If You Filed Taxes from April 15 – July 15 & Received a Refund, You Could Be Getting an Interest Payment from the IRS
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You may be getting a little surprise from the IRS, but there’s a catch…
Because COVID-19 caused a disaster-related postponement of the tax filing deadline, the federal government is required by law to pay interest on tax refunds owed to individual taxpayers. This means that the Treasury Department and the IRS will send interest payments to about 13.9 million taxpayers who filed their 2019 federal income tax returns by the July 15th deadline.
Beginning this week, interest payments will be sent to individual taxpayers (not businesses) who are due to receive a refund or who already received a refund in the past three months. Anyone who paid their taxes by the original deadline of April 15th will not be getting an interest payment.
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While the amount of the interest payments vary based on the size of each tax payer’s refund, the IRS reports that the average payment will be about $18. Interest will be calculated based on the adjusted quarterly rates. The rate for the second quarter was 5%, while the third quarter dropped to 3% on July 1. If the amount owed spans across the quarters, a blended interest rate will apply.
Most interest payments will be issued separately from tax refunds. Taxpayers who received their refund by direct deposit will also have their interest payment deposited in the same account. Everyone else will receive a check with the notation “INT Amount” identifying it as a refund interest payment.
Now for the catch: These interest payments are taxable, so anyone who receives one must report it on their 2020 federal income tax return. This coming January, the IRS will send Form 1099-INT to any taxpayer who received an interest payment totaling $10 or more.
For more information, visit IRS.gov.
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