If you file your taxes by today, Uncle Sam will pay up to 5% interest on your late refund

Personal Finance

ljubaphoto

“This year’s July 15 filing date is considered a disaster-related postponement of the filing deadline,” said IRS spokesman Eric Smith. 

“Where a disaster-related postponement exists, the IRS is required by law to pay interest, calculated from the original April 15 filing deadline, as long as an individual income taxpayer files a 2019 tax return by the postponed deadline —July 15, 2020 in this instance.”

Better than a savings account

JGI/Jamie Grill

The IRS adjusts its interest rate every quarter. The agency will generally pay interest from April 15 until the date the refund is issued.

It’s crediting 5% per year, compounded daily, for the second quarter ending on June 30.

For the third quarter, ending Sept. 30, the agency will credit 3% interest.

In comparison, high-yield savings accounts are paying just over 1%, according to Bankrate.com.

This isn’t free money. You’re going to get a Form 1099-INT from the IRS in 2020.

Dan Herron

principal at Elemental Wealth Advisors

You may receive interest payments separately from your refund, according to the IRS.

Track how much the taxman pays you, as the interest you get from the agency will be subject to taxes when you file your 2020 taxes next year.

“This isn’t free money,” said Dan Herron, CPA and principal at Elemental Wealth Advisors in San Luis Obispo, California. “You’re going to get a Form 1099-INT from the IRS in 2020.”

Don’t wait

The cost of missing the July 15 deadline is steep for people who owe the IRS. Failure to pay penalties are 0.5% of the tax owed, while failure to file carries a penalty of 5% of the unpaid tax.

If the IRS owes you a refund, however, you can’t collect it until you file.

With the average refund totaling $2,762 as of July 3, you may as well e-file today and snap up your interest.

Products You May Like

Articles You May Like

Digital loan start-up Blend jumps to $1.7 billion valuation as mortgage demand surges
Buffett buys back record $5.1 billion in Berkshire stock as coronavirus hits operating earnings
Elizabeth Holmes’ Theranos trial set to begin on March 9, 2021
Covid-19 has put older workers’ retirement at risk. Here’s how stimulus legislation would help
Cramer worries Trump will start ramping up pressure on China even more

Leave a Reply

Your email address will not be published. Required fields are marked *