RyanMcC wrote:Id assume the check was for $25.61 then $4.39 interest was earned on that. I don't know what kind of interest the IRS pays these days but if you can earn that much interest on a $25.61 balance in under a year I'm clearing out my savings account and sending it to the IRS, thats a pretty darn good APR. I'd think it has to be from a previous year's tax return, I'm just guessing though.
The rate for underpayments was 8% during all four quarters of 2007.
The check does indicate that the refund was for 2006, which means that the interest could not have started to accrue until sometime in 2007. The check was dated 1/4/2008, so she got one year of interest at most.
Ignoring daily compounding, in order to earn $4.36 of interest in one year, the principal amount would have had to have been at least $55, not $25.
So it looks as though at least some of her refund was diverted to another liability, even while the refund earned interest. The questions are (a) what liability, and (b) how could the IRS be issuing refund checks at the same time they are suing for the return of an erroneous refund?