On November 13, 2025, the IRS announced that the interest rates charged on tax underpayments (and paid on overpayments) will remain unchanged for the calendar quarter beginning January 1, 2026.

The Rates at a Glance

• For individual taxpayers: 7% per annum, compounded daily, on both overpayments and underpayments.
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• For corporations: Overpayments are taxed at 6%, underpayments at 7%, and large corporate underpayments at 9%.
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• For corporate overpayments exceeding $10,000: the rate is 5%.

Why the Rates Matter

Interest on unpaid taxes starts from the date taxes were originally due until paid in full, and it’s compounded daily. That means even a short delay in paying can cost quite a bit, especially for higher-income taxpayers or business owners.

What This Means for Our Clients:

Here are some scenarios illustrating how these rates can affect different types of clients we serve.

Example: If you are an Online Creator with Late Estimated Taxes

A TikTok creator (age 30) earning $250,000 from sponsorships and merchandise misses one of their quarterly estimated tax payments by six weeks. Because the IRS interest rate for underpayment is 7% compounded daily, the cost of waiting may equal:

• $250,000 × 7% × (6/52) ≈ $2,019 in interest — on top of any penalties.
  If the creator had instead paid the estimate on time, they would avoid that extra cost.

Example: If you are Shopify Store Owner with Overpayment

A Shopify store owner estimates payments too generously and overpays their federal tax by $30,000. Under the IRS rate for overpayments (7%), the refund interest for one year would be:

• $30,000 × 7% = $2,100
  Although a refund is generally good, missing out on even modest interest is a lost opportunity. Better planning could have allowed investing that $30,000 elsewhere during the year.

Example: High-Net-Worth Physician & S-Corp

A Los Angeles doctor receives $650,000 in income from their S-Corporation. They delay final payroll adjustments and owe $100,000 in additional tax at filing time. Because individual underpayment is 7%, and compounded daily, the cost of, say, a 60-day delay would be:

• $100,000 × 7% × (60/365) ≈ $1,150 in interest before even adding possible penalties or state tax interest.
  For business owners like doctors, dentists or high-net-worth individuals, grasping this interest cost is key to cash-flow and tax planning.

Strategic Planning Tips for 2026

✅ 1. Pay as You Go

If you owe significant tax or anticipate a large gain, consider paying early rather than waiting for the due date. The 7% (for individuals) interest rate means time is literally money.

✅ 2. Reconcile Refunds vs. Investment

If you’re overpaying on purpose, ask whether the resulting refund interest (7%) is lower than what you could earn by keeping the funds invested or used elsewhere.

✅ 3. Monitor Corporate Tax Timing

If you own a corporation, recognize the different rates: underpayment at 7% and large corporate underpayments at 9%. Missed deadlines for withholding, payroll tax deposits, or estimated corporate tax can become costly.

✅ 4. Use Proactive Tax Planning

For our e-commerce clients (Shopify, Amazon), creators (YouTube, TikTok), medical practices (doctors, dentists), and other high-income professionals, we recommend:

• Regular cash-flow reviews to avoid surprises
• Quarterly check-ins to ensure estimated taxes, payroll, and filings are on track
• Reserve funds for taxes so there’s no delay in payment

✅ 5. Compound Daily Means Act Now

The daily compounding nature of IRS interest means that even a 30-day delay incurs more cost than one might first assume. Don’t assume interest accrues only monthly or annually — it doesn’t.

Why Velin & Associates, Inc. Should Be Your Tax Partner

At Velin & Associates, Inc., we specialize in working with clients like:

• CPAs for YouTubers, CPA for TikTokers, and CPA for Creators
• E-commerce sellers: Shopify Store CPA, Amazon Business CPA, Online Commerce CPA
• Professionals: Dentist CPA, CPA for Dental Practice, CPA for Doctors, CPA for Medical Practice
• High-net-worth individuals seeking advanced tax planning

We help you stay ahead of rate changes, plan for timing of tax payments, and minimize unnecessary interest cost while keeping you fully compliant.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

💬 Contact us today for a consultation and make sure you’re not paying more than you need to in interest due to delayed tax payments or over-conservative refunds.
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