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Interest On A Tax Refund
I have a scenario based question.
Scenario: I wasn’t supposed to pay FICA tax (federal payroll contribution to fund social security and medicare programs) but it continued getting deducted from my paycheck for couple of years. So I requested my employer to ask IRS for the refund. I got the refund after few years through my employer but also received interest amount on top of the original amount IRS owed me.
Question: Is it halal? If it’s not, what do I do with this interest money? I tried returning it back to my employer thinking it’s not halal but they refused to take it back because of audit issues. Is it ok to donate this money to organizations helping needy and deserving people or organizations spreading word of Allah like Ghamidi center, Inzaar etc. ?
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3 Replies
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Interest On A Tax Refund
updated 3 years, 3 months ago
3 Members
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Replies
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Riba is only in a loan transaction of a consumable item. When someone asks you for a loan and you demand that they pay you back an amount in addition to the original amount then that additional amount is riba and it’s haram. If the IRS sent you back an additional amount on top of what you paid them then it’s not riba and you can use it.
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What is haraam for one is also haraam for organizations that believe in the same.
Perhaps we can donate to organizations that accept interest as it is not haraam for them like hospitals or welfare organizations.
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