The Rebound Indiana: Hoosiers receiving interest payments from the IRS

IRS: Nearly 300 tax Filing, payment and administrative deadlines extended
Posted at 6:00 AM, Sep 03, 2020
and last updated 2020-09-03 08:22:32-04

INDIANAPOLIS — Millions of Americans are getting deposits and checks from the Internal Revenue Service, and WRTV Investigates has uncovered these payments are not a scam.

The IRS is sending interest payments to nearly 14 million taxpayers, including people in Indiana.

You could get one in your mailbox or directly deposited into your bank account, WRTV has learned.

Doretta New, of Indianapolis, unexpectedly received a $30 deposit into her bank account from the IRS.

"First I wondered what it was, because I had no idea what it was,” New said.

We first introduced you to New back in May when she was worried because she hadn’t received her tax refund or her federal stimulus payment.

PREVIOUS | Hoosiers stuck waiting for federal tax refunds and stimulus checks

New finally got her refund and stimulus money in June, but in mid-August, she also received a surprise payment from the IRS.

"The interest payment just showed up in my bank account and it said IRS and that's all it said,” New said. “It's like 'Ok, what's this?'"

The IRS announced this week people who receive these interest payments filed their 2019 federal income tax returns by the July 15 deadline and were owed refunds.

The interest payments are due to the IRS postponing this year's filing deadline to July 15.

The new deadline was related to COVID-19 and is considered a disaster-related postponement, so therefore, the law requires the IRS to pay interest calculated from the original April filing deadline.

The taxpayer must have filed their 2019 federal income taxes by the July 15, 2020, deadline to get an interest payment, according to the IRS.

“These interest payments averaged about $18,” read a statement from the IRS. “The IRS issued most of the payments separately from tax refunds.”

Most taxpayers who received their refund by direct deposit will get their interest payment sent to the same account, and everyone else will receive a paper check.

A note on the check reads "INT Amount” which identifies it as a refund interest payment.

Just know, these interest payments are taxable.

“Why are we getting taxed on that?” New asked. “It just makes absolutely no sense.”

Taxpayers who received a payment must report it on their 2020 federal income tax return next year, according to the IRS.

The IRS will send a Form 1099-INT in January 2021, to anyone who gets a payment of at least $10.

This refund interest only applies to individual taxpayers and businesses aren't eligible.

Here’s how the IRS calculates the interest payments:

“Interest is paid at the legally prescribed rate that is adjusted quarterly. The rate for the second quarter ending June 30 was 5%, compounded daily. Effective July 1, the rate for the third quarter dropped to 3%, compounded daily."

Where the calculation period spans quarters, a blended rate applies, consisting of the number of days falling in each calendar quarter. No interest will be added to any refund issued before the original April 15 deadline.”