IRS paid poor person interest????

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dagsboro
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Joined: Tue Aug 23, 2022 4:45 pm

IRS paid poor person interest????

Post by dagsboro »

My niece, whose total income was $16,000 in 2022, and who qualified for the EITC in the previous year, received this notice from the IRS about 2022 taxes.

Form 1099 INT Total Interest Paid or Credited $24

THIS IS NOT A TAX BILL. It shows the taxable interest paid to you during the calendar year by the Internal Revenue Service. If you are required to file a tax return, report this interest as income on your return. This amount may represent interest on an overpayment for more than one year, or more than one kind of tax. This interest may have been paid with your tax refund or part or all may have been applied against other taxes you owed.

How does someone who has this little income warrant an interest Payment FROM the IRS? She surely did not overpay. She has no idea what she did or did not do. I just told her to follow the instructions from the IRS to report the $24 as income when she files - but we have no idea what the interest payment is for? Any thoughts?
Swift
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Re: IRS PAID POOR PERSON INTEREST????

Post by Swift »

A late refund, perhaps? The IRS does pay interest if they take too long to refund.
petulant
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Re: IRS PAID POOR PERSON INTEREST????

Post by petulant »

Ask your niece if she received a refund of any kind during 2022. It is almost certainly interest included with a tax refund.
Harmanic
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Re: IRS PAID POOR PERSON INTEREST????

Post by Harmanic »

I got a multi thousand dollar check from them and I have no idea what it was for. It just said "due to a change in tax law" but gave absolutely no explanation about what that change was. I even went on their website and nada, zilch. With all the various stimulus programs, it is hard to keep track. Something similar might have happened to your niece, but for a much smaller amount.
The question isn't at what age I want to retire, it's at what income. | - George Foreman
Doctor Rhythm
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Re: IRS PAID POOR PERSON INTEREST????

Post by Doctor Rhythm »

It’s not worth scrutinizing $24. It’s either interest due to her for reasons you can’t determine (I usually assume the IRS is less likely to make an error than I am), or they made a $24 error.
furwut
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Re: IRS PAID POOR PERSON INTEREST????

Post by furwut »

Swift wrote: Thu Jan 26, 2023 4:59 pm A late refund, perhaps? The IRS does pay interest if they take too long to refund.
I think this is likely. IIRC many tax returns filed by paper weren’t processed in a timely manner due to Covid.
secondcor521
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Re: IRS PAID POOR PERSON INTEREST????

Post by secondcor521 »

Harmanic wrote: Thu Jan 26, 2023 5:06 pm I got a multi thousand dollar check from them and I have no idea what it was for. It just said "due to a change in tax law" but gave absolutely no explanation about what that change was. I even went on their website and nada, zilch. With all the various stimulus programs, it is hard to keep track. Something similar might have happened to your niece, but for a much smaller amount.
The most likely explanation is that you received unemployment income in 2020. There was a late change to the tax law which exempted the first $10,200 of UI in 2020. The IRS went back and refigured the tax returns for most affected taxpayers and issued refunds.
Swift wrote: Thu Jan 26, 2023 4:59 pm A late refund, perhaps? The IRS does pay interest if they take too long to refund.
petulant wrote: Thu Jan 26, 2023 5:01 pm Ask your niece if she received a refund of any kind during 2022. It is almost certainly interest included with a tax refund.
It's probably this. If your niece has good records, she can probably compare the amount of the refund she was expecting, and the amount of the deposit to her bank account. The bank account deposit is probably $24 higher than the refund she was expecting. She could also check her tax transcript for 2021 on the IRS.gov website if she has an account there.

And yes, she should report the $24 on her 2022 Schedule B as interest received.

Likely has nothing to do with EITC or her income, by the way. They just took too long to process her tax refund, and they paid interest, which they included with her refund.
tibbitts
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Re: IRS PAID POOR PERSON INTEREST????

Post by tibbitts »

dagsboro wrote: Thu Jan 26, 2023 4:58 pm My niece, whose total income was $16,000 in 2022, and who qualified for the EITC in the previous year, received this notice from the IRS about 2022 taxes.

Form 1099 INT Total Interest Paid or Credited $24

THIS IS NOT A TAX BILL. It shows the taxable interest paid to you during the calendar year by the Internal Revenue Service. If you are required to file a tax return, report this interest as income on your return. This amount may represent interest on an overpayment for more than one year, or more than one kind of tax. This interest may have been paid with your tax refund or part or all may have been applied against other taxes you owed.

