- The IRS, by law, must pay interest on delayed refund checks.
- Because the coronavirus pandemic severely limited the ability of the IRS to process tax filings, many refunds have been delayed and will be accompanied by a separate check for accumulated interest.
- The 2020 tax filing deadline was pushed back from April 15 to July 15.
2020 has been a wonky year for both the IRS and taxpayers, for obvious reasons. As the coronavirus pandemic began to sweep across the country earlier this year, the IRS’ ability to process returns effectively came to a standstill for a good three months. At the same time, the coronavirus pandemic also prompted the IRS to extend the traditional tax return filing deadline of April 15 to July 15.
With the country now reopening and the IRS finally getting around to processing millions of backlogged returns, some folks with refunds coming their way may find themselves on the receiving end of not just one, but two checks from the government. The IRS traditionally pays interest on top of refunds when a refund is paid out more than 45 days after it was initially filed. And seeing as how the IRS is months behind when it comes to issuing refund payments, many people will be receiving a nice interest payment alongside their regular refund check.
The IRS issued a statement on the matter earlier this month:
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. Interest payments may be received separately from the refund.
By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly.
Even if you file your 2019 return today, the interest accrual period — as noted in the statement above — stats running on April 15. If anything, tax payers this year will, oddly enough, be rewarded for filing as close to the July 15 deadline as possible.
As to how much interest to expect, the IRS notes that it pays 5% in annual interest, compounded daily through June 30, 2020. Starting on July 1, the interest rate goes down to 3% per year, compounded daily. All told, it’s not a bad interest rate and the additional payment will undoubtedly come in handy given how many people lost their jobs as a result of the coronavirus pandemic.
On a related note, there’s no indication that the coronavirus in the U.S. will subside anytime soon. Though the number of new cases has gone down in places like New York, it’s currently on the rise across dozens of southern states. And given that a coronavirus vaccine may not be widely available until 2021 at the earliest, a group of 150 doctors and health professionals recently wrote a letter to lawmakers and urged them to consider a second nationwide shutdown. The letter concedes that it’s a drastic measure but notes that it’s the only way to truly prevent the coronavirus from spreading far and wide.read more
