Currently, millions of Americans across the country are still awaiting their tax returns from the 2022 filing season. However, the longer taxpayers are left waiting, the more money they might see in their pockets when they do receive the refund. The IRS generally pays interest on refunds that are delayed more than 45 days, according to the IRS website.
Adjusted Interest Rates
Depending on the federal short-term rate, interest rates are adjusted every quarter. Currently, the interest rate stands at 6% but is poised to increase to 7% on January 1st, 2023. The IRS as of November has had to process around 3.7 million individual tax returns, which includes 1.7 million returns requiring correction or another handling. There are also an additional 2 million paper returns that are waiting to be reviewed and processed.
But Wait
With any good news coming from the IRS, there is almost always a downside. The interest paid by the IRS is taxable. The agency’s interest payments in the 2021 fiscal year have skyrocketed 33%, seeing the agency pay out nearly $3.3 billion for individual returns which was reported by the U.S. Government Accountability Office.
Electronic Filing is Faster
Even though 90% of taxpayers submit their returns electronically, some 17 million sent paper filings, which equated to a massive pile-up of returns. As a result of the millions of paper returns submitted, taxpayers were routinely waiting up to 6 months for their return, with some Americans waiting up to 10 months or more. Of course, the pandemic also played a hand in these unusually long wait times which attributed to staff shortages. If you are still waiting for a refund, you can track the status of it using the agency’s Where’s My Refund tool on their website.
Wrap Up
Although waiting to receive your tax return from the IRS can be frustrating, it is good to know they are taking some accountability and adding on interest payments for late returns, even though it is taxable. If you need help with your tax returns, it is always a good idea to turn to a trusted financial professional for guidance.