20.2.10  Interest on Estate Tax, Foreign Tax, and Excise Tax

Manual Transmittal

March 05, 2013

Purpose

(1) This transmits revised IRM 20.2.10, Interest, Interest on Estate Tax, Foreign Tax, and Excise Tax.

Material Changes

(1) Minor editorial changes have been made throughout this IRM. Website addresses, legal references, IRM references, and visual descriptive narratives were reviewed and updated as necessary. Significant changes to this IRM are reflected in the table below:

Subsection Change
IRM 20.2.10.3.3 Clarified which credits qualify for credit interest if not refunded by IRS in a timely manner per incorporation of Interim Procedural Update (IPU) 110249 issued 01-31-2011.
IRM 20.2.10.3.3.1 Added section per incorporation of IPU 110249 issued 01-31-2011 to clarify special rules for 2010 as outlined in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Pub. L. 111-312), sections 701(c) and 704(c).
IRM 20.2.10.3.4 Renumbered this section to 20.2.10.3.5, as well as all sections following this one.
IRM 20.2.10.3.4 Added new section to provide detailed instructions on processing claims for telephone excise tax refunds (TETR).
IRM 20.2.10.3.4.1 Added instructions for TETR claims filed prior to 2006.
IRM 20.2.10.3.4.2 Added instructions for TETR claims filed in 2006 and later.
IRM 20.2.10.3.4.3 Added instructions for computing TETR credit interest for tax periods 200612 through 200711.
Figure 20.2.10-1 Added TETR interest start date chart.
IRM 20.2.10.3.4.4 Added instructions for computing TETR interest on an "original" Form 8913, Credit for Federal Telephone Excise Tax Paid, for corporate taxpayers.
IRM 20.2.10.3.4.5 Added instructions for computing TETR interest on an "additional" Form 8913 for corporate taxpayers.
IRM 20.2.10.3.4.6 Added instructions for computing TETR interest on an "amended" Form 8913 for corporate taxpayers.
IRM 20.2.10.3.4.7 Added instructions for computing TETR interest for non-corporate taxpayers.
IRM 20.2.10.3.7 Added the text "Form 8849 and Ultimate Purchaser" to the title and added paragraph (3) to provide information on the credit transfer date to use when a claim amount is offset to a balance due per incorporation of IPU 110249 issued 01-31-2011.
IRM 20.2.10.3.10.1 Added new section to recognize the extended return due date for some 2011 Forms 2290 created by Treasury Decision 9537.

Effect on Other Documents

This material supersedes IRM 20.2.10, dated November 18, 2008. It also incorporates IPU 110249 issued 01-31-2011.

Audience

SB/SE employees and other operating division employees that work with interest.

Effective Date

(03-05-2013)

Bradley J. Bouton
Director, Examination Policy
Small Business/Self-Employed

20.2.10.1  (03-05-2013)
Interest on Estate Tax Returns

  1. Estate tax may be extended or deferred and paid in installments as provided in IRC 6166 with interest assessed at a reduced rate. These tax modules are identified by a taxpayer identification number (TIN) ending in "V" (valid TIN) or "W" (invalid TIN) and MFT 52 TXPD 000000 with a Notice Status of 14. Instructions for determining the portion of estate tax that may be subject to the reduced rate are found in IRM 4.25.2, Campus Procedures for Estate Tax.

  2. Interest on a portion of the estate tax is charged at 2% for decedents whose date of death is after December 31, 1997.

  3. Interest on the amount that exceeds the 2% portion [as defined in IRC 6601(j)(2)] shall be paid at 45% of the normal interest rate as found in IRC 6621.

20.2.10.1.1  (03-05-2013)
Installment Payments on Form 706 Estate Tax Return

  1. If all or a portion of an assessment (deferred amount) is paid in installments, compute and assess interest as shown below.

    1. Interest on the deferred amount that is not past due is computed from the return due date (excluding extensions of time to file) to the last prior installment due date.

    2. Interest on the deferred amount that is past due is computed from the return due date (excluding extensions of time to file) to the date of payment using the normal interest rate as provided by IRC 6621.

    3. Interest on the non-deferred amount is computed from the return due date (excluding extensions of time to file) to the date of payment using the normal interest rate.

    4. If Form 890, Waiver of Restriction on Assessments and Collection of Deficiency and Acceptance of Overassessments, is attached to the examination report, the IRS must issue notice and demand within 30 days of the date the waiver is signed to prevent the loss of interest.

    5. If notice and demand is not sent within 30 days, interest on the deficiency cannot be charged from the 31st day after the waiver is signed to the date of notice and demand.

  2. If an extension of time to pay an estate tax deficiency assessment has been granted under IRC 6161(b)(2), compute interest on the entire balance due from the due date of the return to the date of payment using the normal interest rate.

  3. If an extension of time to pay the tax shown on the return (deferred amount) has been granted under IRC 6161(a)(2) or IRC 6163:

    1. Compute interest on the deferred amount from the due date of the return to the date of payment.

    2. Compute interest for the period of the extension of time to pay an installment under IRC 6161(a)(2) at the rate of 2% on the 2% portion and the remainder at 45% of the normal interest rate, from the due date of the installment to the date of payment.

  4. If the time for payment of estate tax is extended under IRC 6166 and a deficiency is assessed after the estate has made one or more timely interest payments:

    • The 2% rate as per IRC 6601(j) is used to determine the amount of interest that should have been paid in each annual interest payment.

