IRS Backlog May Mean Extra Money in Your Pocket
As you may likely know, or will now, the IRS has a severe case of understaffing that has caused them to struggle in processing tax returns and refunds. The IRS has 45 days from the date of filing to process and payout a refund, if they are unable to meet that deadline, they have to pay out interest.
The interest rates vary depending on what type of filing. The interest rates are set to increase on July 1, 2022, and will be:
· 5% for overpayments (4% in the case of a corporation)
· 2.5% for the portion of a corporate overpayment exceeding $10,000
· 5% for underpayments
· 7% for large corporate underpayments
As of early May, the IRS disclosed a backlog of over 9.6 million returns that were yet to be processed. This is not unfamiliar territory for the IRS as in 2021, many taxpayers waited up to nine months for their refunds.
Over the last 7 fiscal years, the Government Accountability Office (GAO), reported that the IRS has paid almost $14 billion in interest, with nearly a quarter of that paid in 2021 when the IRS paid $3.3 billion.
Remember, if you do receive interest on your refund, it is taxable and will require you to fill out Form 1099-INT for interest payments greater than $10.
To check the status of your return you can visit https://www.irs.gov/refunds or by contacting the agency at 1-800-829-1040.
The professionals at the Center for Financial, Legal, and Tax Planning, Inc., are here to answer any question you may have. For more information, please reach out to us at (618) 997-3436.