Archive August 2020

COVID Tax Tip 2020-111: Millions of taxpayers receive a tax refund interest payment

Millions of taxpayers receive a tax refund interest payment

In mid-August interest payments were sent to nearly 14 million individual taxpayers. People who got these payments filed their 2019 federal income tax returns by the July 15 deadline and were owed refunds.

These interest payments averaged about $18. The IRS issued most of the payments separately from tax refunds.

Most taxpayers who received their refund by direct deposit had their interest payment sent to the same account. Everyone else received a check. A note on the check reads “INT Amount.” This identifies it as a refund interest payment.

These interest payments are taxable. Taxpayers who received a payment must report it on their 2020 federal income tax return next year. The IRS will send a Form 1099-INT in January 2021, to anyone who gets a payment of at least $10.

This interest payment is due to the IRS postponing this year’s filing deadline to July 15. The new deadline was related to COVID-19 and is considered a disaster-related postponement. Therefore, the law requires the IRS to pay interest calculated from the original April filing deadline. The taxpayer must have filed their 2019 federal income taxes by the July 15, 2020, deadline to get an interest payment.

This refund interest only applies to individual taxpayers. Businesses aren’t eligible.

Tax Tip 2020-109: Tips for taxpayers who need to file a new W-4

Tips for taxpayers who need to file a new W-4

All taxpayers should review their withholding annually. They can use the IRS Tax Withholding Estimator to check and make sure they’re not having too little or too much federal tax withheld. This tool offers workers, retirees and self-employed individuals a step-by-step method to help figure out if they should adjust their withholding.

Those who need to adjust their withholding should submit a new Form W-4, Employee’s Withholding Certificate to their employer.

People who should check their withholding include those:

who are part of two-income families
working two or more jobs or who only work for part of the year
with children who claim credits such as the child tax credit
with older dependents, including children age 17 or older
who itemized deductions on their 2019 tax return
with high incomes and more complex tax returns
with large tax refunds or large tax bills for 2019
who received unemployment at any time during the year

The IRS Tax Withholding Estimator can help taxpayers check their withholding.

This tool will help determine if they should complete a new Form W-4.
It will also help users determine what information to put on a new Form W-4.
It will save them time because they don’t need to complete the form worksheets. The Estimator does the worksheet calculations.
Taxpayers who complete a new Form W-4 should submit it to their employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step sooner, rather than later.

People should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If adjustments aren’t made for these situations, they will likely owe additional tax and possibly penalties when filing their tax return.

On the other hand, people should generally decrease their withholding if they are eligible for income tax credits or deductions other than the basic standard deduction.

Having the most recent pay statements, information for other income sources and the most recent income tax return can help taxpayers use the Withholding Estimator to figure out their correct withholding.

They might also need to adjust their state or local withholding. They can contact their state’s department of revenue to learn more.