When it comes to the Internal Revenue Service, people know either from firsthand experience or by reputation that the agency places a premium on promptness. Indeed, those who fail to abide by its various tax deadlines face everything from late-filing penalties and late-payment fines to accrued interest on past-due tax obligations.
As maddening as this reality can prove to be, experts indicate that taxpayers should be aware that promptness in tax-related matters is a two-way street, such that the IRS can be held financially accountable in the event it fails to issue a tax refund in a timely manner.
According to the IRS, roughly 90 percent of tax refunds are issued within 21 days of filing. However, in recognition of the fact that some returns may require more careful consideration, the agency’s regulations dictate that it has 45 days from the acceptance of a return to issue a refund and that daily interest will accrue for every day that passes beyond this deadline.
As for when this 45-day clock actually starts ticking, the IRS regulations indicate that it’s the date of filing or the April tax deadline, whichever of the two comes later.
While the idea of being able to turn the tables on the IRS may sound appealing, experts advise people to keep the following points in mind:
- The amount of interest paid for late refunds is not significant. Indeed, the rate for the second quarter of 2016 is only 4 percent.
- If you file your return late only to discover that you were owed a refund the entire time, you will not be paid interest.
- Interest is often not paid in cases where a taxpayer’s refund is stolen by an identity thief.
- The interest paid for late refunds is taxable.
If you have encountered any sort of difficulties with the IRS, please consider speaking with a skilled legal professional who can explain the law, outline your options and help you pursue solutions.