Does the IRS Pay Interest on Amended Returns?

Filing an amended tax return may be necessary if you find errors or omissions after submitting your original return. If the amendment leads to a refund, you may wonder whether the IRS pays interest on the additional amount.

When Interest Applies

The IRS pays interest on refunds from amended returns under specific conditions. If more than 45 days pass from the date your amended return was received before the IRS processes and issues your refund, interest begins accruing on the 46th day. This rule is based on 26 U.S. Code 6611, which governs interest on overpayments. The 45-day period applies regardless of delays caused by backlog, additional review, or other administrative reasons.

If the refund relates to a prior tax year, interest is calculated from the original due date of that return or the date the tax was paid, whichever is later. For example, if you filed an amended return in 2024 for the 2021 tax year and had fully paid your taxes by the 2022 deadline, interest would begin accruing from that payment date if the IRS takes longer than 45 days to process the refund.

Certain types of refunds follow different rules. Refunds stemming from a Net Operating Loss (NOL) carryback, a foreign tax credit carryback, or other adjustments involving prior-year tax attributes may have different interest start dates or be excluded from interest accrual altogether.

How the IRS Calculates Interest

The IRS adjusts its interest rate quarterly, basing it on the federal short-term rate plus three percentage points. The rate changes in January, April, July, and October and is often higher than standard bank savings rates.

Interest is compounded daily, meaning it is calculated each day based on the growing refund amount. Unlike simple interest, which remains static, daily compounding increases the total over time. For example, if the IRS owes $5,000 and the interest rate is 6%, the daily interest accrual would be about $0.82 per day ($5,000 × 6% ÷ 365). After 90 days, this would total around $74 in interest.

Interest payments from the IRS are taxable income. If the total interest paid exceeds $10, the IRS issues Form 1099-INT, which must be reported on your tax return for the year you receive the payment. Many taxpayers mistakenly assume this interest is tax-free, but the IRS treats it like interest earned from a bank.

When to Expect Payment

Processing times for amended returns vary based on IRS workload, the complexity of the changes, and whether further review is needed. The IRS states that most amended returns take up to 20 weeks to process, though delays are common, especially during peak tax seasons or when additional verification is required.

Once approved, refunds are typically issued via direct deposit or a mailed check. Even if you originally selected direct deposit, the IRS may send a paper check if banking details have changed or if the system flags the account for verification.

In some cases, the refund and interest payments arrive separately. This happens when the IRS processes interest payments independently, particularly if the refund is significantly delayed.

If the Refund Is Offset or Reduced

The IRS can offset part or all of a refund to cover outstanding debts, including past-due federal or state taxes, unpaid child support, and delinquent student loans. The Treasury Offset Program (TOP), managed by the Bureau of the Fiscal Service, facilitates these deductions before issuing any remaining balance. If an offset occurs, the IRS sends a Notice of Offset, detailing the amount applied to the debt and any remaining refund.

Taxpayers can dispute an offset if they believe the debt is incorrect or if they are not legally responsible for it. For example, in injured spouse claims, one spouse’s refund may be taken to satisfy the other spouse’s debt. Filing Form 8379, Injured Spouse Allocation, allows the IRS to determine if the non-liable spouse is entitled to their portion of the refund. Processing times for injured spouse claims can extend beyond standard refund timelines, often taking 14 weeks or longer.

Tracking Your Amended Return

Amended returns cannot be tracked using the Where’s My Refund? tool. Instead, the IRS provides the Where’s My Amended Return? tool, which updates once a day and shows three status categories: Received, Adjusted, and Completed.

If an amended return has been in processing for longer than 20 weeks or if additional documentation is requested, contacting the IRS may be necessary. The Amended Return Hotline (866-464-2050) or a local Taxpayer Assistance Center can provide more details, though wait times can be long.

Filing electronically, when possible, can speed up processing. Paper submissions take longer to enter the system, increasing the risk of delays. Ensuring all required forms and supporting documents are included when filing can help prevent setbacks.