Internal Revenue Manual
IRM 20.2.14 — Netting of Overpayment and Underpayment Interest
Part 20. Penalty and Interest
Chapter 2. Interest Section 14. Netting of Overpayment and Underpayment Interest 20.2.14 Netting of Overpayment and Underpayment Interest Manual Transmittal August 18, 2025 Purpose (1) This transmits revised IRM 20.2.14, Interest Netting of Overpayment and Underpayment Interest. Background This section provides the procedures used for netting of overpayment and underpayment interest. Material Changes (1) Minor editorial changes have been made throughout this IRM. Forms, letters, links, citations, and IRM references were reviewed and updated as necessary. Significant changes to this IRM are shown in the table below. Reference Description of Change 20.2.14.1 New subsection and associated subsections (IRM 20.2.14.1 through 20.2.14.1.6) for internal controls. IRM 20.2.14.1, Interest Netting, and its content renumbered as IRM 20.2.14.2 20.2.14.2 Content formerly under IRM 20.2.14.2 moved to IRM 20.2.14.1.2. Title of IRM 20.2.14.2 is now Interest Netting, per the renumbering described in the material changes for IRM 20.2.14.1. 20.2.14.7.10 Content formerly states TC 971 Action Code 660 change to 355. Exhibit 20.2.14-9 Formerly stated in Note: If any credit interest freeze (I-) exists on the module on which you are abating the previously paid interest, manually compute the overpayment interest on the abatement amount to the appropriate interest ending date. Change the work credit to overpayment. Effect on Other Documents This IRM supersedes IRM 20.2.14 dated February 01, 2017. Audience This IRM is intended for Servicewide use by all employees who handle tax adjustments involving the computation of interest. Effective Date (08-18-2025) Nicole L. Young Scott Director, Business Support Office Small Business/Self-Employed
Program Scope and Objectives
20.2.14.1 (08-18-2025) Program Scope and Objectives Purpose: This IRM provides policy guidance for interest netting, the process by which differential interest rates within a single tax period or between two or more tax periods are equalized. Audience: This IRM is intended for servicewide use by all business operation divisions (BODs) needing to compute net rate interest netting. The primary audience is for Restricted Interest tax examiners (TE), who handle computations of interest, including employees and managers in: Small Business Self-Employed (SB/SE) Division, Large Business and International (LB&I) Division, Tax Exempt and Government Entities (TE/GE) Division, Taxpayer Services (TS) Division, IRS Independent Office of Appeals (Appeals), Taxpayer Advocate Service (TAS), and Other IRS functions. Policy Owner: Responsibility for overseeing interest resides with SB/SE, Operations Support (OS), Business Support Office (BSO). Program Owner: The Office of Servicewide Interest (OSI) is responsible for overpayment and underpayment interest policy and IRM 20.2, Interest. OSI's role is to ensure the accuracy of interest and its fair and consistent application. OSI has overall responsibility for coordinating and approving any update to IRM 20.2, Interest, including IRM 20.2.14, Netting of Overpayment and Underpayment Interest. Primary Stakeholders: All operating divisions.
Background
20.2.14.1.1 (08-18-2025) Background Unless otherwise provided by law, interest is mandatory. Interest is paid (charged) on underpayments and interest is paid (allowed) on overpayments. The Office of Servicewide Interest provides policy, training materials, interest tools, and manual interest procedures, when applicable, for overpayment and underpayment interest purposes. It is essential that managers, senior management officials, personnel, and examiners working with computations of underpayment interest correctly understand and follow technical guidance and information for interest rates and methods of computation.
Authority
20.2.14.1.2 (08-18-2025) Authority These procedures are covered under the following authority: IRC 6601, Interest on Underpayment, Nonpayment, or Extension of Time to Payment of Tax. IRC 6611, Interest on Overpayments. IRC 6621, Determination of Rate of Interest. IRC 6622, Interest Compounded Daily. Rev. Rul. 99-40. Rev. Proc. 94-60, which provides procedures to equalize the interest rate differential between underpayment and overpayment rates during "overlapping" periods within the same tax module. Rev. Proc. 99-19 and Rev. Proc. 99-43, which provide guidance for net rate interest netting between two or more tax modules for interest accruing prior to October 1, 1998. Rev. Proc. 2000-26, which provides guidance for interest netting between two or more tax modules, for interest accruing on or after October 1, 1998. Note: Additional authorities can be found in the table located in IRM 20.2.5.6.1, Reasons to Manually Compute Interest.
Roles and Responsibilities
20.2.14.1.3 (08-18-2025) Roles and Responsibilities The Office of Servicewide Interest is responsible for the content of this IRM, answering related questions, and inputting any work requests. The program manager of Office of Servicewide Interest is responsible for oversight of the interest programs. The Director, Business Support Office is the executive responsible for policy and procedures. The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights.
Program Management and Review
20.2.14.1.4 (08-18-2025) Program Management and Review Nearly every function in the IRS has a role in proper interest administration. It is essential that each function conduct its operations with an emphasis on mitigating risk of inaccurate interest computations. Appropriate reviews should be conducted to ensure interest is computed accurately, consistently, and with fairness. To promote the goals of accuracy, consistency, and fairness in the interest program, the Complex Interest Quality Measurement System (CIQMS) Staff, a section within OSI, conducts reviews of interest computations, forwarding their findings to program partners/stakeholders. OSI also prepare reports of significant issues, such as corrections to computer programming that affect taxpayers.
Program Controls
20.2.14.1.5 (08-18-2025) Program Controls In accordance with IRC 6611(a), interest is allowed and paid on any overpayment of tax at the overpayment rate established under IRC 6621. In accordance with IRC 6601, the payment of interest is required on underpayments of tax unless otherwise specified by law. IRC 6621 provides the interest rates on overpayments and underpayments of tax, which are tied to the Federal short-term interest rate. Interest rates are determined quarterly based on changes to the Federal short-term rate. The IRS uses an interest computation method referred to as "interest netting" to equalize differential interest rates within a single tax module (Rev. Proc. 94-60) or between two or more tax modules (IRC 6621(d)).
Terms and Definitions
20.2.14.1.6 (08-18-2025) Terms and Definitions Refer to IRM 20.2.1-2, Definitions of Terms, for the definition of interest terms.
Related Resources
20.2.14.1.7 (08-18-2025) Related Resources For additional information, such as the latest interest news, job aids, interest tools, alerts, training materials, list of the OSI analysts, etc., see the Interest Knowledge Base.
Interest Netting
20.2.14.2 (08-18-2025) Interest Netting Prior to December 31, 1986, the IRS charged underpayment interest at the same rate that it paid overpayment interest. In the Tax Reform Act of 1986, Congress established different compound interest rates under IRC 6621, for underpayments and overpayments. Thus, on January 1, 1987, dual interest rates were legislated. As a result of the rate differential caused by the dual interest rates, it is possible that a taxpayer may be charged interest on an underpayment at a higher rate during a period of time in which the taxpayer was entitled to overpayment interest at a lower rate. Although dual interest rates were established, in a conference report that accompanied the Tax Reform Act of 1986, Congress suggested that the IRS implement comprehensive procedures to eliminate the interest rate differential. When a taxpayer is charged interest on an underpayment during the same period of time interest is allowed on an overpayment, the procedure used by IRS to equalize the interest rate differential is called interest netting. Interest netting is authorized by IRC 6621(d), which was added to the Internal Revenue Code on July 22, 1998. While IRC 6621(d) provides that the "net rate of interest shall be zero" for overlapping interest periods on equivalent tax overpayments and underpayments, this reference does not mean the IRS will not allow or pay interest. It means that the interest rates on an overpayment and an underpayment during any overlapping period(s) will be equalized so that the rate differential will "net" to zero. It is the interest rates that are equalized. "Overlapping" interest periods occur when a taxpayer owes interest on an underpayment, while during the same period of time, interest is allowed on an overpayment at a lower rate. The IRS uses an interest computation method referred to as "interest netting" to "equalize" the interest rates and "eliminate" the interest rate differential within a single module or between two or more tax periods. To accomplish net rate interest netting, the IRS "equalizes" the interest rates by charging underpayment interest at the lower overpayment interest rate or allows overpayment interest at the higher underpayment rate. Interest netting can be applied to a single tax module or between one or more tax modules. During overlapping interest periods within a "single" tax module, equalization of the different interest rates is called within module netting or annual netting. See IRM 20.2.14.4. The equalization of the interest rates between overpayments and underpayments for "two or more" tax modules for the same taxpayer during overlapping periods, is called net rate interest netting. See IRM 20.2.14.6. Underpayment and overpayment interest rates are the same for non-corporate taxpayers for interest charged or allowed on or after January 1, 1999. Therefore, within module or net rate interest netting is not needed for interest with respect to non-corporate taxpayers after this date. Non-corporate taxpayers are entitled to within module and net rate interest netting consideration with respect to interest accruing before this date, including underpayment interest imposed at the higher 120 percent rate on tax motivated transactions under former IRC 6621(c). IRC 6621(d) applies to interest on all types of tax. Therefore, taxpayers may request net rate interest netting for one type of tax that was charged underpayment interest against an overpayment allowed with interest for a different type of tax. For example, a taxpayer may request that the IRS net an overpayment on a Form 941, Employer's Quarterly Federal Tax Return, against an underpayment on Form 1120, U. S. Corporation Income Tax Return. Net rate interest netting can only be applied to overpayments and underpayments for the same taxpayer. The net rate cannot be applied during periods of time in which overpayment interest is not legally allowable or when underpayment interest is not legally payable, (e.g., overpayment interest is not allowable due to the 45 or 180-day interest-free rule, overpayment interest is not allowable because the IRS did not pay it for the appropriate back-off periods before a refund was issued, or underpayment interest is not payable due to the principles described in Rev. Rul. 99-40). Note: If the IRS failed to apply a back-off period when the refund was issued and paid interest up to the date of the refund, then overpayment interest is legally allowable up to the date of the refund under IRC 6611(b)(2).