    • Interest on any underpayment of interest accrues at the prevailing rate under IRC 6601(a) from the date the interest should have been paid under IRC 6166(f)(1) if the return had shown the correct tax liability. See Rev. Rul. 89-32.

    Note:

    The 2% rate was previously 4% for the estates of decedents who died before January 1, 1998. In addition, executors of estates of decedents who died before January 1, 1998, could have elected to use the new 2% rate for installments due after the date of the election. The election had to be made prior to January 1, 1999. See Rev. Proc. 98-15.

  5. Refer to IRM 4.25.2 for more information.

20.2.10.1.2  (03-05-2013)
Credits Against Estate Tax

  1. Death taxes paid to any state, the District of Columbia, or a foreign country, are allowed as a credit against federal estate tax owed. See IRC 2011 and IRC 2014.

  2. Income taxes paid to a foreign country are allowed as a credit against federal income tax owed.

  3. This chapter explains the effect of these credits on interest computations.

  4. IRC 2011(a) and IRC 2014(a) provide for a credit against federal estate tax (for citizens or residents of the United States) for estate, inheritance, legacy, or succession tax paid to:

    • Any state or the District of Columbia [IRC 2011(a),] or

    • Any foreign country or possession of the United States [IRC 2014(a) and] Treas. Reg. 20.2014-1(a)(1)].

  5. IRC 2011(f) provides that IRC 2011 shall not apply to the estates of decedents dying after December 31, 2004. See IRC 2058 which allows for a deduction for state death taxes for estates of decedents dying after December 31, 2004.

  6. The tax must actually be paid to be taken as a credit.

  7. Interest is computed based on the tax adjustment information shown on Form 1366, Tax Analysis Worksheet for Overassessments of Estate Tax Involving Restricted Interest.

20.2.10.1.3  (03-05-2013)
Time Frame for Claims

  1. The credit allowed under IRC 2011 must be claimed within 4 years after the filing of the estate tax return, except if:

    1. A timely petition to Tax Court was filed, then within the 4 year period, or before the expiration of 60 days after the date the decision of the Tax Court becomes final, or

    2. Under IRC 6161 and IRC 6166, an extension of time has been granted for payment of the tax shown on the return, or of a deficiency, then within 4 years of the period of extension, or

    3. A claim for refund or credit of an overpayment has been filed within the time prescribed in IRC 6511, then the 4 year period or before the expiration of 60 days from the date of mailing of a certified/registered notice of disallowance of the claim, or before the expiration of 60 days after a decision by any court of competent jurisdiction becomes final with respect to a timely suit instituted upon such claim, whichever is later. See IRC 2011(c).

  2. The credit allowed under IRC 2014 must be claimed within 4 years after the filing of the estate tax return, except if:

    1. A timely petition to Tax Court was filed, then within the 4 year period or before the expiration of 60 days after the decision of the Tax Court becomes final, or

    2. Under IRC 6161, an extension of time has been granted for payment of the tax shown on the return, or of a deficiency, then within 4 years of the period of the extension. See IRC 2014(e).

  3. If the claim is timely filed, allow any refund of overpaid estate tax based on the credit for taxes actually paid within the 4 year period, but do NOT allow interest on the refund.

20.2.10.1.4  (03-05-2013)
Recovery of Death Taxes Claimed as a Credit

  1. If the executor or other person representing an estate recovers any state or foreign death tax claimed as a credit, they must notify the IRS within 30 days of the receipt of a refund, pursuant to Treas.Reg. 20.2016-1. The federal estate tax will be redetermined; and (without regard to the statute of limitations provided in IRC 6501) the amount of the redetermined federal estate tax is due upon notice and demand.

    If Then
    The redetermined deficiency is the result of recovery of any part of a state (or District of Columbia) death tax claimed as a credit. Compute debit interest under the regular rules of IRC 6601.
    The redetermined deficiency is the result of recovery of any foreign death tax claimed as a credit. Compute debit interest
    FROM:
    The date the executor of the estate (or another person) received the refund from the foreign government. See IRC 2016.
    TO:
    The date of payment of the tax, or if the deficiency is satisfied by credit, to the date the overpayment is applied against the liability.
    THEN:
    To the interest so computed is added an amount equal to any interest paid on the refund by the foreign government. The sum of the two amounts will be the interest assessment. See Rev. Proc. 60-17 Sect. 12.05.

    Note:

    IRC 2016 applies only to IRC 2014 for decedents dying and generation-skipping transfers after December 31, 2004. See IRC 2011(f).

20.2.10.1.5  (03-05-2013)
Combination Adjustments

  1. If an examination determination involves a combination of general adjustments and an adjustment of the credit claimed on the return for state death taxes under IRC 2011, or the foreign death taxes under IRC 2014, the Examination function will flag the case file for the restricted interest examiner. The file will contain Form 1366, Tax Analysis Worksheet for Overassessments of Estate Tax Involving Restricted Interest.

  2. Using Columns C and D of Form 1366, if a deficiency is shown in one column and an overassessment in the other, deduct the lesser amount from the greater amount to determine the net result.

