Why the IRS could owe you extra money this tax season
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Tax season is here, and many Americans are looking forward to their refunds. But this year, there’s a twist that could mean more money in your pocket.
Could the IRS owe you extra cash if your refund is delayed?
The IRS is known for its strict deadlines when it comes to taxpayers filing returns, but what happens when the tables are turned?
Legally, if the IRS takes more than 45 days to issue a refund, they must pay interest on the amount owed to the taxpayer.
This interest is compounded daily and is currently set at a generous 7 percent for non-corporate overpayments, although this rate is subject to quarterly adjustments.
Despite technological advancements, the IRS still faces significant challenges in processing tax returns promptly.
In 2024, nearly 18 million electronic filings were rejected, leading to delays in refunds.
Additionally, only 58 percent of paper returns could be scanned electronically, leaving the rest for manual data entry, which further slows down the process.
Delays in tax refunds can have a profound impact, especially on low-income individuals who rely on the Earned Income Tax Credit (EITC).
For these taxpayers, a delayed refund can mean the difference between food on the table and food insecurity, stable housing or potential eviction, and access to healthcare or unmet medical needs.
The Taxpayer Advocate Service, an independent organization within the IRS, was established to identify and address the most pressing issues faced by taxpayers.
In its annual report, it not only highlights problems but also offers recommendations for improvement.
With over 260,000 cases and nearly 3 million calls to its hotline in a single year, the importance of this service is undeniable.
Financial literacy instructor Alex Beene emphasizes the severity of refund delays, noting that while the Inflation Reduction Act's funding boost to the IRS should help, certain groups still experience longer wait times.
“With the Inflation Reduction Act providing more funding to the IRS, some of those delays should start to shorten, but for some groups, we still see above-average waiting times, with the most common taxpayers affected being those who file by paper, those who make extensive mistakes in their paperwork, and, sadly, those who have fallen victim to identity theft and have to submit a new form," Beene explained.
Despite the challenges, there is a silver lining.
Collins acknowledges noticeable improvements in taxpayer services, including better customer service and shorter wait times.
“For the first time since I became the National Taxpayer Advocate in 2020, I can begin this report with good news: The taxpayer experience has noticeably improved... In 2024, taxpayers and practitioners experienced better service, generally received timely refunds, and faced shorter wait times to reach customer service representatives (CSRs)[...]” Collins stated.
"...After receiving multi[-]year funding, the IRS has made major strides toward improving its taxpayer services and information technology (IT) systems. However, IRS service remains far from perfect[...]" Collins added.
The IRS itself recommends filing electronically and opting for direct deposit to receive refunds faster and more securely than by paper check.
The future of how Congress will address refund delays remains uncertain.
"The incoming administration has signaled other priorities involving everything from reduced taxes to new tariffs. Calls to staff more at the IRS to make these delays manageable seem to be mostly falling on deaf ears[...]" Beene said.
Have you experienced a delayed refund? Do you have tips for dealing with the IRS or strategies for managing your finances during tax season? Share your stories and advice in the comments below.
Could the IRS owe you extra cash if your refund is delayed?
The IRS is known for its strict deadlines when it comes to taxpayers filing returns, but what happens when the tables are turned?
Legally, if the IRS takes more than 45 days to issue a refund, they must pay interest on the amount owed to the taxpayer.
This interest is compounded daily and is currently set at a generous 7 percent for non-corporate overpayments, although this rate is subject to quarterly adjustments.
Taxpayers are legally entitled to interest on refunds if they are delayed by more than 45 days. Image source: Tara Winstead/Pexels.
Despite technological advancements, the IRS still faces significant challenges in processing tax returns promptly.
In 2024, nearly 18 million electronic filings were rejected, leading to delays in refunds.
Additionally, only 58 percent of paper returns could be scanned electronically, leaving the rest for manual data entry, which further slows down the process.
Delays in tax refunds can have a profound impact, especially on low-income individuals who rely on the Earned Income Tax Credit (EITC).
For these taxpayers, a delayed refund can mean the difference between food on the table and food insecurity, stable housing or potential eviction, and access to healthcare or unmet medical needs.
The Taxpayer Advocate Service, an independent organization within the IRS, was established to identify and address the most pressing issues faced by taxpayers.
In its annual report, it not only highlights problems but also offers recommendations for improvement.
With over 260,000 cases and nearly 3 million calls to its hotline in a single year, the importance of this service is undeniable.
Financial literacy instructor Alex Beene emphasizes the severity of refund delays, noting that while the Inflation Reduction Act's funding boost to the IRS should help, certain groups still experience longer wait times.
“With the Inflation Reduction Act providing more funding to the IRS, some of those delays should start to shorten, but for some groups, we still see above-average waiting times, with the most common taxpayers affected being those who file by paper, those who make extensive mistakes in their paperwork, and, sadly, those who have fallen victim to identity theft and have to submit a new form," Beene explained.
Despite the challenges, there is a silver lining.
Collins acknowledges noticeable improvements in taxpayer services, including better customer service and shorter wait times.
“For the first time since I became the National Taxpayer Advocate in 2020, I can begin this report with good news: The taxpayer experience has noticeably improved... In 2024, taxpayers and practitioners experienced better service, generally received timely refunds, and faced shorter wait times to reach customer service representatives (CSRs)[...]” Collins stated.
"...After receiving multi[-]year funding, the IRS has made major strides toward improving its taxpayer services and information technology (IT) systems. However, IRS service remains far from perfect[...]" Collins added.
The IRS itself recommends filing electronically and opting for direct deposit to receive refunds faster and more securely than by paper check.
The future of how Congress will address refund delays remains uncertain.
"The incoming administration has signaled other priorities involving everything from reduced taxes to new tariffs. Calls to staff more at the IRS to make these delays manageable seem to be mostly falling on deaf ears[...]" Beene said.
