Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

Refunds have interest added ? ! ?

dkh
Level 11

Just talked with client that received tax refund on 04/23 for return efiled/accepted 04/15    besides that being exceptionally quick with all that is going wrong at IRS   it also had an extra 3dollars+change added to the total which I presume is interest                 

                                                                   Why ?     

Labels (1)
0 Cheers
28 Replies 28
qbteachmt
Level 15

The IRS announced this would be happening. Are you not signed up for their e-newsletters, so that you get these announcements to your email inbox?

*******************************
"Level Up" is a gaming function, not a real life function.
qbteachmt
Level 15

I found a similar article. It started with last year's delayed filing due date:

https://www.businessinsider.com/personal-finance/irs-will-pay-interest-on-delayed-tax-refunds-2020-6

 

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
qbteachmt
Level 15

IRS:

https://www.irs.gov/newsroom/coronavirus-tax-relief-2019-tax-refund-interest

 

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
BobKamman
Level 14

They shouldn't be doing that if the refund is issued within 45 days of April 15.  Another IRS glitch that is costing taxpayers money.  

qbteachmt
Level 15

"They shouldn't be doing that if the refund is issued within 45 days of April 15."

Did you read anything at the links I provided? This is what started in the prior filing season.

"The IRS is required by law to pay interest on tax refunds due to individual taxpayers affected by the federally declared disaster who filed their Federal tax returns for 2019 on or before the postponed due date of July 15, 2020. The overpayment interest will generally accrue from the original April 15 due date, rather than the postponed due date of July 15.

Normally, the IRS is required to pay interest on a refund if the refund is issued after a statutory 45-day period. This rule does not apply to individual taxpayers who qualify for relief due to a federally declared disaster."

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
BobKamman
Level 14

I don't read that IRS Newsroom trash, but even they can say "generally."   No one who filed by April 15 last year was paid interest if they received their refund by Memorial Day.  I have my doubts about whether this is interest -- was it a $5,000+ refund?  

sjrcpa
Level 15

I'm guessing they made some sort of minor adjustment. I would not worry about it at all.


ex-AllStar
dkh
Level 11

It was at $10000+ refund      and @qbteachmt   yes I keep up on the IRS news

I didn't think the interest was added unless it was efiled/accepted after April 15th    

qbteachmt
Level 15

"I have my doubts about whether this is interest"

It will be specifically stated. And an Account Transcript would list it separately.

"No one who filed by April 15 last year was paid interest if they received their refund by Memorial Day."

https://www.irs.gov/newsroom/coronavirus-tax-relief-2019-tax-refund-interest

"Nearly 14 million individual taxpayers who filed their 2019 federal income tax returns on time and received refunds will receive interest on the refunds."

It's interesting that you post updates from IRS, which are appreciated in the community, but it seems convenient to have selective belief on a subject you disagree with, as if only parts are fake news to you.

If you subscribe to these newsletters, you get the updates. These things develop over time.

 

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
sjrcpa
Level 15

For $3 who cares?


ex-AllStar
BobKamman
Level 14

It's like the Presidential Election Campaign Fund checkoff.  If you want $3 of your taxes to reimburse IRS for erroneous interest payments, you can do that.  It will, however, reduce your refund or increase your balance due.   

dkh
Level 11

Is the delay this year considered a "federally declared disaster"   ????    

qbteachmt
Level 15

Yes, we're all under disaster; that's why the filing date is delayed.

"It was at $10000+ refund      and @qbteachmt   yes I keep up on the IRS news"

The links I gave include the various computations and rates that were used: Interest is paid at the legally prescribed rate that is adjusted quarterly. The rate for noncorporate taxpayers for the second quarter, which ended June 30, 2020, was 5%, compounded daily. Effective July 1, 2020 the rate for the third quarter dropped to 3%, compounded daily.

"I didn't think the interest was added unless it was efiled/accepted after April 15th"

Refund Date. Not filing date.

"No interest will be paid for any refund issued before the original April 15 due date."

