Interests

Question 1

1. When are interests applied?
2. Interest will be imposed on what?
3. When do the assessable and FBAR penalty interests run?

Answer 1

1. Interest accrues on date that the income tax was due until you pay it - IRC 6601
2. Interest is imposed on the tax plus penalties related to the tax
3. The assessable penalties and F-BAR interest don’t run until penalty is assessed

Question 2

You get an interest abatement on what form?

Who has jurisdiction o review denial?

What interest CAN be abated?

Interest does NOT apply to what kind of taxes?

Answer 2

• Claim on Form 843 (Tax Court has jurisdiction to review denial)
• Very limited: See 6404(a) & (b):

IRS CAN abate the unpaid portion of tax assessment or any liability in respect which is:

(1) is excessive in amount, or
(2) is assessed after the expiration of the period of limitation properly applicable thereto, or
(3) is erroneously or illegally assessed.

BUT, this does not apply for income, estate, and gift taxes!

Question 3

What is the abatement of interest attributable to UNREASONABLE ERRORS and DELAYS by the IRS under IRC 6404(e) about?

What are the 2 requirements for this abatement?

Answer 3

The IRS may abate interest where:
1 - A DEFICIENCY is attributable in whole or in part to ANY UNREASONABLE ERROR OR DELAY BY IRS in performing a ministerial or managerial act, OR
2 - Any PAYMENT OF ANY DEFICIENCY to the extent that ANY UNREASONABLE ERROR OR DELAY in such payment is attributable to IRS officer or employee being ERRONEOUS OR DILATORY in performing a ministerial or managerial act.

An error or delay shall be taken into account ONLY IF:

1. Error/delay NOT attributed to the taxpayer, and
2. After the IRS has CONTACTED the taxpayer in WRITING with respect to such DEFICIENCY or PAYMENT.

Question 4

What is the abatement for ERRONEOUS WRITTEN ADVICE under IRC 6404(f) about?

What are the 2 requirements for this abatement to apply?

Answer 4

IRS shall abate any portion of any penalty or addition to tax attributable to: ERRONEOUS ADVICE furnished to the taxpayer in writing by an officer or employee of the IRS acting in such officer’s or employee’s official capacity.

But applies only if:

1. The written advice was REASONABLY RELIED upon by the taxpayer and was IN RESPONSE to a SPECIFIC WRITTEN REQUEST of the taxpayer, AND
2. The portion of the penalty or addition to tax did NOT RESULT from a failure by the taxpayer to provide adequate or accurate information.

Question 5

What is INTEREST SUSPENSION where IRS fails to contact taxpayer under IRC 6404(g)?

When does the suspension period BEGIN and END?

Answer 5

For timely income tax returns, if the IRS DOES NOT PROVIDE A NOTICE to the taxpayer specifically stating the taxpayer’s liability and the basis for the liability before the close of the 3 YEARS beginning on the later of:
(i) the DATE on which the RETURN IS FILED; or
(ii) the due date of the return without regard to extensions…
…the IRS shall SUSPEND the imposition of any interest, penalty, addition to tax, or additional amount with respect to any failure relating to the return.

Interest suspension period:

• BEGINS on the day after the close of 3 YEARS, and
• ENDS on the date on which the IRS provides the notice of liability PLUS 21 days after this date.
• Use this to get interest abatement by asking officer to call it as something else that’s not under the exception list —> negotiate to get into 6404(g) —> IRS officers know what you’re doing and it’s fine with them
• Doesn’t abate all interest but can help

6404(g) = this means if IRS notified taxpayer within 3 year period = no interest will accrue w/ respect to the liability that the IRS notified the taxpayer about starting on the date that the taxpayer filed their return UNTIL 21 days after the date that the IRS notified the taxpayer about the additional tax.

Question 6

What are the EXCEPTIONS for INTEREST SUSPENSION where IRS fails to contact taxpayer under IRC 6404(g)?

Answer 6

Can’t get interest suspension for:

1. The tax liability shown on the return
2. IRC 6651 penalties (failure to file tax return or to pay tax)
3. Penalties, additions to tax, or additional amount involving:
   - Fraud
   - Any gross misstatement
   - Undisclosed reportable transaction or any listed transaction
   - Any criminal penalty

Question 7

What are IRC 6603 deposits?

What is the procedure for making such deposits?

What 3 things must the written statement include?

When is the deposit applied?

What happens if there’s no assessment?

Answer 7

• Taxpayer can make a deposit to stop the running of interest on the amount deposited.
• Procedure for making a deposit under Rev. Proc. 2015-18 =
  by remitting to a check or a money order accompanied by a written statement designating the remittance as a deposit.

The written statement also must include:
1 - The type(s) of tax;
2 - The tax year(s); and
3 - A statement identifying the amount of and basis for the disputable tax.

The deposit is applied after there is an assessment.

If there is no assessment, the IRS will refund the deposit.