How IRS interest works
Separate from any penalty, the IRS charges interest on unpaid tax under IRC §6621. The rate is the federal short-term rate plus three percentage points, compounded daily and reset every quarter. Daily compounding means the balance grows a little every day the tax is outstanding.
Because the rate changes quarterly, an exact figure requires applying each quarter's rate to the days it was in effect. The calculator uses a single rate you supply for a fast screening estimate — close enough to understand the scale, not a substitute for the IRS's own computation on your transcript. Current and historical rates are published on the IRS's quarterly interest rates page.
You generally cannot get interest on tax waived. But when a penalty is abated, the IRS refunds the interest it charged on that penalty too. That is why the fastest way to recover interest is usually to remove the penalty underneath it — the part our practice handles.
Reduce the balance, reduce the interest
Every dollar of penalty removed is a dollar the interest was compounding on. Estimate your interest here, then use the abatement refund estimator to see what penalties (and the interest charged on them) you may be able to recover with Form 843.