    If the net result is Then
    A deficiency in Column C, Compute debit interest under the regular rules of IRC 6601.
    A deficiency in Column D that results from a recovery of an amount claimed and paid as foreign death taxes, Compute debit interest
    FROM:
    The date the executor of the estate (or another person) received the refund from the foreign government. See IRC 2016.
    TO:
    The date of payment of the tax, or if the deficiency is satisfied by a credit, to the date the overpayment is applied against the liability.
    THEN:
    To the interest so computed is added an amount equal to any interest paid on the refund by the foreign government. The sum of the two amounts will be the interest assessment. See Rev. Proc. 60-17 Sect. 12.06.
    A deficiency in Column D that results from the recovery of an amount claimed and paid as state (or District of Columbia) death taxes, Compute debit interest under the regular rules of IRC 6601. (Interest is NOT restricted on this deficiency).
    An overpayment in Column C, Compute credit interest under the regular rules of IRC 6611(b).
    An overpayment in Column D, Do not allow credit interest. See Rev. Proc. 60-17 Sect. 12.03.

  3. In some instances, a re-determination is prepared after adjustments have been made to the amounts claimed as state or foreign death tax credits and the resulting deficiencies or overassessments have been assessed or scheduled.

    • If the amount of the credit changes, prepare another Form 1366 showing the adjustments in each column as corrected. The amount in Column A should be identical to the amount on the original Form 1366.

    • Redetermine the interest on the basis of the corrected Form 1366 and adjust the interest assessed or allowed.

    If the re-determination results in Then
    A deficiency in Column D resulting from a correction to the amount of an overassessment previously allowed on the basis of a state or foreign death tax claim, Compute debit interest
    FROM:
    The refund schedule date (since interest was not allowed on the previous overpayment).
    TO:
    The date of payment (or, if satisfied by a credit, to the date the overpayment is applied against the liability).
    An overassessment in Column D, Do not allow credit interest.
    An overassessment in both Columns C and D, Apportion the allowance of credit interest between the general adjustment in Column C and the restricted overassessment in Column D.

20.2.10.2  (03-05-2013)
Foreign Tax Credit (FTC)

  1. FTC relieves U.S. taxpayers of the double tax burden imposed when the foreign source income is taxed by both the United States and the foreign country from which it is derived.

  2. FTC is claimed by the taxpayer on:

    • Form 1116, Foreign Tax Credit for Individual, Estate, or Trust.

    • Form 1118, Foreign Tax Credit - Corporations.

20.2.10.2.1  (03-05-2013)
Adjustments to FTC

  1. When accrued taxes are paid to the foreign country, or possession of the United States:

    If Then
    The taxes paid differ from the amounts claimed as FTC on the taxpayer’s return, The taxpayer must report the adjustment. Re-determine the tax liability for the year in which the accrued FTC was claimed.
    Any part of the tax actually paid is refunded to the taxpayer by the foreign country, The taxpayer must report the refund. Re-determine the tax liability for the year in which the FTC was claimed.
    The accrued taxes are not paid before the date that is 2 years after the close of the year for which the FTC was claimed, The taxpayer must reverse out the FTC for the accrued but unpaid tax. Re-determine the tax liability for the year the FTC was claimed. If the foreign tax is actually paid in a later year, re-determine the tax liability again for the year to which the foreign tax relates.

20.2.10.2.2  (03-05-2013)
Interest on Adjustments to FTC

  1. For interest on adjustments to FTC:

    If Then
    The adjustment results in a reduction of the FTC previously allowed for the year in which the foreign tax accrued and a corresponding increase in the tax liability, Compute debit interest on the increase
    FROM:
    The date the taxpayer received the refund of foreign taxes paid.
    TO:
    The date of payment of the increase in U.S. tax, or if the deficiency is satisfied by credit, to the date the overpayment is applied.
    THEN:
    To the interest so computed is added an amount equal to any interest paid on the refund by the foreign government. The sum of the two amounts will be the interest assessment. However, the above amount is not to exceed the amount that would have been assessed under normal interest procedures found in IRC 6601. See Treas. Reg. 1.905-4T(e).
    The FTC claimed on the return was for accrued but unpaid taxes which were abated by the foreign country or possession of the U.S., Compute debit interest on the corresponding increase in tax
    From:
    The due date of the return.
    To:
    The date of payment of the tax.
    The adjustment results in an increase in the FTC previously allowed and a corresponding decrease in the tax liability, Compute credit interest under the regular rules of IRC 6611(b) and IRC 6611(f)(2).

20.2.10.2.3  (11-18-2008)
Time Frame for Filing Claims

  1. A claim for credit or refund attributable to foreign taxes paid or accrued must be filed within 10 years from the due date of the return for the year in which the foreign taxes were actually paid or accrued.

20.2.10.2.4  (03-05-2013)
Carrybacks and Carryovers of Excess Foreign Taxes Paid

  1. Taxpayers can carryback or carryover credit for excess foreign taxes paid. If a carryback of foreign taxes paid or accrued to foreign countries or possessions of the United States results in an overpayment of tax, that overpayment is deemed not to have been made before the filing date for the taxable year in which such taxes were actually paid or accrued. See IRC 6611(f)(2).

  2. No interest will be paid on post-OBRA (after December 31, 1993) carryback and carryover refunds if issued within 45 days of the date the claim is received by the IRS. See IRC 6611(e) and IRC 6611(f)(4)(B).

