ATLANTA — If you’re one of the millions of people waiting on a refund from the Internal Revenue Service, you might be getting more than you expected.
The IRS has 45 days to process a return and issue a refund. If the process takes longer than 45 days, the agency has to add interest. The amount of interest depends on the size of the refund and how long your wait.
Alan Lowe waited so long for his refund, he thought the IRS had forgotten him.
“After a while you get to the point of, maybe I won’t get it at all,” he said. “That’s where my mind went because I knew the IRS was having problems.”
After filing in March of last year, Lowe’s check didn’t arrive until March of this year.
During the pandemic, the IRS has struggled to issue checks on time meaning a lot of late refunds.
“The backlog is real and that's why we're seeing taxpayers perceived interest that is not normal for other years,” Financial Expert Andrew Poulos explained.
The interest rate added to refunds this tax season is 4%. Interest is added quarterly, so with an average refund of $2,800 the IRS will add $112 in interest after three months, $362 dollars if the wait for your refund lasts a full year.
But Poulos reminds us that the IRS sees that extra money as income. They’re going to tax it.
“No different than if you earn interest on a bank account,” he said. “That’s reportable income. Same situation here except it's coming from the government.”
Meanwhile, the interest added to Lowe’s refund wasn’t enough for him to notice.
“Finally it just showed up one day and I was shocked,” said Lowe.
However, he added he would have preferred getting his check on time.