Interest on Underpayment of Estimated Taxes. You are required to pay your income tax liability throughout the year. You can make your payments through employer withholding, installment payments of estimated taxes, or a combination of both. If you did not pay in advance at least 90% of your income tax liability (after applying your credits) or 100% of your prior year income tax liability (after applying your credits), you may have to pay interest on the underpayment of your estimated tax.
Effective January 1, 2022, the annual interest rate assessed on outstanding balances is 3 percent. This rate also applies to underpayment of estimated taxes. Interest is calculated daily.