IRS to Pay Interest on Tax Refunds

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bryanm
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IRS to Pay Interest on Tax Refunds

Post by bryanm »

Title says it all. IRS to pay interest from 4/15/2020 on tax refunds. 5% Interest for 2nd quarter, 3% for 3rd quarter. Pretty good risk-free rate.



Maybe I should have paper filed...
livesoft
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Re: IRS to Pay Interest on Tax Refunds

Post by livesoft »

If I apply my refund to my 2020 taxes, then will I still get interest from the IRS and how?
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Flora
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Re: IRS to Pay Interest on Tax Refunds

Post by Flora »

I highly doubt you will get interest if you applied your 2019 overpayment to 2020.
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Re: IRS to Pay Interest on Tax Refunds

Post by Clever_Username »

I regret doing such a great job with my withholdings last year! I only was due a refund of $1700 or so (plus another $1700 or so in Social Security excess payments due to switching employer midyear).
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Re: IRS to Pay Interest on Tax Refunds

Post by Vanguard Fan 1367 »

bryanm wrote: Thu Jun 25, 2020 8:44 pm Title says it all. IRS to pay interest from 4/15/2020 on tax refunds. 5% Interest for 2nd quarter, 3% for 3rd quarter. Pretty good risk-free rate.



Maybe I should have paper filed...
I had ants in my pants waiting for my refund and I e-filed. Now I hope that they take their time sending it.
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TheDDC
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Re: IRS to Pay Interest on Tax Refunds

Post by TheDDC »

Feh. That averages out to a buck a month average for me with my $330 refund. I could care less. Just give me my refund.

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Kookaburra
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Re: IRS to Pay Interest on Tax Refunds

Post by Kookaburra »

Wouldn’t it be better to not be waiting on a refund accruing 5% interest, but instead to have had the money to put in the market for the recent 40% run-up?
the way
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Re: IRS to Pay Interest on Tax Refunds

Post by the way »

bryanm wrote: Thu Jun 25, 2020 8:44 pm Title says it all. IRS to pay interest from 4/15/2020 on tax refunds. 5% Interest for 2nd quarter, 3% for 3rd quarter. Pretty good risk-free rate.



Maybe I should have paper filed...
It was being discussed here viewtopic.php?f=2&t=318002&p=5323777#p5325282, until some people started arguing OT and they closed the thread.

So still wondering when the interest clock starts, April 15, the day it's sent, July 15, or the day it's processed?
MarkNYC
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Re: IRS to Pay Interest on Tax Refunds

Post by MarkNYC »

livesoft wrote: Thu Jun 25, 2020 8:46 pm If I apply my refund to my 2020 taxes, then will I still get interest from the IRS and how?
Based on certain parameters, the IRS will pay interest on the delayed payment of tax refunds. When a taxpayer elects to have their 1040 tax overpayment applied to the next year's estimated tax, the taxpayer is electing not to receive a tax refund payment. With no tax refund to be sent, there would be no interest.

I don't expect IRS to change this policy for 2019 due to the unusual 7/15 filing date.
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Re: IRS to Pay Interest on Tax Refunds

Post by the way »

MarkNYC wrote: Fri Jun 26, 2020 9:06 am
livesoft wrote: Thu Jun 25, 2020 8:46 pm If I apply my refund to my 2020 taxes, then will I still get interest from the IRS and how?
Based on certain parameters, the IRS will pay interest on the delayed payment of tax refunds. When a taxpayer elects to have their 1040 tax overpayment applied to the next year's estimated tax, the taxpayer is electing not to receive a tax refund payment. With no tax refund to be sent, there would be no interest.

I don't expect IRS to change this policy for 2019 due to the unusual 7/15 filing date.
Or as an optimist, I'd say I'm getting a million percent interest! 8-)
petulant
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IRS Paying Interest on Delayed Refunds

Post by petulant »

[Post moved into here, see below. --admin LadyGeek]

https://www.tulsaworld.com/business/inv ... bfe5c.html

Per the article, IRS is paying 5% until June 30 and then 3% thereafter for time periods after April 15, even if a person filed after April 15. Interest compounds daily.