General Netting Computation Information
20.2.14.3 (08-18-2025) General Netting Computation Information The IRS performs Interest netting computations by using the commercial off-the-shelf (COTS) software program, InterestNet, by Decision Modeling, Inc., commonly referred to as the Automated Computation Tool (ACT/DMI). Using ACT/DMI, tax module transactions are imported from IDRS into the software program. The ACT/DMI program analyzes the tax account underpayments and overpayments to determine the underpayment(s) and overpayment(s) available for netting. Caution: The ACT/DMI program has the ability to import account data from IRS computer systems. While the import feature will capture taxpayer account data and establish initial interest positions (e.g. Adj/End date and some suspension periods), this functionality is not an "import" and "process" product. The interest technician is still responsible for analyzing the taxpayer's account, applying the correct interest laws, setting interest effective dates/positions prior to the calculation and the final interest adjustment determination. Although there are some differences in the way netting is performed for a single module (within module netting, see IRM 20.2.14.2(3)) versus multiple modules (net rate interest netting, see IRM 20.2.14.2(4)), the general computation method is the same. The information below reflects the very basic steps used to determine the netted interest amount(s). Since the ACT/DMI program provides an intricate computer based analysis to arrive at the net rate adjustment, these basic steps cannot include all of the analysis performed by ACT/DMI. Determine the overlapping interest computation period(s). Note: It may be helpful to prepare a time-line to visually reflect the underpayment and overpayment interest computation period(s) to determine where the overlapping period(s) occur. Determine the overlapping amount. Determine the overlapping interest rates. Compute netted interest (underpayment interest computed at the overpayment interest rate or overpayment interest computed at the underpayment interest rate). Compute underpayment or overpayment interest on any remaining amounts on which netting does not apply. Determine the amount(s) and period(s) still available for netting. The ACT/DMI program uses the 530 report to reflect this information. The ACT/DMI software computes the net rate by doing a day-by-day comparison and applying the net rate where the interest rate spread is the greatest. It is not administratively feasible to do this kind of comparison or interest computation with CC COMPA. Therefore, the ACT/DMI software must always be used for net rate interest computations. It is necessary to know how interest netting is basically accomplished before using the ACT/DMI program. Therefore, using the following example which illustrates within-module netting, each step of the process is discussed. Example: On March 15, 2013, Calcite Corporation filed Form 1120 for the tax period ending December 31, 2012, showing an overpayment of $1,654,900.00, which was refunded with a 23C date of October 22, 2013. Overpayment interest of $4,900.72 was computed to October 13, 2013, (9-Day back-off) at the "regular" rate on the first $10,000.00 (see, IRM 20.2.4.9(Special Overpayment Interest Rules for Corporations) and at the lower GATT rate on the remainder. It is later determined that Calcite Corporation owes additional tax in the amount of $595,890.00 for the same tax return, and the taxpayer is not subject to large corporate underpayment (LCU) interest. The taxpayer sent a payment of $631,351.04 on August 21, 2015 to pay the tax and interest on the module. There are no suspension periods of underpayment interest (e.g., there is no "credit elect" issue from the previous year). On September 12, 2015, the IRS issued a notice and demand for payment of the underpayment interest and Calcite Corporation paid the amount due within 21 calendar days. Underpayment interest will be computed to September 12, 2015, the date the notice was issued.
Determining the Overlapping Period(s)
20.2.14.3.1 (08-18-2025) Determining the Overlapping Period(s) A running module balance is computed on the tax module to verify the original underpayment and overpayment interest amounts. When unable to determine how the interest was originally computed, the original interest computations can often be found with the adjustment source document. If a source document is unavailable and information on an adjustment is needed to accurately recreate the interest computation, all avenues must be used to locate the required documentation, such as: Order all applicable source documents from the Files function. Call the offices or employees that may have had the case in the past to determine if an "office file" is available. Contact the taxpayer or power-of-attorney (POA) to obtain copies of any documents they may have (e.g., ACT/DMI reports, Form 2285, Concurrent Determinations of Deficiencies (Increases in Tax) and Overassessments (Decrease in Tax) in Cases Involving Restricted Interest Provisions of the Internal Revenue Code, etc.). Or, if applicable, contact the examining official to request that they contact the taxpayer or POA directly. Prepare a time line to determine where the overlapping period(s) occur. Begin the time line with the earliest tax event (usually the return due date of the oldest tax period). Continue building the time line with each event that impacts interest such as payments, refunds, penalty assessment, waiver periods, etc., for the entire tax module. For each period, indicate whether the period of limitations for overpayments or underpayments was open at the time the taxpayer filed the request to ensure that the IRC 7502 timely mailing/timely filing rule is applied. Indicate relevant information, such as GATT/LCU/TMT interest rates, along the time line. Superimpose a similar time line for the overlapping period over the first time line. Create and superimpose additional time lines as needed to cover all the overlapping periods. Indicate overlapping periods on the time line. Identify the amount of underpayment and overpayment that overlap for each overlapping period. Identify unnetted amounts and unnetted periods so this information is available for any possible future net rate requests. Note: The time line may be prepared by hand or through the use of the drawing feature in a word processing program. See Exhibit 20.2.14-1 for an example of a time line based on the Calcite Corporation example described in IRM 20.2.14.3(3) above. In the Calcite Corporation example, the overlapping period is from March 15, 2013, the return due date, to October 13, 2013, the last day overpayment interest was paid. Do not include periods when no overpayment interest was paid or payable.
Determine the Overlapping Amount
20.2.14.3.2 (02-01-2017) Determine the Overlapping Amount The overlapping amount is the lesser of the running module balance for either the underpayment or overpayment, including interest. In the Calcite Corporation example, the interest start date for both the overpayment and the underpayment are the same: March 15, 2013. Overpayment interest was allowed on $1,654,900.00. Underpayment interest was charged on $595,890.00. In this example, the underpayment is the lesser amount, so the overlapping amount on which netting is applicable is $595,890.00 as of March 15, 2013. Figure 20.2.14-1 Figure 20.2.14-1 Calcite Corporation Overlapping Period Time LineSummary: The displayed time line reflects the overlapping period of overpayment and underpayment interest accruals for the underpayment to be netted against the overpayment. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.201212, Form 1120, Underpayment, 03152013, $595,890.00201212, Overpayment, 03152013, (amount on which overpayment interest was previously paid)201212, Refund Date, 10132013, $1,659,800.72201212, Payment Date, 08212015, $631,351.04From 1 to 4: Underpayment Interest PeriodFrom 1 to 3: Overpayment Interest PeriodFrom 1 to 3: Overlapping Period. Overlapping Amount $595,890.00 Please click here for the text description of the image.
Determine the Interest Rate during the Overlapping Period
20.2.14.3.3 (08-18-2025) Determine the Interest Rate during the Overlapping Period The net rate adjustment is generally accomplished by computing underpayment interest at the overpayment rate during the overlapping interest period(s). Because the IRS calculated GATT overpayment interest differently prior to January 1, 1999, always compute overpayment interest in the same manner as originally allowed. To allow the taxpayer the best benefit of netting, if the entire overpayment is not used, use the GATT rate first, then the higher rate for "within module netting" and "net rate interest netting" purposes. See IRM 20.2.4.10.3, GATT Rate, for instructions on computing interest at the "GATT" rate. In the Calcite Corporation example, the amount of the overpayment subject to the GATT rate exceeds the underpayment amount, so the entire net rate adjustment will be computed at the GATT rate. Figure 20.2.14-2 Figure 20.2.14-2 Calcite Corporation Overlapping Period Time LineSummary: The displayed time line reflects the overlapping period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.201212, Form 1120, Underpayment, 03152013, $595,890.00201212, Overpayment, 03152013, (amount on which overpayment interest was previously paid)201212, Refund Date, 10132013, $1,659,800.72201212, Payment Date, 08212015, $631,351.04From 1 to 3: Overlapping Period; Underpayment interest at GATT rate on $595,890.00 is $4,900.72From 3 to 4: Unnetted Underpayment Interest Period Please click here for the text description of the image.
Compute Netted Interest
20.2.14.3.4 (02-01-2017) Compute Netted Interest Using the overlapping period, amount, and rate determined for the Calcite Corporation, compute underpayment interest at the lower overpayment rate. In the Calcite Corporation example which illustrates within module netting, GATT interest is computed on $595,890.00 from March 15, 2013, to October 13, 2013, for a total of $1,733.03. This is the netted interest amount (underpayment interest computed at the overpayment interest rate) and will be input with a TC 772 or computer generated with a TC 777.
Compute Underpayment and Overpayment Interest on Remaining Amounts
20.2.14.3.5 (02-01-2017) Compute Underpayment and Overpayment Interest on Remaining Amounts At the end of the netting period, underpayment interest continues on the running module balance at the underpayment rate. In the Calcite Corporation example, the module balance at the end of the netting period is the principal of $595,890.00, plus the netted interest of $1,733.03. Because normal overpayment interest processing on the originally issued "taxpayer initiated" overpayment allows an interest-free (9-Day back-off) period on this module from October 14 to October 22, no underpayment interest can be charged during this period up to the amount of the overpayment. Thus, underpayment interest on the $597,623.03 begins on October 23, 2013.
Using the Automated Computation Tool (ACT/DMI)
20.2.14.3.6 (08-18-2025) Using the Automated Computation Tool (ACT/DMI) The ACT/DMI software is programmed to complete all of the above steps to correctly compute both within module and net rate interest netting when the correct tax module information is input. Note: While the ACT/DMI software can perform interest netting computations, it is vital that the module information be correctly analyzed and entered into the program. First, enter the tax module information into the program to verify the previous overpayment interest to the refund date of October 22, 2013, as shown in Figure 20.2.14-3. Figure 20.2.14-3 Figure 20.2.14-3 ACT/DMI Single Module ScreenSummary: This is an example of how to enter the tax module information into the Single Module screen of the ACT/DMI program to verify the previous overpayment interest computed to the refund date of October 22, 2013, as explained in the text. The top line of the ACT/DMI Single Module screen print reflects four icon boxes for saving changes, cancelling changes, adding transactions and deleting transactions. Next is shown Selected Module: Federal 99-9999999 (for taxpayer identification number), 1120 (for the form number), 2012/12 (for the tax period), and in the far right is a drop down box allowing the user to reflect how the transactions should appear on the screen (Show All, Original Only, Included Only, Included & Interest, Tax Only).The table shown below reflects the entries for the Single Module screen for the Calcite Corporation example. Amounts enclosed in parentheses represent a credit amount.RefCodeDescriptionDateAmountStartAdj/EndBalanceAddExcelSOL10150Return Filed and Assessed Tax Liability002220132,500,100.00-031520132,500,100.00---20660Estimated Tax04152012(1,500,000.00)-031520131,000,100.00---30660Estimated Tax06152012(1,500,000.00)-03152013(499,900.00)---40716Generated Overpayment Credit Applied From Prior Period04152012(1,155,000.00)-03152013(1,654,900.00)---50776Generated Interest Due on Overpayment10222013(4,900.72)--(1,659,800.72)-0-601004Refund Interest High102220134,900.721013201310222013(1,654,900.00)---70846Refund of Overpayment102220131,654,900.0010132013102220130.00---Runto10/22/13-Computed InterestTranscript InterestAdjustment------Run MethodDeficiency0.000.000.00Principle---ProcessIRS DefaultOverpayment(4,900.72)(4,900.72)0.000.000.00--- Please