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IRS interest jumps to 6% on October 1rst. Here’s how much money you’ll get for a missing refund

KEY POINTS

  • If you’re still waiting on a tax refund, you may be earning interest on your unpaid balance, and the rate jumps to 6% on Oct. 1, according to the IRS.
  • Typically, the IRS has 45 days to process your tax return and issue a refund before interest starts to accrue.
  • the IRS reported that the average refund interest check on 2019 federal returns was $18. Interest rates at that time were 5% during the second quarter, and 3% during the third quarter.

Millions of Americans still have tax returns in limbo as the IRS works to clear its backlog.

But there’s a little good news if you’re missing a refund: You may be earning interest on your unpaid balance, and the rate jumps to 6% from 5% on Oct. 1, according to the IRS agency.

Typically, the IRS has 45 days to process your tax return and issue a refund before interest starts to accrue. Interest adjusts every quarter based on the federal short-term rate.

How to calculate your interest

The interest is an annual rate compounded daily, meaning you divide the 6% rate by 365, explained Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

For perspective, in 2020, the IRS reported that the average refund interest check on 2019 federal returns was $18. Interest rates at that time were 5% during the second quarter, and 3% during the third quarter.

As of Aug. 5, there were 9.7 million unprocessed individual 2021 tax returns, according to the IRS, with 1.8 million requiring “error correction or other special handling.”

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