Taxes should be filed on April 15 of every year. However, because of the COVID-19 pandemic, it was understandable that a lot of people failed to file their taxes on time.
The Internal Revenue Service (IRS) moved the due date this year to July 15 to give way to those affected by the pandemic. Those who filed their taxes after April 15 are in luck because they would be getting extra money from the government. It is referred to as an interest check.
Let’s discuss this unusual extra money this year: Every year, the IRS has to pay interest on refunds because the federal government takes some time to actually process them. The IRS admitted that as of June, it has a backlog of 4.7 million returns.
According to the IRS, the accrual period for this interest check will start on April 15. This means that if you filed your tax return later, then you are going to get an interest check. The interest payments will or might be sent as a separate check from the actual refund. Of course, with the backlog, you might receive your refund later. This means additional interest.
Note that this is different from the stimulus payment from the government. The Coronavirus Aid, Relief and Security Act, which is wittily referred to as the CARES Act, is a law signed by President Donald Trump to give financial assistance to the millions of Americans affected by COVID-19.
Don’t be confused considering that the stimulus check is also issued by the IRS and is based on a person’s adjusted gross income. If you already received a stimulus check, then expect another check coming. Of course, that is granting that you are eligible for it.
If you are a taxpayer who didn’t receive a refund by April 15, then the months that you didn’t get it will incur an interest. The total amount of the interest will be sent to you as a second check.
Wondering how much you will get?
The IRS will pay an annual interest of 5% that will be compounded each day until June 30. By July 1, the interest rate would have decreased to just 3%. What would this entail? This means that for every $1,000 that should have been refunded to you, you will get 14 cents as interest every day from April 15 to June 30. This would decrease to just 8 cents every day starting on July 1.
The IRS, though, is yet to announce the date of the release of the interest checks. It is hoping that it will be out later in the summer.
Of course, the interest is taxable. It will be part of your taxable income in your 2020 tax return. At least, it will be available at a time when a lot of people really need the money. COVID-19 affected a lot of people and not just in terms of health. A lot of people also lost their jobs while some experienced shorter work hours.