It depends. Why did you return the IRS check, and why do you expect to receive it again?
The IRS pays interest on tax refunds when mandated by law. A "return" is the form you file; any excess tax paid over taxes owed that you receive back is a "refund".
In general, the IRS pays interest on the amount you overpay starting from the later of the:
- Tax return filing due date
- Late filed tax return received date
- Date we get your return in a format they can process
- Date the payment was made
They stop paying interest on overpayments on the date they refund your overpayment (and interest) or offset it to an outstanding liability.
Exception: They have administrative time (typically 45 days) to issue your refund without paying interest on it. See here for more details.
If you returned a check because it was paid in error, so you wouldn't be entitled to it, then the interest isn't taxable.
If the 1099-INT was issued in error, to account for the Form 1099-INT on your tax return, you could enter the form in TurboTax. When you get to the screen that asks if any of the following situations apply, you could select "I need to adjust the taxable amount" and then on the following screen, enter the amount again. The amount would then appear on the return as both a positive and a negative number. In the alternative, you could enter the negative number under Other Reportable Income with an explanation.
If you are issued a check by the IRS that includes interest, and you don't return it, then the interest is taxable.
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