This provision is different from the long-standing 45-day rule, generally requiring the IRS to add interest to refunds on timely-filed refund claims issued more than 45 days after the return due date. What is the penalty for filing taxes late? Every year, the IRS pays interest on refunds that take extra time to process, with interest accruing from April 15 until whenever the agency cut your check (or dropped your direct deposit). Page Last Reviewed or Updated: 25-Sep-2020, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation, Electronic Federal Tax Payment System (EFTPS), Treasury Inspector General for Tax Administration, 13.9 million Americans to receive IRS tax refund interest; taxable payments to average $18. Interest on individual 2019 refunds reflected on returns filed by July 15, 2020 will generally be paid from April 15, 2020 until the date of the refund. Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. During this time the agency was also tasked with delivering about over 160 million stimulus checks to Americans. No interest will be added to any refund issued before the original April 15 deadline. It applies to folks … The IRS sets a deadline of 45 days from the filing deadline to pay out any refunds. The IRS announced on Wednesday that it will pay interest on delayed refunds, the Wall Street Journal first reported. Account active Yes, you will owe interest taxes on your delayed refund interest payment. In other words, if you are set to get money back from your taxes, and you filed ahead of the annual deadline, interest will start accruing on that money if the government is late paying you. The IRS charges interest when taxpayers don’t pay on time and it pays interest to taxpayers when the government issues refunds too slowly. In January 2021, the IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10. All your questions answered about filing and paying taxes. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective. For the third quarter, which ends on September 30, 2020, the interest rate will be 3% per year, compounded daily. The IRS charges interest when taxpayers don’t pay on time and it pays interest to taxpayers when the government issues refunds too slowly. Americans who filed their 2019 federal income tax returns on time should expect a refund this week. As of June 12, the latest IRS statistics available, the IRS had paid out just over 92 million refunds — about 11% lower than this time last year. Actually, it's more than a bit if you compare it to current interest rates for most accounts. People who submitted their 2019 income tax returns by July 15 are eligible for interest payments of up to 5% on their tax refunds. When refunds are delayed, the IRS pays interest rates far higher than bank accounts do: 5% compounded daily for … If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. The daily rate is the annual rate divided by 365. window.googletag = window.googletag || {cmd: []}; Normally, the IRS pays interest only on refunds paid after 45 days from the date the return is filed, if returns are filed by the tax deadline. googletag.cmd.push(function() { Your Social Security number or individual taxpayer identification number. You can check the status of your refund using the IRS's refund-tracking service within 24 hours of filing a tax return online. In normal times, the agency says it issues 90% of tax refunds within 21 days of the filing date, but it's often quicker for those who file electronically. By law, the IRS does not owe interest on refunds if they are issued within 45 days of the due date of the return (usually April 15) or the date the return is filed, whichever is later. When you finally get the amount that you overpaid on your 2019 taxes, Uncle Sam will tack on a bit on interest to make up for your wait. The government agency announced it would grant interest on tax refunds that are issued after April 15 – … as well as other partner offers and accept our, Fee-only vs. commission financial advisor, See Business Insider's picks for the best tax software ». The interest payments, averaging about $18, will be made to individual taxpayers who filed a 2019 return by this year's July 15 deadline and either received a refund in the past three months or will receive a refund. This year, taxpayers with a refund issue date between April 15 and June 30 earn an annual interest rate of 5%, while taxpayers issued refunds between July 1 and September 30 earn an annual interest rate of 3%, the IRS explained in a statement. 2  These rates are higher than what most would receive in a short-term CD or high-yield savings account. This provision is different from the long-standing 45-day rule, generally requiring the IRS to add interest to refunds on timely-filed refund claims issued more than 45 days after the return due date. We do not give investment advice or encourage you to adopt a certain investment strategy. Savers will notice this is far more interest than is currently being offered by even the best high-yield savings accounts and certificates of deposit (CD). By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly. For a tax return filed on time, the IRS has 45 days from the filing deadline to process your return and send you a refund. The IRS will pay interest to individuals whose tax refunds have been delayed. About 12 million of these payments will be direct deposited. In essence, taxpayers who file their return on or before July 15, the new tax-filing and payment due date, and are owed a refund will earn interest. To calculate how much interest you could be due, let's use the average refund amount so far for 2020, which the IRS says is $2,767. If your refund is issued between July 1 and September 30, you'll earn an annual 3% interest rate, compounded daily. In the past, the IRS paid me interest on refunds even if I filed a year late. }); Disclosure: This post is brought to you by the Personal Finance Insider team. By clicking ‘Sign up’, you agree to receive marketing emails from Business Insider googletag.defineSlot('/1035677/Business_Insider_AMP_', [[300, 139], [1, 1], [300, 360], [300, 475], [595, 139], [595, 360], [595, 475], [300, 250], [595, 250]], 'div-gpt-ad-1602088621612-0').addService(googletag.pubads()); If your refund is issued between April 15 and June 30, you'll earn an annual 5% interest rate, compounded daily. By law, the IRS is required pay interest on tax refunds if it is more than 45 days late in issuing a refund for an on-time tax return. Typically the IRS has a 45-day grace period to issue refunds to taxpayers