In a Program Manager Technical Advice, the IRS has determined that the limits on overpayment interest don’t apply when a taxpayer qualifies for disaster relief.
Background.
Generally, interest is paid on any overpayment of tax from the date of overpayment to the refund date. (Code Sec. 6611(a), Code Sec. 6611(b)(2)) However, there are two exceptions to this general rule (overpayment interest limits).
Code Sec. 6611(b)(3) disallows the payment of interest on an overpayment (overpayment interest) for the period during which a return is late, taking into account any extensions (late-return rule).
Code Sec. 6611(e) disallows overpayment interest if the refund is paid within 45 days after the original due date for filing or, if the return is filed after the original due date, within 45 days of the date the return was filed (45-day rule).
Code Sec. 7508A(a) provides relief to qualifying taxpayers (disaster relief) from certain deadlines imposed by the internal revenue laws for performing certain acts, including filing a return, by allowing the IRS to disregard a certain period (period disregarded) when determining whether a return was filed on time.
Code Sec. 7508A(c) states that the exceptions to the overpayment interest limitations in Code Sec. 7508(b) apply for purposes of Code Sec. 7508A.
Code Sec. 7508(b)(2) provides an exception to the limitations on overpayment interest found in Code Sec. 6611(b)(3) and Code Sec. 6611(e); those rules do not apply to a taxpayer who qualifies for relief under Code Sec. 7508 if the return is filed on time after applying the period disregarded.
Question.
Does Code Sec. 7508A(c) provide an exception to the overpayment interest limits when a taxpayer qualifies for disaster relief?
Advice.
Yes.
Code Sec. 7508A(c) incorporates the exception to the overpayment interest limits in Code Sec. 7508(b) so neither the late-return rule nor the 45-day rule apply when a taxpayer qualifies for disaster relief. Therefore, the period for calculating overpayment interest includes the period disregarded in Code Sec. 7508A(a).
To continue your research on interest on overpayments, see FTC 2d/FIN ¶T-8027; United States Tax Reporter ¶66,114.
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