IRS — August 19, 2020

The IRS Will Pay Interest on Your Delayed Tax Refund in 2020

by Susannah McQuitty

The IRS is sending additional checks for refund interest on refunds delivered after May 30.

Some taxpayers have good news and a deposit on the way: The Treasury Department and IRS are sending refund interest payments to about 13.9 million individual taxpayers who filed their 2019 federal income tax returns on time.

What is refund interest?

The IRS is generally required to add interest to any refunds issued more than 45 days after the tax return due date (typically April 15 each year); however, this year is a little different (that’s the understatement of the century!).

Even though the tax return due date was technically July 15, the IRS is still required to pay interest on refunds issued 45 days after April 15 since the deadline postponement was disaster-related. That means anyone who filed by July 15 and received their tax refund after May 30 will receive interest on that refund—so even if you didn’t file until July, your refund will have interest that grew from June 1 to the day you receive it. It’s odd, but who’s going to say no to extra money?

Note that this refund interest doesn’t apply to businesses—only individual taxpayers.

Who gets refund interest payments?

Payments 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 (after May 30) or are still waiting on a refund.

How much is my refund interest worth?

The interest payments average about $18. The interest rate changes on a quarterly basis: The rate from June 1 to 30 was 5%, compounded daily, and from July 1, the rate for the third quarter dropped to 3%, compounded daily.

Where the calculation period spans two or more quarters, a blended rate applies, consisting of the number of days falling in each calendar quarter. The IRS will calculate the interest rate for you, no need to do math gymnastics on your own.

How will I get my refund interest payment?

In most cases, taxpayers who received their refund by direct deposit will have their interest payment direct deposited in the same account. About 12 million of these payments will be direct deposited, though the payment will arrive separately from your refund payment.

Everyone else will receive a check. A notation on the check saying “INT Amount” will identify it as a refund interest payment and indicate the interest amount.

Do I owe taxes on refund interest?

Yes, you will owe interest taxes on your delayed refund interest payment. You’ll need to report your payment amount as interest income when you file your taxes in 2021. The IRS will send a Form 1099-INT in January detailing the interest payment info to anyone who receives interest totaling at least $10.

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