Wouldn’t it be nice to be surprised by the IRS in a good way? Depending on when you filed your 2019 tax return as well as if you received a refund, the Internal Revenue Service might just be rewarding you with some extra cash in the very near future.
Interest Payment Refunds
In a news release published on Aug. 18, the IRS and the U.S. Department of the Treasury announced that approximately 13.9 million individual taxpayers who filed their 2019 federal income tax returns by July 15 will be receiving tax refund interest payments.
Due to the COVID-19 pandemic, the filing deadline for tax returns was extended from April 15 to July 15, 2020. When such a postponement occurs due to a disaster, the IRS has to make interest payments by law.
Because of this, anyone who filed a 2019 income tax return by the July 15 deadline and received a refund in the past three months or is waiting for their refund will also receive a separate interest payment.
What You Can Expect
This interest is paid at the legally prescribed rate, which is adjusted quarterly. The rate for the second quarter ending June 30 was 5%, compounded daily, dropping to 3% compounded daily effective July 1.
Because the average tax refund for this tax season is $2,741, the interest payments will average approximately $18. Depending on the amount of your tax refund, your interest payment might be higher or lower.
Business entities are not eligible, and no interest will be paid for refunds issued before the original April 15 due date.
You don’t have to do anything to receive the payment. About 12 million payments will be refunded by direct deposit. Everyone else will receive a check with a notation that says “INT Amount,” identifying it as a refund interest payment.
Although it won’t likely be a huge refund, it is important to note that these interest payments are taxable. If you receive a payment of at least $10, you will also receive a FORM-1099 INT, which the IRS will send out in January 2021. You will be obligated to report the payment on your 2020 federal income tax return.
The IRS began issuing refund interest payments on Aug. 19, 2020, and most eligible taxpayers should receive payment by Aug. 28, 2020.