IRS pays 8%

[Raygun99]

May not be for this forum but it is keeping me awake at night I realize this is a moving number and offer this question only as a curious topic:* If the IRS allows 8% interest on overpayments can a Taxpayer chose to file later knowing He/She has a $10,000 refund due, would it make sense or do any harm to just delay filing two-three years to accrue the refundable interest? Better than a CD?!



IRS news release IR-2023-154 and Rev. Rul. 2023-17 announce that interest rates for the fourth calendar quarter of 2023 (beginning Oct. 1) will increase to 8%. The 8% rate last applied in the fourth quarter of 2007.

*

The rates are:

*

·*** 8% for overpayments (7% in the case of a corporation),

·*** 8% for underpayments,

 

[pb4uski]

I don't think that would work. IIRC they only pay interest where it is their fault... like if you file a return and they don't process it timely. Besides, you might be subject to failure to file penalties.

 

[rothlev]

I don't think that would work. IIRC they only pay interest where it is their fault... like if you file a return and they don't process it timely. Besides, you might be subject to failure to file penalties.

I have helped clients file back tax returns and many clients report receiving interest . I am not sure if this applies to everyone.

 

[marko]

IMO, never a good idea to try and outsmart the IRS. The less they see of you the better.

 

[Gumby]

In 2021, I received interest from the IRS because they were so slow on paying me a refund. The rule is that they will pay interest if your refund is not paid out within 45 days of either the April 15th deadline for filing -- i.e. usually about May 30th -- or the day subsequent to that deadline when they actually receive your return.

https://www.irs.gov/payments/interest#pay

 

[pb4uski]

I have helped clients file back tax returns and many clients report receiving interest . I am not sure if this applies to everyone.

When you say "file back tax returns" do you mean that they failed to file or that they filed, amended their return and as a result of the amended return were due a refund?

 

[rothlev]

When you say "file back tax returns" do you mean that they failed to file or that they filed, amended their return and as a result of the amended return were due a refund?

failed to file, there is no penalty for filing late returns when the IRS owes a refund.

 

[Gumby]

failed to file, there is no penalty for filing late returns when the IRS owes a refund.

But you don't get the refund unless and until you file a return and the interest clock doesn't start until 45 days after you file, so the OPs scheme won't work.

 

[Affinity4Investing]

But you don't get the refund unless and until you file a return and the interest clock doesn't start until 45 days after you file, so the OPs scheme won't work.

I'd agree with what you posted. Delaying a filing to earn more interest cannot be allowed.

 

[Sunset]

Perhaps if a person mailed the return (written) in at the end of the filing period, it would be at the bottom of the pile.
Possibly it would not be converted and processed in time to avoid the interest.
But who wants to file a return by hand

 

[NewEnglander]

This year I filed my taxes on March 15. The IRS didn't send my refund until mid August! They paid me 2.25% interest for being late. Not bad for 5 months from filing date or 4 months from April 15 due date. They never told me why my refund was delayed but I suppose it was due to the large tax credit for solar installed on our house.

 

[Affinity4Investing]

This year I filed my taxes on March 15. The IRS didn't send my refund until mid August! They paid me 2.25% interest for being late. Not bad for 5 months from filing date or 4 months from April 15 due date. They never told me why my refund was delayed but I suppose it was due to the large tax credit for solar installed on our house.

What if they had processed your refund within the normal time period, say 45 days. Could you have invested that $ and made a better return than what you got from them in interest? Just a hypothetical...

 

[NewEnglander]

What if they had processed your refund within the normal time period, say 45 days. Could you have invested that $ and made a better return than what you got from them in interest? Just a hypothetical...

I don't think so, rates of CDs and short term treasury bills earlier this year were even lower than current rates, I know of nowhere else I could have obtained 8%.