I made a mistake on my 2019 federal taxes and had to file a 1040x amended return to get back money that I accidentally overpaid. (Basically, I accidentally double counted the capital gains on a custodial account for my kid on both her individual taxes and my own taxes, because of a minor oversight of the TurboTax/Brokerage import tool that imported it into both tax filings)….
Anyway, the IRS returned me the overpaid taxes in 2019…plus interest…And the interest was much more than how much I would have earned leaving the amount in a 2-3 year CD…. So I was curious exactly how much interest is paid for overpaid taxes, and I found this from the IRS…
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June 24, 2020
Interest on individual 2019 refunds reflected on returns filed by July 15, 2020 will generally be paid from April 15, 2020 until the date of the refund. Interest payments may be received separately from the refund. By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly. The interest rate for the second quarter, ending on June 30, 2020, is 5% per year, compounded daily. The interest rate for the third quarter, ending September 30, 2020, is 3% per year, compounded daily.
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So, yes overpaying your taxes and then asking for a refund does in fact give you better returns than leaving the same money in your 1.5%-2% CD, lol.
