About 13.9 million taxpayers are getting a surprise from the Internal Revenue Service starting this week: An extra check from the IRS — if you filed your federal return on time.
Given that the tax filing deadline for 2019 returns has been a moving target, you may be wondering what “on time” actually means. The original due date was April 15, 2020, but the IRS pushed out the deadline to July 15. For IRS interest payment purposes, you’re in the running for an IRS bonus if you filed your tax return by mid-July.
Here are more details about IRS interest payments.
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IRS interest payment FAQ: 7 things to know
Am I eligible for an interest payment?
If you filed your 2019 federal income tax return by the July 15 deadline and are owed a refund or received a refund in the past three months, you are eligible for the interest payment. If you received your refund before the original April 15 deadline, you will not receive an interest payment.
How much will I get?
The average payment is about $18, according to the IRS.
How is interest calculated?
TLDR: Between 3% and 5%, compounded daily since the original April 15 filing deadline. The background: The rate adjusts quarterly based on the federal short-term rate (plus three percentage points) for the first month in each calendar quarter. The original filing deadline and postponed one spanned the second and third quarters where the rates were 5% and 3%, respectively. Therefore, the IRS is using a blended rate based on the number of days that fall in each calendar quarter.
Will I get a check or will it be direct deposited?
If you got your tax refund via direct deposit (or are set up to do so), that’s how your interest payment will be paid. The IRS says about 12 million payments will be sent this way, with the remainder being sent by mail.
Why is the IRS making interest payments?
The IRS is required by law to pay interest on amounts owed to individual taxpayers if the filing deadline postponement is due to a disaster. Not surprisingly, COVID-19 qualifies as a disaster.
Are businesses eligible?
Nope. The refund interest requirement does not apply to businesses.
Will I owe taxes on the interest payment?
Yup. But only if the interest payment is $10 or more. The IRS will remind you about the payment next year when they mail out a Form 1099-INT for you to use when filling out your 2021 federal tax return.
Read next:
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