Once upon a time, the IRS charged interest on tax underpayments at the rate of 6 percent per year, simple (noncompounding) interest. At that rate of interest, it was almost good business to underpay your taxes. You could invest the tax money that you didn't pay; and since even a mediocre broker could do better than 6 percent in the stock market, you could make more money than you might eventually have to pay the IRS if you were audited. Or, if you needed money for your business, it was a lot easier (and often cheaper) to "borrow" it from the IRS than from your bank.
That was then. Today, the IRS charges interest at market rates, plus three points. The rate changes each calendar quarter, based on the market rates during the previous quarter. Since 1982, IRS interest rates have ranged from 7 to 20 percent. And there's more. Instead of charging simple interest as it did in the past, the IRS now charges interest that compounds daily -- not annually, or monthly, but daily.