Well, some good news for some folks for a change.

WASHINGTON—Americans can earn guaranteed 4% interest when money-market funds and savings accounts aren’t paying even half that. The catch: The IRS has to be sitting on your tax refund.

That 4% rate for individuals took effect in April—up a percentage point from the prior quarter. The rate for large corporate refunds is 1.5%, up from 0.5%. Generally, the Internal Revenue Service has 45 days to process a tax return and pay a refund. After that, interest starts accruing in amounts tied to federal short-term interest rates and adjusted each quarter.

Those interest payments have real costs for the public: In fiscal year 2021, the IRS paid $3.3 billion in interest to tax filers, more than triple what it paid in 2015, according to a Government Accountability Office report. For the fiscal year that started in October, refund interest payments through March are down 11% but still well above 2019 levels, according to Treasury Department data.

“It’s not a small amount of money,” said Jessica Lucas-Judy, director of tax issues at GAO. “If there’s some way to avoid some of these payments, that’s probably a good thing.”

The IRS has been moving slower than usual to process tax returns. Administration officials say that is the result of years of Republican-backed budget cuts. Republicans say the agency hasn’t given priority to taxpayer service. Some recent years have been particularly difficult. In fiscal 2019, the aftermath of a government shutdown caused a backlog. The IRS slowed again when the coronavirus pandemic began in 2020 and is still months behind schedule in processing paper returns.

As of April 29, the IRS has 9.6 million unprocessed individual tax returns, some from tax year 2020 and some from 2021. The agency says it is taking more than 20 weeks to handle amended tax returns and hopes to catch up on all of its processing backlogs by the end of 2022.

he $3.3 billion in interest payments is a tiny fraction of total federal spending, but the amount is equal to about one-quarter of what it costs to run the tax agency. Interest payments don’t come out of the IRS budget.



For taxpayers who need their refunds for living expenses, the interest might not amount to much consolation for the long waits. And the payments are taxable income. But for companies and those individuals who can afford to wait, the money can add up. This also works in reverse. Taxpayers who owe the IRS money are charged interest by the government.

The GAO says the IRS isn’t doing enough to limit interest payments. “IRS does not fully understand the causes for refund interest payments—both within and outside of its control—and therefore cannot communicate this information to Treasury and Congress,” GAO wrote.

The IRS, in its official response to the report, said refund interest payments can’t be analyzed in a vacuum, and that some costs aren’t its fault but are required under the law. The agency also noted that interest rates vary over time and the government does actually have use of the money while it processes refunds.

“Our role is to administer the Tax Code as it is enacted,” wrote Douglas O’Donnell, deputy commissioner for services and enforcement. “We do not believe the amount of interest paid is a reliable or meaningful business measure.”



Some refund interest costs stem from specific decisions by Congress and the White House. In 2020, the Trump administration delayed the individual tax-filing deadline to July 15 from mid-April, and in 2021, the Biden administration delayed it to May 17.

Those changes gave taxpayers and preparers more time to get their returns in. But under the tax code, interest began accruing 45 days after the mid-April deadline, meaning that the IRS was forced to make payments covering periods before the returns were actually due.

Nina Olson, the former longtime in-house taxpayer advocate at the IRS, said the government should get technology that would let it do automatic processing for returns that are prepared with tax software but are printed out on paper and mailed in. Currently, employees transcribe those by hand and enter them into the IRS computers.

“I don’t think the IRS shrugs it off,” Ms. Olson said of the rising interest costs. “It’s just that we have had two and now three filing seasons that have been abnormal.”

link: https://www.wsj.com/articles/i...=1&mod=WTRN#cxrecs_s

Guess who is the paying that interest.

Yeah me. That is why I said some folks.

If you need your refunds for living expenses, you need to go to HR and change your withholding because you're definitely doing it wrong.

The IRS has to be one of the worst .gov agencies.

Naturally the article stated this was Trumps fault for budget cuts.

Lets not forget under Obamas watch they spend over 10 million for guns and ammo.

Lastly, why do so many people like to submit paper returns?

And that interest is why you should file a paper return when you anticipate a substantial refund if you’re just going to deposit the refund in a bank account. Maximizes the wait time the government pays you 4%.

quote:

Originally posted by gpbst3:
The IRS has to be one of the worst .gov agencies.

Naturally the article stated this was Trumps fault for budget cuts.

Lets not forget under Obamas watch they spend over 10 million for guns and ammo.

Lastly, why do so many people like to submit paper returns?

I like it now because last year when I submitted and paid electronically, the Gov took 2 payments of what I owed instead of one and I had a hell of a time getting the money back.

I admit that it strikes me as more than a little ironic that the people who are ridiculed for overpaying their taxes because they could get (maybe) 1.5% interest on the excess if they kept it are now looking at 4% interest on what they did overpay.

(Yeah, I know that some of the financial wizards among us get more than 4% interest on their money, but many of us don’t, so have fun ridiculing us for that too. That will ensure we remain in awe of you for being able to buy a few more six-packs than we could with all that extra dough rolling in. )

quote:

Originally posted by tsmccull:
Maximizes the wait time the government pays you 4%.

And then the .gov taxes you on that interest. They get you coming and going.

So the debtor gets to set the interest rate?

Heck, if they owed me, I'd be asking for consumer credit card interest rates.

I guess Prov 22:7: “... the borrower is slave of the lender” Doesn't apply when it's the gvm't that is the borrower. Oh well.

quote:

Originally posted by 229DAK:

quote:

Originally posted by tsmccull:
Maximizes the wait time the government pays you 4%.

And then the .gov taxes you on that interest. They get you coming and going.

Only if they send me a 1099 form that shows the interest. Got no details at all for why 2020’s refund was deposited about 3% higher than my tax form’s refund amount almost a year after my return was received by the IRS. Maybe I had a math error they found and I missed a deduction. Can’t report interest I don’t know about.

quote:

Only if they send me a 1099 form that shows the interest. Got no details at all for why 2020’s refund was deposited about 3% higher than my tax form’s refund amount almost a year after my return was received by the IRS. Maybe I had a math error they found and I missed a deduction. Can’t report interest I don’t know about.

^^^^^^^^^^
I doubt they will unless it is a large sum. The amount of interest will be detailed. I would not play games with these people.

Flat tax will eliminate the need for so many employees of the IRS, the government can work on those back log of the old ones from 2019,20,21&22

quote:

Originally posted by 229DAK:

quote:

Originally posted by tsmccull:
Maximizes the wait time the government pays you 4%.

And then the .gov taxes you on that interest. They get you coming and going.

Yup they 1099 you on it. I got one the last two years.

quote:

Originally posted by tsmccull:

quote:

Originally posted by 229DAK:

quote:

Originally posted by tsmccull:
Maximizes the wait time the government pays you 4%.

And then the .gov taxes you on that interest. They get you coming and going.

Only if they send me a 1099 form that shows the interest.

I got ten dollars and change the year before from a late refund. IRS sent me a 1099.