How does someone who has this little income warrant an interest Payment FROM the IRS? She surely did not overpay. She has no idea what she did or did not do. I just told her to follow the instructions from the IRS to report the $24 as income when she files - but we have no idea what the interest payment is for? Any thoughts?
My only thoughts are that it's probably not worth worrying about the $24. I would just report it.
dukeblue219
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Re: IRS PAID POOR PERSON INTEREST????

Post by dukeblue219 »

Why does it bother you that a "poor person" would receive interest?
hicabob
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Re: IRS PAID POOR PERSON INTEREST????

Post by hicabob »

My kid got an interest payment too. I think it has to do with years old refunds finally being processed?
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JoMoney
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Re: IRS PAID POOR PERSON INTEREST????

Post by JoMoney »

I remember once receiving an IRS notice that I had miscalculated/overpaid my taxes one year, they gave me the opportunity to dispute it (I didn't) and sent me a check for the over payment + interest.... then sent me a 1099 for the interest they had paid me.
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Re: IRS paid poor person interest????

Post by Pops1860 »

Title edited to remove 'all caps' per forum policy:
avoid posting in ALL CAPITAL LETTERS or otherwise using distracting formatting
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aaaaaa111111
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Sprucebark
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Re: IRS paid poor person interest????

Post by Sprucebark »

I got the same letter for about the same amount.

2020 taxes- refund due. Took forever to get the refund and received the funds and the interest at the end of 2021.

2021 taxes- tax due. Paid that and it was cashed immediately. No interest due to me.

The letter says I received interest from the IRS in calendar year 2022. How does 2021 end up in calendar year 2022? Isn’t that the wrong period? I went back and looked at my return vs what the IRS deposited me, and the different is the interest shown in the letter. The amount is correct. The reported time period is off by one year.

I wonder how widespread this error is and if the IRS is alerted to the issue and if they plan on fixing it.
AlaskaTeach
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Re: IRS paid poor person interest????

Post by AlaskaTeach »

I must comment, because I am an "expert" at getting strange letters from the IRS. I feel like I am on an "IRS hitlist." I committed maybe three things that attracted way too much attention, I believe.

1. In 2012 I made the best or 2nd best personal finance decision of my life in buying back six years of my state of Texas employment. I worked for the state from 1986 to 1992 and in '92 I pulled my contributions out and rolled them into an IRA. The IRA exploded in the 90s and come back to earth in the 2000s. I started teaching in 2001 and was not certain I would be a career teacher until the 10s.

When I went to buy the years of service, I used qualified money, i.e. an IRA. I called the IRS to make sure I was completing the transaction correctly, and asked the IRS employee his first name and badge number, because I believed this was a very, very unusual transaction and was concerned about an audit. I wrote an email to myself with the employee info.

Boom!! Six months later I got a friendly letter from the IRS questioning the purchase. I quickly filled out the form and responded with the employee name and ID.

Got a nice letter a couple of months later saying they had received my letter and agreed the transaction was ok.

2. One year between 1999 and 2004 I was sitting in the small 2 bedroom apt. doing the federal income taxes, and saw the form 8396 on the back of the 1040. My curiosity led me to discover that the 8396 was the form for the Mortgage Credit Certificate. I used the MCC to get an annual $2000 tax credit for a long time, from 2004 to 2018. Yep, 14 years of $2000 tax credits = $28000 of tax credits. Wow!!!

3. One year I realized my wife and I had paid for after school care in addition to the aforementioned $2000 tax credit. We had about $5000 in tax credits. I converted my wife's IRA at the very unusual, almost impossible 0% tax bracket.

I get a friendly letter from the IRS about every other year.

One year they sent me the notice about having to pay me interest because they took so long to process my return.

On the back of that letter was a letter complaining that I was not using e-file to file my taxes. I finally gave in this past year and filed electronically and of course, there was a catch. The e-filer that claimed it was free was basically using a "loss-lead strategy". The only people who get a free e-file with that company are people who have an AGI far less than mine. I think the free e-file was for incomes below $50k.

