Interest rates remain the same for third quarter of 2025

IR-2025-59, May 12, 2025

The Internal Revenue Service announces that interest rates will stay the same for the third quarter of 2025 — that’s from July 1 to September 30, 2025.

What Are These Interest Rates For?

These rates apply when:

• You owe the IRS and haven’t paid your taxes in full (underpayments).
• The IRS owes you money because you paid too much in taxes (overpayments).

For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily.
Here is a complete list of the interest rates (July – Sept 2025):

• 7% — if you overpaid your taxes (for individuals).
• 6% — if a corporation overpaid.
• 4.5% — for any part of a corporate overpayment over $10,000.
• 7% — for underpayments (taxes owed but not fully paid).
• 9% — if a corporation underpaid a large amount.

Why Does This Matter?

These interest rates affect how much extra:

• You’ll owe if you don’t pay your taxes on time.
• You’ll get back if the IRS owes you money and takes a while to pay you.

For example:
• If you owe $1,000 in taxes and don’t pay by the deadline, the IRS will charge 7% annual interest, added daily until it’s paid.
• If the IRS owes you a refund and delays paying it, they’ll pay you 7% interest on that amount.

How Are These Rates Decided?

The IRS bases these rates on something called the federal short-term rate (FSR), and adds a few percentage points depending on the situation (individuals, corporations, large payments, etc.). They recalculate them every three months.

Basic Formulas

For Individuals:
• Underpayment rate (you owe IRS):
FSR + 3%
• Overpayment rate (IRS owes you):
FSR + 3%

For Corporations:
• Underpayment rate:
FSR + 3%
• Overpayment rate:
FSR + 2%

Special Cases for Corporations:
• Large underpayments (big tax debts):
FSR + 5%
• Overpayment over $10,000:
FSR + 0.5%

Example (Let’s say the FSR is 7% this quarter):

Individuals:
• You owe the IRS → 7% + 3% = 10% interest
• IRS owes you → 7% + 3% = 10% refund interest

Corporations:
• Owe IRS → 7% + 3% = 10%
• IRS owes them → 7% + 2% = 9%
• Large tax debt → 7% + 5% = 12%
• Refund over $10,000 → 7% + 0.5% = 7.5%

Summary

• If you owe the IRS, they charge you interest.
• If they owe you, they pay you interest.
• The interest rate depends on who you are (individual or corporation) and how big the amount is.
• Everything is based on the federal short-term rate, which changes every 3 months.

These interest rates are computed from the federal short-term rate determined during April 2025.

Revenue Ruling 2025-11 PDF announcing the rates of interest will appear in Internal Revenue Bulletin 2025-23, dated June 2, 2025.

Need Help Understanding How This Affects You?

We’re here to help you understand how these rules might affect your taxes or refunds — especially if you’re dealing with penalties, payment plans, or large balances.

As trusted CPAs in Los Angeles, Velin & Associates, Inc. provides expert accounting services in Los Angeles and personalized guidance from an experienced tax accountant Los Angeles professionals. Whether you’re looking for a reliable tax advisor Los Angeles, or need the insight of top-tier accountants Los Angeles, we’re here to support you.

Contact Velin & Associates, Inc. today:

📞 323-902-1000
📧 dmitriy@losangelescpa.org
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