click here for the text description of the image. Next, the tax assessment and subsequent payment amounts are entered on the Single Module screen, as shown in Figure 20.2.14-4, with interest computed using a running module balance until the date of the notice. For this example, a notice date of September 12, 2015 was used. Figure 20.2.14-4 Figure 20.2.14-4 ACT/DMI Single Module ScreenSummary: The tax assessment and subsequent payment amounts are added to the Single Module screen as continued from Figure 20.2.14-3.The table below provides the descriptions for each line entry on the Single Module screen for the Calcite Corporation. Amounts enclosed in parentheses represent a credit amount.RefCodeDescriptionDateAmountStartAnd/EndBalanceAddExcelSOL10150Return Filed and Assessed Tax Liability102220132,500,100.00-031520132,500,100.00---20660Estimated Tax04152012(1,500,000.00)-031520131,000,100.00---30660Estimated Tax06152012(1,500,000.00)-03152013(499,900.00)---40716Generated Overpay Credit Applied From Prior Period04152012(1,155,000.00)-03152013(1,654,900.00)---50776Generated Interest Due on Overpayment10222013(4,900.72)--(1,659,800.72)-O-601004Refund Interest High102220134,900.721013201310222013(1,654,900.00)---70846Refund of Overpayment102220131,654,900.0010132013102220130.00---80300Additional Tax Assessment By Examination08212015(631,351.04)--(35,461.04)---90670Subsequent Payment08212015(631,351.04)--(35,461.04)---RunTo08212015-Computed InterestTranscript InterestInterest Adjustment-----RunMethodDeficiency33,728.010.0033,728.01PrincipleTotal--ProcessIRSDefaultOverpayment(3,167.69)(4,900.72)1,733.03(35,461.04)0.00-- Please click here for the text description of the image. The ACT/DMI program will compute the netted and underpayment interest and provide a 490 Activity Summary report (See Figure 20.2.14-5) which is sent to the taxpayer showing the restricted interest computation. The report must also be used as documentation for the interest adjustment and be attached to the file source documents. Since this computation format and content cannot be retained on IDRS, it is highly recommended that copies of the report (paper or electronic) be maintained in addition to source documents sent to the Files function. IRC 6631 requires that an explanation of interest computations be sent to an individual (IMF) taxpayer "with each notice which includes an amount to be paid." The requirements of IRC 6631, also apply to employment and excise tax liabilities of sole proprietors. Master File programming will systemically include an explanation of the interest calculation with notices sent to taxpayers. However, if interest is manually computed or restricted, an interest computation must be mailed to the taxpayer. See IRM 20.2.1.2.2, Notice Requirements. IRC 6631does not apply to statutory notices of deficiency (i.e., 90-Day letters), or refunds. IRC 6631 applies to notices that "include an amount to be paid." Note: While there is no statutory "requirement" to provide an explanation on Business (BMF) modules, it is recommended that an explanation be provided to the taxpayer when the interest is manually computed. Figure 20.2.14-5 Figure 20.2.14-5 ACT/DMI 490 Activity SummarySummary: This is an example of a printout of the ACT/DMI 490 Activity Summary report reflecting the interest computation for the Calcite Corporation example.The top of the summary report is titled 490 Activity Summary - Calcite CorporationThe next line of the summary report states FED - **-***9999 1120 Tax Period: 2012/12Below the above taxpayer identifying information is the ACT/DMI module status shown on 5 lines with text on the left and right.Line 1, left states Run Method: IRS Default/ Line 1 right states Module Status: Open/(Open)Line 2, left states Interest To: 08212015/ Line 2, right is blankLine 3, left states GATT Method: Retain Character (New)"/Line 3, right states "GATT Date: 01/01/1995 Amount: $10,000"Line 4, left states LCU Method: Default IRS/ Line 4, right states LCU Interest Date: LCU Interest is OFFLine 5, left states Underpay Net Start: All Dates Included/ Line 5, right states Overpay Net Start: All Dates IncludedThe tables below provide the descriptions for each line entry on the 490 Activity Summary report. The interest computation of the 490 Activity Summary has three sections; Section 1 - Provides a list of all the transactions included in the computation; Section 2 - Provides the interest computation details; Section 3 - Provides a recap of the interest computed in the module as compared to interest per the transcript. Amounts enclosed in parentheses represent a credit amount.Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipleBalance10222013-03152013150 Return Filed & Assessed Tax Liability-2,500,100.002,500,100.00Various-03152013660 Estimated Tax-3,000,000.00)(499,900.00)04152012-03152013716 Generated Overpay Applied from Prior Period-(1,155,000.00)(1,654,900.00)08212015-03152013300 Additional Tax Assessment By Examination-595,890.001,059.110.001022201310132013102220131004 Refund Interest High(4,900.72)4,900.721,054,109.28102220131013201310222013846 Refund of Overpayment(1,654,900.00)1,654,900.00600,790.7208212015--670 Subsequent Payment-(631,351.04)(30,560.32)Interest Computation DetailInterest Start DateInterest End DateDescriptionAmount FactorInterestBalance03152013-150 Return Filed & Assessed Tax Liability2,500,100.00-----300 Additional Tax Assessment By Examination595,890.00-----660 Estimated Tax(3,000,000.00)-----716 Generated Overpay Credit Applied from Prior Period(1,155,000.00)--(1,059,010.00)0316201310132013Overpay(10,000.00)0.011683849(116.84)---Overpay GATT(1,049,010.00)0.002908311(3,050.85)(1,062,177.69)1014201310222013Overpay Suspended(1,062,177.69)--(1,062,177.69)10222013-846 Refund of Overpayment1,654,900.00-----1004 Refund Interest High4,900.72--597,623.031023201308212015Underpay597,623.030.05643692433,728.01631,351.0408212015-670 Subsequent Payment(631,351.04)--0.00Account Summary DetailAccount SummaryAs ComputedPer TranscriptAdjustmentThe transactions shown below are added for information and are not part of the 490 Activity SummaryDeficiency Interest33,728.01-33,728.01TC 340Overpayment Interest(3,167.69)(4,900.72)1,733.03TC 772Principal Balance--(35,461.04)-Totals (the actual report does not reflect the word Totals.30,560.32(4,900.72)0.00- Please click here for the text description of the image. The 490 Activity Summary report in Figure 20.2.14-5 shows the following interest adjustments that must be made to the module: Underpayment interest (TC 340) in the amount of $33,728.01, and, Netted interest (TC 772) in the amount of $1,733.03. Note: The two amounts shown above equal the total interest being assessed on the module, $35,461.04.
Within Module Interest Netting under Revenue Procedure 94-60
20.2.14.4 (08-18-2025) Within Module Interest Netting under Revenue Procedure 94-60 Rev. Proc. 94-60 describes procedures for the IRS to use to calculate interest on an underpayment when the taxpayer has previously received a refund of an overpayment with interest for the same tax period and time frame (overlapping period). The process of equalizing interest rates based on Rev. Proc. 94-60 is called within module or annual interest netting. Note: Interest allowed under IRC 6603(d) on a deposit returned to the taxpayer at the federal short-term rate cannot be used for within module interest netting. During the period interest was payable on an overpayment, interest will be charged at the same rate on the portion of the underpayment (including accrued interest) that does not exceed the refund or offset principal. Overlapping periods occur when a taxpayer owes interest on an underpayment for the same period of time that interest was previously paid on an overpayment. In most cases, the overlapping period occurs between the overpayment availability date and the refund date less the applicable back-off period. Caution: Master File does not perform within module netting during the period that interest was paid on an offset. If netting is applicable, interest must be manually computed and restricted using TC 772 (netted interest) and TC 340. The IRS applies the rules of Rev. Rul. 99-40 (regarding the treatment of "credit elect" payments) before computing within module netting. If an interest-free overpayment period exists at the same time as an overpayment that accrued interest, within module netting will only apply to the extent a subsequent underpayment exceeds the interest free amount. Careful analysis is needed to determine if this situation exists. Example: Onyx Corporation timely paid the tax shown on Form 1120 for the 200712 tax year and has an overpayment of $85,000.00. A credit elect of $50,000.00 is applied to the 200812 tax year and a refund of $35,290.94 is issued (overpayment interest is allowed because the 45-day period was not met). Later, Exam makes a general tax assessment of $42,000.00. The tax module information is shown below. 200712 Tax Account for Onyx Corporation Example T/C Tax Account Information Amount TC 150 03152008 120,000.00 TC 650 03152008 205,000.00 TC 836 04152008 50,000.00 TC 776 06142008 290.94 TC 846 06142008 35,290.94 TC 300 08092009 42,000.00 Note: When the tax module information is input to ACT/DMI, the TC 300 must be entered with a due date of April 15, 2008. Otherwise, ACT/DMI will apply within module netting for the period from March 15th to April 15th. Based on Rev. Rul. 99-40, underpayment interest is not due on the Exam assessment until April 15, 2008. Therefore, within module interest netting cannot be applied during this period because underpayment interest is not being charged. Figure 20.2.14-6 Figure 20.2.14-6 Overlapping Period Time LineThe following information shows the time line reflecting the overlapping period of underpayment and overpayment interest for the Sanpete Sand and Gravel Corp. example. The descriptions for this time line will be described in rows from left to right from rows 1 through 6 to explain the information on the page. The information is displayed from where the interest computation periods begin and end, the interest rates that apply during the underpayment and overpayment interest periods, the amounts on which interest is computed during that period, and interest-free periods. Amounts enclosed in parentheses represent a credit amount.Row 1 of the time line contains four boxes reflecting the following information in box 1 through 4:Box 1 - beginning 200712 overpayment interest period 03152008 for ($85,000.00).Box 2 - 200712 04152008.Box 3 - 200712 Refund Date -9 days 06052008.Box 4 - 200712 09192009 Full Pay Exam Assessment.Row 2 shows a shaded rectangle (spanning between Box 1 and Box 3 of Row 1) that states Overpayment interest at GATT rate on $35,000.00, reflecting that interest on this amount is computed from 03152008 to 06052008.Row 3 shows a shaded rectangle (spanning between Box 1 and Box 2 of Row 1) that states Overpayment Interest-free on $50,000.00, reflecting the 03152008 to 04152008 overpayment interest-free period that results from Rev. Rul. 99-40.Row 4 contains two rectangles reflecting the following information:Box 1 of Row 4 contains an unshaded rectangle (spanning between Box 1 and Box 2 of Row 1) stating underpayment Interest-free up to $50,000.00 reflecting the 03152008 to 04152008 underpayment interest-free period that results from Rev. Rul. 99-40.Box 2 of Row 4 contains a shaded rectangle (spanning between Box 2 and Box 3 of Row 1) stating underpayment interest at GATT Rate on $35,000.00 with an asterisk reflecting that underpayment interest is charged at the GATT rate on $35,000.00 of the $42,000.00 underpayment from 04152008 to 06052008.Row 5 contains three rectangles reflecting the following information:Box 1 of Row 5 states 200712 Exam Assessment 42,000.00 reflecting the beginning interest period for the Exam assessment.Box 2 of Row 5 states underpayment interest at underpayment Rate on 7,000.00 with an asterisk(spanning between Box 2 and Box 3 of Row 1) reflecting that underpayment interest is charged on $7,000.00 of the $42,000.00 underpayment at the prevailing underpayment interest rate from 04152008 through 06052008.Box 3 of Row 5 states underpayment interest at underpayment Rate on 42,000.00 with an asterisk(spanning between Box 3 and Box 4 of Row 1) reflecting that the underpayment interest at the prevailing rate continues on the $42,000.00 from 06052008 to 09192009, the date the Exam assessment was paid in full.Row 6 contains an unshaded rectangle providing a note on the use of the asterisk stating *These amounts were rounded for illustration purposes only. Please click here for the text description of the image. If the net rate benefit was previously allowed during an overpayment period, the benefit of within module netting for the same overpayment period and amount will not be allowed. Thus, the same overpayment cannot be used for both within module and net rate interest netting. Interest netting (within module or net rate) is unnecessary for interest periods prior to January 1, 1987, as underpayment and overpayment interest rates for corporate and non-corporate taxpayers were equal prior to that date. Additionally, interest netting does not apply to non-corporate taxpayers for interest periods beginning on or after January 1, 1999, as interest rates became the same as of that date. Exception: The 120 percent interest rate applicable to tax motivated transactions (TMT) is subject to netting procedures.
