Yes — If They Make You Wait Long Enough, They Have to Pay You

Most taxpayers don’t know this, but if the IRS holds your refund long enough, it triggers a legal requirement: they must pay you interest on the amount owed. You are not powerless when a refund is delayed—you are owed compensation.

This is not a “loophole.”
This is federal law.

The 45-Day Rule Explained

The IRS has 45 days from the later of:

• The tax filing deadline, or
• The date you actually file your return

If they take longer than that to issue your refund, they must pay interest on it.

Example:

• If you file before April 15, the 45-day clock starts April 15
• If you file after April 15, the clock starts on your filing date

Meaning:

• Refund issued on Day 44: no interest
• Refund issued on Day 46: interest applies

How Much Interest Does the IRS Pay?

The interest rate changes quarterly and is typically around:

4–7% annually

It compounds daily.

Yes—daily compounding.

This means:

• A $6,000 refund
• Delayed 100 days past the deadline
• Could generate additional interest of $80–$150 or more

Where You’ll See the Interest (Transcript Code 776)

When interest is paid, it appears on your IRS transcript as:

• TC 776 — Refund Interest Paid

This is the code that confirms:

1. The IRS acknowledges the delay
2. You were compensated
3. The interest credit was applied

If your delay goes past the 45-day rule and you don’t see TC 776, something went wrong—and you can address it.

Yes, The Interest Is Taxable

This part shocks many taxpayers:

The refund interest is considered taxable income.

Meaning:

• You will receive a Form 1099-INT
• It will report the interest amount
• You must include it on your following year’s return

Example:

IRS paid you $120 interest
Next year, you must report $120 as income

When The IRS Owes You Interest

You may qualify if:

• IRS held your refund due to processing delays
• Identity verification took months
• Your return sat in manual review
• The IRS requested additional documentation
• Your refund was frozen by TC 570
• Your return was resequenced
• IRS admitted internal backlog

The longer they hold your refund, the more they owe.

When The IRS Does NOT Owe Interest

They are NOT required to pay interest if:

• Your refund was delayed due to your error
• You incorrectly filled the return
• You filed late
• You had to amend your return
• You were audited for cause
• Refund was delayed due to identity mismatch or fraud suspicion

Important nuance:
If the delay was your fault, interest does not apply.
If the delay was their fault, interest does.

Real-World Example

A taxpayer filed on March 1, 2026
IRS processes slowly
Refund issued on August 15, 2026

Result:

• Refund amount: $7,200
• Interest paid: $190
• Code posted: TC 776

This is not uncommon.

How to Check Whether the IRS Paid You Interest

Step 1: Pull your Account Transcript

irs.gov/transcripts

Step 2: Look for these codes:

• TC 846 — refund issued
• TC 776 — interest paid

If only TC 846 is present and you were delayed far beyond 45 days, you can call and request reconciliation.

Your Leverage: The Rule Is On Your Side

This is one of the few times where the IRS actually loses money for delaying payments.
They are financially incentivized to issue refunds quickly.

The IRS can ignore your complaints…
…but they cannot ignore federal statute.

The Bottom Line

If your refund was delayed more than 45 days after the relevant date (April 15 or filing date), you are legally entitled to interest on your refund.

You earned that money.
You’re owed that interest.
And the IRS must pay it.

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