Q&A: IRS pays interest on late refunds

Dear Liz: I filed my return electronically with direct deposit. I have yet to receive my refund or that stimulus relief check. We have to pay interest on any late tax payment. Will the IRS pay interest on late refunds?

Answer: The IRS has said it will pay interest on late refunds if the return was filed by July 15, the extended tax deadline. The interest “will generally be paid from April 15, 2020, until the date of the refund,” the IRS says on its site. Don’t expect to get rich: The interest rate for the second quarter, which ended June 30, is 5% a year, while the interest rate for the third quarter, which ends Sept. 30, is 3% a year.

Q&A: The case for filing a tax return

Dear Liz: A couple on Social Security who hadn’t received their stimulus payments wrote that they “do not make enough income to file tax returns.” It might be worthwhile to let your readers know that, even if one’s income is below the amount where they must file a tax return, they nevertheless may file a tax return. I volunteer at a site where we do free tax preparation, and we encourage filing even when not required. It can help identify or potentially prevent identity theft, and it provides documentation of tax status that may be helpful in the future.

Answer: Thanks for that tip. People receiving Social Security weren’t required to file tax returns to receive their stimulus payments of up to $1,200 each, but as you noted there can be other advantages to filing even when it’s not necessary.

Most stimulus payments have been delivered at this point, although a congressional committee estimated 30 million to 35 million had not been sent. If you got a letter saying your payment had been sent, but you haven’t received the money, you can ask the IRS to trace your payment by calling (800) 919-9835.

Q&A: Coronavirus stimulus checks, tax refunds and the IRS’ backlog hell

Dear Liz: I’m a CPA. I sent out your recent column about IRS backlogs to two clients just this morning. It’s nice to have a published article backing up what I’ve unfortunately been having to tell clients for a few weeks now.

Answer: Pandemic-related shutdowns, years of congressional budget cuts and the effort required to push out more than 159 million stimulus checks have left the IRS facing a massive backlog. National Taxpayer Advocate Erin Collins estimated that 4.7 million unopened paper tax returns had accumulated as of mid-May. Taxpayers who filed paper returns and are due a refund may be in for “a long wait,” Collins told Congress last month. Many lower-income people and those who lost jobs are in dire need of the money, but it is unclear when they will get it.

Q&A: Still no coronavirus stimulus check? You’re not alone

Dear Liz: Both my wife and I are on Social Security retirement benefits. We were told we had to do nothing to get our stimulus payment even though we don’t file tax returns. We’ve made two calls to the IRS and gotten no suggestions from them.

Answer: If your Social Security payments are direct deposited, your relief payments should have been sent to that bank account. If you don’t have direct deposit, your payments should have been mailed. You (or a computer-savvy friend) can check to see the status of your payment at the “Get My Payment” section of the IRS.gov website.

If your payment isn’t on the way or there’s another problem, you should reach out to the IRS. It’s not clear from your statement — “no suggestions from them” — if in your previous attempts you actually reached a human being or just a recording. Please make sure you’re calling the right number because the stimulus payment number — (800) 919-9835 — is different from the general taxpayer hotline. You may have to be patient because hold times can be long.

Thursday’s need-to-know money news

Today’s top story: Some taxpayers face a desperate wait for refunds. Also in the news: Are variable rate student loans worth the risk, 6 ways your investments can fund racial justice, and why your federal student loan servicer may be changing.

Some taxpayers face a desperate wait for refunds
IRS delays are hurting struggling families.

Even Near 1%, Are Variable Rate Student Loans Worth the Risk?
Your rate could change dramatically in the future.

6 Ways Your Investments Can Fund Racial Justice
Money makes change sustainable.

Your Federal Student Loan Servicer May Be Changing
Say goodbye to NelNet.

Some taxpayers face a desperate wait for refunds

As a 58-year-old woman on disability, Robin Short of Wallingford, Connecticut, relies on her tax refund to catch up on bills. She filed her return electronically in February, opting for direct deposit so she could get her $773 refund quickly.

She’s still waiting, as are millions of others. In my latest for the Associated Press, how the IRS is slowly resuming operations after pandemic-related lockdowns, but delayed refunds are devastating some people’s finances.

