The Internal Revenue Service said Tuesday it will send interest payments this week to about 13.9 million taxpayers who filed their 2019 federal income tax returns on time and were due a refund.
The payments, averaging about $18 each, will go to people who filed their federal tax return by this year’s postponed July 15 deadline and “either received a refund in the past three months or will receive a refund. Most interest payments will be issued separately from tax refunds,” the IRS said in a press release.
Interest will be paid starting April 15 at the blended rate of 5% annually for the second quarter ending June 30, and 3% for the third quarter.
Some readers say they’ve already gotten an interest payment with their refund check, or assume they did with a direct-deposit refund because the amount was for more than the refund they claimed.
Many more taxpayers than usual will get interest payments this year because the IRS shuttered its offices at the end of March because of the coronavirus pandemic and stopped opening mail. It gradually began to reopen them in June and July and is now working through the backlog of returns.
Most taxpayers who received their refund by direct deposit will have their interest payment direct deposited in the same account, the IRS said. About 12 million of these payments will issued this way. Everyone else will receive a check with the interest noted as “INT Amount.”
Lawrence Little of Moraga mailed his return in mid-March and got a refund check Aug. 1st, with $2.63 in interest noted at the bottom.
Herb Miller of San Anselmo said he mailed his federal tax return return on March 7. On July 16, he got a direct deposit “for $23.59 more than we claimed without any explanation. It seems to me it must be interest.”
The IRS clarified that refunds issued in the past few weeks, and that will be issued in the future, will include interest. The separate payments generally apply to refunds issued in late April through late July.
Many taxpayers are still awaiting their 2019 refunds, including John Brooks of Fairfax, who said he mailed his return around March 15, 2020.
The IRS could not say how much it expects to pay in interest overall.
The interest payments are taxable and must be reported as interest on 2020 federal income tax returns. In January, the IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10.
Most taxpayers who received their refund by direct deposit will have their interest payment directly deposited in the same account. About 12 million of these payments will issued this way. Everyone else will receive a check with the interest noted as “INT Amount.”
Normally, the IRS only has to add interest to refunds issued more than 45 days after the April 15 due date to taxpayers who file by April 15.
However, “this year's COVID-19-related July 15 due date is considered a disaster-related postponement of the filing deadline,” the IRS said. “Where a disaster-related postponement exists, 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 — July 15, 2020, in this instance.” Businesses are not eligible for the interest payment.
Richard Pon, a San Francisco accountant, said he got interest with his directly deposited refund. “If a refund is higher than expected or a correction of error. However, with return error, generally you would receive a letter a week or two after the check arrives showing the adjustment,” he said. “If the refund amount includes cents, then it’s definitely including interest as interest is not rounded to nearest dollar” but standard refund amounts are.
Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender
The Link LonkAugust 19, 2020 at 02:45AM
https://www.sfchronicle.com/business/networth/article/IRS-to-send-out-interest-on-late-tax-refunds-this-15493054.php
IRS to send out interest on late tax refunds this week - San Francisco Chronicle
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