  3. If the erroneous application of a carryback under IRC 904(c) or IRC 907(f) results in a deficiency, that deficiency must be assessed at any time within one year after the expiration of the period within which a deficiency may be assessed for the year of the excess taxes described in IRC 904(c) or IRC 907(f). See IRC 6501(i).
    Example:

    If Then
    Excess foreign taxes are erroneously carried back from 2007 and claimed in 2006, resulting in a deficiency for 2006, Assess the deficiency within one year of the assessment statute expiration date of the 2007 tax year.

20.2.10.2.5  (03-05-2013)
Computing Overpayment Interest on Excess Foreign Taxes Carried Back

  1. Manually compute overpayment interest on refunds attributable to the carryback of excess foreign taxes.

    1. The interest start date is the due date of the return for the year in which the foreign taxes were paid or accrued if the return was filed on or prior to the due date or extended due date. If late filed, interest starts on the date the return was filed. Interest ends on the date the carryback is refunded minus all applicable back-off periods (see IRM 20.2.4.7, Refunds) or the date it is applied to another tax underpayment.

    2. No interest is allowed on carryback and carryover refunds if issued within 45 days of the date the claim is received by the IRS. See IRC 6611(e) and IRC 6611(f)(4)(B).

  2. The interest start date is never earlier than the due date of the return for the year in which the excess foreign taxes were generated. See IRC 6611(f)(2).

20.2.10.3  (03-05-2013)
Excise Taxes

  1. Excise tax liabilities are reported on Form 720, Quarterly Federal Excise Tax Return, Form 730, Monthly Tax Return for Wagers, Form 11-C, Occupational Tax and Registration Return for Wagering, Form 2290, Heavy Highway Vehicle Use Tax Return, Form 6627, Environmental Taxes, and Form 8725, Excise Tax on Greenmail.

  2. Excise tax credits and refunds are claimed on Schedule C of Form 720, Form 8849, Claim for Refund of Excise Taxes, line 5 of Form 730, line 5 of Form 2290, Form 4136, Credit for Federal Tax Paid on Fuels),Form 6478, Credit for Alcohol Used as Fuel,Form 8864, Biodiesel and Renewable Diesel Credit,Form 8906, Distilled Spirits Credit, and Form 8913, Credit for Federal Telephone Excise Tax Paid, which are attached to an individual or business income tax return.

20.2.10.3.1  (11-18-2008)
Interest Generally Allowable

  1. Underpayment interest accrues on unpaid excise taxes, unless otherwise provided, from the due date of the return to the date paid.

  2. Unless specifically stated otherwise, overpayment interest accrues from:

    • The due date of the return,

    • The date the return is filed, or

    • The date the tax is paid.

    whichever is later, to the date of refund or offset of the credit.

  3. Many excise tax adjustments are statutorily made without interest.

20.2.10.3.2  (03-05-2013)
Underpayment of "Collected" Excise Taxes

  1. Chapter 33 of the Internal Revenue Code imposes an excise tax on amounts paid for certain facilities and services. Compute interest on any underpayment of excise tax from the date the taxpayer makes the payment for the facility or service to the date the tax is paid.

    • The person paying for the facility or service is liable for the tax and is known as the "taxpayer."

    • The person receiving payment for the facility or service is known as the "collecting agency."

  2. Compute debit interest to the date paid regardless of whether the taxpayer makes a delinquent payment of the tax to the collecting agency or whether a direct assessment of the tax is made against the taxpayer by the IRS.

20.2.10.3.3  (03-05-2013)
Special Interest Rules

  1. Ultimate Vendor Claims. Claims by registered ultimate vendors of undyed diesel fuel and undyed kerosene (Form 720, Schedule C; Form 8849, Schedule 3) are paid with interest if the refund is not issued within 45 days of receipt (20 days for electronic claims). Interest accrues from the claim received date to the refund schedule date. See IRC 6427(i)(4)(A).

  2. Alcohol, Biodiesel, or Alternative Fuel and Mixture Claims as determined in IRC 6427(e)(1) and IRC 6427(e)(2). Claims for alcohol, biodiesel or alternative fuel, alcohol fuel mixture credit, biodiesel mixture credit or the alternative fuel mixture credits (Form 720, Schedule C; Form 8849, Schedule 3) follow the same rules as claims by registered ultimate vendors described in paragraph (1) above and in accordance with the chart shown below. See IRC 6427(i)(3)(B).

    If the claim is Then
    Allowed, Issue a manual refund without interest no later than the 42nd day (15th day for electronic claims) after the claim received date.
    Allowed but not timely processed within 45 days (20 days for electronic claims), Interest must be paid from the claim received date to the refund schedule date less the appropriate back-off period.

20.2.10.3.3.1  (03-05-2013)
Special Rule for 2010

  1. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. 111-312, provides for a one-time claim for payment on a taxpayer's calendar year 2010 sales or use of biodiesel mixtures, alternative fuels, and alternative fuel mixtures.

    • Section 701(c) of the above Act, provides for a credit for biodiesel and renewable diesel used as fuel as well as biodiesel and renewable diesel fuel mixtures as determined under IRC 6426(c).

    • Section 704(c) of the above Act, provides for a credit for alternative fuel and alternative fuel mixtures as determined under IRC 6426(d) or IRC 6426(e).

  2. All claims must be submitted in accordance with IRB 2011-6 463 (Notice 2011-10) which states in part:

    • Claims must be filed between February 2, 2011 and August 1, 2011. Claims may be filed as early as January 14, 2011, but will be deemed as filed on February 2, 2011.

