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14 million taxpayers are about to get an extra check from the IRS. Here's how to tell if you will

Nearly 14 million Americans will receive additional money for getting their federal tax refund later than usual, according to the IRS.

Twenty/20

While some Americans have been getting erroneous letters from the IRS about unpaid balances, others can expect happier news from the agency: They're getting an extra refund check

The IRS said it began sending out interest payments last week to nearly 14 million Americans who received a tax refund this year.

Here's what you need to know about the IRS announcement and who qualifies for the extra payment

Why the IRS is issuing interest payments

The IOU stems from a quirk in the tax code. By law, the IRS must issue interest payments to Americans who receive their refund checks 45 days after the typical April 15 filing date. 

This year, the IRS extended the filing deadline to July 15 due to the coronavirus pandemic. Since this year's extension is considered disaster-related postponement, the IRS is required to pay interest calculated from the original April 15 filling deadline. 

Who can expect an extra check

If you filed a 2019 return by this year's July 15 deadline and either received a tax refund after April 15 or expect a refund soon, be on the lookout for an interest payment. 

The refund interest requirement only applies to individual income tax filers, not businesses, according to the IRS. 

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Plan for a small windfall

By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly, according to the IRS. For the second quarter, which ended on June 30, 2020, the interest rate was 5% per year, compounded daily. For the third quarter, which ends on September 30, 2020, the interest rate is 3% per year, compounded daily. 

While that's more interest than you'd earn parking your money in a savings account, don't expect a big payout. The average interest payment is about $18, according to the IRS. 

Look for a direct deposit, or a paper check

Most payments will be issued as a separate amount from your tax refund. About 12 million people will have their interest payments directly deposited into the same bank account that their tax refund was deposited. Everyone else can expect to receive a paper check. 

If you receive a paper check, be on the lookout for a notation saying "INT Amount." That's how you'll know it's a legit check for your refund interest payment. 

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Interest payments are taxed

Interest payments are considered taxable income, so you'll need to report any money you receive from the IRS on your 2020 federal income tax return next spring. In January 2021, the IRS will send out a Form 1099-INT to anyone whose interest payment totaled $10 or more, for easier filing. 

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