The IRS has yet to issue tax refunds to millions of Americans, but there is one bright spot: the money may be earning interest, and rates are set to increase in January.
On returns that are delayed by more than 45 days after the filing deadline, the Internal Revenue Service typically pays interest, according to its website.
Tax Refund
Depending on the federal short-term rate, interest rates are changed every quarter. The interest rate is currently 6%, but it will rise to 7% on January 1st. The interest rate was only 3% a year ago, in contrast.
As of mid-November, the IRS had received about 3.7 million individual tax returns, of which 1.7 million required error correction or another special handling. An additional 2 million paper forms were still awaiting review and processing.
The IRS paid out approximately $3.3 billion in interest payments for individual returns in the fiscal year 2021, a 33% increase from the previous year.
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IRS Is Taxing Revenue From Mobile Payment Apps
Furthermore, apps like PayPal and Venmo are becoming increasingly popular, especially among small-business owners who sell their products on marketplaces like Etsy. It’s vital to keep in mind that mobile payment applications will disclose any business transactions totaling more than $600 for the upcoming filing year if you sell things online.
The American Rescue Plan Act, a COVID-19 response measure, contains the tax code amendment that was officially signed into law. Before, tax authorities were only notified when a user’s annual revenue from commercial transactions topped $20,000 and exceeded $200.
The IRS claims it will use the tax information provided by the mobile apps to find possible unreported revenue and create fresh audit and collection strategies.
According to the Alliance for 1099-K Fairness, these new reporting requirements will harm independent contractors who sell used products at a discount and may need to pay a tax expert to ensure compliance.
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