Because of staff shortages and an existing backlog of returns, your tax refund may arrive later than usual this year. The good news is that if this is the case, it may be slightly larger than expected.
To process returns and issue refunds, the IRS has 45 days. Following that, it is necessary to pay interest. And, as of last month, the individual interest rate increased to 4%. (On a typical refund of $2,800, that works out to $112.)
The interest is paid on a quarterly basis.
While most refunds are processed within 21 days, the IRS is in the midst of a budget crisis, and millions of unprocessed individual returns 2021 remained at the start of this year’s tax season.
According to a report from the US Government Accountability Office, the IRS paid $3.3 billion in interest to taxpayers last year (GAO). According to the Wall Street Journal, refund interest payments were down 11% for this tax season as of March, but they were still higher than in 2019.
The IRS has received some criticism as a result of these increases.
“The GAO discovered that certain types of errors occur every year; however, the IRS does not assess the underlying causes of taxpayer errors on returns.” This could help reduce future errors, refund delays, and strains on IRS resources,” according to the report.
In its response, the IRS stated that its process for analyzing errors is robust and that the amount of interest paid is not a meaningful business measure.
The IRS had 9.6 million unprocessed individual tax returns as of April 29. The agency’s Where’s My Refund? tool, which updates the status of tax refunds daily, is the best place to track where things stand with yours.