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Waiting on your tax refund? The IRS may owe you interest

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Key Points
  • By law, the IRS must issue interest payments to Americans who receive their tax refund checks late, or 45 days after the typical mid-April filing deadline.
  • Starting in April, the interest rate the IRS owes individual filers went up to 4%, compounded daily.
  • From May 1, 2020, to April 30, 2021, the IRS paid $3.3 billion in interest to tax filers, triple what the tax agency paid in 2015, according to a Government Accountability Office report. 

If you're one of the millions of Americans who is waiting for a tax refund, or if received your refund late, be on the lookout for a separate check from the IRS.

By law, the IRS must issue interest payments to Americans who receive their tax refund checks late, or 45 days after the typical mid-April filing date. The interest rate adjusts quarterly and as of April 1, 2022, it sits at 4%. The amount owed is compounded daily.

As of late April, the tax agency had a backlog of 9.6 million unprocessed individual tax returns from 2020 and 2021, according to a Wall Street Journal report.

The backlog, caused by years of budget cuts, understaffing, and pandemic-related office closures, should "absolutely" be resolved by December, IRS Commissioner Charles Rettig told lawmakers in March.

In fiscal year 2021, the IRS paid $3.3 billion in interest

The slow pace at which the IRS is processing returns is costing billions. From May 1, 2020, to April 30, 2021, the IRS paid $3.3 billion in interest to tax filers, triple what the tax agency paid in 2015, according to a Government Accountability Office report. 

Over the last seven fiscal years, the IRS has paid out $14 billion in refund interest, according to the GAO. But on an individual level, payments typically don't amount to much: In 2020, the average interest check was $18.

According to the latest date, the average tax refund this year is $3,019 for the week ending April 29, according to the IRS.

If you're owed interest from the IRS, it will come separate from your tax refund, so be on the lookout for an extra check. It's worth noting that interest payments are taxable and that you must report the interest in your 2022 federal income tax return. The IRS will send form 1099-INT to anyone who receives interest of $10 or more.

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