If you’re still missing your tax refund, you’ll soon receive 7% interest from the IRS — but it’s taxable

Bill Oxford | E+ | Getty Images

If your tax refund is still in limbo, there’s good news: Your balance may be accruing interest, and the rate increases to 7% from 6% on Jan. 1, according to the IRS.

As of Nov. 18, there were 3.4 million unprocessed individual returns received in 2022, including filings for previous tax years, the agency reported.

related investing news

CNBC Pro
These assets have yields not seen in years — here’s what to know about preferred stocks

Adjusted quarterly and tied to the federal short-term rate, the 7% interest applies to pending refunds and unpaid tax balances.

More from Personal Finance:
Why long Covid could be ‘the next public health disaster’
Why using buy now, pay later for holiday gifts is ‘horrible’
Key things to know before rebalancing your portfolio

“It’s a big jump,” said Sheneya Wilson, a certified public accountant and founder of Fola Financial in New York, noting the rate has more than doubled since January, when it was 3%.

Typically, the IRS has 45 days after the tax-filing deadline to process your return and issue a refund. After that, your “overpayment” starts to accrue daily compounding interest.

Although 7% interest is more than you’ll earn from savings accounts or the new rate for Series I bonds, there’s a downside — IRS interest is taxable.

Here's how to get the most value out of your charitable giving

During the fiscal year 2021, IRS interest payments grew to $3.3 billion, a 33% increase from 2020 for individual returns, the U.S. Government Accountability Office reported in April.

What to do if you can’t pay your tax balance

You never want to be negligent when it comes to the IRS.

Sheneya Wilson

Founder of Fola Financial

However, if you’re wrestling with a sizable tax balance, you may have options, Wilson said.

With a balance of $50,000 or less, including tax, penalties and interest, you can set up an installment plan online, but you’ll have to call the IRS for larger amounts, she said. However, you’ll still accrue penalties and interest until the balance is paid off.

Another option, known as an offer in compromise, may allow you to settle for less than you owe if you have gone through some type of financial hardship, Wilson said. “Usually they’re going to request a down payment but the remaining balance can still also be paid over time,” she said.

For all the latest Technology News Click Here 

Read original article here

Denial of responsibility! TechAI is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.