In these tumultuous times, a financial relief like a tax refund would be a much-needed respite. However, how can you leverage this relief refund? What are the specific steps you need to follow? You must be having these or similar questions about the refund interest payment. Through this blog, we are trying to answer general and specific frequently asked questions about Coronavirus tax relief.
1. Should I use the “Where’s My Refund” system to know the refund interest payment status?
You will not get any information through the “Where’s My Refund” application, as it is not a part of this application.
2. What is the amount of refund interest payments?
It depends. The refund interest amount for each taxpayer would receive different based on the criteria. However, $18 is an average refund interest amount.
You would be paid interest at a legally stipulated rate, which is quarterly adjusted. For the 2 nd quarter that ended June 30, 2020, a noncorporate taxpayer would ger 5% compounded daily. For the same taxpayer, the rate plunged to 3% compounded daily for the third quarter, starting from July 1, 2020.
3. When will I get the payments of interest refund?
The refund interest payments by IRS would be initiated on August 19, 2020. However, most eligible taxpayers will get their refunds before August 28, 2020.
4. What happens when I no longer use the bank account used for direct deposits of my previous refunds?
Firstly, the IRS will try to issue a direct deposit to your bank account. In cases when your bank account has been closed or the bank account information is invalid, the bank will reject the direct deposit. Upon such rejection, your payment will be mailed through a paper check to the address — listed during your tax filing. This paper check would typically reach you in 14 days— standard mailing time.
5. What if I still didn’t receive my 2019 refund payment? Will the interest payment be combined with the refund payment?
Mostly, the IRS would issue the interest payment and 2019 tax refund payment separately. If the refund interest has been sent out through a paper check, the check would have notation suggesting it as refund interest payment.
6. Can I change my address for check payments?
If you want your check payments to be received at a different address — other than the one given by you on your tax filing— you can use Form 8822, Change of Address, to notify the new address to the IRS.
In cases when the post office returns the payment to the IRS, it will keep your refund interest payment on hold until they receive an updated address from you.
7. Would the refund interest payments received be categorized as taxable income?
Yes! The refund interest payment you would receive for 2019 would be taxable — making it mandatory for the taxpayers to report such refund interest in 2020 federal income tax return filing. For taxpayers receiving a total interest of $10 or above, IRS will send a For- 1099-INT.
8. When will IRS issue 1099-INT forms for refund interest payment?
The Form 1099-INT— to be issued for taxpayers receiving interest above $10— will be done before February 1, 2021.