"The average amount of the interest payments is $18.

Individual taxpayers who filed a 2019 return by the July 15, 2020 postponed filing deadline and have already received a refund will receive an interest payment separately."

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
BobKamman
Level 14

IRS Newsroom wouldn't know a primary source if it bit them in the behind.  It's difficult to prove a negative, so I'm not going to waste my time trying to prove this is illegal.  

qbteachmt
Level 15

I'm just surprised no one posted here about a huge refund owed, and asked if they should wait to file at the last minute, so that they earned interest on that refund.

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
sjrcpa
Level 15

OP did not say this was a 2019 return.


ex-AllStar
sjrcpa
Level 15
dkh
Level 11

Nope, no capital gains        

qbteachmt
Level 15

I gave the 2019 links, because I haven't found the 2020 article from the IRS. Here's one from Marketwatch:

https://www.marketwatch.com/story/pandemic-related-backlogs-forced-the-irs-to-pay-out-billions-in-in...

It seems the IRS is none too pleased about the situation.

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
dkh
Level 11

2020 return

IRonMaN
Level 15

For 3 bucks you already have more time invested in this than I would.  As someone else would say -------- just my opinion 😉

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)
dkh
Level 11

Yep !     The time I had to spend on phone with client explaining why (or at least my opinion of why) the refund was LARGER than expected was ridiculous.    

 

abctax55
Level 15

I'm lucky, I guess.

A client emailed me  "refund finally arrived"; it was held up while the IRS recomputed & gave him $ 3 extra.  He asked if I wanted a copy of the paperwork - I said I don't really care :-).  He said he guessed as much.

Former Chump..umm... AllStar...This message was typed from 6 feet away so you can safely read it immediately.

If a post answers your question, click on *Accept as solution* for future searches
BobKamman
Level 14

Are you in Texas, Louisiana or Oklahoma?  There are disasters, and then there are disasters . . .

BobKamman
Level 14

What the heck is going on here?  According to "Where's My Refund," my client is about to be paid $1.31 interest Wednesday (April 28) on his $2,000+ refund.  The return was filed in March but processing was delayed because he thinks he did not $1,100 of his EIP2 in January and IRS must think he did.  

Might take a day or two for the media to discover this generosity.  

dkh
Level 11

Honestly, I don't care why they gave him the extra $3+      The client called so I would confirm what he received was his actual tax return refund. As he put it,  there is so much money being given out he wasn't sure.   

 

BobKamman
Level 14

Here is where IRS screwed up.

Code Section 7508A, which deals with disaster areas and allowed IRS to permit last year’s 3-month extension and this year’s 1-month extension, says

(c)Special rules for overpayments
The rules of section 7508(b) shall apply for purposes of this section.

And Section 7508(b) says

(b)Special rule for overpayments
(1)In general
Subsection (a) shall not apply for purposes of determining the amount of interest on any overpayment of tax.

(2)Special rules
If an individual is entitled to the benefits of subsection (a) with respect to any return and such return is timely filed (determined after the application of such subsection), subsections (b)(3) and (e) of section 6611 shall not apply.

So what are these two parts of Section 6611 that should be disregarded?

The second one mentioned, 6611(e) has the 45-day rule. So IRS can’t rely on that.

But the first one, 6611(b)(3), deals only with “late returns”. That still leaves Section 6611(b)(2), which gives IRS 30 days to issue a refund with no interest:

(b)Period
Such interest shall be allowed and paid as follows: . . .

(2)Refunds
In the case of a refund, from the date of the overpayment to a date (to be determined by the Secretary) preceding the date of the refund check by not more than 30 days, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer.  

So the 45-day rule is out, but the 30-day rule should still be followed. Payments issued April 23, like your client’s, and April 28, like mine, were less than 30 days from April 15, so should not have included interest.

qbteachmt
Level 15

"When do we charge interest?"

and

"When do we pay interest?"

https://www.irs.gov/businesses/small-businesses-self-employed/interest-for-individuals

 

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers