Commissioner of the Internal Revenue Service Charles Rettig speaks during a Senate Finance Committee hearing April 7, 2022. The IRS said Friday that starting July 1, it will pay 5% interest on delayed individual tax refunds. File Photo by Bonnie Cash/UPI | License Photo
May 20 (UPI) -- The IRS said Friday it will pay 5% interest to people with delayed tax returns starting in July. That's up a full percentage point from the last interest rate increase in April.
In a Friday statement, the IRS said the new rates on delayed refunds, considered overpayments by the IRS, will be 4% for corporations starting July 1.
The interest will be 7% on large corporate underpayments exceeding $10,000, according to the agency.
Explaining at how it arrived at the interest rates for corporations, the IRS said, "Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points, and the overpayment rate is the federal short-term rate plus two percentage points. The rate for large corporate underpayments is the federal short-term rate plus five percentage points."
The IRS has paid nearly $14 billion in refund interest in the last seven years, according to Government Accountability Office report published in April.
The GAO said in that report that, "IRS has experienced several challenges in recent years, including difficulty hiring workers to process returns, implementing notable tax law changes, and managing the 2020 and 2021 filing seasons during the COVID-19 pandemic."
The number of delayed returns is still in the tens of millions.
The IRS legally must process tax refunds within 45 days, and pays interest on delayed refunds.
The IRS warned in January that tax refunds could be delayed due of staffing shortages and processing backlogs.
A government watchdog report in January said the IRS was facing a crisis as it struggled with millions of backlogged tax returns.