This is good news for those who are still waiting to file or who filed (say by paper) but haven't received a refund yet.
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bryanm
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Re: IRS to Pay Interest on Tax Refunds

Post by bryanm »

the way wrote:So still wondering when the interest clock starts, April 15, the day it's sent, July 15, or the day it's processed?
Per the IRS clock starts on 4/15.
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Re: IRS to Pay Interest on Tax Refunds

Post by LadyGeek »

I moved petulant's post into the ongoing discussion.
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the way
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Re: IRS to Pay Interest on Tax Refunds

Post by the way »

bryanm wrote: Fri Jun 26, 2020 10:48 am
the way wrote:So still wondering when the interest clock starts, April 15, the day it's sent, July 15, or the day it's processed?
Per the IRS clock starts on 4/15.
👍 I paper-filed so this would be great! (I do see they included the word "generally" as a hedge tho).
Last edited by the way on Fri Jun 26, 2020 1:32 pm, edited 1 time in total.
livesoft
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Re: IRS to Pay Interest on Tax Refunds

Post by livesoft »

MarkNYC wrote: Fri Jun 26, 2020 9:06 am
livesoft wrote: Thu Jun 25, 2020 8:46 pm If I apply my refund to my 2020 taxes, then will I still get interest from the IRS and how?
Based on certain parameters, the IRS will pay interest on the delayed payment of tax refunds. When a taxpayer elects to have their 1040 tax overpayment applied to the next year's estimated tax, the taxpayer is electing not to receive a tax refund payment. With no tax refund to be sent, there would be no interest.

I don't expect IRS to change this policy for 2019 due to the unusual 7/15 filing date.
OK, thanks for that info. I think I will have some applied to 2020 and some received as refund. I guess the next thing to figure out is that if I have the refund split to go 3 places: (1) to 2020 taxes, (2) to Amazon gift card via HRBlock rebate, and (3) ACH'd to checking account, then some interesting things may or may not happen.
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Re: IRS to Pay Interest on Tax Refunds

Post by whodidntante »

One year my state enacted a tax increase effective July 1st. I also received a large bonus in the first half of the same year as well as some other income. So I filed what was essentially two half fiscal year tax returns on paper in order to reduce my tax liability for the year. While this was 100% legal, I think minds were blown at the state tax office. It took a very long time to get my refund. Wish I had received interest on that. :happy
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Re: IRS to Pay Interest on Tax Refunds

Post by the way »

livesoft wrote: Fri Jun 26, 2020 12:30 pm OK, thanks for that info. I think I will have some applied to 2020 and some received as refund. I guess the next thing to figure out is that if I have the refund split to go 3 places: (1) to 2020 taxes, (2) to Amazon gift card via HRBlock rebate, and (3) ACH'd to checking account, then some interesting things may or may not happen.
Surprised you have so much refund since you usually try to shave it pretty close.

btw, the HRBlock rebate is a bad deal - 4% on top of your refund, so a 3.85% discount. You can get 5% or over using the right CC on amazon.
livesoft
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Re: IRS to Pay Interest on Tax Refunds

Post by livesoft »

the way wrote: Fri Jun 26, 2020 6:29 pmSurprised you have so much refund since you usually try to shave it pretty close.
Here's how it went down: My spouse received an unexpected bonus in late December 2019 that had 25% tax taken out regardless of any of the tax machinations that we had done. We could not have paid less tax going into that week of December because we didn't know this income was coming. We could not have had zero tax taken out of the bonus because the regulation is that such bonuses must have 25% tax withheld. There was no way to not have this refund.
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go140point6
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Re: IRS to Pay Interest on Tax Refunds

Post by go140point6 »

Wow, I wonder if California did something like this. I got an extra 0.59 on my refund for some reason when it posted early June. I always do round up/down to an even dollar when preparing taxes, so this surprised me. Of course still waiting for Fed. I actually mailed mine on April 15 exactly.

