Yes, the IRS pays interest on refunds, but only if your refund is delayed beyond a certain point
The IRS pays interest on tax refunds when the agency takes longer than 45 days to send your money back after you file. The interest rate changes quarterly and is set by federal law, not by the IRS. For the current rate, you can check the IRS website or ask a tax professional — the rate has ranged from less than 1% to over 8% in recent years, depending on economic conditions.
The 45-day clock starts from the date you file your return, not from the date the IRS receives it. If you file electronically and the IRS processes your return within 45 days, you receive no interest. If processing takes longer, the IRS calculates interest from day 46 onward and adds it to your refund check or direct deposit.
Most refunds arrive within 21 days of filing electronically, so most people never see refund interest. The delays that trigger interest usually happen when the IRS needs to verify information on your return, when you claim certain credits like the Earned Income Tax Credit, or when the IRS is processing a high volume of returns during tax season.
Key Takeaways
- The IRS pays interest on refunds delayed beyond 45 days from the filing date, at a rate set quarterly by federal law.
- Electronic filing usually results in refunds within 21 days, so refund interest is uncommon for most filers.
- The interest clock starts from your filing date, not the date the IRS receives your return.
- You do not need to request refund interest — the IRS calculates and includes it automatically if your refund is late.
- Refund interest is taxable income in the year you receive it, though the amount is usually small.
How the IRS calculates refund interest
The IRS uses a daily compounding method, meaning interest accrues on the interest as well as on the original refund amount. The rate is the federal short-term rate plus 3 percentage points, and it changes on January 1, April 1, July 1, and October 1 each year. You can find the current rate on the IRS website under "Interest Rates."
The calculation is automatic — you do not fill out a form or request it. When the IRS issues your refund after day 45, the interest is already included in the amount you receive. For example, if your refund is $2,000 and the IRS sends it on day 60 with an interest rate of 8% annually, you would receive slightly more than $2,000 to account for the 15 days of interest owed.
The interest amount is usually small because most delays are short. A refund delayed by two weeks at 8% interest would add only a few dollars. You will see the interest amount listed separately on your refund notice if you receive one, or it may straightforward appear as part of your total refund.
When refunds are delayed and interest starts accruing
The IRS delays refunds for several reasons. The most common is that you claimed a refundable credit, such as the Earned Income Tax Credit or the Child Tax Credit. These credits trigger additional verification steps that can add weeks to processing time. If you claimed these credits, expect your refund to take longer even if everything on your return is correct.
The IRS also delays refunds when it needs to verify information — for instance, if your reported income does not match what your employer reported on your W-2, or if there is a discrepancy in your Social Security number. Identity theft concerns can also trigger a delay. In these cases, the IRS contacts you by mail with questions or requests for documents.
During peak tax season (February through April), the IRS processes millions of returns and may take longer straightforward due to volume. Filing early in the season can sometimes result in faster processing, though this is not may provide. If you file late in the season, expect longer processing times even without complications.
What happens to refund interest on your taxes
Refund interest is considered taxable income in the year you receive it. If the IRS pays you $50 in interest on a delayed refund in 2024, you must report that $50 as income on your 2024 tax return. The IRS will send you a Form 1099-INT if the interest is $10 or more, though some people receive interest below that threshold.
In practice, refund interest rarely changes your tax situation significantly because the amounts are small. A $2,000 refund delayed by a month at current interest rates generates only a few dollars in interest. However, if you are in a tight tax situation — for instance, if you owe taxes and are trying to minimize additional income — even small amounts matter.
Keep any notice from the IRS showing refund interest, as you will need it to report the income correctly. If you do not receive a Form 1099-INT but the IRS paid you interest, contact the IRS to request one so you have documentation for your records.
How to check if your refund is delayed
The IRS provides a tool called "Where's My Refund?" on its website. You enter your Social Security number, filing status, and the exact refund amount from your return. The tool shows you the status of your refund and, if it has been processed, the date it was sent. You can check this tool 24 hours after you file electronically, or four weeks after you mail a paper return.
If the tool shows your refund is still being processed after 21 days from electronic filing, it is delayed. At that point, you can contact the IRS by phone or through its website to ask why. Common reasons include missing information on your return, a need to verify your identity, or a match with another return (for instance, if someone else claimed a dependent you also claimed).
If your refund is delayed, the IRS will contact you by mail if action is needed on your part. Do not wait for a call — the IRS contacts people by mail first. If you receive a letter asking for documents or information, respond promptly to avoid further delays.
Refund interest versus other types of tax interest
Refund interest is different from the interest you owe if you underpay your taxes. When you owe the IRS money and do not pay by the important date, the IRS charges you interest on the amount owed — this is money you pay to the IRS, not money the IRS pays to you. The rate is the same (federal short-term rate plus 3 percentage points), but the direction is opposite.
You also do not earn interest on money you overpay throughout the year through withholding or estimated tax payments. If you have $5,000 withheld from your paychecks and the IRS holds that money for nine months before refunding it, you receive no interest on that $5,000. Interest accrues only on refunds delayed beyond 45 days from filing.
Some people ask whether they can request a refund instead of a credit if they overpay. The answer is no — the IRS decides whether to refund or credit based on your return. However, you can choose to have a refund applied to next year's estimated taxes if you prefer, though this is rare.
Frequently Asked Questions
Can I get interest on a refund if I file a paper return instead of electronically?
Yes, the same 45-day rule applies to paper returns. However, the clock starts from the date the IRS receives your return, not the date you mail it. Paper returns typically take longer to process, so delays are more common. Allow four weeks before checking the status of a paper return.
What if the IRS made a mistake and delayed my refund for no reason?
You still receive interest if the delay exceeds 45 days, regardless of the reason. The IRS does not distinguish between delays caused by its own error and delays caused by missing information on your return. If your refund was delayed and you believe the IRS was at fault, you can file a complaint with the Treasury Inspector General for Tax Administration, but the interest is paid regardless.
Do I have to report refund interest if it is less than $10?
The IRS does not send a Form 1099-INT for interest under $10, but you are still required to report it as income on your tax return if you received it. Keep any notice from the IRS showing the interest amount so you have documentation.
If I owe taxes next year, can the IRS use my refund interest to pay what I owe?
Yes. If you receive a refund with interest in one year and owe taxes the next year, the IRS can explore your refund (including the interest) to your next year's tax bill. This happens automatically if you do not request otherwise.
Why is refund interest so low compared to what banks pay?
The IRS interest rate is set by federal law and is tied to the federal short-term rate, which is much lower than consumer savings rates. The rate reflects the cost of borrowing to the federal government, not the value of money to individuals. You have no control over the rate — it is the same for everyone.