Q4 and finish the year with a refund. Each installment’s penalty runs from its due date until the earlier of the payment date or the return’s due date.
Penalties Stacked on Top
Interest is only part of what a late balance costs. Two flat-rate penalties usually apply, and both are separate from the 6% interest:
- Failure to file: 5% of the unpaid tax for each month or partial month the return is late, capped at 25%.
- Failure to pay: 0.5% of the unpaid tax for each month or partial month the balance is unpaid, also capped at 25%.
When both apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay amount, so the combined charge is 5% per month (4.5% plus 0.5%) for the first five months, then 0.5% per month after that.
The IRS also charges interest on penalties. Once a penalty is assessed and noticed, the 6% daily-compounded interest applies to the penalty balance too, not just the underlying tax. A $5,000 tax debt with $1,250 in penalties accrues interest on the full $6,250.
Penalty Relief Pulls Interest Down With It
Penalties can sometimes be removed, and interest almost never can. But when a penalty is reduced or removed, the IRS automatically reduces the interest that had been compounding on that penalty. That is why First-Time Abate and reasonable-cause requests are worth making whenever you have grounds: illness, disaster, reliance on bad professional advice, or a clean compliance history.
Payment Plans Do Not Pause Interest
An approved installment agreement does not slow the 6% interest at all. Interest keeps compounding daily on the remaining balance for the life of the plan.
What an installment agreement does is cut the failure-to-pay penalty in half, from 0.5% per month to 0.25% per month, as long as the return was filed on time. That is a real savings, but it only touches the penalty. The interest keeps running at the full rate.
The practical takeaway: when you owe, the best financial move is to pay as much as you can as early as you can, even if you can’t clear the whole balance. Every dollar paid immediately stops carrying 6% annual interest and the ongoing failure-to-pay penalty.
Narrow Ways to Reduce the Interest
The 6% rate is set by statute. You can’t negotiate it. A few specific situations, though, can cancel interest or stop it from accruing.
IRS Errors
The IRS can abate interest that resulted from unreasonable errors or delays by its employees on routine administrative tasks: losing a file, failing to process a payment you made, sitting on a case without acting. Legal disagreements about how much tax you owe do not qualify. Only procedural mistakes do. You request abatement by filing Form 843, identifying the specific error, the period, and why the delay was unreasonable. This relief applies only to tax types that require a notice of deficiency, such as income tax and estate tax. It is not available for employment taxes or most excise taxes.
Cash Deposits During a Dispute
If you are contesting a potential tax bill that has not yet been formally assessed, such as during an audit, you can send the IRS a cash deposit that stops the interest clock on the disputed amount as of the date the IRS receives it. If you win the dispute, the deposit comes back. If you lose, it gets applied to the bill and you have avoided interest that would have accrued during the fight. The deposit must come with a written statement identifying it as a deposit and estimating the disputed tax.
Disaster Areas
When the President declares a federal disaster area, the IRS can postpone filing and payment deadlines for affected taxpayers, generally for up to a year. Interest and penalties do not accrue during the postponement. The IRS announces the covered areas and new deadlines through news releases.
Combat Zone Service
Military members serving in a designated combat zone or contingency operation have their tax deadlines suspended for the whole period of service, plus any continuous hospitalization for injuries from that service, plus 180 days after leaving the zone or hospital. No interest or penalties accrue during that entire window.