If you filed your 2019 tax return by the July 15 extended deadline, and are owed a refund, you will receive a check from the IRS this week for accrued interest. Nearly 14 million Americans will receive an interest payment check, with the average payment being $18. Here’s what you need to know.
Why You Will Receive An Interest Check
Because COVID-19 is labeled a “disaster” by the federal government and caused the tax return deadline to be extended, the IRS is required to pay interest on the refunds owed to individuals. Businesses will not qualify for an interest payment.
Interest is paid at the adjusted quarterly rates. The rate for the second quarter was 5%, while the third quarter dropped to 3%. If the amount owed spans across the quarters, a blended interest rate applies. No interest will be added to any refund issued before the original April 15 deadline.
How To Receive An Interest Check
Checks will be sent to taxpayers who met the July 15 deadline and either received a refund in the past three months or anticipate receiving a refund. The interest payments will be issued separately from tax refunds, in most cases.
Taxpayers who received their tax refund by direct deposit will have their interest payment direct deposited in the same account. About 12 million of these payments will be direct deposited. Everyone else will receive a mailed check.
Your Interest Check Will Be Taxed
All earned interest is taxable income. Taxpayers who receive an interest check must report the interest on the 2020 federal income tax return they file next year. In January 2021, the IRS will send a Form 1099-INT to taxpayers who receive an interest check over $10.
For the millions of taxpayers that will receive a check in the coming days, the 1099-INT sent out in 2021 will be an additional form you need for your next tax return.
Brett Holzhauer is a graduate of the Walter Cronkite School of Journalism at Arizona State University. He writes about using points and miles for travel, personal finance news, utilizing credit cards as financial leverage, and investing for the future. He has been featured in publications such as The Points Guy, The Money Manual, Recruiter, Travel Pulse, and LendingTree. He is a full-time digital nomad with his wife, Kiersten.