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The Fed Just Raised Rates for the First Time Since 2023 - Clear Start Tax Explains Why That Also Raises the Cost of Owing the IRS
The Fed Just Raised Rates for the First Time Since 2023 - Clear Start Tax Explains Why That Also Raises the Cost of Owing the IRS
IRS interest on an unpaid balance is pegged to the federal short-term rate and reset every quarter. When the Fed moves, the cost of owing moves with it.
IRVINE, CA / ACCESS Newswire / September 16, 2026 / The Federal Reserve raised its benchmark interest rate on Wednesday, its first increase since 2023, in a unanimous quarter-point decision. Clear Start Tax says the move carries a consequence for anyone already carrying a balance with the IRS that will get far less attention than the mortgage and credit card coverage.
The IRS does not set its interest rate by discretion. Federal law ties it to the federal short-term rate, adding three percentage points for individual underpayments, and the resulting figure is reset every quarter. When the Fed raises rates, the rate the IRS charges on unpaid tax follows it upward.
"Most people read a rate decision as a story about mortgages. If you owe the IRS, it is also a story about your balance, because the agency charges interest on a formula rather than a judgment," said a spokesperson for Clear Start Tax, a national tax relief and resolution firm.
Two features of that interest make the effect larger than it first appears. It compounds daily rather than monthly, and it runs entirely separately from penalties, which accrue on their own schedule. A balance left alone is therefore growing on two tracks at once, and one of those tracks just got steeper.
The timing also matters. Because the rate is set quarterly and announced in advance, the increase does not land the day the Fed acts. It arrives with the next quarterly adjustment, which gives taxpayers a narrow and unusually clear window to address a balance before the higher figure applies to it.
What Clear Start Tax recommends for taxpayers carrying a balance
- Treat the quarterly reset as a deadline, since acting before it applies is cheaper than acting after
- Remember interest compounds daily and runs separately from penalties, so a paused balance is still growing twice over
- Confirm which years are unfiled first, because most relief cannot be approved while returns are missing
- Compare the cost of an arrangement against another quarter of accrual rather than against paying in full today
By answering a few questions about what is owed and how many years are unfiled, taxpayers can find out whether they qualify for relief under the IRS Fresh Start Program.
"Nobody chooses the rate they are charged on back taxes. What they can choose is how long they are charged it for," the spokesperson added.
About Clear Start Tax
Clear Start Tax is a nationwide tax resolution and relief firm specializing in helping individuals and businesses address IRS and state tax issues. With a team of experienced tax professionals, the company provides tailored strategies for resolving back taxes, negotiating settlements, and achieving long-term compliance.
Need Help With Back Taxes?
Click the link below:
https://clearstarttax.com/qualifytoday/
(888) 710-3533
Contact Information
Clear Start Tax
Corporate Communications Department
[email protected]
(949) 800-4011
SOURCE: Clear Start Tax
View the original press release on ACCESS Newswire
(F.Allen--TAG)
