Level 15

Question

Refunds have interest added ? ! ?

Forum|Forum|5 years ago
April 26, 2021
8 replies
29 views

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 ?

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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?

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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

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qbteachmt

Level 15

IRS:

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

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BobKamman

Level 15

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."

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BobKamman

Level 15

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?

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 😉

Slava Ukraini!

dkhAuthor

Level 15

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.

HumanKind... Be Both

BobKamman

Level 15

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

BobKamman

Level 15

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.

dkhAuthor

Level 15

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 15

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

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