Millions of Americans are lining up for larger payments as the IRS processes returns.
- Millions of Americans applied for stimulus checks on their tax returns.
- The IRS has a large backlog of returns that have not been processed.
- The IRS must pay interest on unpaid refunds after 45 days have passed.
In recent years, Americans were entitled to a substantial amount of stimulus money.
The CARES Act was passed under President Donald Trump and provided $1,200 per adult and $500 per eligible dependent. The Trump administration also handed out an additional $600 check to most Americans toward the end of Trump’s term. And under President Biden, the American Bailout Act authorized payments of $1,400 for adults and dependents, as well as an expanded Child Tax Credit that offers additional relief to parents.
Most of this money was deposited long ago in Americans’ bank accounts or sent by check. But there are millions of people who did not receive all of their stimulus money and who filed tax returns to claim their payments.
Unfortunately, the IRS has a large backlog of tax returns to process, so many are still waiting for at least some of their funds. And there’s a strong chance that those who are waiting are now in line to receive some additional money on top of the original amount of stimulus payments they owed. This is why.
IRS owes stimulus payments to Americans with unprocessed returns
Under IRS rules, the agency must process tax returns within 45 days of when they are filed. If more than 45 days have passed, the IRS must pay the taxpayer interest on the refunded money owed. The interest rate is now 4%, up from 3% previously, because it is pegged to the fed funds rate, which was recently increased.
Due to a lack of staff and issues related to COVID-19, the IRS is seriously behind in processing tax refunds. In fact, there are about 9.6 million unprocessed tax returns. Many of the taxpayers who filed these returns are owed large refunds, in many cases because they claimed unpaid stimulus money when they filed their tax forms.
Although the IRS has not indicated how many of the unprocessed returns are older than 45 days, the agency reported that several of the returns they have not yet reviewed were submitted before 2022. Much of this backlog is likely beyond the limit. 45 days, or soon, and every taxpayer who finds their return isn’t processed on time can expect to get a larger payment once interest charges are added.
With so many unprocessed returns, taxpayers are likely to receive billions of dollars in additional interest payments on top of the stimulus money they are owed.
In the past seven years alone, the IRS paid out close to $14 billion in interest, and $3.3 billion of that amount was sent to taxpayers in 2021 alone. The agency may owe even more this year, as President Trump and President Biden authorized tax extensions. returns in 2020 and 2021. Although taxpayers were given more time, the due date for refunds was still set at the original tax due date so interest could start accruing sooner.
Americans need to be aware of this so they can understand what to expect when the IRS finally sends out their refunds and they receive the stimulus money they are due.