IRS to pay 5 percent interest to individuals with delayed tax refunds

(The Hill) – The IRS will begin paying 5% guaranteed interest to individuals with late tax returns starting in July, up one percentage point from the last rate hike that took effect in April.

The agency will also pay 4% interest on delayed corporate tax returns, 5% on underpayments on tax returns, and 7% on “large corporate underpayments.” , the IRS said Friday.

The federal government regularly spends billions of dollars in profits on delayed returns. The IRS has paid out nearly $14 billion in refund interest over the past seven fiscal years, according to a Government Accountability Office (GAO) report released in April.

The GAO estimates such payments totaled $3.3 billion in fiscal year 2021 alone.

“The IRS does not identify, monitor, and mitigate problems that contribute to the return of interest. Accordingly, the IRS is missing out on an opportunity to reduce costs,” the watchdog report said.

The number of late filings, still in the tens of millions, has skyrocketed during the pandemic as the IRS has closed facilities and redirected resources to administering benefits like the child tax credit.

By law, the agency has 45 days to process a refund. The agency says it will receive 90% of the refund within three weeks.

“The IRS is reviewing 13 million unprocessed tax returns and more than 26 million tax returns awaiting further IRS action,” Representative Tom Rice (RS.C.) told the House Ways and Means subcommittee hearing. on taxpayer equity earlier this week. “At the same time, IRS phone service levels are near all-time lows, making it nearly impossible to contact an IRS agent for help with tax or audit issues.”

Some Democrats have campaigned for more IRS funding while accusing Republicans of obstructing the agency from maintaining de facto tax privileges due to uneven enforcement. .

Senate Finance Committee Chairman Ron Wyden (D-Ore.) said: “I will get to the heart of the matter for families whose refunds may be delayed due to the IRS backlog, ” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said in a statement in April. “If you’ve been frustrated by the IRS’s poor customer service, you’ve had years of Republicans cutting off liability for the agency’s inability to live up to your expectations.”

“For all the talk of running government more like a business, Republicans seem to want to turn government into a dysfunctional business that never has a repeat customer. .”

Meanwhile, Republicans fear that increased funding for the IRS will result in tens of thousands of federal employees focusing on tax enforcement.

“President Biden’s plan to give the IRS $80 billion in additional mandatory funding and 87,000 new IRS agents will result in significantly higher audit rates for all Americans of all income levels, according to the Office of Congressional Budget Office,” House Ways and Means Republicans said in a statement Wednesday.

Representative Bill Pascrell (DN.J.), chairman of the House Ways and Means Oversight Subcommittee, has called for the resignation of IRS Commissioner Charles Rettig, a Trump appointee.

“Mr. Rettig had a lot of time and a lot of cooperation to begin the important work of fixing the IRS. There needs to be real accountability. President Joe Biden must replace Mr. Rettig immediately and also nominate. a Chief Counsel to the IRS,” Pascrell said last week.

https://www.wfla.com/news/national/irs-to-pay-5-percent-interest-to-individuals-with-delayed-tax-refunds/ IRS to pay 5 percent interest to individuals with delayed tax refunds

Alley Einstein

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