    • If these claims are not paid by IRS within 60 days of the filing of the claim or February 2, 2011, whichever is later, interest will be paid from the filing date of the claim or February 2, 2011, whichever is later. Interest will be paid in accordance with IRC 6621 overpayment rates.

    This special rule applies to the above types of fuel sold or used after December 31, 2009.

    For a more detailed explanation and further instructions, please see IRM 21.7.8.4.5.4, Form 8849, Schedule 3, Certain Fuel Mixtures and the Alternative Fuel Credit.

20.2.10.3.4  (03-05-2013)
Telephone Excise Tax Refund (TETR) Claims

  1. Taxpayers may request a credit or refund of the telephone excise tax on nontaxable service that was billed after February 28, 2003, and before August 1, 2006, only on their 2006 federal income tax returns. For this purpose, the 2006 income tax return is the income tax return for calendar year 2006 or for the first taxable year including December 31, 2006. Details are covered by IRB 2006-25 1141 (Notice 2006-50) and IRB 2007-5 405 (Notice 2007-11), which amplified, clarified, and modified IRB 2006-25. The refund statute is open for six years from July 26, 2006, to July 26, 2012. Detailed instructions for the special interest rules that apply to these claims can be found in IRM 21.6.3.5.13, TETR Interest-General Information, for individual master file (IMF) tax modules and in IRM 21.7.4.4.23.4, TETR Interest, for business master file (BMF) tax modules.

    Caution:

    When a TETR refund has been issued with TETR credit interest, any subsequent refunds will not be allowed credit interest up to the amount of the original TETR credit interest. Subsequent refunds that are due credit interest will need to be manually computed.

20.2.10.3.4.1  (03-05-2013)
TETR Claims Filed Prior to 2006

  1. Some taxpayers filed protective claims for TETR refunds for periods prior to the periods covered in Notice 2006-50 (taxes billed on or prior to February 28, 2003).

  2. If a claim was filed within the period of limitations and a notice of claim disallowance has not been sent, then the refund period of limitations remains open regardless of what other action may have been taken on the account. Interest will be paid on the refund from the later of: the return due date; or the payment date.

  3. If a notice of claim disallowance has been sent and more than two years have passed from the date of the notice of claim disallowance and the taxpayer has not filed a refund suit or obtained an extension of the time to file a refund suit, then the refund period has expired and the claim may not be paid. If two-year period has not expired or the taxpayer signed an extension of time to file a refund suit, the refund statute remains open. Interest will be paid from the later of:

    • The return due date; or

    • The payment date.

  4. Net rate interest netting as described in IRC 6621(d) is permitted on the credit interest portion of a TETR claim when submitted with Form 8913, Credit for Federal Telephone Excise Tax Paid. Normal netting methods apply when netting tax periods prior to 200612 as described in IRM 20.2.10.3.4.1 (1). For instructions for netting TETR interest using the ACT/DMI interest program, see IRM 20.2.14, Netting of Overpayment and Underpayment Interest.

20.2.10.3.4.2  (03-05-2013)
TETR Claims Filed in 2006 and Later

  1. For periods covered by Notice 2006-50:

    1. Claims will only be allowed when filed with a Form 8913, Credit for Federal Telephone Excise Tax Paid, unless, as individuals, the safe harbor amount was claimed. This applies to claims filed before or after Notice 2006-50 was issued. Protective claims filed without Form 8913 should not be allowed for the tax periods covered in Notice 2006-50.

    2. If the procedures found in Notice 2006-50 and Notice 2007-11 have been followed, refunds will be issued with interest.
      i) If the taxpayer used the interest factors provided in the instructions for Form 8913, then the allowable interest has been covered through May 30, 2007. Additional interest will be allowed from May 30, 2007 to the current refund date, including the appropriate back-off period for systemically generated refunds (i.e., 9/13/16/20 days). See IRM 20.2.4.7.1.1, Systemic Refund Dates for IMF and BMF.

    3. The taxpayer is instructed to compute interest on lines 1 through 14 of Form 8913 to 45 days beyond the later of the return due date or the return received date. If the claim is not processed and the refund issued within 45 days of the received date, additional interest must be allowed from the date the taxpayer computed interest, to the current refund date, including the appropriate back-off period.

  2. Net rate interest netting, as described in IRC 6621(d), is permitted on the allowable interest portion of a TETR claim. For instructions for netting TETR interest using the ACT/DMI interest program, see IRM 20.2.14, Netting of Overpayment and Underpayment Interest.

    Note:

    Net rate interest netting of allowable TETR interest on IMF tax modules will not normally take place because of the interest rate equalization, after January 1, 1999, of the credit and debit interest rates for non-corporate taxpayers (tax motivated interest (TMT) excepted).

20.2.10.3.4.3  (03-05-2013)
Computing TETR Credit Interest

  1. Under normal circumstances, the taxpayer would be required to file a Form 720 for each of the 14 TETR tax periods in order to claim the telephone excise tax refund. However, this requirement was waived and Form 8913 was developed so that taxpayers could file just one form with the 2006 income tax return to claim the credit for all 14 tax periods. Each of the 14 lines shown on Form 8913 represent a quarter for which the taxpayer is entitled to a TETR tax refund.

