If you received a statement from the IRS showing interest income, it’s a Form 1099-INT, and it reports interest the IRS paid you because your tax refund was delayed. That interest is taxable, and you report it on your federal return for the year the form covers. Your refund itself is not taxable; only the interest portion is.
What the Form Is
Form 1099-INT, Interest Income, is the same form banks and brokerages send when they pay you interest. When the IRS is the payer, it fills out the form and sends copies to you and to its own matching system.1Internal Revenue Service. About Form 1099-INT, Interest Income
The number you need is in Box 1, “Interest Income.” That’s the taxable amount. The IRS is only required to send the form when it paid you $10 or more in interest during the year.1Internal Revenue Service. About Form 1099-INT, Interest Income If you got less than that, no form will arrive, but the income is still taxable and still belongs on your return.
Before you file, confirm that your name and Social Security number on the 1099-INT match your records. The IRS matches these details against your return, and a mismatch can generate a notice even when your numbers are right.
Why the IRS Paid You Interest
Interest is compensation the IRS owes by law when it holds your overpayment too long. Federal law gives the agency a 45-day grace period from the filing deadline (or from the date it received a late-filed return) to issue your refund without owing interest. Once that window closes, interest starts accruing on the full refund.2Internal Revenue Service. Interest – Section: When Does the IRS Pay Interest? The interest is compounded daily.3Office of the Law Revision Counsel. 26 USC 6622 – Interest Compounded Daily
How to Report It on Your Return
Put the Box 1 amount on Line 2b of Form 1040, the same line used for interest from bank accounts and bonds.4Internal Revenue Service. 1040 (2025) – Section: Line 2b Don’t report the refund itself anywhere; it isn’t income.
If your total taxable interest from all sources for the year is more than $1,500, you also need to file Schedule B (Interest and Ordinary Dividends) with your return.5Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends On Part I, list the IRS as the payer with the amount from Box 1. The total from Schedule B, Line 4, flows to Form 1040, Line 2b.6Internal Revenue Service. 2025 Schedule B (Form 1040) At $1,500 or less in total interest, you can skip Schedule B and enter the amount straight on Line 2b.
The IRS automatically compares the 1099-INT it issued against what you report. Matching the figure exactly avoids a notice and the back-and-forth that follows.
If Your 1099-INT Is Missing or Wrong
If you believe the IRS paid you interest but no form arrived, check your IRS Online Account at irs.gov, where information returns are available to view.7Internal Revenue Service. Online Account for Individuals You can also request a Wage and Income Transcript, which shows the information returns on file for you. Transcripts are available through your online account, by calling 800-908-9946, or by mailing Form 4506-T.8Internal Revenue Service. Transcript Types for Individuals and Ways to Order Them
If the form arrived but the amount looks wrong, call 800-829-1040 to request a corrected version. Have your name, address, Social Security number, and the payment details ready.9Internal Revenue Service. What to Do When a W-2 or Form 1099 Is Missing or Incorrect If a corrected form hasn’t arrived by the filing deadline, report the amount you believe is accurate based on your own records.
State Tax Treatment
Don’t assume this interest is exempt from state income tax because it came from the federal government. Interest on U.S. Treasury bills, notes, and bonds is exempt from state and local tax.10Internal Revenue Service. Topic No. 403, Interest Received IRS refund interest is not a Treasury obligation, and most states tax it as ordinary interest income. Check your state’s rules.
Watch for an Estimated Tax Penalty
Refund interest arrives in a lump sum you didn’t plan for. If it’s large enough to push your total tax well above what you paid in through withholding or estimated payments, the IRS can assess an underpayment penalty for the quarter you received it.11Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
You can reduce or eliminate that penalty by using the annualized income installment method on Schedule AI of Form 2210, which recognizes that the income came in one quarter rather than evenly across the year.12Internal Revenue Service. Form 2210 – Underpayment of Estimated Tax by Individuals, Estates, and Trusts Check Box C in Part II of Form 2210, complete Schedule AI, and file the form with your return. Skip this step and the IRS will calculate the penalty as if you earned the interest evenly across all four quarters.