IRS will pay interest on tax refunds issued after April 15 - San Francisco Chronicle

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The Internal Revenue Service will “generally” begin paying interest on 2019 federal tax refunds issued after April 15 to anyone who files a 2019 return by July 15, the agency said Wednesday.

That appears to be more generous than what the IRS is obligated to pay, but will come as small solace to the untold number of people who filed their returns months ago and have yet to receive their refund. Because of the coronavirus, IRS facilities have been shut down for most of the past three months and paper returns have been accumulating in trailers.

“Interest on individual 2019 refunds reflected on returns filed by July 15, 2020 will generally be paid from April 15, 2020 until the date of the refund. Interest payments may be received separately from the refund,” the IRS said in a brief statement.

The interest rate is 5% per year for the second quarter ending June 30, and 3% for the third quarter ending Sept. 30, it added.

By law, the IRS does not owe interest on refunds if they are issued within 45 days of the due date of the return (usually April 15) or the date the return is filed, whichever is later. If it misses that deadline, then “interest on the refund will start on the return due date, late filed return received date, or date the payment was made, whichever is the latest,” according to the IRS website.

This year, the IRS extended the due date for filing 2019 returns to July 15, and it was not clear if it would use April 15 or July 15 as the starting date to determine when interest on refunds was due and when it would start.

Based on its statement, the IRS not only chose the earlier date, but will pay interest on all refunds issued after April 15, regardless of when people filed their tax return, as long as they get it in by July 15.

“That appears to be what the IRS is saying,” said Mark Luscombe, principal analyst with Wolters Kluwer Tax & Accounting.

“This is supported by the fact that they included the second quarter interest rate, assuming apparently that it would enter into the calculation," he said. “Perhaps this is another effort to get some money into the hands of struggling taxpayers. If taxpayers expecting a refund had known about this earlier, it might have paid to hold off filing returns until July 15 in order to get 5% and 3% interest on their refund money.”

The IRS has received requests to clarify its statement but has not issued a clarification, IRS spokesman Raphael Tulino said.

On Tuesday, Treasury Secretary Steven Mnuchin said he has been “thinking about” extending the tax filing deadline again, beyond July 15. “As of now I’m not intending on doing that, but it’s something we may consider,” Mnuchin said during a Bloomberg virtual event.

The IRS issued evacuation notices for its facilities on March 27. Although thousands of IRS employees continued to work remotely, all jobs that were not portable, such as opening mail, were halted. That prevented further processing of tax returns filed by mail, but many people who filed electronically before the shutdown are also awaiting refunds.

Cythia Cramer of Springfield, Ore., said she mailed her return Feb. 3 and has yet to received a refund.

Patrick Peters, of Canal Winchester, Ohio, said he filed electronically the first week of February and is still waiting for his refund.