  2. For taxpayers subject to the corporate and GATT interest rates, credit interest is computed at the corporate interest rate on the first $10,000 of each separate amount claimed for the 14 tax periods. "Each" overpayment exceeding $10,000 is subject to the GATT interest rate. Do not collectively aggregate the overpayments for each of the 14 tax periods shown on Form 8913 when making these credit interest calculations. See IRM 20.2.4.9, Special Credit Interest Rules for Corporations, for more information on computing interest using corporate and GATT interest rates. In order to properly apply the corporate and GATT rates, each of the 14 periods must be entered as separate modules in the ACT/DMI program.

  3. The taxpayer's entry on line 1, Column (d), of Form 8913 is entered to ACT/DMI as a Transaction Code (TC) 766 with a start date of 1 day prior to the interest start date as shown in the chart on Page 4 of the instructions for Form 8913. When computing interest for Form 8913 using ACT/DMI, use the dates shown in Figure 20.2.10-1.

    Note:

    ACT/DMI begins interest accruals the day after the date entered as the start date.

    Figure 20.2.10-1

    TETR Interest Start Date Chart

    Line From Form 8913 ACT/DMI Interest Start Date
    Line 1 July 31, 2003
    Line 2 October 31, 2003
    Line 3 January 31, 2004
    Line 4 April 30, 2004
    Line 5 July 31, 2004
    Line 6 October 31, 2004
    Line 7 January 31, 2005
    Line 8 April 30, 2005
    Line 9 July 31, 2005
    Line 10 October 31, 2005
    Line 11 January 31, 2006
    Line 12 April 30, 2006
    Line 13 July 31, 2006
    Line 14 October 31, 2006

20.2.10.3.4.4  (03-05-2013)
TETR Instructions for an "Original" Form 8913 Claim - Corporate Taxpayers

  1. Step 1: If the taxpayer is a corporation as defined in IRM 20.2.4.9 (2), Special Credit Interest Rules for Corporations, and therefore subject to the lower corporate and GATT interest rates, each line of Form 8913 (lines 1-14) must be set up in ACT/DMI as a separate module.

    1. Using the ACT/DMI software program, interest is to be computed from the dates indicated using the chart in Figure 20.2.10-1, to 45 days beyond the original return due date or received date, whichever is later.

      Example:

      The original return was received on 03/15/2007; the interest is computed to 04/29/2007. Or, the original return was received on 09/15/2007; interest is computed to 10/30/2007. The "interest TO date" is based solely on the "original" return received date, not the received date of the amended return.

    2. Use the "Description" box in the "Edit Existing Module" screen to differentiate each individual line. For example, for line 1, enter "Form 8913 line 01."

  2. Step 2:

    1. Add TC 766 for line 1 of Form 8913 into the first module using the amount the taxpayer entered on line 1, Column (d).

    2. Compute interest to 45 days beyond the original return due date or received date, whichever is later.

    3. Repeat step 1, IRM 20.2.10.3.4.4 (1), and IRM 20.2.10.3.4.4 (2) for each of the 14 lines on Form 8913.

      Note:

      Because each line is a separate computation, it may be helpful to use a blank Form 8913 and fill in the computed interest amounts in Column (e). This will simplify the actions to be taken in step 3.

  3. Step 3:

    1. Accept the figures in Column (d) and the total on line 15.

    2. Using the interest amounts computed on ACT/DMI and input in Column (e), enter the total interest amount on line 15 of Form 8913.

      Note:

      ACT/DMI will total the interest amount by using the netting screen. Click on the "Netting" button and when the netting screen opens, highlight and select the modules of all 14 lines. Enter the date to be computed to as determined in step 1, and click on "Process." Click on "Reports." In the "Analysis Reports" screen (top left hand box), select the 020 Report, then select "View" or "Print." The total amounts for all 14 lines can be found at the bottom of the last page.

  4. Step 4: For an "Original" claim;

    1. Line 15, Column (d) is the credit reference number (CRN) 253 amount for the adjustment and will be entered with the due date of the return as the transaction date.

    2. Line 15 Column (e) is the CRN 254 amount for the adjustment and will also be entered with the due date of the return.

      Note:

      It is important to post the credit with the due date (not current 23C Date) in order for these credits to be available to pay tax as of the due date, or if overpaid, to accrue additional interest from the date interest was computed to in steps 1 and 2. Use of CRN 253 and 254 will allow the adjustment to post with the return due date.

  5. Step 5: Create a separate module on ACT/DMI for the 2006 tax period.

    1. Enter the entire module and include the TC 766 total amount and the TC 770 total amount computed from the Form 8913, entering these transactions into ACT/DMI with the due date of the return.

    2. Enter TC 1011 credit suspension for the total amount of the TC 766 and TC 770. Suspend from the due date of the return, to the date interest was computed in steps 1 and 2 (i.e., 45 days after original return received date). The credit interest amount (TC 770) will now be considered a credit as of the due date of the return but will only accrue additional credit interest beginning on the date interest was computed to in step 1.

    3. Remove the "O" from the "Excl" column of the ACT/DMI "Update Modules" screen on the TC 770 entry. It will not be included in the total amount of credit interest shown in the ACT/DMI 490 Report.