Master File Computation of Within Module Netting
20.2.14.4.1 (08-18-2025) Master File Computation of Within Module Netting Effective January 1993, Master File programming was updated to accomplish netting within a single module. When refunds are issued with interest, Master File posts the netted interest amount with a TC 777, which carries the 23C date of the prior related refund and a "999" in the Julian Date field of the DLN as shown in the following partial TXMOD example. Computer Generated Within-Module Netting T/C POSTED TRANS-AMOUNT CYC DLN 150 05262008 2,500,000.00 200822 00311-302-00002-8 660 06152007 5,000,000.00- 200726 00397-101-00000-7 776 05262008 16,231.85- 200822 00311-302-00002-8 846 05262008 2,516,231.85 200822 00311-302-00002-8 420 09192009 0.00 200944 00977-000-00000-9 Blank PBC>000 SBC>00000 EGC>00 - 300 12072009 729,890.00 200950 00347-532-00000-9 336 12072009 55,806.10 200950 00347-532-00000-9 777 05262008 4,731.39 200950 00311-999 - - - - Julian Date - 999 denotes netted interest If multiple refunds are involved, Master File separately calculates and posts netted interest amounts attributable to each refund. Each netted interest amount posts with the 23C date of the related refund, beginning with the earliest refund. Master File also calculates the netted interest and the underpayment interest amounts on quick and prompt assessments (Form 2859, Request for Quick or Prompt Assessment) on modules where interest is not restricted. See IRM 20.2.14.4.4, Within Module Netting for Quick and Prompt Assessments, for processing instructions. Caution: If overpayment interest was manually computed and input with TC 770, then the within module netting adjustment must also be manually computed. Master File calculates the netted interest amount by finding the difference between the amounts of the interest paid on the refunded overpayment and the recomputed overpayment interest on the corrected refund amount. Underpayment interest (TC 336, TC 196) is computed on: The amount of the subsequent assessment, in excess of the refunded overpayment, FROM the due date of the liability to the appropriate interest TO date, and The netted underpayment amount plus the netted interest FROM the 23C date of the refund to the appropriate interest TO date.
Master File Limitations in Computing Within Module Interest Netting
20.2.14.4.2 (08-18-2025) Master File Limitations in Computing Within Module Interest Netting The process of applying within module netting results in an underpayment interest amount. Master File may not be able to correctly compute within module netting in modules containing an underpayment or overpayment interest-free period associated with a refund, offset or assessment when the interest-free period(s) overlaps the underpayment or overpayment interest period(s) to be netted. Master File may also not be able to compute netted interest in modules containing more than one underpayment interest-free period, even when there's no overlap with the underpayment or overpayment period(s) to be netted. Examples include, but are not limited to: Two or more refunds (one issued without interest and one or more issued with interest) and the underpayment interest period on the subsequent assessment overlaps both types of refunds. See IRM 20.2.4, Overpayment Interest. An underpayment interest-free period created by a credit elect and the underpayment or overpayment interest period to be netted overlaps the interest-free period. More than one underpayment interest-free period due to IRC 6601(c) waiver periods for agreements when the tax liability is not assessed within 30 days (one type of waiver is Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment). See IRM 20.2.5, Interest on Underpayments. An underpayment interest-free period due to IRC 7508(A) (i.e., presidentially declared disaster) and another due to IRC 6601(c). See IRM 20.2.7, Abatement and Suspension of Interest. Interest input with TC 190 for quick or prompt assessments. TC 190 does not restrict Master File from computing underpayment interest but it does restrict Master File from performing within module netting. Note: If Master File's ability to accurately compute within module netting is in question, manually compute and restrict the module or monitor and verify Master File's systemic computation after posting of the adjustment. Reminder: If overpayment interest was manually computed and input with TC 770, then the within module netting adjustment must also be manually computed. Master file does not perform "within module netting" on a MFT 31 tax module that is not established through mirroring of its corresponding MFT 30 tax module. See IRM 21.6.8.4.2, Mirrored Module Overview. Those tax modules that are not mirrored require all interest to be manually computed and input with TC 34X. See IRM 20.2.14.4.3 (7). Underpayment interest periods that are "interest-free" by law are also interest-free for netted interest computations. If, during an overlapping period, an interest-free period for an underpayment exists, suspend netting computations during that interest-free period to the extent the underpayment is subject to the interest-free period.
Manually Computing Within Module Interest Netting
20.2.14.4.3 (08-18-2025) Manually Computing Within Module Interest Netting Master File is currently programmed to compute within module netting on tax modules that are not previously restricted. Do not restrict a tax module for within module netting unless there is another reason the module must be restricted, or it is determined that Master File cannot correctly compute interest netting on that module. See IRM 20.2.5.6.1, Reasons to Manually Compute Interest, for some of the reasons a module may need to be restricted. The following example illustrates an overlapping underpayment and overpayment interest period that requires within module netting: Example: On March 15, 2013, James Corporation filed a Form 1120 for the tax period ending December 31, 2012, reporting an overpayment in the amount of $60,000.00, which was refunded with $142.04 of interest on July 17, 2013. On February 22, 2015, the taxpayer files a Form 1120-X, Amended U.S. Corporation Income Tax Return, increasing the 2005 tax liability by $80,000.00. On April 2, 2015, the IRS issues a notice and demand relating to the $80,000.00 tax increase, and James Corporation pays the amount stated on the notice and demand within 21 calendar days. Shown below in Figure 20.2.14-7 is the ACT/DMI "Single Module" screen for the information in the James Corporation example above with interest computed to April 2, 2015. The ACT/DMI software is programmed to compute "within module" interest netting. Figure 20.2.14-7 ACT/DMI Single Module ScreenSummary: This figure provides the tax module information entered into the ACT/DMI Single Module screen for the James Corporation example. The top line of the ACT/DMI Single Module screen print reflects on the left side, four icon boxes for saving changes, cancelling changes, adding transactions and deleting transactions. In the middle of the top line is shown Selected Module: Federal 99-9999999 (for taxpayer identification number),1120 (for the form number), 2012/12 (for the tax period), and in the far right, is a drop down box allowing the user to reflect how the transactions should appear on the screen (Show All, Original Only, Included Only, Included & Interest, Tax Only).The table shown below reflects the entries for the Single Module screen for the James Corporation example. Amounts enclosed in parentheses represent a credit amount.RefCodeDescriptionDateAmountStartAdj/EndBalanceAddExclSOL10150Return Filed and Assessed Tax Liability07172013300,000.00-03152013300,000.00---20660Estimated Tax04152012(360,000.00)-03152013(60,000.00)---30776Generated Interest Due on Overpayment07172013(142.04)--(60,142.04)-O-40846Refund of Overpayment0717201360,000.000708201307172013(142.04)---501004Refund High Interest07172013142.0407082013071720130.00---60290Additional Tax Assessment By Exam0402201580,000.00-0315201380,000.00---RunTo04/02/2015-Computed InterestTranscript InterestInterest Adjustment----RunMethodDeficiency4,433.000.004,433.00PrincipleTotal---ProcessIRS DefaultOverpayment0.00(142.04)142.0480,000.0084,575.04--- Please click here for the text description of the image. The 490 Activity Summary below shows the underpayment interest adjustment in the amount of $4,433.00 and netted interest adjustment in the amount of $142.04 that would be posted to Master File for the tax assessment. See Figure 20.2.14-8 for the 490 Activity Summary report. Figure 20.2.14-8 Figure 20.2.14-8 ACT/DMI Report 490 Activity SummaryThis is the example of the ACT/DMI interest computations 490 report for the net rate underpayment as explained in the text for tax year 200212. The top section of the report provides the title with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title - 490 Activity Summary James Corp.Taxpayer Identifying Information:FED - **_***9999 James Corp. 1120 Tax Period: 200212Top Left:Run Method: IRS DefaultInterest To: 04022015GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance07172013-03152013150 Return Filed and Assessed Tax Liability-300,000.00300,000.0004152012-03152013660 Estimated Tax-360,000.00(60,000.00)04022015-03152013290 Additional Tax Assessment-80,000.0020,000.00071720130708201307172013846 Refund of Overpayment(60,000.00)60,000.0080,000.000717201307082013071720131004 Refund Interest High(142.04)142.0480,142.04The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterest Balance03152013-150 Return Filed and Assessed Tax Liability300,000.00-----290 Additional Tax Assessment80,000.00-----660 Estimated Tax(360,000.00)---0316201307082013Underpay20,000.000.009496474189.9320,189.930709201307172013Underpay20,189.930.00073996914.9420,204.8707172013-846 Refund of Overpayment60,000.00-----1004 Refund Interest High142.04--80,346.910718201304022015Underpay80,346.910.0526234414,228.1384,575.04The bottom section of the report provides the "Account Summary" information.Account SummaryAccount SummaryAs ComputedPer TranscriptAdjustmentDeficiency Interest4,433.00-4,433.00Overpayment Interest-(142.04)142.04Principal Balance--80,000.00Totals4,433.00(142.04)84,575.04 Please click here for the text description of the image. If the ACT/DMI program is not used, take the following steps (as defined in IRM 20.2.14.3, General Netting Computation Information), to determine the overlapping interest periods for within module interest netting for the James Corporation: Determine the underpayment interest computation period(s). Underpayment interest is charged from March 15, 2013 (RDD), to April 2, 2015 (23C date of the $80,000.00 tax increase). Determine the overpayment interest computation period on the refund. Overpayment interest on the refund was computed from March 15, 2013, to July 8, 2013 (refund date less 9 days). Prepare a time line reflecting the underpayment and overpayment interest computation periods to determine where the overlapping period(s) occur. When preparing a time line, the ending date for the overpayment interest computation period must be the date to which the overpayment interest was actually computed (i.e., the overpayment interest back-off date). The overlapping underpayment/overpayment interest period is from March 15, 2013, to July 8, 2013. This is the time frame during which both underpayment and overpayment interest accrued. Determine the overlapping amount subject to netting and compute the netted interest (underpayment interest computed at the lower overpayment interest rate) on the amount of underpayment equal to the overpayment during the overlapping period. Netted interest is computed on $60,000.00 of the $80,000.00 underpayment during the overlapping interest period from March 15, 2013, to July 8, 2013. Netted interest on the $60,000.00 totals $142.04. Continue the underpayment interest computation on the netted underpayment amount of $60,000.00, plus the netted interest of $142.04, from the July 17, 2013 refund date of the overpayment to the assessment date of April 2, 2015, for an interest computation of $3,164.89. Note: No "within module netting" takes place during the back-off period for computation of overpayment interest on a generated refund. See IRM 20.2.4, Overpayment Interest. However, underpayment interest is charged through that period on any portion of the tax assessment that exceeds the principal amount of the refund. Compute interest on the amount of underpayment that exceeds the overpayment principal from the applicable interest start date to the interest computation ending date. In this example, interest on the underpayment of $20,000.00 is computed from March 15, 2013 to April 2, 2015 and totals $1,268.11. When this amount is added to the interest computation of $3,164.89 (from the prior step) and the netted interest of $142.04, it results in a total underpayment interest amount of $4,575.04. Note: When comparing separate interest computations with a single running module computation, the result may vary by a few cents due to rounding. Manually calculated within module netted interest should mirror Master File computations. Begin the netting calculation with the earliest refund and continue through the latest refund when processing subsequent assessments with multiple refunds. When adjustments are processed via CC AMCLS or CC ADJ54, input a TC 772 for the interest amount for the underpayment that was netted, or if one interest adjustment involves multiple overpayments that were netted, combine the netted amounts for a single TC 772 adjustment. See IRM 20.2.14.4.4 for within module netting when processing quick and prompt assessments. Exception: When processing erroneous refunds with TC 844 (on a module where interest is not restricted), do not input TC 772. Master File programming will generate a TC 777 for the netted interest amount. If the module is restricted (or needs to be), input the underpayment interest amount with a TC 340. Do Not include the netted interest amounts with the TC 340 amount. The netted interest amount(s) are input as a separate TC 77X. Exception: Because TC 772 will not post to an MFT 31 tax module that was not established through mirroring of its corresponding MFT 30 tax module, any netted interest amount(s) must be included with the TC 340 amount.
