There might be more money headed your way from the IRS.Angela Lang/CNET
Tax Day was July 15, after the IRS postponed the traditional April 15 deadline because of the COVID-19 outbreak. And that was just one of several unconventional policy maneuvers the federal government has undertaken to help struggling Americans during the coronavirus pandemic. It also issued stimulus checks, which were sent to qualified taxpayers back in April. (If you haven't received one yet, check out our guide on how to track your stimulus check.)
A second round of stimulus checks was a key component of the GOP's HEALS Act, announced July 27. It could help offset the loss of the extra $600 in unemployment benefits that was part of the CARES Act and expired on July 31. (Note that Republicans have proposed a new unemployment benefit of $200 a week as part of the HEALS Act.)
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But the stimulus payments are wholly separate from tax refunds, millions of which are still being processed by the IRS. The 2020 tax deadline extension, which provided all taxpayers with more time to fill out paperwork, calculate refunds and scrape together payments, will also result in some taxpayers getting a few more dollars from the government. Read on to find out if you can expect to receive a second tax refund payout from the IRS -- and when it might show up in your bank account or mailbox.
Why is the IRS sending a second check to some households?
Every year, the IRS pays interest on refunds that take extra time to process, with interest accruing from April 15 until whenever the agency cut your check (or dropped your direct deposit). If you haven't yet received your refund check, you're not alone: The IRS said back in June that it had a backlog of 4.7 million returns.
This year, the interest accrual period began on April 15, as usual -- even if you didn't file until July 15. So, in effect, there was a modest but real advantage to filing later this year. Couple that with the IRS backlog, and it means more people than usual will get a tax interest payment from the IRS this year.
Are these payments from the IRS different than the stimulus payments?
Yes. The CARES Act provided a one-time stimulus payment to eligible US residents, designed to bring financial relief to the millions of people impacted economically by the pandemic. It's a bit confusing -- because the stimulus checks were issued by the IRS, and based on a taxpayer's individual's 2019 adjusted gross income. But they're totally separate and different from this year's tax refunds and tax interest payments.
Who will receive a tax interest payment?
Taxpayers eligible for a refund -- who didn't receive it by April 15 -- will accumulate some amount of interest. The sum of that interest may be sent out as a second check or direct deposit.
How much will I get?
As usual, the IRS will pay 5% annual interest, compounded daily through June 30. On July 1, the interest rate decreases to 3%. For every $1,000 due back to you, you can expect to collect about 14 cents in interest per day between April 15 and June 30 and 8 cents a day thereafter.
Is there a catch?
There's always a catch.
"The interest is taxable," said Pamela Lucina, chief fiduciary officer and head of the trust and advisory practice at Northern Trust Wealth Management. "This means you will receive a 1099-INT for 2019 and will pay taxes on it when you file your 2020 return."
When will I get my tax interest payment?
The IRS says that tax interest payments could come in a second check or direct deposit -- though they could also be added into a forthcoming refund. In an email to CNET, the IRS said: "The exact timing is yet to be determined, but it will be later this summer. "
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