    4. Compute interest to the current 23C Date, minus the appropriate back-off days.

  6. Step 6: Once the total amounts have been determined;

    1. Input the adjustment with the TC 766 amount as a CRN 253 and the TC 770 amount as a CRN 254 computed to 45 days beyond the original return due date or received date, whichever is later. Using the CRN 253 and 254 will allow the TC 766 and TC 770 to post with the due date of the return.

    2. Use TC 770 (NOT CRN 254) for the additional credit interest which accrued from 45 days beyond the due date or original return received date, to the 23C Date, minus the appropriate back-off days. This TC 770 will post with the 23C Date.

20.2.10.3.4.5  (03-05-2013)
TETR Instructions for an "Additional" Form 8913 Claim - Corporate Taxpayers

  1. Step 1: See IRM 20.2.10.3.4.4 (1).

  2. Step 2: Add TC 766 for line 1 of Form 8913 into the first module using the amount the taxpayer entered on line 1, Column (d).

    1. For an "additional" Form 8913, also enter a separate TC 766 for the original Form 8913, line 1, Column (d) amount. The date of the TC 766 will be the corresponding date found in the chart in Figure 20.2.10-1 above. The two forms must be entered into one module because the taxpayer is entitled to the $10,000 threshold only once for each line.

    2. Compute interest to 45 days beyond the original return due date or received date, whichever is later.

    3. Repeat step 1, IRM 20.2.10.3.4.4 (1), and step 2, IRM 20.2.10.3.4.5 (2), for each of the 14 lines on Form 8913.

    Note:

    Because each line is a separate computation, it may be helpful to use a blank Form 8913 and fill in the computed interest amounts in Column (e). This will simplify the actions to be taken in step 3.

  3. Step 3:

    1. Accept the figures in Column (d) and the total on line 15.

    2. Use the interest amounts computed on ACT/DMI, which includes both the original and additional forms and enter in Column (e). Then add the total interest amount for line 15 of Form 8913.

      Note:

      ACT/DMI will total the interest amount by using the netting screen. Click on the "Netting" button and when the netting screen opens, highlight and select the modules of all 14 lines. Enter the date to be computed to as determined in step 1, and click on "Process." Click on "Reports." In the "Analysis Reports" screen top left hand box, select the 020 Report, then select "View" or "Print." The total amounts for all 14 lines can be found at the bottom of the last page.

  4. Step 4: For an "Additional" claim;

    1. The amount on line 15, Column (d) is the CRN 253 amount of the adjustment and will be entered with the due date of the return.

    2. Take the amount of credit interest shown on line 15 Column (e) and subtract the amount of the TC 770 CRN 254 previously posted with the original TC 766. This reduced figure is the amount of the CRN 254 that will be input along with your CRN 253 adjustment.

      Note:

      It is important to post both transactions with the due date (not current 23C Date) in order for these credits to be available to pay tax as of the due date, or if overpaid, to accrue additional credit interest from the date interest was computed to in steps 1 and 2. Use of CRN 253 and 254 will allow the adjustment to post with the return due date.

  5. Step 5: See IRM 20.2.10.3.4.4 (5).

  6. Step 6: See IRM 20.2.10.3.4.4 (6).

20.2.10.3.4.6  (03-05-2013)
TETR Instructions for an "Amended" Form 8913 Claim - Corporate Taxpayers

  1. Step 1: See IRM 20.2.10.3.4.4 (1).

  2. Step 2:

    1. Add TC 766 for line 1 of Form 8913 into the first module using the amount the taxpayer entered on line 1, Column (d).

    2. Compute interest to 45 days beyond the original return due date or received date, whichever is later.

    3. Repeat step 1, IRM 20.2.10.3.4.4 (1) and step 2, IRM 20.2.10.3.4.4 (2) for each of the 14 lines on Form 8913.

      Note:

      Because each line is a separate computation, it may be helpful to use a blank Form 8913 and fill in the computed interest amounts in Column (e). This will simplify the actions to be taken in step 3.

  3. Step 3:

    1. Accept the figures in Column (d) and the total on line 15.

    2. Use the interest amounts computed on ACT/DMI, which includes both the original and additional forms and enter in Column (e). Then add the total interest amount from line 15 of Form 8913.

      Note:

      ACT/DMI will total the interest amount by using the netting screen. Click on the "Netting" button and when the netting screen opens, highlight and select the modules of all 14 lines. Enter the date to be computed "TO" as determined in step 1, and click on "Process." Click on "Reports." In the "Analysis Reports" screen top left hand box, select the 020 Report, then select "View" or "Print." The total amounts for all 14 lines can be found at the bottom of the last page.

  4. Step 4: For an "Amended" claim;

    1. The amount on line 15, Column (d) must be reduced by the amount previously allowed as a TC 766 CRN 253 on the taxpayer's account. The difference is the new CRN 253 amount of the adjustment and will be entered with the due date of the return.

    2. Take the amount of credit interest shown on line 15 Column (e) and subtract the amount of the TC 770 CRN 254 previously posted with the original TC 766. This reduced figure is the amount of the CRN 254 that will be input along with your CRN 253 adjustment.

      Note:

      It is important to post both transactions with the due date (not current 23C Date) in order for these credits to be available to pay tax as of the due date, or if overpaid, to accrue additional credit interest from the date interest was computed to in steps 1 and 2. Use of CRN 253 and 254 will allow the adjustment to post with the return due date.

