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20.2.5.12
(03-01-2002)
Debit Interest on Liabilities Paid by Offset
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IRC section 6402(a) permits the Service to credit a taxpayer’s overpayment to his/her outstanding liability.
Note:
In order to be
"outstanding"
the liability must be unpaid.
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Debit interest stops on any portion of a liability satisfied by credit of an overpayment, as of the credit availability date.
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Compute debit interest on the liability satisfied by an offset of credit as follows:
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Using a current TXMOD or Master File transcript, compute a running module balance on interest from the due date of the tax
to the date the offset is available.
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Apply the offset as a payment on the credit availability date.
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Continue debit interest to the applicable ending date, waiver date plus 30 days (if applicable), payment date or 23C date,
whichever is appropriate.
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If possible, offset overpayments in a manner that will not create overlapping debit and credit interest periods creating a
net rate netting situation.
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If an overpayment, on which interest is prohibited by law, is applied to an outstanding tax liability, compute interest from
the due date of the liability to the availability date of the overpayment.
20.2.5.12.1
(03-01-2002)
Debit Interest on Liabilities Paid by Offset from a Different Taxpayer
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A liability of one taxpayer may be paid by the overpayment of another taxpayer at the overpaid taxpayer’s request.
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Compute debit interest on the liability satisfied by the offset of credit as follows:
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Using a current TXMOD or Master File transcript, compute a running module balance on interest from the due date of the tax
to the date the offset is applied.
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Apply the offset as a payment on the current date.
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Continue debit interest to the applicable ending date, waiver date plus 30 days (if applicable), payment date or 23C date.
Example:
ABC Corporation was purchased by XYZ Corporation on March 31,1999. On June 15, 1999, ABC Corporation filed a short period
return showing an overpayment. The taxpayer requested the overpayment be applied to XYZ's liability for the full year return
due and filed on March 15, 2000. The technician is performing the credit transfer on July 16, 2001. Interest is computed to
the current 23C date.
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Debit interest is computed on XYZ’s liability from March 15,2000, to July 23, 2001 (the current 23C date), when ABC’s overpayment
(with interest) is applied.
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Credit Interest is computed on ABC Corp.'s overpayment from June 15, 1999 to July 23, 2001 and may be transferred to XYZ's
liability with the July 23, 2001 date.
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If XYZ’s liability is not totally satisfied, debit interest will continue to accrue on the balance until it is satisfied.
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