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If you filed your federal income tax return between April 15 and July 15 and got a refund, the Internal Revenue Service (IRS) has a little something extra for you: interest on your refund.
The IRS says 13.9 million taxpayers will get a check averaging $18 on the interest on their refunds. Normally, the IRS pays interest only on refunds paid after 45 days from the date the return is filed, if returns are filed by the tax deadline. But if you file late because the IRS has extended the filing deadline because of a disaster, the IRS calculates the interest starting with the initial filing deadline.
In this case, the disaster was the COVID-19 pandemic, which prompted the IRS to extend the tax filing deadline nationally from April 15 to July 15 for the first time in history. Under the law, anyone who filed a federal income tax return after April 15 but by the delayed July 15 deadline will collect interest on the refund.
The average tax refund as of July 24 was $2,741 — identical to the previous period in 2019. The IRS quarterly interest rate for refunds was 5 percent in the three months ended June 30 and 3 percent for the three months starting July 1. Interest is compounded daily. If the calculation spans both quarters, you'll get a blended rate.
The interest on your refund is taxable as ordinary income for the 2020 tax year. Anyone who gets a refund of more than $10 will get a Form 1099-INT in January and will have to report that amount on the 2020 income tax return.
If you got your refund before April 15, you won't get any interest from the IRS. Businesses are not eligible to get interest on refunds, just individual filers.
