GAO Says Virus Led To $970M Increase In IRS Interest Payments

The Internal Revenue Service paid around $970 million more in interest on delayed refunds in 2020 than in 2019 because of the novel coronavirus pandemic, the Government Accountability Office said in a report released Monday.

The agency paid out $3.03 billion in refund interest in the 2020 fiscal year, a 47% increase from the $2.06 billion it remitted in the 2019 fiscal year, the GAO said in its report that outlined tax processing challenges in 2020 and 2021 resulting from the pandemic. The IRS was slow to issue refunds to some taxpayers because of delays in processing due to the pandemic, which forced a shift to work from home for agency employees and limited access to paper returns, the GAO said.

The IRS generally has to pay interest to taxpayers when it doesn't process returns within 45 days under Internal Revenue Code Section 6611 . The agency's manual processing of some tax returns also led to a backlog of still-unprocessed tax returns, the GAO said.

In addition to an increase in return interest paid, the pandemic also led to a 3% difference in the amount of taxes collected by September 2020 compared with the same period in 2019, the GAO said. The IRS said this difference — which amounts to $100 billion in taxes — was the result of filing and payment extensions and a mail backlog, which the agency recently cleared, according to the report.

--Additional reporting by David van den Berg. Editing by Neil Cohen.

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