IRS to pay interest on refunds issued after April 15
Many taxpayers who received or will receive their refunds after April 15 of this year will get interest payments from the IRS, the agency said Wednesday.
The IRS said that if individuals have their refunds issued after April 15 and they file their 2019 tax returns returns prior to the July 15 deadline, they will receive interest that covers the period from April 15 until the refund issue date.
The development on interest payments comes after the IRS in March extended the filing deadline for individuals’ 2019 tax returns from April 15 to July 15 due to the coronavirus pandemic. Treasury Secretary Steven Mnuchin said Tuesday that the department may consider a further extension of the due date.
Taxpayers with refunds issued after April 15 will be eligible for interest payments regardless of whether they filed their returns before or after that date, according to the IRS.
For example, if someone files their return on July 15 and is issued their refund on Aug. 1, they would receive interest for the period from April 15 to Aug. 1. A taxpayer who filed their return on April 10 and was issued their refund on April 25 would receive interest for the period from April 15 to April 25.
Taxpayers may get their interest payments separately from their refunds, the IRS said.
“By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly,” the IRS said in a statement. “The interest rate for the second quarter, ending on June 30, 2020, is 5% per year, compounded daily. The interest rate for the third quarter, ending September 30, 2020, is 3% per year, compounded daily.”
Interest payments taxpayers receive this year would be considered taxable income on their 2020 returns, which they will file next year, according to the IRS.
In typical years, a taxpayer who files a return on or after April 15 wouldn’t get interest from the IRS unless the agency took more than 45 days to issue the refund.