Why is the IRS paying out extra refund money?

Shelves on all sides filled with cardboard boxes
pp1 / Shutterstock

When the pandemic hit, the IRS acted like many workplaces and sent its employees to work from home. But the tax agency struggled due to its outdated, paper-reliant system.

Last April, reports emerged that the IRS had to move boxes of unopened mail into trailers as taxpayers sent in their paper tax returns and it ran out of space to store them.

While the IRS holds taxpayers to a firm deadline to get their returns in, the agency also expects employees to process and send out refunds within a reasonable amount of time. When it takes longer than 45 days after the filing deadline, the IRS will tack on interest to your refund.

So if you still haven’t received your refund for the 2019 tax year, know that the check is still coming and that the IRS will give you a little extra for your patience.

The same problem could happen again this year. The Government Accountability Office noted in March that interest payments were steadily increasing over the years, well before the pandemic. The office cautioned that these delays will continue to cost billions if the system isn’t modernized to reduce its dependency on paper.

If reams of 2020 tax refunds end up being delayed, too, you could get another interest bonus — but in the end, it’s unlikely to amount to much. The average interest payment last year was just $18, and those interest payments become taxable income.

What can I do to get my refund sooner?

Young man doing his taxes
Rocketclips, Inc. / Shutterstock

First, get your taxes filed sooner rather than later. The IRS has given taxpayers until April 15 to get their returns in, but since they have been processing through first in, first out, acting now will push your return up the queue.

You’ll also want to opt for a reliable tax software program to ensure your return is processed immediately.

While 90% of people now submit their taxes electronically, the new chief taxpayer experience officer at the IRS has cautioned that taxpayers who file paper returns “need to prepare for a lengthy potential wait.”

And, just like with your stimulus check, you can get your tax refund quicker if you set up direct deposit with the IRS. According to the latest news, you could see stimulus money in your account by the end of March — but it will take longer if that money has to be sent in the mail in the form of a check.

What to do if you can’t wait for your return

Young couple sit at kitchen table, man has head in hands, woman with hands on his shoulders, looking at papers
WAYHOME studio / Shutterstock

If you need some extra cash right now, there are a few things you can do to find some extra funds immediately.

  • Cut the cost of your debt. If you’ve been relying heavily on your credit card to get you through the pandemic, you’re probably piling up tons of expensive interest. Make your debt easier to carry — and unload sooner — by folding your balances into a single debt consolidation loan at a lower interest rate.

  • Slash your insurance bills. Car insurance companies have been handing out discounts to drivers sticking close to home through the pandemic. If yours won’t budge then maybe it’s time to shop around for a better deal from a more flexible provider. And while you’re looking, you could also save hundreds on your homeowners insurance by comparing rates to find a lower price.

  • Reduce your mortgage payments by refinancing your mortgage. If you haven’t looked around for a lower interest rate on your home loan in the last year, what are you waiting for? Rates have been historically low lately and refinancing your existing mortgage could reap big savings. An estimated 16.7 million U.S. homeowners could reduce their monthly house payments by an average $303 through a refi, according to mortgage tech and data provider Black Knight.

  • Trim your budget to free up more cash. By finding a few creative ways to cut back, you can possibly rearrange your budget to give yourself your own “tax refund”. Cut your cable service or any other monthly entertainment subscriptions you’re not using. Have a hobby or special talent? Turn it into a side hustle to bring in extra income. And, download a free browser extension that will automatically scour for better prices and coupons whenever you shop online.

About the Author

Sigrid Forberg

Sigrid Forberg


Sigrid is a reporter with MoneyWise. Before joining the team, she worked for a B2B publication in the hardware and home improvement industry and ran an internal employee magazine for the federal government. As a graduate of the Carleton University Journalism program, she takes pride in telling informative, engaging and compelling stories.

You May Also Like

Looking For Passive Income? There's One Option Right Below Your Feet

One company’s innovative approach makes farmland investing easier and more accessible.

How to Get a Free Credit Score

It's simpler than ever to get a free credit score.

Do Big Stores Save You the Most? We Price-Check Our Shopping List

With one 30-second trick, we found $460 in savings beyond Walmart and Amazon.

3 Ways to Earn Big Returns Without the Shaky Stock Market

Don't limit yourself to the stock market. These alternatives can trounce the S&P 500.