Not surprisingly, due to coronavirus shutdowns and a delayed tax deadline, tax return processing was slower this year, which meant that tax refunds were paid out more slowly than usual. Due to this delay, the Treasury Department and the Internal Revenue Service are sending interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds.
The amount of interest paid is calculated based on a taxpayer’s refund issue date. Those with a refund issue date between April 15 and June 30 earned an annual interest rate of 5%, while taxpayers issued refunds between July 1 and September 30 earn an annual interest rate of 3%. All interest is compounded daily, and accrues between April 15 and the day the refund is issued. Most of these interest payments will be issues separately from tax refunds and will average around $18.
In most cases, the 12 million or so taxpayers who received their refund by direct deposit will also have their interest payment direct deposited in the same account. 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.
TAKE NOTE: By law, these interest payments are taxable and taxpayers who receive them must report the interest on their 2020 federal income tax return. In January 2021, the IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10.
This provision is different from the long-standing 45-day rule, generally requiring the IRS to add interest to refunds on timely-filed refund claims issued more than 45 days after the return due date. Instead, this year’s COVID-19-related July 15 due date is considered a disaster-related postponement of the filing deadline. This means that the IRS is required, by law, to pay interest, calculated from the original April 15 filing deadline, as long as an individual files a 2019 federal income tax return by the postponed deadline, which is July 15, 2020 this year. This refund interest requirement only applies to individual income tax filers − businesses are not eligible.
If you received your refund prior to April 15, you will not receive an interest payment.
If you have questions on this matter, feel free to reach out to us or visit the IRS website at irs.gov.