The good news: Money may soon come to you from the Internal Revenue Service. The bad news is: it probably won’t be much, and you’ll have to pay taxes on it.
The IRS announced this week that it owes interest payments to nearly 14 million Americans who received their individual tax credits after April 15 or are still being reimbursed.
The average payment will be $ 18.
The reason the IRS owes this money is the COVID-19 pandemic. To ease the pressure on taxpayers due to the virus-ridden economy, the IRS has this year extended the deadline for filing returns to July 15, three months after the traditional deadline of April 15.
The delay means that money returned in the hands of the IRS sat longer than normal. In essence, taxpayers who took the opportunity to later lend that money to the government. At that time, the money generated interest – interest that the IRS is now required by law to pay out.
The IRS said it calculated the interest rate based on a legally prescribed rate that is adjusted quarterly: at 5% for the quarter ending June 30 and 3% for the current quarter ending September 30.
Taxpayers who receive their refunds through direct deposit will deposit the interest payment into the same account. Everyone else will get a check with a notation that says “INT amount”.
The law only requires the IRS to make such interest payments to individual taxpayers, not to companies.
The interest payment that the IRS sends you is taxable, and you will be required to report the payment when you file your tax return next year. The agency plans to send a Form 1099-INT in January to anyone who receives an interest payment of at least $ 10.
As for those of you who filed your taxes early and received your tax return before April 15 – and those who filed late July 15 – you do not have to worry about any of this. The IRS says you do not receive interest payments.
