IRS paid me interest on delayed tax refund - unexpected money!

You're absolutely right about this interest policy! The IRS is required by law to pay interest on refunds that are issued more than 45 days after the return filing date (or the due date, whichever is later). The interest rate they pay is the same rate they charge for underpayments, which changes quarterly. Currently it's around 7% annually, which explains why even a short delay beyond 45 days resulted in noticeable interest on what sounds like a substantial refund. Just keep in mind that the interest they paid you is considered taxable income, which is why you received a 1099-INT. You'll need to report this interest on your 2024 tax return. It's basically the government giving you money with one hand and taking a portion back with the other! The identity verification process has become much more common in recent years as the IRS attempts to combat tax refund fraud. Unfortunately, as you experienced, it often creates delays for legitimate taxpayers.

I had a similar experience but with a much bigger windfall! I filed an amended return for my small business using Form 1040-X for some missed deductions from 2022. Those amended returns take FOREVER to process! The IRS website says to expect up to 16 weeks, but mine took over 8 months. When I finally got my refund, there was an extra $437 included as interest! I was confused until I checked out https://taxr.ai which helped explain what was happening. Their tax document analyzer immediately identified it as IRS interest payment and explained the 45-day rule. This service has been super helpful for other tax questions too - like when I got a CP2000 notice that made absolutely no sense to me. I just uploaded it and got a plain-English explanation of what the IRS wanted.

I tried taxr.ai after seeing it mentioned here and WOW it saved me so much stress! I had a stack of tax forms I didn't understand including a 1099-INT from the IRS similar to what the original poster received. I uploaded everything and instantly got clear explanations for each document. It even flagged that I might qualify for additional credits I wasn't aware of. The interface is super simple - just upload photos or PDFs of your tax documents and it explains everything in normal human language. I was planning to pay a tax preparer $350 this year but decided to try filing myself with the guidance from taxr.ai. Such a relief not to be confused about tax forms anymore!

For anyone dealing with IRS identity verification issues like the original poster mentioned, I've been there and it's absolutely frustrating. After trying for WEEKS to get through on the IRS phone line and constantly getting the "call volume too high, try again later" message, I discovered this service called Claimyr (https://claimyr.com) that actually got me through to a real human at the IRS. Their system somehow bypasses the hold queue and actually calls you back when they have an IRS agent on the line. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c I was able to resolve my identity verification issue in a single call instead of waiting months for an in-person appointment like OP had to do. Might have saved me from missing that 45-day window and getting interest, but at least I got my refund processed way faster!

I have to publicly eat my words about Claimyr. After being super skeptical, I actually tried it yesterday because I've been trying to reach the IRS for THREE WEEKS about a letter I received claiming I underreported income. Got a call back in about 35 minutes with an actual IRS agent on the line! The agent was able to pull up my account and confirm that the letter was sent in error - they had already received corrected information from my brokerage but the letters had already been automatically sent out. Saved me from sending in a bunch of documentation and probably waiting months for a response. And definitely saved me hours of hold music. Consider me converted from skeptic to believer.

Just wanted to add some info about these interest payments: The interest rate the IRS uses changes quarterly, and it's been pretty high lately. For Q1 of 2025, it's 7% annually. So if you have a big refund that's delayed, the interest can add up fast. Also, don't forget that the 45-day timer starts from either your filing date OR the due date of the return, whichever is LATER. So if you file early, they still have 45 days from the official due date to get your refund to you before interest kicks in.

I've had the opposite experience with interest. I miscalculated my quarterlies one year and thought I'd paid enough, but ended up owing more. The IRS hit me with underpayment penalties AND interest that was way more than what they'd pay me in the reverse situation.

This is such a great reminder that the tax system can occasionally work in our favor! I had no idea about the 45-day interest rule until reading this thread. It's refreshing to hear about the IRS actually paying taxpayers interest for once, especially after all the stories we hear about penalties and fees going the other way. Your identity verification experience sounds absolutely painful though - 8 weeks is ridiculous for something that should be straightforward. I'm glad you at least got compensated for their delay with that interest payment. The irony of getting a 1099-INT from the IRS for money they paid you because they were late is pretty amusing! Thanks for sharing this - I'm definitely going to keep this in mind if I ever have a large refund situation. Every little bit helps, especially when it's the government finally paying US interest for a change.