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During a normal year, the IRS pays interest if it issues a refund more than 45 days after receiving your return, given that it is holding onto money that technically belongs to you.
However, this is not a normal year since the IRS extended the filing deadline for the first time ever, until July 15. Consequently, the agency said it will pay interest as if its refunds are late starting on April 15.
Interest is to be paid individual on 2019 refunds for returns that were filed by July 15, until the date of the refund.
The agency’s interest rate in the second quarter, ending June 30, is 5 percent per year – compounded daily. For the third quarter, which ends Sept. 30, it is 3 percent per year.
Interest payments might be received separately from the refund itself and they will count as taxable income.
It has been suggested that some taxpayers may be waiting until next calendar year to receive their refund if they filed a paper return.
The IRS stopped processing paper returns at the end of March as it began adjusting operations in order to keep employees safe and to comply with coronavirus-related social distancing and stay-at-home guidelines.
National Taxpayer Advocate Erin Collins recently confirmed that many taxpayers face “extreme delays” in receiving those checks.
Once the returns are processed, the IRS typically issues refunds electronically within 21 days. In the regular mail, they can take up to six weeks.