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For those who’re still waiting for a tax refund, there is a silver lining: it might be accruing interest, and the speed jumps to five% from 4% on July 1, based on the agency’s latest quarterly adjustment.
Typically, the IRS has 45 days after the filing deadline to process returns and send refunds. After that, the agency tacks on day by day compounding interest, explained Tommy Lucas, a licensed financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
Tied to the federal short-term rate, IRS interest currently falls below 8.3% annual inflation. However it’s still significantly higher than the typical savings account.
While this sounds good, there may be a downside: your interest is taxable.
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IRS interest payments ballooned to $3.3 billion within the fiscal yr 2021, with a 33% spike from 2020 for individual returns, the U.S. Government Accountability Office reported.
The simplest method to check the status of a refund is thru the “Where’s My Refund?” online tool or through the use of the IRS2Go app. The portal shows three steps: return receipt, refund approval and if the refund was sent, with an estimated deposit date.
Recently, the IRS updated the portal to incorporate 2019 and 2020 returns, said Phyllis Jo Kubey, a Recent York-based enrolled agent and president of the Recent York State Society of Enrolled Agents.
“Before this upgrade, the web refund inquiry only covered current-year refunds, meaning that anyone inquiring a few prior-year refund needed to call the IRS,” she said.
High call volumes have been an ongoing issue with many taxpayers struggling to succeed in IRS agents. Throughout the first half of 2021, there have been fewer than 15,000 employees to handle over 240 million calls — one agent for each 16,000 calls, based on the National Taxpayer Advocate.
“I hope that is the start of more enhancements to the IRS online refund inquiry tools, and I look ahead to seeing more improvements,” Kubey said.
The IRS began 2022 with about 8.2 million paper returns, and there have been 1.7 million left as of May 6, Ken Corbin, the chief taxpayer experience officer for the agency told the House Oversight Subcommittee in May.
“Our goal is to bring the IRS back to a state prior to the pandemic,” he said. “Now we have to process this paper so we are able to get back to the business of providing the service the taxpayers deserve.”
IRS Commissioner Charles Rettig in March told House lawmakers he expects the backlog to clear by the tip of 2022.