Does the IRS Pay Interest on Refunds? The 45-Day Rule and Rates

Yes, the IRS does pay interest on refunds, but only when it fails to deliver the money within 45 days of the later of your return’s due date or the date you filed. When the agency misses that window, interest runs all the way back to the date you overpaid, not just from the 46th day forward. The rate for the first quarter of 2026 is 7%, dropping to 6% for the second quarter, and it compounds daily.

The 45-Day Rule

Under 26 U.S.C. § 6611, the IRS must pay interest on any overpayment of tax at a rate reset each quarter, with a 45-day grace period built in for processing. If your refund arrives inside that window, you get your money and nothing extra. If it arrives a day late, interest accrues retroactively.¹

The clock starts on the later of two dates: your return’s due date (April 15 for most individual filers, ignoring extensions) or the date you actually filed. File on March 1, and the IRS treats the return as filed on April 15, giving itself until about May 30. File late on June 1, and the deadline pushes to mid-July.¹

The retroactive piece is what makes the rule matter. When the IRS blows past 45 days, it doesn’t owe interest starting day 46. It owes interest from the date of your overpayment, which for withheld taxes and estimated payments is generally the original return due date. A refund three months late generates interest covering the entire period your money sat with the government.¹

The same logic applies if the IRS credits your overpayment against a future tax bill instead of sending a check. Interest accrues from the overpayment date to the due date of the tax the credit is applied against.¹

The Current Rate and How It Compounds

The IRS recalculates its overpayment rate every quarter using a formula tied to the federal short-term rate (the average yield on U.S. Treasury securities maturing in three years or less). For individual taxpayers, the overpayment rate equals that short-term rate plus three percentage points.²

For 2026, the announced non-corporate overpayment rates are:

The IRS compounds this interest daily, so each day’s calculation includes previously accumulated interest. Over several months of delay, daily compounding produces a slightly larger payment than a flat annual rate would suggest. The agency typically announces the next quarter’s rate near the end of the prior quarter.³

Amended Returns and Loss Carrybacks

If you file an amended return on Form 1040-X or a formal refund claim, the 45-day rule shifts. The IRS gets 45 days from the date it receives your processible amended return to issue the refund. Meet the deadline, and no interest accrues for the period between your claim and the payment. Interest from the original overpayment date to the claim filing date is still allowed under the general rules.¹

If the IRS takes longer than 45 days, the no-interest window disappears and full interest runs from the original overpayment date through the refund date. Most amended return filers end up earning interest here, because the IRS routinely takes four months or more to process Form 1040-X.⁵

Refunds from carrying a net operating loss or capital loss back to a prior year follow a special timing rule. The overpayment is treated as arising at the end of the tax year the loss occurred, not the earlier year the loss is carried back to. So a 2025 loss carried back to 2023 generates interest starting from the close of 2025.⁶

When the IRS itself triggers a refund after an audit, the interest calculation gets a 45-day haircut. The agency computes what the total interest would be, then subtracts 45 days from the count.¹

Offsets and Undeliverable Checks

Interest may accrue on your refund and still not reach you. If you owe back taxes, past-due child support, defaulted federal student loans, or other qualifying government debts, the Treasury Offset Program can intercept your refund before it lands. The offset applies to the full overpayment, including any accrued interest. You’ll get a notice explaining what was taken and any balance left over.⁷

Undeliverable checks work differently depending on fault. If the check comes back through a postal or government error, the IRS allows additional interest until a replacement is issued. If the failure is on you, say a wrong address on the return, no extra interest accrues during the delay.⁵

The Three-Year Deadline to Claim the Refund

Interest on a late refund only helps if you’re still eligible for the refund at all. You must file within three years of your original return’s due date or two years from the date you paid the tax, whichever is later. Miss that window and you forfeit the overpayment entirely. The IRS keeps the money, and no accrued interest changes that.⁸

This catches more people than you’d expect. Someone who was supposed to file for 2022 and didn’t get around to it until mid-2026 could find the refund window has already closed. If you have unfiled returns, this is the clock that matters most.

Reporting the Interest as Income

Interest the IRS pays on a delayed refund is taxable income. It isn’t part of your refund itself. It’s compensation for the government holding your money too long, and it’s taxed like any other interest you earn.

If the interest totals $10 or more, the IRS will send you Form 1099-INT reporting the amount.⁹ Even if you receive less than $10 and no form arrives, you’re still required to report the full amount on the taxable interest line of your Form 1040. The reporting obligation doesn’t have a minimum, so small payments that arrive without a 1099 still belong on the return.

You don’t need to calculate the interest yourself. When the IRS finally issues a late refund, it automatically includes any interest owed as a separate line item on the refund notice.

1
Office of the Law Revision Counsel. 26 USC 6611 – Interest on Overpayments
2
Office of the Law Revision Counsel. 26 USC 6621 – Determination of Rate of Interest
3
Internal Revenue Service. Quarterly Interest Rates
4
Internal Revenue Service. Internal Revenue Bulletin 2026-08
5
Internal Revenue Service. IRM 20.2.4 Overpayment Interest
6
eCFR. 26 CFR 301.6611-1 – Interest on Overpayments
7
Internal Revenue Service. IRM 21.4.6 Refund Offset Research, Reversals, and Injured Spouse
8
Internal Revenue Service. Time You Can Claim a Credit or Refund
9
Internal Revenue Service. About Form 1099-INT, Interest Income