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Dear Tax Talk,
I filed my 2007 taxes a year late, but I was not worried about it since I had calculated that $12,000 was due to me as a refund. In the past, the IRS paid me interest on refunds even if I filed a year late. I got my 2007 refund, but they did not pay interest. Does the IRS owe me interest on my 2007 refund?
The IRS is not a bank. If you fail to get your refund on time, don’t expect the IRS to pay you interest for the loan. On an original filing, the IRS has 45 days to process the return and issue your refund without owing you interest.
When you file a late return it has to be submitted to the IRS on paper, as electronic filing is not available for late individual returns. Historically, a paper return takes about 45 days to process and that is why the IRS didn’t pay you interest. If the processing takes longer, the IRS will pay you interest after the 45th day.
If you file a return and later discover that you made an error that results in an additional refund, interest will be paid on the overpayment. Interest is paid from the date filed (or due date without extensions) until approximately within 30 days of issuing the refund.
For example, if you filed your 2007 tax return and later remembered that you did not claim your real estate taxes as a deduction, the IRS will refund you the tax plus interest when you later file an amended return.
If you get examined by the IRS and it is determined that you are owed a refund, interest will also be paid. Interest paid by the IRS is considered income and must be reported on Schedule B. The IRS interest rate on overpayments is adjusted quarterly. Historical rates are available on Taxalmanac.org.
Read more Tax Talk columns.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.