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The rate for calculating interest on overpayments is less
than the rate for calculating interest on underpayments. See
sec. 6621(a)(1) and (2). However, when respondent exercises his
authority to offset under section 6402(a), section 6601(f)
provides that there shall be no net interest due for the period
of mutual indebtedness. Petitioner maintains that it overpaid
interest for 1988 through 1991 because respondent improperly
failed to offset overpayments from prior years against the agreed
underpayments for 1988 through 1991.
On September 25, 1995, petitioner paid the agreed
underpayments relating to 1988 through 1991, together with
interest at the underpayment rate. Petitioner claims that
respondent's failure to offset caused it to overpay interest in
the amount of $626,794.
Discussion
Section 6402(a) authorizes the Secretary to credit an
overpayment against any tax liability owed by the same taxpayer.
Section 6402(a) provides:
(a) General Rule.--In the case of any overpayment,
the Secretary, within the applicable period of
limitations, may credit the amount of such overpayment,
including any interest allowed thereon, against any
liability in respect of an internal revenue tax on the
part of the person who made the overpayment and shall,
subject to subsections (c) and (d), refund any balance
to such person.
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Last modified: May 25, 2011