The IRS announced last week that it owes interest payments to 13.9 million Americans who received their individual tax refunds after April 15 or who are still owed refunds. The average payment will be $18.
The IRS owes this money because of the COVID-19 pandemic. The IRS postponed the deadline for filing 2019 tax returns to July 15, three months after the traditional deadline of April 15, in order to ease the burden on taxpayers who were adversely affected by the economy. The deadline delay means refund money sat in the hands of the IRS longer than usual. In effect, taxpayers who took the opportunity to file by July 15 loaned that money to the government. During that time, the money generated interest which the IRS is now required by law to pay out.
Interest was calculated by the IRS based on a legally prescribed rate that is adjusted quarterly – 5% for the quarter that ended June 30 and 3% for the current quarter, which ends Sept. 30.
Taxpayers who receive their refunds via direct deposit will get the interest payment deposited in the same account. Everyone else will get a check with a notation that says “INT Amount.”
The law requires the IRS to make such interest payments only to individual tax filers, not to businesses. By law, these interest payments are taxable and taxpayers who receive them must report the interest on the 2020 federal income tax return they file next year. Taxpayers who receive an interest payment of at least $10 will receive a Form 1099-INT in January.
Those taxpayers who filed taxes early and received a refund before April 15 — and those who filed late, after July 15, will not receive an interest payment.
For more information about tax planning or tax preparation for businesses and individuals, connect with the tax professionals at Grossman St. Amour CPAs. Our tax professionals can work with you to help find the best solutions and strategies.
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