WILL YOU RECEIVE AN EXTRA PAYMENT FROM THE IRS THIS YEAR?

In March, at the height of the COVID-19 outbreak, the IRS decided to postpone the tax-filing deadline from April 15 to July 15. This postponement came at a critical time, allowing taxpayers to take an extra three months to file their returns, and come up with any money that may have been owed for 2019.

The tax deadline postponement was critical for many Americans, but it was not without its complications. American taxpayers who took advantage of this decision by the IRS also inadvertently delayed their own returns, at a time when they needed them most. Millions of Americans became unemployed during the initial outbreak and subsequent recession and waiting an extra three months for their returns put many in challenging financial situation.

If you took advantage of the postponed tax-filing deadline and received your refund later than usual, there is good news: The IRS will be paying interest on some refunds, which could result in you receiving an extra check. Recent estimates show that nearly 14 million filers will qualify for the separate payment from the IRS for interest on this year’s refunds.

While getting an interest payment on this year’s refunds will be beneficial to millions, figures show that the interest payment may be a small sum when based on national refund data. The average tax refund this year was estimated at $2,741 as of late July, so the average interest payment would sit around $18. Since the interest payment is based on your individual refund, individuals who received more than the national average will see higher interest payments. It is important to note that any interest payment that an individual might receive will count as income for this year, so be sure to save your 1099 form for the interest payment if you receive one, so that you can file in 2021.

If you received a large refund on taxes from 2019 and your 2020 earnings are
comparable, you might consider adjusting your withholding for the remainder of 2020. Rather than waiting to file your 2020 taxes to receive one large refund, adjusting withholdings to maximize income for the remainder of this year may be a better choice for some, especially those who are dealing with financial woes due to the pandemic.