And yeah, I was forced to paper file this year for both fed and state... first time I had to paper file in memory...bah!
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FIREchief
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Re: IRS to Pay Interest on Tax Refunds

Post by FIREchief »

Let me get this straight. For those folks who willingly lent money interest free to the IRS during most/all of 2019, the IRS will now pay them interest for a couple of months on the excess money that hasn't been returned to them? Doesn't sound like a great deal to me... :P
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livesoft
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Re: IRS to Pay Interest on Tax Refunds

Post by livesoft »

FIREchief wrote: Fri Jun 26, 2020 7:06 pm Let me get this straight. For those folks who willingly lent money interest free to the IRS during most/all of 2019, the IRS will now pay them interest for a couple of months on the excess money that hasn't been returned to them? Doesn't sound like a great deal to me... :P
:) In our case, we did not willingly lend money and even then we set our 2020 tax withholding to $0.00 per paycheck since we expected to apply the refund to 2020 tax liability. Also think about it this way: We would have invested the money and lost 30% in the stock market by March 23rd, so this refund thing saved us a lot of money! :twisted:
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Re: IRS to Pay Interest on Tax Refunds

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livesoft wrote: Fri Jun 26, 2020 7:21 pm
FIREchief wrote: Fri Jun 26, 2020 7:06 pm Let me get this straight. For those folks who willingly lent money interest free to the IRS during most/all of 2019, the IRS will now pay them interest for a couple of months on the excess money that hasn't been returned to them? Doesn't sound like a great deal to me... :P
:) In our case, we did not willingly lend money and even then we set our 2020 tax withholding to $0.00 per paycheck since we expected to apply the refund to 2020 tax liability. Also think about it this way: We would have invested the money and lost 30% in the stock market by March 23rd, so this refund thing saved us a lot of money! :twisted:
:P I guess I can't argue with that "logic." :sharebeer
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Re: IRS to Pay Interest on Tax Refunds

Post by barberakb »

TheDDC wrote: Thu Jun 25, 2020 10:51 pm Feh. That averages out to a buck a month average for me with my $330 refund. I could care less. Just give me my refund.

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Re: IRS to Pay Interest on Tax Refunds

Post by denovo »

whodidntante wrote: Fri Jun 26, 2020 12:56 pm One year my state enacted a tax increase effective July 1st. I also received a large bonus in the first half of the same year as well as some other income. So I filed what was essentially two half fiscal year tax returns on paper in order to reduce my tax liability for the year. While this was 100% legal, I think minds were blown at the state tax office. It took a very long time to get my refund. Wish I had received interest on that. :happy
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MisterBill
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Re: IRS to Pay Interest on Tax Refunds

Post by MisterBill »

So has anyone received an interest payment, and how long after your refund did it arrive? i filed my taxes last week at the deadline and received the refund yesterday, which was very impressive. I guess they were incented to pay me quickly to reduce the interest they have to pay.

And for those who say "why did you wait so long to file if you were getting a refund?", it's because when I started my taxes back in March I owed money and only after putting in my other stuff did I realize that I was due a refund. Still, a 3-5% interest, it's not that bad.
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Re: IRS to Pay Interest on Tax Refunds

Post by MisterBill »

Update -- I got a small deposit from the IRS in my checking account today, so I guess that was the interest they owed me. I wonder if they will be mailing out an explanation? Did anyone get one?
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Re: IRS to Pay Interest on Tax Refunds

Post by neurosphere »

MisterBill wrote: Tue Aug 18, 2020 9:08 pm Update -- I got a small deposit from the IRS in my checking account today, so I guess that was the interest they owed me. I wonder if they will be mailing out an explanation? Did anyone get one?
Yes, today: viewtopic.php?f=2&t=323381
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MisterBill
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Re: IRS to Pay Interest on Tax Refunds

Post by MisterBill »

neurosphere wrote: Thu Aug 20, 2020 1:52 pm
MisterBill wrote: Tue Aug 18, 2020 9:08 pm Update -- I got a small deposit from the IRS in my checking account today, so I guess that was the interest they owed me. I wonder if they will be mailing out an explanation? Did anyone get one?
Yes, today: viewtopic.php?f=2&t=323381
Thanks, but in theory that thread (which claims to have been merged) should have been merged into this one. Anyway, it's good news. Not often you get rewarded for procrastinating.
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