Within Module Netting for Quick and Prompt Assessments
20.2.14.4.4 (08-18-2025) Within Module Netting for Quick and Prompt Assessments Special procedures apply for netted interest amounts related to quick and prompt assessments made using Form 2859, Request for Quick or Prompt Assessment. If interest is restricted, enter on Form 2859 a separate TC 772 for each netted interest amount using the transaction date of the TC 770 or TC 776 being netted and TC 340 for the underpayment interest. If interest is not restricted and does not need to be restricted, take the following steps: Calculate the netted interest as shown in IRM 20.2.14.4.3, Manually Computing Within Module Interest Netting. Enter as TC 190 the sum of the netted interest plus the underpayment interest. Indicate in the Remarks area of Form 2859 the separate components of the interest. When the adjustment posts, Master File with split the TC 190 into its respective netted interest (TC 777) and underpayment interest (TC 196 or TC 197) charges, generating each systemically. Caution: It is recommended the assessment be monitored to ensure the netting adjustment(s) posts properly.
Within Module Interest Netting on Subsequent Assessments Involving Tax Motivated Transactions (TMT)
20.2.14.4.5 (08-18-2025) Within Module Interest Netting on Subsequent Assessments Involving Tax Motivated Transactions (TMT) When making a within module interest netting adjustment due to a subsequent assessment involving TMT interest: During the overlapping period, underpayment interest on the tax motivated transaction is charged at the same interest rate that was allowed on the overpayment. The amount of tax subject to the within module netting adjustment is limited to the amount of overpayment on which interest was allowed. Prior refunds must be shown as "tax motivated" to ensure interest is calculated at the TMT rate within the ACT/DMI program. To accomplish this, select the TC 846 or TC 840 in the "Single Module" screen, then click on the "Advanced" link located in the bottom area of the screen which opens the "Advanced" window. In the "Transaction Type" drop down menu, choose "Motivated" and click the "Save" icon at the top of the "Single Module" screen. This action must also be completed for the accompanying TC 1003 or TC 1004. Figure 20.2.14-9 Changing Transaction Type with the Advanced LinkAt the bottom of the ACT/DMI Single Module screen is a box that provides Module Options, Transaction Options, and Other Options. Within this box are option links to make changes to the module, transactions, and access tools and reports. Click on the Advanced link within the options box which opens the Advanced window. The Advanced window provides the following options with each containing drop down menus on the right: Transaction Type, Suspension Code, and Reduce GATT Threshold. The top line in the Advanced window reflects Transaction Type followed by the drop down menu. Click on the Transaction Type drop down menu, to select the applicable transaction type:StandardStandard HighMotivatedNegligentMotivated NegligentFraudulentMotivated FraudulentInterestInterest HighPenaltyThe MotivatedTransaction Type is selected. Click the Save transaction changes icon button at the top left corner of the Selected Module screen to save this selection. Please click here for the text description of the image. When the total assessment is comprised of both non-TMT and TMT tax, apply netting against the portion of the overpayment that is equal to the non-TMT tax first. If any unnetted overpayment remains, compute interest at the overpayment rate on the portion of TMT tax equal to the remaining unnetted overpayment.
Erroneously Computed Overpayment Interest
20.2.14.5 (08-18-2025) Erroneously Computed Overpayment Interest When there is a subsequent assessment and it is determined that overpayment interest was originally overpaid or underpaid, the following procedures apply: If overpayment interest was originally And the period of limitations for Then OVERPAID Recovery is OPEN, Implement Category D Erroneous Refund procedures. See, IRM 21.4.5.5.5, Overview of Category D Erroneous Refunds. OVERPAID Recovery is CLOSED, Do Not implement erroneous refund procedures. The excess may need to be written off with TC 534 or TC 608 on ACT/DMI. It may also be necessary to contact the Accounting/Erroneous Refund function to have a (false) credit applied for an amount equal to any expired balance. See IRM 21.4.5.5.5, Overview of Category D Erroneous Refunds Note: The exception is the common-law right-of-offset which may apply if a new overpayment is to be issued from the module. IRM 20.2.1.4.2.2.4(3), Overpaid Overpayment Interest, contains instructions regarding the common-law right-of-offset. UNDERPAID Requesting additional overpayment interest is OPEN, Allow the applicable overpayment interest. Reduce the underpayment interest and or increase the overpayment interest accordingly. UNDERPAID Requesting additional overpayment interest is CLOSED, Do Not allow the underpaid overpayment interest and Do Not reduce the underpayment interest by the underpaid amount. Using ACT/DMI, suspend the amount of overpayment interest that cannot be allowed. The suspension can be accomplished by using TC 1011 or input of an interest suspension on the applicable refund, offset and related interest transaction line(s). This will force ACT/DMI to compute the same amount of overpayment interest originally allowed on the refund or offset. For additional information regarding erroneously computed overpayment interest, see IRM 20.2.1.4.2, Manual Calculation of Interest.
Net Rate Interest Netting
20.2.14.6 (08-18-2025) Net Rate Interest Netting Net Rate Interest Netting is authorized by IRC 6621(d) as follows: "Elimination of the interest rate differential on overlapping periods of tax overpayments and underpayments. To the extent that, for any period, interest is payable under sub chapter A and allowable under sub chapter B on equivalent underpayments and overpayments by the same taxpayer of tax imposed by this title, the net rate of interest under this section on such amounts shall be zero for such period." While IRC 6621(d) provides that the net rate of interest shall be zero for overlapping interest periods on tax overpayments and underpayments, this reference does not mean that the interest rate itself is zero. It means that interest allowable on an overpayment and interest payable on an underpayment during any overlapping interest period(s) will be equalized so that the rate differential will net to zero.
Net Rate Interest Netting Post-Enactment Interest
20.2.14.6.1 (08-18-2025) Net Rate Interest Netting Post-Enactment Interest IRC 6621(d) provides for a net interest rate of zero to the extent of overlapping tax underpayments and tax overpayments for the same taxpayer. While generally applying to interest accruing on or after October 1, 1998, IRC 6621(d) may apply to interest before that date if some conditions are satisfied. See IRM 20.2.14.6.1.2, Pre-Enactment Date Interest Periods. Section 2.05 of Rev. Proc. 2005-18 specifies that interest allowable under IRC 6603(d) on a deposit returned to the taxpayer at the federal short-term rate cannot be used for net rate interest netting during an overlapping period.
Post-Enactment Date Interest Periods
20.2.14.6.1.1 (08-18-2025) Post-Enactment Date Interest Periods Post-Enactment periods as defined by Rev. Proc. 2000-26 are interest periods beginning on or after July 22, 1998, (i.e., interest during calendar quarters October 1, 1998, and later). There is no statutory requirement that the taxpayer request the IRS to apply IRC 6621(d). However, the IRS does not have the ability to automatically apply the net rate. The IRS will recalculate the interest amounts applying the net rate upon the taxpayer's request in accordance with IRC 6621(d) and Rev. Proc. 2000-26. Rev. Proc. 2000-26 instructs taxpayers to file Form 843, Claim for Refund and Request for Abatement, to ensure they receive the benefit of interest netting for post-enactment interest periods. Note: Requests for application of the net rate may be received through correspondence under limited circumstances. Information regarding the overlapping periods of time should be included. See IRM 20.2.14.6.1.1(5). Requests for the net rate are to be filed and processed at the Ogden Campus. Net rate requests are sent to the following address: Internal Revenue Service 1973. N. Rulon White Blvd Mail Stop 6800 Ogden, UT 84404 Exception: Do Not Forward to the Ogden Campus net rate requests that involve tax periods that are currently under consideration by any function of the IRS (including Examination, Appeals, or a case before a federal court that requires a computation of interest by any function of the IRS). See IRM 20.2.14.6.3.3. Post-enactment interest netting requests must be filed on or before the date on which the last applicable period of limitations closes (either the underpayment or overpayment period of limitations). See IRM 20.2.14.6.2(3), Exhibit 20.2.14-13, and Rev. Proc. 2000-26 section 4.01. Form 843 is not required in connection with a return(s) under consideration by any function of the IRS (including Examination, Appeals, or a case before a federal court that requires a computation of interest by any function of the IRS). Rather than filing a Form 843, the taxpayer may provide the contact representative of such function a letter or written statement that: States that the taxpayer is requesting net rate interest netting or the net interest rate of zero under IRC 6621(d). Indicates the type of tax and type of return that affects the interest computation for the taxable period under consideration. States when and for what period(s) the refund or payment that affects the interest computation for the taxable period under consideration was made, and States that, to the extent of equivalent amounts of overpayment or underpayment, net rate interest netting has not previously been applied to obtain an interest adjustment under IRC 6621(d). When the taxpayer files a request and the underpayment period of limitations is closed, but the overpayment period is open, make the net rate adjustment to the overpayment period by equalizing the overpayment interest rate to the underpayment interest rate.
Pre-Enactment Date Interest Periods
20.2.14.6.1.2 (08-18-2025) Pre-Enactment Date Interest Periods Following the enactment of the Restructuring and Reform Act 1998, Rev. Proc. 99-19 was issued to provide guidance regarding the application of IRC 6621(d) with respect to interest. Rev. Proc. 99-19 was later modified and superseded by Rev. Proc. 99-43. Special rules apply to interest periods beginning before July 22, 1998, (i.e., interest accruing before October 1, 1998). The taxpayer must still request the IRS to apply IRC 6621(d) and reasonably identify the periods and amounts of underpayments and overpayments for which the net rate applies. For requests involving interest periods prior to October 1, 1998, follow these guidelines to determine if a request is timely filed under IRC 6621(d): Both the underpayment period of limitations and the six-year overpayment period of limitations must be open on July 22, 1998, authorizing the IRS to allow additional overpayment interest and credit or refund underpayment interest for the tax periods involved with the net rate request. Refer to IRM 20.2.14.6.2, and Exhibit 20.2.14-13, for procedures on determining the applicable period of limitations for the underpayment and overpayment. The taxpayer's request must be filed on or before December 31, 1999, if both the underpayment and overpayment periods of limitations expired on or before December 31, 1999. If both applicable periods of limitations were open on July 22, 1998, and at least one of the applicable periods of limitations will be open after December 31, 1999, the request must be filed on or before the date on which the last applicable period of limitations closes. Note: A Form 843 is not required when a computation of interest is requested by a taxpayer in connection with a return of the taxpayer under consideration by any function of the IRS including Examination, Appeals, or a case before a federal court that requires a computation of interest. Rather than filing a Form 843, the taxpayer may furnish a letter or written statement to such function. See IRM 20.2.14.6.1.1(5).
