Still Owed Your Tax Refund? You Might Get More Money Back Starting Oct. 1

You may be owed more money than you realize.

The IRS announces interest rates every quarter. Interest rates are set to increase for the final quarter of 2022. This year, IRS interest rates have continued to rise each quarter. Beginning on Oct.1, interest rates will increase from 5% to 6% for individual taxpayer overpayments.

What does that mean? If you overpaid your taxes and are still due a tax refund, you may be owed interest, and a higher interest rate could result in extra money in your pocket. Since most savings accounts are paying interest rates of around 2%, 6% is a much higher and more attractive rate.

The government's slow speed could result in a personal financial win for your bank account.

How tax refund interest works

The IRS aims to pay tax refunds promptly. But with delays and staffing shortages, that doesn't always happen. Some taxpayers end up waiting months for their tax refund to arrive. After a certain time limit (usually 45 days), the IRS pays interest on unpaid tax refunds. The interest rate is an annual rate that compounds daily.

You may be owed interest if you're still waiting on a tax refund check. If your check is still not in your hand by Oct. 1, you'll benefit from the higher Q4 interest rate. This is an easy way to earn more money, which you can use to meet your savings goals sooner.

Taxpayers should remember that IRS interest is considered taxable income -- so you'll need to report interest earnings on your tax return.

Related: Best Tax Software

Four ways to spend your tax refund

Only you can decide what to do with your tax refund. If you don't yet have a plan and are looking for ideas on how to put your tax refund to use, here are some suggestions to consider.

1. Pay off debt. If you have high-interest debt, like credit card debt -- using your refund to eliminate it could be beneficial. The sooner you knock out debt, the sooner you can focus on other financial goals like saving for a home or contributing to your retirement account.
2. Start an emergency fund. It's never too late to start an emergency fund. Your tax refund could provide the perfect opportunity to fund your emergency savings account.
3. Fund a necessary housing expense. Have you been putting off a big household expense like upgrading a failing home appliance or making essential home repairs? Your tax refund could help you afford a home project that improves your life.
4. Invest in yourself. Another way to put your tax refund to good use is to invest in yourself. There are many ways to do this -- such as taking a class that will improve your skills and knowledge, taking better care of your body, or prioritizing your mental health. You can show up for yourself by investing in yourself.

Are you looking for guidance related to important money matters? Check out our personal finance resources to boost your financial knowledge. As you learn more, you can make small changes that help improve your financial situation.