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George Saenz, the Bankrate.com Tax Talk columnistDoes delayed tax refund come with interest?

Dear Tax Talk,
I filed a tax return sometime in the beginning of April. I had applied for my wife's tax ID as well, and sent all the documents to the Philadelphia office. (I had to apply for my wife's tax return as I got married last year and my wife is from India on a dependent visa.) I was claiming my wife as a dependent for 2005.

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I got my wife's tax ID in mid-May, but until the second week in June I did not receive the tax return. I called IRS for the tax return and they said they never received anything from the Philadelphia office and the rep asked me to file the claim again electronically. So I filed another claim on June 12 and waited for four to five weeks.

Now since July I have been calling IRS for my tax return and they say that I have duplicate returns (apparently they received my original return) and need more time to confirm that they are duplicates. Can I do something in this to get back my money sooner? Does IRS owe me interest for delaying my tax refund?
-- N.K.L.

Dear N.K.L.,
At least the good thing is that the IRS will pay you interest for delaying the processing of your return. Fair is fair: If you owe taxes, IRS charges you interest. So conversely if they delay your refund, they owe you interest.

If you file your return after the due date (including extensions), no interest will be paid if the refund is made within 45 days after the date you filed. If the refund is not made within this 45-day period, interest will be paid from the due date of the return or from the date you filed, whichever is later. If you filed on or before April 15, you will earn interest of your refund from April 15 to the day it is issued.

Interest rates are adjusted quarterly. For the first six months of 2006, the interest rate on refunds was 7 percent and currently the rate is 8 percent.

Your problem points out the problems that many have expereinced when they have to apply for an individual tax identification number (ITIN) because the applicant is not eligible for a Social Security number. If you need to file a tax form and don't have a Social Security number, you need to get an ITIN. You apply for an ITIN by filing Form W-7 with the tax return that you need to file. For example, in your case it was Form 1040. Since the Philadelphia IRS center is responsible for foreign matters, all the processing of ITINs goes through that office.

It used to be that the IRS gave out ITINs without a tax form, but because they didn't trust applicants to use the number correctly, they now want to see your tax form. Based on my recent experiences, and yours, too, ITIN applicants can't trust that IRS will process their tax forms correctly. I hope the IRS will take note of these problems and adjust their processes accordingly.

To ask a question on Tax Talk, go to the "Ask the Experts" page, and select "taxes" as the topic.

Bankrate.com's corrections policy -- Posted: Aug. 29, 2006
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