The formula, straight from Publication 103
Tax due × interest rate ÷ 365 = daily interest; daily interest × number of days = total interest. In a leap year the divisor is 366. The number of days runs from the day after the payment due date through the date you pay. That is the whole method: no compounding, no interest on interest.
Where the rate comes from
Since 1994 Illinois has used one uniform rate for underpayments and overpayments of the taxes IDOR administers. It is reviewed every January 1 and July 1 and set from the federal underpayment rate under IRC 6621. Recent periods: 3% from July 2020 through June 2022, 5% for the second half of 2022, 7% for 2023, 8% for 2024, and 7% for 2025 and 2026. A balance open since 2021 has therefore accrued at four different rates, and the calculator charges each one only for the days it was in force.
Payments
Each payment reduces the principal from its date; interest for the days after it is figured on the smaller balance. Because the interest is simple, the order in which IDOR applies a payment between tax and interest does not change the interest total for a given set of dates, only the split on the statement.
A worked example
Suppose $2,000 of 2023 Illinois tax was unpaid on April 15, 2024, $1,000 was paid on October 1, 2024, and the rest is being figured to March 1, 2025. The 2024 rate is 8% and 2024 has 366 days; the 2025 rate is 7% over 365 days. The calculator produces three segments: April 16 to October 1, 2024 (169 days on $2,000 at 8% ÷ 366) is $73.88; October 2 to December 31, 2024 (91 days on the remaining $1,000) is $19.89; and January 1 to March 1, 2025 (60 days at 7% ÷ 365) is $11.51. Total interest: $105.28. The same balance and payment under the IRS's daily compounding would come to $109.55, which is the size of difference simple interest makes over a year: real, but small next to the penalties.
Not computed here
Interest paid to you on an overpayment (it starts only if the refund is not issued within 90 days of the return due date), and the 150% rate assessed on liabilities from abusive tax shelter transactions.
Official sources used on this page
- Publication 103: Interest (formula, simple daily, 365/366, start and stop): R-09/25
- IDOR: Interest Rates (period table): page read 2 Sep 2026
Every rule record names its source, revision and the date it was last verified; the results panel prints the ones your calculation used. Rules last verified 2 September 2026.