The Treasury and IRS announced on August 18 that they were to start sending interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds.
The interest payments are being made to individual taxpayers who filed a 2019 return by this year’s July 15 deadline, and who either received a refund in the past three months or will receive a refund. The amount of the average interest payment is about $18. Most interest payments will be issued separately from tax refunds. Taxpayers who received their refund by direct deposit can expect their interest payments to be directly deposited in the same account. Other eligible taxpayers will receive a check.
By law, these interest payments are taxable, and taxpayers who receive them must report the interest on their 2020 federal income tax return. The IRS will send a Form 1099-INT, Interest Income, in January 2021 to anyone who receives interest totaling at least $10. Interest will be paid at the legally prescribed rate that is adjusted quarterly. If a calculation period spans quarters, a blended rate will apply, consisting of the number of days falling in each calendar quarter.
This provision is different from the long-standing 45-day rule, which generally requires the IRS to add interest to refunds on timely-filed refund claims issued more than 45 days after the return due date. Due to this year’s COVID-19 disaster-related postponement of the filing deadline, the IRS is required by law to pay interest, calculated from the original April 15 filing deadline, as long as an individual has filed a 2019 federal income tax return by the postponed deadline, July 15, 2020. Businesses are not eligible for this refund interest requirement.