You really might. I got $5.14 in interest (in its own check!) because they processed my tax return late this year.
The IRS is required to send interest to everyone who files their taxes after May 15 I think, one full month after April 15, assuming they got a refund. A lot of people did so this year because the tax season was stretched until July 15. The administrative procedure changes did not affect the law that requires the IRS to pay this interest.
This also reminds me that if you’re expecting a refund and you plan on just dumping it into a savings account, think about waiting as long as you can, assuming you remember to do it within the statute of limitations (3 years from original due date). The IRS pays better interest than any bank.
Well, my letter says they’re charging me 3%. I don’t know if that’s reciprocal and I’d earn 3% if they end up owing me.
All the information I can find right now shows that the rate for underpayments and overpayments is exactly the same, and it has been that way since 1999. They’re still listed separately though.
I had no idea the IRS would pay interest to the taxpayer in the case of an overpayment. That’d be a better investment than most other “safe” investments! Though of course filing late would pose other risks (like a scammer filing before you do).
I do have a vague memory of getting a bit extra refund once, though I think it was on a state return vs Federal, and I don’t recall what the circumstances were - but it was definitely noted as interest. I’d simply forgotten about it until the topic was mentioned here.
Should be interesting (hah) to see what they do with my in-laws this year. I’d posted elsewhere, but “they” filed a tax return claiming a 7,000 refund. Intuit’s attempt at direct depositing it failed, so they sent the in-laws a check. The in-laws did not file ANY kind of return (elderly, single source of income, not required, and certainly no refund due) - so they’re holding onto the check but have filed a fraud report with the IRS. Since I suspect IRS’s fraud department does not talk with its “you filed a return with wrong numbers” department, I imagine the latter will send a demand for that 7K plus interest.
Used to be 1% different, IIRC, but still about the same.
Yes. This is what you paid for Audit Defense for. It’s to handle basically any inquiry from the IRS – even a phone call. It has nothing to do with TurboTax’s guarantee, which is conditioned on TurbTax having made an error.
If you weren’t going to use the TuboTax audit defense, you would be wasting the money you paid for membership.
Well it’s more like a insurance policy I think. I don’t think my auto insurance is wasted if I don’t have an accident.
If you weren’t going to use it when the IRS sends an inquiy. Auto insurance payments would be wasted if you didn’t submit claims to the insurance you were paying for, and instead hired other professionals to handle the other driver’s lawsuit against you.
Oh, gotcha. I misunderstood your point.
Followup: I heard from my EA at TaxAudit. They think I really do owe about $16,000, ouch. And the IRS will add interest and penalties to that, ouch again. Better than $41000 though!
Their IRS response is in TaxAudit QC which should be done by Monday-ish and they’ll send it to the gummint and cc: me. I should expect to get a “we received your reply and will respond” response from the IRS in 60-90 days (though it has taken up to 120 days, my EA says) and then in probably 6-8 months the IRS will give me a total that they think I owe and I’ll be told to pay up. My EA says we can follow up on the penalties and try to bargain down at that time.
Overall a pretty great followup from Turbo/TaxAudit.
Do you know the issue they found?
Under reported RSU/ ESPP gains, then AMT showed up and delivered the finishing blow. I’d filed using my prelim 1099 from ETrade rather than the supplemental because I didn’t know to do otherwise; I’d expected that would work out in my favor when adjusted, but it didn’t quite.
Also I expect the 2017 tax law changes fucked me, but I’ll never really know.
Ooooouch!!! And yeah, 18K is better than 41K but not exactly palatable.
Hopefully you will indeed be able to negotiate down the penalty portion of it.
I just saw this. I am not anyone’s lawyer, and certainly not a tax lawyer, this is not legal advice.
AIUI, generally, the law requires anyone who made more than a certain, very small, amount of income to file a tax return by April 15. If you are owed a refund, you are still required by law to file, but they waive the penalties as long as you don’t owe money. So, holding off filing for 3 years is against the law, and it is very risky if you turn out to be wrong about getting a refund.
The only way to legally try to get the IRS to owe you interest is to file at the last minute and hope it doesn’t get processed until months later. That is the reason why some people don’t file until April 15 (although I’d bet procrastination is the top reason).
They don’t “waive” the penalties. The penalties are based on the amount that you owe. Note I didn’t say that you should wait to do this for businesses you own, because late pass-through returns are assessed a penalty just for being late based on the number of partners/shareholders (I think). But what I said also applies to gift tax returns. If your estate is going to be small enough to not be hit with estate tax, it simply doesn’t matter if you make a gift over the yearly limit and don’t report it, because the penalties for not filling a gift tax return simply to show your lowered estate exemption are based on the tax you owe. That’s advice we tell every single person who asks us if they should file a gift tax return. We could say “Sure you need to, that’s what the law says. That’ll be $XXX for preparing it” but we actually know that it’s pointless.
I agree it’s something of a risk to wait if you happen to be wrong, but if you file the return and get your refund as expected and the IRS later audits you, you’ll be in the same position if they find out whatever caused you to owe money. It’s extremely rare for the IRS to not issue a refund that’s been filed for even if they have information that could tell them you misreported income; it takes them a long time to piece all that together, which is part of the reason why the system is based on voluntary compliance and they generally take people’s word on their returns, but audit those whose are most suspicious.
People generally do something illegal every time they operate a motor vehicle, so I wouldn’t put much stock in doing something just because it is required by law. Especially when it’s absolutely toothless in terms of penalties.
Of course, I may be entirely off base with the entire matter, and that the IRS doesn’t actually pay you interest if you don’t file on time. I don’t actually have any personal experience filing late and getting paid interest. I’ve just been generalizing the fact that the IRS has been paying interest to those filing after April 15, but in this case it’s still on time. I know if you file and make a mistake such that you’re owed more money, they will pay interest on the amount that you later claim, but in all such cases I know of the original filing was on time. I’ve never intentionally filed anything late, and I definitely would always prefer to have my refund ASAP, so this isn’t something that I’ve tested. So probably better to ignore what I said as suggested.
I’m glad to hear that the audit defense option is worth it. I’m sorry to hear that you owe a bunch of money though Best wishes.
Oh - as a side note: the past 2 years we’ve opted to pony up for the audit defense ourselves - because of some very large medical deductions (daughter in a therapeutic residential facility) and commensurate stock sales.
TurboTax claims our audit risk is still “low” but I’d rather have the coverage.
The IRS pays interest from the due date or the filing date- whichever is later. So holding on to your refund, hoping to get interest? Nope.
Of course, I may be entirely off base with the entire matter, and that the IRS doesn’t actually pay you interest if you don’t file on time.
You are correct this time. They dont.