Staff shortages and an existing backlog of returns makes it more likely than ever that your tax refund could arrive later than usual this year. The good news is, it could be a bit bigger than expected if that proves to be the case.
The IRS has 45 days to process returns and issue refunds. After that, it’s required to pay interest. And starting last month, that interest rate jumped to 4% for individuals. (On the average refund of $2,800, that would work out to $112.)
The interest is paid quarterly.
While most refunds are processed within 21 days, the agency is in the midst of a budget crisis, and at the beginning of this year’s tax season, millions of unprocessed individual returns 2021 remained.
Last year, the IRS paid $3.3 billion in interest to taxpayers, according to a report from the U.S. Government Accountability Office (GAO). As of March, refund interest payments were down 11% for this tax season, the Wall Street Journal reports, but they’re still higher than they were in 2019.
Those increases are bringing some criticism to the IRS.
“GAO found that some categories of errors occur each year; however, IRS does not assess the underlying causes of taxpayer errors on returns. Doing so could help reduce future errors, refund delays, and strains on IRS resources.,” the report read.
The IRS, in its reply, said its process for analyzing errors is robust and the amount of interest paid is not a meaningful business measure.
As of April 29, the IRS has 9.6 million unprocessed individual tax returns. The best place to track where things stand with yours is with the agency’s Where’s My Refund? tool, which updates the status of tax refunds daily.
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