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20.2.4.7
(03-01-2002)
Refunds
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Any overpayment remaining after all outstanding balances are satisfied is refunded along with applicable credit interest.
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Credit interest is allowed from the effective date of the latest available refundable credit to the refund schedule date (less
the applicable back-off period).
20.2.4.7.1
(03-01-2002)
Refund Schedule Dates
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All refunds issued by a service center must be certified by the service center director as valid. A schedule of the refunds
issued is prepared each week.
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The Refund Schedule Date is the date that the service center director certifies that all refunds shown on the schedule are
valid and are to be paid.
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Additional credit interest is not computed on an overpayment for any period after the date the refund schedule is signed.
20.2.4.7.1.1
(03-01-2002)
Systemic Refund Dates for IMF and BMF
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Credit interest on refunds is computed:
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On IMF accounts, to the 23C date less 13 days (the fourteenth day preceding the refund check date).
Example:
If the date of a systemic IMF refund (TC 846) is July 31, 2000, Master File computes allowable interest on the overpayment
to July 18, 2000.
See Exhibit 20.2.4 - 2..
Note:
Prior to July 10, 1984, credit interest on IMF accounts was computed to the 23C date less 12 days.
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On BMF accounts, to the 23C date less 9 days (the tenth day preceding the refund check date (BMF).
Example:
If the date of a systemic BMF refund (TC 846) is July 3, 2000, Master File will compute allowable interest on the overpayment
to June 24, 2000.
See Exhibit 20.2.4 - 3.
Note:
Prior to July 10, 1984, interest was computed to the 23C date less 7 days.
20.2.4.7.2
(03-01-2002)
45–Day Rule
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The 45–day rule provides for a processing period during which credit interest is limited in certain situations.—IRC section
6611(e)
20.2.4.7.2.1
(03-01-2002)
45–Day Rule and Income Tax Returns
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For income tax returns with due dates prior to January 1, 1994, without regard to extension, interest was not paid on an overpayment when it was refunded within 45 days
of the date the return was filed in processible form.—IRC section 6611(e)
-
IRC section 6611(e) applied to , and
Exception:
For tax periods ending 197412 through 197511, substitute 60 days for 45 days.
20.2.4.7.2.2
(03-01-2002)
45–Day Rule and All Tax Returns
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For returns with due dates on or after January 1, 1994, without regard to extension, the 45–day rule was expanded to apply to all types of tax returns.—IRC section
6611(e)(1) as amended by PL 103–66.
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To determine whether the 45 day period has been met, consider these dates:
-
the normal return due date
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the return received date, without regard to extensions
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the Return Processible Date (RPD), if present (also known as the Correspondence Received Date).
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the received date of a formal or informal claim
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Add 45 days to the later of these dates. If the refund is not made
on or before
that date, interest must be allowed on the refund.
Note:
The refund check date for computer-generated refunds is:
IMF: 23C date less 3 days
BMF: 23C date less 1 day
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Master File computes allowable interest to:
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IMF: 23C minus 13 days
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BMF: 23C minus 9 days
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Compute allowable interest on manual refunds to the date certified by Accounting for allowing the refund.
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See Exhibit 20.2.4 - 4.No Allowable Interest-45 Days
20.2.4.7.2.3
(03-01-2002)
45–Day Rule and Amended Returns and Claims, OBRA '93
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The 45–Day rule was further expanded to include amended returns and claims for credit or refund filed on or after January
1, 1995.
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When an overpayment results from a claim or amended return and the refund is issued within 45 days of the received date of
the processible claim or amended return, no interest is allowed from the received date of the claim/amended return received
date. Credit interest is allowed from the credit availability date to the received date of the processible claim/amended return.
Example:
A claim for a refund of timely filed prepaid credit for a 200012 Form 1040 is received on August 14, 2001. The refund is issued
on September 20, 2001, within the 45–days. Credit interest is allowed from April 15, 2001, the return due date to August 14,
2001, the claim received date.
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When an overpayment results from a claim or amended return and the refund is not issued within 45 days of the received date,
credit interest is allowed from the availability date to the refund schedule date.
Caution:
For manual computations, be sure to consider the received date of the amended return/claim in the same manner.—IRC section
6611(e)(2)
Exception:
For carryback claims of Foreign Tax Credit (FTC) filed prior to January 1, 1995, see IRM 21.16, Carryback DP Adjustments. Carryback claims of FTC filed on or after January 1, 1995, are subject to the 45–day rule under OBRA 1993.