  5. Step 5: See IRM 20.2.10.3.4.4 (5).

  6. Step 6: See IRM 20.2.10.3.4.4 (6).

20.2.10.3.4.7  (03-05-2013)
TETR Instructions for Non-Corporate Taxpayers

  1. If the taxpayer is not a "corporation" as defined in IRM 20.2.4.9 (2) and can use the non-corporate interest rates, the Form 8913 and the rest of the 2006 tax account can all be computed on one ACT/DMI module. The amounts from Form 8913, Column (d) will be input with the dates shown in the chart found in Figure 20.2.10-1. The "Interest TO Date" will be the normal 23C Date, minus any applicable back-off days.

20.2.10.3.5  (03-05-2013)
Payments Related to Certain Retailers and Manufacturers Excise Taxes

  1. IRC 6416(b) identifies certain payments as overpayments subject to credit or refund without interest (Form 720, Schedule C, Form 8849, Schedule 6); price adjustments; specified uses and resales; tax-paid articles for further manufacture; tires; return of certain installment accounts; and truck chassis, bodies, and semitrailers used for further manufacturing. These overpayments are refunded without interest.

20.2.10.3.6  (03-05-2013)
Gasoline Used in Farming by Government and Educational Organizations

  1. IRC 6420 provides for a payment (without interest) to the ultimate purchaser of gasoline, if the gasoline is used on a farm for farming purposes and the ultimate purchaser is a governmental entity or an organization described in IRC 501(a). Annual claims are made on Form 8849, Schedule 6. The overpayment may be refunded or taken as an income tax credit as provided for in IRC 6420(g). Overpayment interest is not allowed on either type of credit.

20.2.10.3.7  (03-05-2013)
Fuels Not Used for Taxable Purposes (Form 8849 and Ultimate Purchaser)

  1. IRC 6421 provides for a payment (without interest) if gasoline is used in an off highway business use; in inter-city, local or school buses; or sold to any person for an exempt purpose. IRC 6427 provides for a payment (without interest) if a tax has been imposed on the sale of fuel and the purchaser uses the fuel for a nontaxable purpose or resells the fuel. Claims are made on Form 720, Schedule C, or Form 8849, Schedule 1. The overpayment may be refunded or taken as an income tax credit as provided for in IRC 6421(i).

  2. Overpayment interest is not allowed on either type of credit.

  3. If the claim amount needs to be offset for a balance due on another module, the credit transfer date will be the received date of the claim.

20.2.10.3.8  (03-05-2013)
Laid-off Wagers

  1. IRC 6419(b) identifies as an overpayment the tax on a wager that is laid off by the taxpayer (Form 8849, Schedule 6, or Form 730, line 5). These overpayments are refunded without interest.

20.2.10.3.9  (03-05-2013)
Vaccines

  1. IRC 4132(b) identifies as an overpayment any tax on a vaccine that is returned to the manufacturer or destroyed (Form 720, Schedule C, or Form 8849, Schedule 6). The tax shall be abated, credited or refunded without interest.

20.2.10.3.10  (03-05-2013)
Heavy Highway Vehicles

  1. IRC 4483(d) identifies as an overpayment tax paid on the use of heavy highway vehicles when the vehicle is used for 5,000 miles or less (7,500 for agricultural vehicles) (Form 720, or Form 2290, Line 5). The credit or refund of the tax is made without interest.

20.2.10.3.10.1  (03-05-2013)
2011 Form 2290 Extended Return Due Date

  1. Treasury Decision 9537 provides final and temporary regulations that require the due date for filing Form 2290 for tax periods July 1, 2011, August 1, 2011, and September 1, 2011 be extended to November 30, 2011. The original due dates are August 31, September 30, and October 31, 2011, respectively.

  2. Interest will begin to accrue on any unpaid amounts for the above noted tax periods on December 1, 2011.

  3. Returns for the above stated tax periods will not be processed by the IRS prior to November 1, 2011.

20.2.10.3.11  (03-05-2013)
Chemicals

  1. IRC 4662(d) identifies as an overpayment any tax paid on a taxable chemical that is exported, used as feedstock, and, in some cases, used as fertilizer or animal feed. The credit or refund of the tax is made without interest.

  2. IRC 4682 identifies as an overpayment any tax paid on an ozone-depleting chemical that is used as a feedstock, exported, or used as a propellant in a metered-dose inhaler (Form 720, Schedule C, or Form 8849, Schedule 6). The credit or refund of the tax is made without interest.

20.2.10.3.12  (03-05-2013)
Tax on Removal of a Taxable Fuel

  1. IRC 4081 imposes a tax on removal, entry, or sale of certain types of fuel. Underpayment interest is computed from the return due date (RDD) on any second tax assessed to the account.

  2. IRC 4081(e) provides for a refund of those taxes in certain cases. Claims for refund made under this Code section must be filed on Form 8849, Schedule 5. See IRM 21.7.8.4.5.6, Form 8849, Schedule 5, IRC Section 4081(e) Claims, for processing procedures.

    1. The credit availability date for credits allowed under IRC 4081(e) is the due date of the return. These credits are posted to Master File as a TC 766 (input with the appropriate credit reference number) using the return due date and are refunded without interest.

    2. In the event any second tax is paid with subsequent payments (made after the RDD), those payments may be refunded with interest. Because the latest credits on the module are refunded first, the subsequent payments would be refunded before the IRC 4081(e) (TC 766) credit.


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