Applicable Periods of Limitation for Post-Enactment Periods
20.2.14.6.2 (08-18-2025) Applicable Periods of Limitation for Post-Enactment Periods IRC 6511(a) provides general period of limitation stating that claims for credit or refund of underpayment interest must be filed by the later of the following dates. Contact Chief Counsel if there are questions about whether an alternate period of limitation applies under IRC 6511(d), IRC 6511(f), IRC 6511(g), or IRC 6511(h). See IRC 6511 for details. Three years from the time the return is filed; or Two years from the time the tax (including interest) was paid, whichever period expires later. See Exhibit 20.2.14-13. If an agreement is made between the taxpayer and the IRS to extend the period of time for assessment (i.e., Form 872, Consent to Extend the Time to Assess Tax, the request must be filed within 6 months of the extended Assessment Statute Expiration Date (ASED). The amount of credit or refund may not exceed the portion of the tax paid after the execution of the agreement and before the filing of the request. It is also limited to the portion of the tax that would have been open under the two or three year period of limitations described above, if a request had been filed on the date the agreement was executed. Note: If no return is filed by the taxpayer, the claim must be filed within two years from the time the tax was paid. If the request is timely, determine the amount of tax that may be credited or refunded under IRC 6511(b). If a request is filed during the 3-year period, the amount of credit or refund shall not exceed the portion of the tax paid within the period immediately preceding the filing of the request, equal to 3 years, plus the period of any extension of time for filing the return. If the request is not filed within the 3-year period, the amount of the credit or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the request. For credit OFFSETS, add 2 years to the cycle date of the offset to determine the applicable 2-year period. Exception: If the offset is a misapplied payment, use the date of the payment to determine the applicable 2-year period. If a Form 872 was signed by the taxpayer, the amount of credit or refund may not exceed the portion of the tax paid after the execution of the agreement and before the filing of the net rate request plus the portion of the tax that would have been open under the two or three year period of limitations described above, if a request had been filed on the date the agreement was executed. Note: See IRC 6511 and IRM 25.6.1, Statute of Limitations Processes and Procedure, for further details. The 3 or 2-year period of limitations is determined based on the underpayment that is to be netted. The Internal Revenue Code does not provide a period of limitations for the allowance and payment of interest on an overpayment of tax. However, 28 U.S.C. section 2401 and 28 U.S.C. section 2501 provide a six-year period within which a suit must be filed for the allowance of additional interest on an overpayment. The schedule date of the overpayment is the starting event for the six-year period. The schedule date is shown on Form 2188, Voucher and Schedule of Overpayment and Overassessments. If a Form 2188 is not available, for administrative purposes, the 23C date of the refund or cycle date of the offset will be considered the schedule date of the overpayment. An adjustment of interest allowable on an overpayment may be allowed and paid within the six-year period of limitations beginning on the 23C date of the refund or the cycle date of an offset overpayment. Although Form 843 can be used to request additional overpayment interest, filing Form 843 will not stop the running of the six-year period (see Rev. Proc. 2000-26). If the request is received within the six-year period of limitations, the IRS may allow and pay additional overpayment interest after the six-year period has expired. However, the IRS should caution the taxpayer that filing a request does not protect the six-year period for filing suit. The only manner in which a taxpayer can fully protect the right of a judicial review of the IRS determination is to file suit within the six-year period. Note: The six-year period of limitation also applies to the allowance of additional interest on an overpayment when the IRS discovers the error, whether or not the error was made by the IRS. Generally, the net rate adjustment is made to the underpayment period. However, when the underpayment period of limitations for interest accruing on or after October 1, 1998 is closed, but the overpayment period is open, the net rate adjustment is made to the overpayment period by designating the status of the underpayment period as USE. See IRM 20.2.14.6.6 and its subsections for details.
Guidelines for Filing Net Rate Requests
20.2.14.6.3 (08-18-2025) Guidelines for Filing Net Rate Requests Rev. Proc. 2000-26, provides the following guidelines for filing a net rate request. The request should be filed on Form 843, Claim for Refund and Request for Abatement. Exception: See IRM 20.2.14.6.1.1(5). The taxable periods for which the taxpayer overpaid and underpaid its tax liability must be identified. The request must state when the taxpayer paid the tax if the underpayment is no longer outstanding. The request must state when the taxpayer received a refund of tax if the overpayment is no longer outstanding. The request must identify and establish the periods for which the taxpayer's overpayment and underpayment overlapped and the overlapping amount. The request must state that, to the extent of equivalent amounts of underpayment and overpayment for the identified period(s), the period(s) has (have) been used only once to obtain the net rate under IRC 6621(d). However, if the full amount of the overpayment or underpayment is not used in a netting calculation, the remaining portion may be used in another netting calculation. The request must provide a computation, to the extent possible, of the amount of interest to be credited, refunded, or abated to provide a net interest rate of zero for the period(s) of overlap. Note: Due to the length of some of the computations, the taxpayer may submit their netting computations on a compact disc (CD), digital video disc (DVD), or flash drive. It is the responsibility of the tax examiner working the request to scan the portable media for any viruses. Instructions for scanning can be found on the IRS Source at the following link: Data Protection.
Resolved and Unresolved Tax Periods
20.2.14.6.3.1 (08-18-2025) Resolved and Unresolved Tax Periods Interest netting under IRC 6621(d) is only available when there exists overlapping periods of overpayment and underpayment upon which interest is both payable and allowable. Prior to the time an overpayment or underpayment is determined for a tax period there is no principal upon which interest can be computed. In addition to interest being payable or allowable when processing a net rate request, consideration must also be given to whether the underpayment or overpayment is resolved or unresolved. Underpayments or overpayments are resolved if, at the time the net rate request is filed, the overlapping underpayment and overpayment amounts have been identified, determined, and no longer subject to controversy in Exam, Appeals, or a court. Conversely, underpayments and overpayments are unresolved if, at the time the net rate request is filed, the overlapping underpayment and overpayment amounts have not been determined because they are in Exam, Appeals or the taxpayer is pursuing litigation.
Requests with Resolved Tax Periods
20.2.14.6.3.2 (08-18-2025) Requests with Resolved Tax Periods Net rate netting (NRN) requests where all periods are resolved will be processed at the Ogden Campus by the Accounts Management (AM), Complex Interest Team at the following address: Internal Revenue Service 1973 N. Rulon White Blvd Mail Stop 6800 Ogden, UT 84404 Net rate requests that include resolved and unresolved periods will be sent to the Ogden Campus, Centralized Case Processing (CCP) Team. See IRM 20.2.14.6.3.3. If there is no "L" Freeze and or no Examination or Appeals involvement on any of the tax periods included in the NRN request, the AM Complex Interest Team will ensure the NRN request contains all required information. The request must properly identify the taxpayer, the taxpayer identification number (TIN), the overlapping underpayment and overpayment amount(s) and date(s), the tax years and type(s) of overpayment and underpayment taxes involved. The request should also state that the overlapping periods and amounts have not previously been used to obtain a net interest adjustment. If all required information is included, the AM Complex Interest Team will process the request. If the required information is not included in the request, the AM Complex Interest Team will notify the taxpayer in writing that the information is not complete and the NRN request cannot be processed. The notification will specify what information is missing, and will advise the taxpayer that 30 days are given to perfect the information. If the required information is not received within the 30 days, the AM Complex Interest Team will cross out the received date stamp and return the request to the taxpayer with a letter explaining the reason(s) the NRN request is being returned. If there is an "L" Freeze on any of the tax periods included in the NRN request, the AM Complex Interest Team will access the AIMS database for each tax period that has an "L" Freeze to determine its status code. If the AIMS status code is 08 or less for any of the NRN request tax periods and all tax periods are resolved for the NRN request, the AM Complex Interest Team will process the NRN request as usual. If, prior to closing the NRN request, any of the NRN request's tax period status codes change to 09 or above and less than 80, the AM Complex Interest Team will send the NRN request to CCP at the Ogden Campus using Form 3210, Document Transmittal. The AM Complex Interest Team will issue a letter of transfer to the taxpayer. If the AIMS status code is 09 through 79 for any of the NRN request tax periods, AM Complex Interest Team will forward the entire NRN request to the CCP function at the Ogden Campus using Form 3210. The AM Complex Interest Team will issue a letter of transfer to the taxpayer. If the AIMS status code is 80 through 89 for any of the NRN request tax periods, the AM Complex Interest Team will contact the Appeals Senior Program Analyst, Tax Policy and Procedure, to coordinate processing.
Requests with Resolved and Unresolved Tax Periods
20.2.14.6.3.3 (08-18-2025) Requests with Resolved and Unresolved Tax Periods NRN requests that include resolved and unresolved periods are forwarded internally to the Ogden Campus, Centralized Case Processing (CCP) team. Upon receipt, that function will review the NRN request to determine if it can be processed. Requests that are to be worked by CCP, should be forwarded to the following address: Internal Revenue Service - Exam 1973 N Rulon White Blvd Mail Stop 4020 Ogden, UT 84404 If all periods involved are resolved, CCP will ensure the NRN properly identifies the taxpayer, the taxpayer identification number (TIN), the overlapping underpayment and overpayment amount(s) and date(s), and the tax years and type(s) of overpayment and underpayment taxes involved, and will process the request. If all periods are resolved, but the required information is not present, CCP will notify the taxpayer and or representative in writing that the information is not complete and NRN request cannot be processed. The notification will specify what information is missing, and will advise the taxpayer and or representative that 30 days are given to perfect the information. If the required information is not received within 30 days, CCP will cross out the received date stamp and return the request to the taxpayer and or representative with a letter explaining the reason(s) the NRN request is being returned. If a request involves both unresolved and resolved periods, CCP will contact the taxpayer and or representative in writing to notify that the request has one or more unresolved period(s) and any resolved periods will be processed, and the information for any unresolved periods will be retained. CCP will contact the Field Examination team when an open exam exists and that resolved periods will be processed. CCP will forward a copy of the unresolved periods in the NRN request to Field Exam, if necessary. Field Exam will follow procedures in IRM 4.10.26, Examination of Returns, Net Rate Netting Procedures for LB&I Cases, for the unresolved periods. CCP will advise the taxpayer and or representative to notify CCP when the unresolved periods are resolved and update and perfect the information upon resolution of the unresolved periods or submit a new NRN request. The received date will be the date CCP receives the updated or perfected information. The original received date stamp does not apply to unresolved tax periods.
Requests Received by Field Examination
20.2.14.6.3.4 (08-18-2025) Requests Received by Field Examination When an NRN request or Form 843 is received by Field Examination or Appeals, the function will review the NRN request to determine if the request can be processed, or whether it has unresolved tax periods. If all periods involved are resolved, Field Examination will ensure the NRN request properly identifies the taxpayer, the taxpayer identification number (TIN), the overlapping underpayment and overpayment amount(s) and date(s), and the tax years and type(s) of overpayment and underpayment taxes involved in order for the NRN request to be processed. Note: If a NRN request is not received on Form 843 because a return(s) is under consideration by a function of the IRS, that function will instruct the taxpayer and or representative to provide them with a letter or written statement with the following information: Item Information 1. Statement that the taxpayer is requesting the net rate under IRC 6621(d); 2. Type of tax and type of return that affects the interest computation for the taxable period(s) under consideration; 3. When and for what period(s) the refund or payment (that affects the interest computation for the taxable period(s) under consideration) was made; and 4. Statement that equivalent amounts of overpayment or underpayment, for the period(s) in the request, have not previously been applied to obtain a net rate adjustment under IRC 6621(d). Field Examination will transfer a NRN request in which all periods are resolved on a Form 3210 to the Ogden Campus CCP team for processing. See IRM 20.2.14.6.3.3. When Field Examination receives a NRN request which contains both resolved and unresolved tax periods, they will contact the taxpayer and or his representative to notify them that the NRN request contains one or more unresolved period(s) and explain the NRN request will be transferred to CCP and the resolved periods processed with information for the unresolved periods retained. Field Examination will transfer the entire NRN request on a Form 3210 to CCP. See IRM 20.2.14.6.3.3. Exception: Field Examination will hold the NRN request if the unresolved period will be agreed upon and closed to CCP within 90 days. The NRN request should be included in the administrative file when the case closes and the Form 3198 should indicate the NRN request is included. CCP will work these NRN requests in conjunction with the closure of the examination.
