Silly Question About Tax Refund

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Kosmo
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Silly Question About Tax Refund

Post by Kosmo »

In December I filed an amended 2011 tax return on behalf of my wife (we were not married in 2011) and she received the refund check today. It had interest added to it for the 3 year "loan" we gave the treasury dept.

So the question: Will she receive a 1099 next year for this interest payment? I'm not worried about paying the additional tax (the interest was ~$75), but I'm just curious. I want to make sure I don't forget about it in a year.
furwut
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Re: Silly Question About Tax Refund

Post by furwut »

Yes it's taxable. No - you may not get a 1099.

https://ttlc.intuit.com/questions/19334 ... om-irs-gov
Twins Fan
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Re: Silly Question About Tax Refund

Post by Twins Fan »

Nice, I didn't know that.

I had to amend my 2013 taxes this year. First time I had to amend any. I wonder if I'll get a couple extra bucks more than I'm thinking.

I bet they have a rockin interest rate, huh? :happy
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House Blend
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Re: Silly Question About Tax Refund

Post by House Blend »

Twins Fan wrote:I bet they have a rockin interest rate, huh? :happy
Not clear to me whether that was meant to be sarcasm, but when I amended my 2012 return in 2013 I received an extra 2% in interest.

Not sure how they do the accounting, but I did an IRA recharacterization in June 2013 that changed my 2012 tax bill. The check from the US Treasury arrived about 6 months later. The way I look at it, that annualizes to about 4%, but maybe they run the interest clock back to the normal due date for the return.

And yes, in line with the OP, I reported that interest on Schedule B.

Meanwhile, some Boglehead wingnut is dreaming up some scheme to store his emergency fund at the US Treasury and make withdrawals from it by filing amended returns. :idea:
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dodecahedron
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Re: Silly Question About Tax Refund

Post by dodecahedron »

House Blend wrote: Meanwhile, some Boglehead wingnut is dreaming up some scheme to store his emergency fund at the US Treasury and make withdrawals from it by filing amended returns. :idea:
IRS is currently paying 3% on overpayments of individual income tax payments, which is a pretty sweet interest rate compared to what is available elsewhere these days. (However, the clock doesn't start running until 45 days after the filing deadline (or the date you filed the original return, if later.)

http://www.irs.gov/uac/Newsroom/Interes ... er-of-2015

That is also the interest rate they charge on underpayments (though penalties may also apply in many cases.)

Here is the history of past interest rates (which change each quarter.)

http://accountants.intuit.com/tax/artic ... est-rates/

More interesting details here:

http://www.procedurallytaxing.com/it-ma ... en-filing/
Twins Fan
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Re: Silly Question About Tax Refund

Post by Twins Fan »

I was being sarcastic... maybe I shouldn't have been. I'm surprised by the 2 and 3% interest rates mentioned... figured it would be much lower.

I shouldn't be so negative, I guess? :happy
mptness
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Re: Silly Question About Tax Refund

Post by mptness »

What if you apply your refund to next year's estimated payments. Are you credited with any interest?
Wagnerjb
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Re: Silly Question About Tax Refund

Post by Wagnerjb »

furwut wrote:Yes it's taxable. No - you may not get a 1099.

https://ttlc.intuit.com/questions/19334 ... om-irs-gov
I received a refund several years ago that contained interest. I got a 1099 the following year.
Andy
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dodecahedron
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Re: Silly Question About Tax Refund

Post by dodecahedron »

mptness wrote:What if you apply your refund to next year's estimated payments. Are you credited with any interest?
No, but you are credited with having made the estimated payment as of 4/15 (even if you actually filed your original return later than 4/15.) E.g., last year, I filed for an extension on my 2013 return. When I finally got around to filing (in late August 2014), I decided to apply some of the refund to my 2014 estimated taxes. I later discovered that that estimated payment was considered to have been made by April 15, 2014 (and not credited on August 2014, the point at which I actually filed and requested that some of the refund be applied to the estimated tax for the following year.)
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grabiner
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Re: Silly Question About Tax Refund

Post by grabiner »

dodecahedron wrote:
mptness wrote:What if you apply your refund to next year's estimated payments. Are you credited with any interest?
No, but you are credited with having made the estimated payment as of 4/15 (even if you actually filed your original return later than 4/15.) E.g., last year, I filed for an extension on my 2013 return. When I finally got around to filing (in late August 2014), I decided to apply some of the refund to my 2014 estimated taxes. I later discovered that that estimated payment was considered to have been made by April 15, 2014 (and not credited on August 2014, the point at which I actually filed and requested that some of the refund be applied to the estimated tax for the following year.)
The reason for this is that the payment was actually made before April 15; it was made from withholding in the previous year, or from an estimated tax payment made by January 15.
Wiki David Grabiner
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dodecahedron
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Re: Silly Question About Tax Refund

Post by dodecahedron »

grabiner wrote:
dodecahedron wrote:
mptness wrote:What if you apply your refund to next year's estimated payments. Are you credited with any interest?
No, but you are credited with having made the estimated payment as of 4/15 (even if you actually filed your original return later than 4/15.) E.g., last year, I filed for an extension on my 2013 return. When I finally got around to filing (in late August 2014), I decided to apply some of the refund to my 2014 estimated taxes. I later discovered that that estimated payment was considered to have been made by April 15, 2014 (and not credited on August 2014, the point at which I actually filed and requested that some of the refund be applied to the estimated tax for the following year.)
The reason for this is that the payment was actually made before April 15; it was made from withholding in the previous year, or from an estimated tax payment made by January 15.
Or possibly by a payment made with the request for an extension, which theoretically should be filed by April 15. (I did in fact file my request before April 15 though I didn't feel the need to add any additional funds at the time.) For that matter, it is certainly possible to make estimated tax payments for the prior year liability later than April 15, though I didn't do this, but many people do submit estimated payments--in order to mitigate potential penalties. (All my payments were in fact made before Jan 15, 2014, so It is not clear to me how my application of the refund to estimated taxes for 2014 would have been dated in IRS records if some of it had been traced to estimated 2013 payments submitted after April 15, 2014.)
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Kosmo
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Re: Silly Question About Tax Refund

Post by Kosmo »

Wow, thanks for all the info. I honestly hadn't even thought about being paid interest. And I was actually confused when the check arrived in the mail for a different amount than I submitted. There was no explanation or any other paperwork in the envelope, but there was a small not in the check that said "INT" and the amount. In Saturday's mail my wife received a letter explaining that she'd get a refund and that she would be paid interest (only a few days late). It didn't include how much interest or what the rate was.

In total there were 3 separate letters: 1) notice that the amended return had been accepted, 2) refund check, 3) explanation of refund. My letter for the IRS is E for efficiency. [/sarcasm]
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dodecahedron
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Re: Silly Question About Tax Refund

Post by dodecahedron »

Kosmo wrote:
In total there were 3 separate letters: 1) notice that the amended return had been accepted, 2) refund check, 3) explanation of refund. My letter for the IRS is E for efficiency. [/sarcasm]
Amended returns are very cumbersome for the IRS to handle. They can't be efiled and require scrutiny by human beings. Because of the need for checks and balances (to prevent internal fraud by IRS employees), there need to be multiple human beings involved, which is probably why multiple pieces of correspondence were generated. The IRS also doesn't allow direct deposit on amended returns (probably due to concerns about mistranscriptions of the numbers on paper returns by their employees.) The IRS warns that these returns can take 10-12 weeks to process.

None of the snail mail paper correspondence would have been necessary if the original return had computed the correct tax liability and refund. In that case, the whole thing could have been processed without human intervention and without any paper correspondence whatsoever.
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