who file by April 15 before interest starts accruing on the amount they're owed. I got my 2007 refund, but they did not pay interest. The IRS has been severly affected by coronavirus shutdowns and performed only "mission-critical functions" for at least two months. According to the IRS website, Interest on 2019 refunds reflected on returns filed by July 15, 2020 will generally be paid from April 15, 2020 until the date of the refund. since. It may be sent as a separate payment. googletag.pubads().enableSingleRequest(); In most cases, taxpayers who received their refund by direct deposit will have their interest payment direct deposited in the same account. The IRS announced on Wednesday that it will pay interest on delayed refunds, the Wall Street Journal first reported. About 13.9 million Americans will receive interest payments from the IRS this week. If you're still waiting for your federal tax refund, the Internal Revenue Service has a bit of good news for you. The IRS imposes plenty of consequences on taxpayers who miss its April filing deadline, including late-filing penalties, late-payment penalties, and interest on overdue tax bills. Interest is paid at the legally prescribed rate that is adjusted quarterly. Where a disaster-related postponement exists, the IRS is required, by law, to pay interest, calculated from the original April 15 filing deadline, as long as an individual files a 2019 federal income tax return by the postponed deadline − July 15, 2020, in this instance. Instead, this year's COVID-19-related July 15 due date is considered a disaster-related postponement of the filing deadline. Typically, tax returns are due on April 15, meaning that the IRS has until May 30 to get your refund to you. Note that this 45-day period does NOT begin when you file your return. But others, who filed electronically, are still waiting for their refunds, too. The Penalty for Late Filing. When refunds are delayed, the IRS pays interest rates far higher than bank accounts do: 5% compounded daily for the second quarter and 3% compounded daily starting July 1. Stories, strategies, and tips for better personal finance. All interest is compounded daily, and accrues between April 15 and the day the refund is issued. To answer your question, yes, the IRS owes interest to taxpayers on delayed refunds. Interest and Late Refunds. This refund interest requirement only applies to individual income tax filers − businesses are not eligible. However, the date for computing interest begins 45 days after the later of: The unextended due date. The IRS has told people who filed a paper return to expect delays. We operate independently from our advertising sales team. The IRS will send a Form 1099-INT in January detailing the interest payment info to anyone who receives interest … In January 2021, the IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10. Like the failure-to-pay penalty, it's a … Interest payments may be received separately from the refund. To check your refund status, you'll need three things: Editor's note: This article has been updated to clarify that 5% and 3% are the annual rates. What you decide to do with your money is up to you. The IRS said it will send interest payments to about 13.9 million taxpayers who filed their tax returns but received their refunds late. Subscriber The IRS announced it’s starting to send out interest payments this week to individual taxpayers whose tax refunds were delayed. Does the IRS owe me interest on my 2007 refund… In January, the IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10. The IRS charges interest when taxpayers don't pay on time and it pays interest to taxpayers when the government issues refunds too slowly. When the Treasury Department moved the usual April tax deadline to July 15, it exposed a "quirk in the tax code," the Wall Street Journal's Richard Rubin first reported on Wednesday. The IRS is currently backlogged with returns on account of the coronavirus lockdown from a … Everyone else will receive a check. The penalty for filing late is steeper. The average interest payment will be … As Rubin put it, the IRS is "paying for the privilege of holding on to the money since April 15," just as a taxpayer would pay the IRS if they owed money. Some of the offers on this site are from companies who are advertising clients of Personal Finance Insider (for a full list. This does not influence whether we feature a financial product or service. Most interest payments will be issued separately from tax refunds. Consider a taxpayer expecting the average refund — $2,767 — who filed a return on May 1 and is issued their refund on June 30. We occasionally highlight financial products and services that can help you make smarter decisions with your money. Because the coronavirus pandemic severely limited the ability of the IRS to process tax filings, many refunds … The IRS says 13.9 million taxpayers will get a check averaging $18 on the interest on their refunds. Typically the IRS has a 45-day grace period after the April 15 tax deadline to issue tax refunds, but the rule doesn't apply because of the tax-deadline extension. You’ll need to report your payment amount as interest income when you file your taxes in 2021. But the IRS last month said it would pay interest on individual 2019 refunds reflected on returns filed by July 15. A leading-edge research firm focused on digital transformation. Where the calculation period spans quarters, a blended rate applies, consisting of the number of days falling in each calendar quarter. The IRS updates its system daily, usually overnight. Sign up for Personal Finance. In addition to the refund amount, the IRS will owe that taxpayer about $30 — a fraction of the annual 5% rate for 76 days, compounded daily. "Interest on individual 2019 refunds reflected on returns filed by July 15, 2020 will generally be paid from April 15, 2020 until the date of the refund. You still need to file if you want your refund. An official website of the United States Government. A notation on the check − saying "INT Amount" − will identify it as a refund interest payment and indicate the interest amount. WASHINGTON — This week the Treasury Department and the Internal Revenue Service will send interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds. By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly. After the 45 days have passed, interest begins to accrue. If that refund payment is late by 30 days, it would accrue interest worth about $12. 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