20.2.4.7.2.4
(03-01-2002)
45–Day Rule and Master File (Amended Returns and Claims)
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Master File uses the amended claims date field (AMD–CLMS–DT) to apply the 45–Day Rule.
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Follow existing procedures to determine the received date of an amended return/claim. Always enter the date the processible
amended return or claim was received by the Service in the AMD–CLMS–DT field.
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The AMD-CLMS-DT field must be completed for all adjustments resulting from claims or amended returns, including the adjustments
input by the Code and Edit Function. (CC ADJ54–TC 29X and blocking series 200–299)
| If a claim or amended return is |
And the overpayment is |
Then |
| Filed before January 1, 1995
|
refunded |
Interest is allowed
FROM: the overpayment availability date
TO: the refund schedule date
|
| Filed on or after January 1, 1995
|
refunded within 45 days of received date |
Credit interest is allowed
FROM: the availability date
TO: the received date of claim. No interest is allowed from the received date to the refund schedule date.
|
| Filed on or after January 1, 1995
|
NOT refunded within 45 days of received date |
Credit interest is allowed
FROM: the availability date
TO: the refund schedule date (less 9/13 day back-off period)
|
Note:
If the AMD–CLMS–DT is prior to the return due date, including extensions, and the refund is issued within 45 days of RDD, credit interest is not allowed. If the refund is not issued within 45 days of RDD, credit interest is allowed from the interest start date to the 23C date less 9/13 days.
20.2.4.7.2.5
(03-01-2002)
45–Day Rule and IRS Initiated Adjustments
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If an IRS initiated adjustment results in a refund or credit of an overpayment, 45 days are subtracted from the number of
days that interest otherwise would have been allowed. This rule applies to any refund paid on or after January 1, 1995, regardless of the taxable period to which the refund relates.
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An IRS Initiated Adjustment is an adjustment initiated by the Service without the taxpayer's request.
Example:
IRS has proposed a deficiency on a taxpayer's Form 1120 for depreciation expense. When the taxpayer's receipts are examined,
it is discovered that the taxpayer is actually entitled to additional depreciation expense. The resulting overpayment is IRS
initiated.
Example:
AUR generates a notice to the taxpayer regarding unreported interest income. The taxpayer responds that the income was unreported,
but includes additional itemized deductions. The resulting refund is taxpayer initiated.
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When the Service prepares an SFR for a taxpayer who later files a delinquent return, or signs an examination report that is
deemed to be a return, any resulting adjustment is not
"IRS INITIATED"
. These adjustments are a result of the filing of an original delinquent return or the signing of an examination report,
and any refund is subject to the 45–day rule for original returns.
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The 45–Day rule for IRS initiated adjustments IS APPLIED TO OFFSETS. Subtract 45 days from the date to which credit interest
is computed.
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When processing an IRS initiated adjustment via Document Code 47 or 54, input Priority Code (PC) 3. Priority Code 3 will allow
credit interest to be computer generated from the interest start date to the 23C date less 54 days (BMF) or 58 days (IMF).
The 54/58 days is a combination of the 9/13 and 45 day period. If PC 3 is not used with a refund adjustment, Master File only
backs off the 9/13 day period.
Note:
For Document Code 47
, Priority Code 3 is also used as the settlement amount/amended return freeze
"unpostable bypass"
. Master File
"reads"
PC 3 for the unpostable bypass and 54/58 day back-off period when both criteria apply. When a refund adjustment is not
being processed, Master File reads the PC 3 for only the unpostable bypass. When a refund adjustment is processed with PC
3, and the 45–day rule is not applicable, manually compute the credit interest and input it with TC 770.
20.2.4.7.3
(03-01-2002)
Manual Refunds
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Credit interest is computed according to the date of the refund schedule prepared by the Accounting Function.
Note:
When manually computing interest, attach the supporting documentation/computation to the manual refund documents before routing
to Accounting.
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When the 45 day period is in jeopardy, consider issuing a manual refund.
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For specific instructions on preparing manual refunds, see Customer Service IRM 21.4, Manual Refund.
20.2.4.7.4
(03-01-2002)
Non-Negotiable Refund Checks
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If a refund check is not issued in negotiable form and a new check is issued, allow interest to the date the replacement check
is issued.
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