Q&A: The IRS is finally staffing up. Here’s how to get your coronavirus stimulus money

Dear Liz: We do not make enough income to file tax returns, so we used the IRS site to apply for our economic stimulus payment ($1,700 for one adult and one teenage child). We received a response email stating our information was received successfully by the IRS several weeks ago. We included our bank deposit information for a fast direct deposit but the money has not arrived and we hear that the government ran out of money. We are desperate. What can we do or who can we speak with about this delay?

Answer: The government did not run out of money, and at a minimum you should be able to file a tax return next year to get your stimulus payment as a refundable credit. Since you need the money now, though, you should follow up with the IRS.

The IRS has reopened the general taxpayer helpline that was shuttered because of the coronavirus pandemic, but it has also added thousands of phone reps to a special hotline to deal with stimulus payment problems: (800) 919-9835. That’s the number you should call to inquire about your payment.

(Previous columns have dealt with people’s refunds being held up because the IRS didn’t have enough workers to open its mail. Tax processing centers are reopening, but it will take awhile to work through the backlog. You can check the status of a refund through the “Where’s My Refund?” tool on the IRS site or by calling (800) 829-1954.)

Q&A: Once is enough for tax returns

Dear Liz: You’ve covered the fact that 2019 tax refunds, especially for those of us who filed paper returns, are delayed. After days of trying to get through to someone at the IRS, I actually connected with an agent. After he told me there are massive problems in their mailroom, I said I was going to file again except this time I would do it electronically. His response, “Don’t do that because it will be a mess.” Can you check with your IRS contacts and see if they are adamant against refiling electronically?

Answer: Adamantly and emphatically, the IRS does not want people to file duplicate returns. Not only will that add to the agency’s already massive backlog, but duplicate returns can trigger identity theft protocols that could make it harder for you to file your returns in the future.

“The only time you would really want to file a duplicate return is when the IRS sends you a notice that the return you previously filed was never received,” said Henry Grzes, lead manager for tax practice and ethics at the American Institute of Certified Public Accountants. In the past, those notices were sent out 12 to 18 months after the return was due.

Many people have been waiting months for their refunds because of pandemic-related shutdowns. The IRS is slowly reopening the processing centers that were closed, but the backlog is tremendous. Although the agency was able to send out more than 150 million stimulus checks and to process most electronically filed returns, more than 10 million unopened paper returns and other mail had accumulated by mid-May.

The agency has been bringing back its workforce in stages, and the last of the IRS’ processing centers is scheduled to open June 29. In addition to the backlog, they’ll be dealing with even more filings as the extended July 15 tax deadline looms. In short, it’s unclear how much longer you’ll have to wait to get your refund.

The fact that you got through to a human being at all means you beat the odds. As mentioned in the previous column, the IRS was struggling even before the pandemic because of congressional budget cuts. Last year the agency was able to answer fewer than 1 in 4 phone calls, according to the Taxpayer Advocate Service.

Friday’s need-to-know money news

Today’s top story: Now is the time to teach your Gen-Z kids about credit. Also in the news: 1 in 4 retirees say COVID-19 may force them to go back to work, when and how should you report your no-show stimulus check to the IRS, and how to set up a zero-based budget.

Now Is the Time to Teach Your Gen-Z Kids About Credit
Preparing them for the real world.

1 in 4 Retirees Say COVID-19 May Force Them to Go Back to Work. What This Could Mean for You
A dramatic change in plans.

When and how should you report your no-show stimulus check to the IRS?
Tracking down your check.

How to set up a zero-based budget
Making your income and expenses match.

Tuesday’s need-to-know money news

Today’s top story: How the pandemic alters Americans’ financial habits. Also in the news: Navigating LGBTQ financial challenges, a July 15th tax extension reminder, and Americans are heading back to the stores.

Survey: How the Pandemic Alters Americans’ Financial Habits
Nearly 70% of Americans have been dealing with a negative impact to their finances.

Q&A With Debt Free Guys: Navigating LGBTQ Financial Challenges
Happy Pride!

If You Request a Tax Extension, You Still Have to Pay by July 15
You must file AND pay.

Americans appear ready to shop again
Back to the stores.