One year I received a letter complaining about my decision to use the educator tax deduction of $250. The amount of labor and supplies the IRS used to send me that letter eclipsed any amount they would recover in case they were correct. I mean 10% of 250 is $25.

Of course they were incorrect. On the back page of the 1040 it lists occupation, and I had typed educator. Duh!!!
cheesepep
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Re: IRS paid poor person interest????

Post by cheesepep »

I recently received something similar, but in the amount of a few hundred $.

Here is the timeline: filed taxes before 4/15/2022. Months later received notice from IRS that additional taxes were due. Paid that. Months later received notice from IRS saying that a refund is due. Cashed that. And now received interest payment to report. Not sure why (as the above) but will report it as such.
Topic Author
dagsboro
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Re: IRS paid poor person interest????

Post by dagsboro »

To all who took the time to reply to my curiosity about my very low income niece's interest payment to her by the IRS, thanks very much. It's nice to know I can ask a question to more informed folks.
Asyouwish
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Re: IRS paid poor person interest????

Post by Asyouwish »

Interest paid on a late refund. Yes, the IRS pays interest if the refund is issued later than 45 days after the due date. So if the return is filed by April 15, the IRS has 45 administrative days to process the refund. If the refund is delayed beyond 45 days, the IRS pays interest. Being poor or rich has nothing to do with it.

She can go back and check her actual refund and see if it was $24 higher than she was expecting. The interest income is determined by the “year” it is paid. Not by the tax year it belongs to. So if her 2019 refund was delayed and actually paid in 2021, that interest goes on her 2021 return.

The IRS was pretty bad last year in processing refunds. Pandemic leftovers, stimulus payments, other odd rules for 2021 causing extra delays.
talzara
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Re: IRS paid poor person interest????

Post by talzara »

AlaskaTeach wrote: Thu Jan 26, 2023 10:58 pm I must comment, because I am an "expert" at getting strange letters from the IRS. I feel like I am on an "IRS hitlist." I committed maybe three things that attracted way too much attention, I believe. ...

Boom!! Six months later I got a friendly letter from the IRS questioning the purchase. I quickly filled out the form and responded with the employee name and ID.
Some people get very worried when they receive an IRS letter. You're the opposite. You've gotten so many IRS letters that you're used to it.

The IRS does not have a CRM system. When you call the IRS to ask a tax question, they don't know who you are, and they don't add any notes to your account. It's not like when you call customer service at a large corporation, and they type up notes to document each call with the customer. When you file a return, the people who process and audit returns don't know what you've already discussed with other IRS employees.

Based on what you have written, it appears that you're getting a lot of computer-generated letters that are sent out automatically. Nobody has even looked at your return yet. If you have the same tax situation year after year, then you'll get the same letters year after year.
tACKJAYE
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Re: IRS paid poor person interest????

Post by tACKJAYE »

dagsboro wrote: Thu Jan 26, 2023 4:58 pm My niece, whose total income was $16,000 in 2022, and who qualified for the EITC in the previous year, received this notice from the IRS about 2022 taxes.

Form 1099 INT Total Interest Paid or Credited $24

THIS IS NOT A TAX BILL. It shows the taxable interest paid to you during the calendar year by the Internal Revenue Service. If you are required to file a tax return, report this interest as income on your return. This amount may represent interest on an overpayment for more than one year, or more than one kind of tax. This interest may have been paid with your tax refund or part or all may have been applied against other taxes you owed.

How does someone who has this little income warrant an interest Payment FROM the IRS? She surely did not overpay. She has no idea what she did or did not do. I just told her to follow the instructions from the IRS to report the $24 as income when she files - but we have no idea what the interest payment is for? Any thoughts?
Someone I know had to mail a paper return due to some special situation. IRS took a few months to process it and paid about $1000 in interest with a refund, for which he got 1099-INT.
Katietsu
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Re: IRS paid poor person interest????

Post by Katietsu »

dagsboro wrote: Fri Jan 27, 2023 5:27 am To all who took the time to reply to my curiosity about my very low income niece's interest payment to her by the IRS, thanks very much. It's nice to know I can ask a question to more informed folks.
And EITC is refundable. So, someone whose income is low enough to have no tax liability and no withholding can get a refund. In 2022, there were even more opportunities for a larger refund for a low income person due to things like an expanded child tax credit and the recovery rebate credit which was the stimulus for people who had not got their stimulus.
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