Session 9 Lecture Oct 2012

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Interest:

Interest TA319 Session 9

Underpayment Interest:

Standard Rate: Short-term federal interest rate + 3 percentage points Large Corporate Underpayment (LCU) Interest: Add another 2 percentage points Compounded Accrues until liability fully paid Underpayment Interest

Overpayment Interest:

Same as underpayment interest rate for non-corporate taxpayers. Corporations pay slightly higher rates. Interest on overpayments begins on the date of overpayment and continues to a date preceding the date of the refund check by not more than 30 days. If refund created by carryback, measure from date of filing of return that created the carryback. Interest not owed if paid within 45 days. Overpayment Interest

Interest Rate Netting:

Standard overpayment and underpayment interest rates are equal (except for LCU) When the taxpayer owes interest to the IRS and the IRS owes interest to the taxpayer at the same time, the interest nets and no money is due either direction. Interest Rate Netting

Ways to Reduce Interest:

Timely payment after notice and demand Make a deposit in lieu of cash bond Stops interest accrual while still letting the taxpayer go to Tax Court Ways to Reduce Interest

Interest Suspension:

IRC section § 6404(g) IRS must mail you a 30-day letter or 90-day letter stating your amount due within 36 months of the latter of: The filing date of your return The due date (without extensions) of the return Interest suspended until the notice is mailed + 21 days Interest Suspension

Interest Abatement:

IRC § 6404(a) – (f) IRS is allowed to abate tax and related penalties and interest under limited circumstances Interest Abatement

Interest Abatement:

Section 6404(a) authorizes abatement of assessments that are: Excessive in amount Assessed after the expiration of the applicable statute of limitations Erroneously or illegally assessed Interest Abatement

Tax Court Review:

Interest abatements are at IRS discretion – IRC § 6404(e) Tax Court can review a denial of abatement for abuse of that discretion – IRC § 6404(h) Tax Court Review

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