Net Rate Interest Netting Steps to Computation
20.2.14.6.4 (02-01-2017) Net Rate Interest Netting Steps to Computation The following steps must be taken in order to determine the net rate interest adjustment. Determine the overlapping interest computation period(s). Determine the amount subject to the net rate during the overlapping period(s). Determine the applicable interest rate during the overlapping period(s). Determine the adjustment amount to the underpayment interest. Determine the adjustment amount to overpayment interest.
Determine the Overlapping Interest Computation Period(s)
20.2.14.6.4.1 (08-18-2025) Determine the Overlapping Interest Computation Period(s) The net rate can only be applied based on interest legally allowed or allowable on an overpayment and legally paid or payable on an underpayment. The net rate cannot be applied based on an overpayment for the period during which interest is not legally allowed (e.g., 45-day interest-free period, refund back-off period), nor on an underpayment for the period during which interest is or was not legally charged (e.g., Rev. Rul. 99-40). Caution: Section 2.05 of Rev. Proc. 2005-18 specifically prohibits the use of interest allowed on an IRC 6603 deposit at the federal short-term rate to make a net rate interest adjustment for the same period. To apply the net rate during an overlapping period where underpayment and overpayment interest was or will be paid and allowed: Determine the overpayment and underpayment interest computation periods for the tax years where interest has already been or will be paid or allowed. Compare the interest computation periods to each other to determine when the overlapping interest period(s) occurs. It can be helpful to prepare a time line or ACT/DMI Report 530, Adjustment/Positions to "visually" determine when the overlapping interest periods occur. See Exhibit 20.2.14-18 for specific information related to preparing a time line. Example: The Gold Corporation is a calendar year taxpayer and agrees to a 200412 Form 1120 tax underpayment of $150,000.00. The taxpayer paid the tax plus interest on February 20, 2009. On March 23, 2009, a $79,000.00 refund with interest was issued from the taxpayer's 200712 Form 1120 return. On August 1, 2009, Athens Corporation filed a request asking that the net rate be applied to the underpayment interest paid for the 200412 Form 1120 based on the 200712 overpayment that was issued with interest. The overlapping period is from March 15, 2008 to February 20, 2009. Determine the Overpayment and Underpayment Interest Periods. Interest on the 200412 Form 1120 Interest on the 200412 Form 1120 tax underpayment of $150,000.00 was charged as follows: 1. From 03152005 (return due date) 2. To 02202009 (payment date) Overpayment interest on the tax year 200712 Form 1120 Overpayment interest on the tax year 200712 Form 1120 overpayment of $79,000.00 was allowed as follows: 1. From 03152008 (return due date and the return was timely filed) 2. To 03142009 (refund schedule date, -less 9-day back off period) The net rate adjustment for this example will be made to the underpayment period. The overlapping period is from 03152008 to 02202009. Note: When determining the overlapping period, always use the overpayment interest back-off date as the ending date for the overpayment interest computation period. Using the back-off date provides the actual time frame during which interest was allowed on the overpayment. A time line or ACT/DMI Report 530 can be used to visually compare and determine when the interest computation periods "overlap." Figure 20.2.14-10 Figure 20.2.14-10 Overlapping Period Time LineThe following display shows a time line as described in the text concerning the overlapping period of overpayment and underpayment interest. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed as from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200412, Form 1120, Underpayment, 03152005, $150,000.00200712, Form 1120, Overpayment, 03152008, ($79,000.00)200412, Payment in full date, 02202009, ($204,361.17)200712, Refund date minus 9 day back-off, 03142009, $81,676.25From 1 to 3: Underpayment periodFrom 2 to 4: Overpayment periodFrom 2 to 3: Overlapping net-rate period Please click here for the text description of the image. If the benefit of within module netting under Rev. Proc. 94-60 was previously allowed during an overpayment period, a net rate benefit for the same overpayment period and amount cannot be allowed. The same overpayment cannot be used for both within module and net rate interest netting.
Determine the Amount Subject to the Net Rate during the Overlapping Period(s)
20.2.14.6.4.2 (02-01-2017) Determine the Amount Subject to the Net Rate during the Overlapping Period(s) The amount of the overpayment or underpayment subject to the net rate interest computation is determined as follows: If Then, during the overlapping period The underpayment interest is adjusted, Interest is "charged at the overpayment rate" on the underpayment amount that is "equal" to the overpayment amount. The overpayment interest is adjusted, Interest is "allowed at the underpayment rate" on the overpayment amount "equal" to the underpayment amount.
Determine the Applicable Interest Rate during the Overlapping Period(s)
20.2.14.6.4.3 (08-18-2025) Determine the Applicable Interest Rate during the Overlapping Period(s) After determining the overlapping periods, the interest rate to be "charged" or "allowed" during the overlapping "net rate" period must also be determined. The interest rate originally payable on the underpayment and allowable on the overpayment can be determined from reviewing the original interest computation. If the documentation to support previously computed underpayment or overpayment interest is not readily available (attached to the return or in the administrative file), all avenues must be used to locate the required documentation, such as: Order the applicable document(s) from the Files function. Call the offices or employees who may have had the case in the past, to determine if an "office file" (e.g., audit reports Form 4549, Income Tax Examination Changes, Form 2285, Concurrent Determinations of Deficiencies (Increases in Tax) and Overassessments (Decreases in Tax) in Cases Involving Restricted Interest Provisions of the Internal Revenue Code, ACT/DMI reports, etc.) is available. Contact the taxpayer or power-of-attorney (POA) to obtain copies of any documents they may have (e.g., ACT/DMI reports, Form 2285, etc.) Or, if applicable, contact the examining official to request that they contact the taxpayer or POA directly. Note: If the tax examiner is still unable to locate the documentation and cannot "back into" the previous interest amount, make the adjustment using all available information and thoroughly document in the case file all actions taken and attach it to the interest adjustment. Accounts Management Services (AMS), can also be used to document all actions taken. If the original calculation of interest for the underpayment or overpayment period(s) was not correct, make the net rate adjustment based on the correct interest the taxpayer should have paid or been allowed. If Then Making the net rate adjustment to the underpayment interest and the overpayment interest was overpaid and is recoverable based on the period of limitations, Compute the correct overpayment interest and follow erroneous refund procedures to recover the overpaid interest. Perform the net rate adjustment using the corrected overpayment interest calculation. Making the net rate adjustment to the underpayment interest and the overpayment interest was overpaid and is not recoverable, Compute the correct overpayment interest; do not follow erroneous refund procedures. Perform the net rate adjustment using the corrected overpayment interest calculation. Do not adjust the overpayment interest. Making the net rate adjustment to the underpayment interest and the overpayment interest was underpaid and the period of limitations is not open to allow additional overpayment interest, Restrict the ACT/DMI program from allowing the additional overpayment interest by using an interest suspension. Making the net rate adjustment to the underpayment interest and the overpayment interest was underpaid and the period of limitations is open to allow additional overpayment interest, Perform the net rate adjustment based on the correct amount of overpayment interest. Making the net rate adjustment on the overpayment and the underpayment interest is not correct. Perform the net rate adjustment based on the correct amount of underpayment interest. GATT interest computations made prior to January 1, 1999, are to be recomputed in the same manner as originally allowed. However, if an error was made in the overpayment interest originally allowed, make the net rate adjustment based on the interest that should have been allowed (using the same GATT computation methodology). Example: First Technology Inc. was issued an overpayment of $23,710.00 on July 25, 1998. Overpayment interest was allowed using the original GATT processing procedures that provided that all interest accruals through December 31, 1994, would continue to accrue at the prevailing higher overpayment interest rate. That is, the interest on the overpayment accrued interest at the federal short term rate plus 2% rather than the lower corporate GATT rate. However, an error was made in the interest computation. The overpayment interest must be recomputed, correcting the error (using the original procedures), to ensure the taxpayer is allowed the net rate based on the interest that should have been allowed on the overpayment. When preparing the time line, in addition to the computation period dates, also enter the date for which interest begins at a different rate or effective date (i.e., large corporate interest applicable date or GATT rate effective date). "Charge" or "allow" interest during the overlapping period(s) as follows: If Then, during the overlapping period The net rate is applied to the underpayment period, Charge interest on the underpayment at the same rate as allowed on the overpayment (up to the amount of overpayment available for netting). The net rate is applied to the overpayment period, Allow interest on the overpayment at the same rate as charged on the underpayment (up to the amount of underpayment available for netting). When a net rate adjustment is made to an underpayment period, interest is "charged" at the lower overpayment rate during the overlapping period. Note: For underpayment interest that has been paid, the abated interest that will be refunded or offset is allowed overpayment interest (if applicable). Interest (as appropriate) is allowed on the abated underpayment interest amount from the credit availability date to the refund schedule date or liability deu date (if offset). This overpayment interest period creates a new overpayment interest period that may later be used to apply the net rate against another underpayment period that overlaps this interest computation time frame. For underpayment interest that has yet to be assessed: Compute the interest to be assessed without considering the net rate adjustment. Retain a copy of the pre-netting computations for the case file. After arriving at the interest due, then apply the net rate. If the ASED is imminent (within 60 days), it may be necessary to post a TC 34X for the pre-netting interest amount with the tax assessment. Input a TC 34X for the net rate interest adjustment to reflect the increase or decrease to the interest previously posted. Adjust overpayment interest as appropriate with a TC 77X. Monitor the adjustments to ensure correct posting to Master File. When a net rate adjustment is made against an overpayment, interest is allowed at the same rate that was charged on the underpayment during the overlapping period. The interest allowed on the resulting overpayment (that is created by the net rate adjustment) would also create a new overpayment interest period that may later be used to apply the net rate against another underpayment period. The net rate may be allowed on TMT interest. When making a net rate adjustment due to an assessment involving 120 percent (TMT) interest: During the overlapping period, interest on the tax motivated transaction is charged at the same rate that was allowed on the refunded or offset overpayment. For net rate purposes, apply the net rate to interest on any non-TMT tax before applying the procedure to TMT tax.
