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Still Owed Your Tax Refund? You Might Get More Money Back Starting Oct. 1 – The Motley Fool

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You may be owed more money than you realize.

…….

Image source: Getty Images

You may be owed more money than you realize.


Key points

  • The IRS pays interest on delayed tax refund payments, and for Q4, the interest rate is increasing from 5% to 6%.
  • You may get a bigger interest payment if your refund is still delayed.

The IRS announces interest rates every quarter. Interest rates are set to increase for the final quarter of 2022. This year, IRS interest rates have continued to rise each quarter. Beginning on Oct.1, interest rates will increase from 5% to 6% for individual taxpayer overpayments.

What does that mean? If you overpaid your taxes and are still due a tax refund, you may be owed interest, and a higher interest rate could result in extra money in your pocket. Since most savings accounts are paying interest rates of around 2%, 6% is a much higher and more attractive rate.

The government’s slow speed could result in a personal financial win for your bank account.

How tax refund interest works

The IRS aims to pay tax refunds promptly. But with delays and staffing shortages, that doesn’t always happen. Some taxpayers end up waiting months for their tax refund to arrive. After a certain time limit (usually 45 days), the IRS pays interest on unpaid tax refunds. The interest rate is an annual rate that compounds daily.

You may be owed interest if you’re still waiting on a tax refund check. If your check is still not in your hand by Oct. 1, you’ll benefit from the higher Q4 interest rate. This is an easy way to earn more money, which you can use to meet your savings goals sooner.

Taxpayers should remember that IRS interest is considered taxable income — so you’ll need to report interest earnings on your tax return.

Related: Best Tax Software

Four ways to spend your tax refund

Only you can decide what to do with your tax refund. If you don’t yet have a plan and are looking for ideas on how to put your tax refund to use, here are some suggestions to consider.

  1. Pay off debt. If you have high-interest debt, like credit card debt — using your refund to eliminate it could be beneficial. The sooner you knock out debt, the sooner you can focus on other financial goals like saving for a …….

    Source: https://www.fool.com/the-ascent/taxes/articles/still-owed-your-tax-refund-you-might-get-more-money-back-starting-oct-1/

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