Determine the Net Rate Adjustment Amount to Underpayment Interest
20.2.14.6.4.4 (08-18-2025) Determine the Net Rate Adjustment Amount to Underpayment Interest To accurately determine the net rate underpayment interest adjustment: Note: Determine the overpayment amount that is equal to the underpayment amount as of the beginning of the overlapping period. The following example illustrates how to apply the net rate when the underpayment interest starts before interest begins to accrue on the overpayment. Example: Agate Corporation filed a 200612 Form 1120-X and fully paid the underpayment of $53,000.00 plus interest of $6,706.66 on December 3, 2008. On June 2, 2008, Hunter Corp. filed a Form 1120-X claiming an overpayment of $32,000.00 from its 200712 tax return, which was refunded with interest on September 17, 2008. Figure 20.2.14-11 Figure 20.2.14-11 Overlapping Period Time LineSummary: The following display shows a time line for the Hunter Corporation example concerning application of the net rate when underpayment interest starts before interest begins to accrue on the overpayment. This time line is presented using numbers from left to right to help explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200612, Form 1120X, Underpayment, 03152007, $53,000.00200712, Form 1120X, Overpayment, 03152008, ($32,000.00)200712, Refund, 09082008, ($32,572.17)200612, Payment, 12032008, ($59,706.66)From 1 to 2: underpayment interest at normal rate $4,306.19From 2 to 4: underpayment interest at normal rate $1,060.04From 2 to 3: Overlapping period; underpayment interest at overpayment rate $572.17From 3 to 4: underpayment interest at normal rate $442.58 Please click here for the text description of the image. Underpayment interest begins on 03152007, which is prior to the date interest begins on the overpayment and the beginning of the overlapping period of 03152008. Since interest has not yet accrued on the overpayment amount as of the beginning of the overlapping period, the amount of the underpayment subject to the net rate (at the beginning of the overlapping period) equals only the principal overpayment amount of $32,000. Interest on the underpayment is computed as follows: Underpayment interest at the normal rate is computed from 03152007 to 03152008 to determine the balance due as of the beginning of the overlapping period. When the underpayment amount is greater than the overpayment amount (as of the beginning of the overlapping period), separate the amount of underpayment subject to the net rate from the underpayment amount charged interest at the prevailing rate. Note: The separation is performed automatically by the ACT/DMI software. Interest Computation Breakdown Amount Computation $53,000.00 03152007 to 03152008 (normal underpayment rate) = 4,306.19 4,306.19 Add accrued interest at the normal underpayment rate.** 57,306.19 Underpayment balance on 03152008 (32,000.00) Subtract the amount of underpayment equal to the available overpayment on 03152008 (beginning of the overlapping period) which will accrue underpayment interest at the net (overpayment) rate from 03152008 to 09082008 (refund schedule date of 09172008, less the 9-Day back-off period). 25,306.19 Equals the underpayment amount that will continue to accrue interest at the underpayment rate from 03152008 to 12032008. 1,060.04 Add accrued interest at the normal underpayment rate** $26,366.23 Balance due on 12032008 Net Rate Interest Computation Amount Computation $32,000.00 03152008 to 09082008 (net rate period) 572.17 Add accrued underpayment interest at the overpayment rate** 32,572.17 Balance due on 09082008 442.58 Add accrued interest at the normal underpayment rate from 09082008 to 12032008** $33,014.75 Balance due on 12032008 Interest previously assessed $6,706.66 **Add all interest amounts above (**) to equal the total interest after netting 6,380.98 Net Rate Adjustment or Netting Benefit (TC 341) (325.68) Reminder: Allow statutory overpayment interest (as appropriate) on the net rate adjustment amount that will be refunded or offset. The next example illustrates how to apply the net rate when the underpayment interest computation and the beginning of the overlapping period start after interest begins to accrue on the overpayment. In addition, the example illustrates how the underpayment interest computation is made factoring in the net rate to arrive at the interest due on the unprocessed underpayment. Example: Sapphire Corporation received a refund of an overpayment in the amount of $9,200.00 plus $1,537.99 in interest on August 18, 2008, from its 200512 Form 1120. On November 21, 2008, Stetson Corporation also signed an agreement for a 200612 Form 1120 tax underpayment of $27,000.00. The underpayment has not been processed and the corporation requests a net rate adjustment on the 200612 return based on the 200512 overpayment. Figure 20.2.14-12 Figure 20.2.14-12 Overlapping Period Time LineSummary: The following display shows a time line for the Stetson Corporation example concerning the overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200512, Form 1120, Overpayment, 03152006, ($9,200.00)200612, Form 1120, Underpayment, 03152007, $27,000.00200512, Refund, 08092008, $10,737.99200612, 870 waiver date plus 30 days, 12212008From 1 to 2: Overpayment available ($9,838.13) which consists of ($9,200.00) principal and ($638.13) overpayment interest as of 03152007.From 2 to 3: Overlapping Period: Underpayment interest computed at the overpayment interest rate $899.86 (03152007 to 08092008 on netted amount of $9,838.16).From 2 to 4: Underpayment interest computed at the normal rate $2,228.81 (03152007 to 12212008 - interest on the $17,161.87 amount of underpayment that is not netted ($27,000.00 less $9,838.13).From 3 to 4: Underpayment interest at normal rate $222.89 Please click here for the text description of the image. Overpayment interest begins on 03152006, which is prior to the date interest begins on the underpayment and the beginning of the overlapping period of 03152007. Since overpayment interest begins prior to the date interest starts on the underpayment, the amount of underpayment subject to the net rate equals the available overpayment amount of $9,200.00 plus the overpayment interest of $638.13 that has accrued to 03152007 (the beginning of the overlapping period). Interest Computation Breakdown Prior to the Overlapping Period Amount Description $9,200.00 03152006 to 03152007 (overpayment) = 638.13 638.13 Add accrued interest at the overpayment rate 9,838.13 Available overpayment amount that is equal to the underpayment that will be charged interest at the net (overpayment) rate as of the beginning of the overlapping period. Interest on the underpayment is computed as follows: Interest Computation Breakdown on the Unnetted Portion Amount Description $27,000.00 Underpayment due 03152007 (9,838.13) Subtract the amount of underpayment equal to the available overpayment on 03152007 (beginning of the overlapping period) which will accrue underpayment interest at the net (overpayment) rate from 03152007 to 08092008 (refund schedule date of 08182008, less 9-Day back-off). 17,161.87 Equals the underpayment amount that will accrue interest at the prevailing rate from 03152007 to 12212008. 2,228.81 Add accrued interest at the prevailing underpayment rate** 19,390.68 Balance due on unnetted portion to 12212008 (IRC 6601(c) suspension) Net Rate Interest Computation Amount Description $9,838.13 03152007 to 08092008 (net rate period) 899.86 Add accrued underpayment interest at the overpayment rate** 10,737.99 Balance due that continues to accrue underpayment interest at the prevailing rate from 08092008 to the 12212008 interest ending date. 222.89 Add accrued underpayment interest at the prevailing rate** $10,960.88 Balance due on the netted portion to 12212008 (870 waiver + 30 days) **Total Interest Due (**) with Netting $3,351.56 (2,228.81 + 899.86 + 222.89) Interest Previously Assessed .00 Net Rate Adjustment (TC 340) $3,351.56 When a net rate adjustment is made to an underpayment year (for which payments or credits had previously been made), applying the net rate causes the balance due to decrease. Since the former balance due is decreased, this results in a lesser amount of the previous payments or credits being needed to pay the revised balance due. Any "excess" payments or credits are an overpayment available for refunding or offset to another year's tax liability. The resulting overpayment may be available to use for a future net rate adjustment.
Determine the Net Rate Adjustment Amount to Overpayment Interest
20.2.14.6.4.5 (08-18-2025) Determine the Net Rate Adjustment Amount to Overpayment Interest Net rate adjustments are generally made to the underpayment period. When the taxpayer files a request and the underpayment period of limitations is expired, the net rate adjustment is made to the overpayment period. However, the six-year period for refunding of overpayment interest must be open at the time the request is filed. See IRM 20.2.14.6.6 and subsections for additional information. Applying the net rate to an overpayment period follows the same methodology as applicable to an underpayment period. The net rate is applied by allowing overpayment interest on the amount of the overpayment that is equal to the underpayment (plus accrued interest, as applicable) as of the beginning of the overlapping period. The example below illustrates how to apply the net rate to the overpayment period when the underpayment period status is USE but the overpayment period is open. Example: The Emerald Corporation filed a 200612 Form 1120-X and fully paid the underpayment of $53,000.00 plus interest of $5,617.29 on August 3, 2008. On June 2, 2008, Henry Corporation filed a Form 1120-X claiming an overpayment of $32,000.00 from its 200712 tax return, which was refunded with interest on September 17, 2008. The taxpayer filed a net rate request on December 31, 2010. Figure 20.2.14-13 Figure 20.2.14-13 Overlapping Period Time LineThe following display shows a time line for the Henry Corporation example to reflect the overlapping period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200612, Form 1120X, Underpayment, 03152007, $53,000.00200712, Form 1120X, Overpayment, 03152008, ($32,000.00)200612, Payment, 08032008, ($53,617.29)200712, Refund, 09082008, ($32,572.17)From 1 to 3: Underpayment interest at normal rate $5,617.29From 2 to 3: Overlapping period; Overpayment interest at the underpayment interest rate $732.13From 3 to 4: Overpayment interest at normal rate $95.72 Please click here for the text description of the image. Interest on the overpayment is computed as follows: Since the period of limitations on the underpayment period has expired, overpayment interest will be computed at the underpayment interest rate during the overlapping period. Any overpayment that was created as a result of applying the net rate during the overlapping period will be allowed overpayment interest at the prevailing rate to the refund schedule (23C) date, less the 9-Day back-off period. See IRM 20.2.4.8.1, Systemic Refunds, for an explanation of the refund back-off period. Net Rate Interest Computation Amount Description $32,000.00 03152008 to 08032008 (net rate period) 732.13 Add overpayment interest at the underpayment interest rate 32,732.13 Available credit on 08032008 95.72 Add accrued overpayment interest at the prevailing rate to 09082008 32,572.17 Amount refunded on 09172008 with 9-Day back-off to 09082008 255.68 Available credit at 09082008 .16 Add accrued overpayment interest at the prevailing rate from 09082008 to 09172008. 255.84 Overpayment available for refund or offset as of 09172008. TC 770 is $255.84 Plus overpayment interest at the prevailing rate to the current 23C minus the appropriate back-off period. Reminder: Ensure overpayment interest (as appropriate) is allowed on the net rate adjustment amount that will be refunded or offset from the available overpayment date.
Unnetted Interest Computation Period(s)
20.2.14.6.5 (08-18-2025) Unnetted Interest Computation Period(s) When a net rate computation is made during an overlapping period, the amount of overpayment or underpayment (that is allowing the net rate adjustment to be made) may not be completely used for that period. The part of an interest computation period and the amount of overpayment or underpayment that is not used to make a net rate adjustment on a tax year is considered the "unnetted" portion. An unnetted period or amount can also occur outside of the overlapping interest computation period (i.e., when an underpayment or overpayment accrues interest before the overlapping period, netting does not occur during that time frame, so an unnetted period and amount also exists). Note: If another tax year's interest computation period overlaps with a remaining "unnetted" period and amount, a net rate adjustment may be made to the underpayment and or overpayment interest based on that remaining unnetted period and amount. Reminder: Consideration must still be given to whether the period of limitation remains open for the unnetted period and amount to allow another net rate adjustment. When the net rate is applied to underpayment interest that has been paid, interest is allowed on the overpayment of underpayment interest as appropriate from the date of the overpayment to the refund schedule date or liability due date (if offset). This interest period creates an overpayment period that may later be used to apply the net rate against another underpayment period. The time line in Figure 20.2.14-14, illustrates that the overpayment interest period (from 03152007 to 01012008) was not completely used. Only part of the computation period was used for the net rate adjustment, from 03152007 to 07072007. The part of the overpayment computation period not used for the net rate adjustment runs from 07072007 to 01012008. The period from 03152006 to 03152007 is also not used for the net rate adjustment. These time frames are both unnetted computation periods. If a subsequent adjustment occurs for another tax year and the underpayment interest computation period overlaps with any remaining unnetted computation period(s), a net rate adjustment may be made during these unnetted time frames. In addition to reflecting the unnetted computation period(s), the amount of overpayment or underpayment available for use for another net rate adjustment must also be determined. This amount is shown in the interest computation source documents. Figure 20.2.14-14 Figure 20.2.14-14 Time Line for Unnetted Periods and AmountsThe following display shows a time line as described in the text to reflect the overlapping and unnetted periods of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200512, Form 1120, Underpayment, 03152006, $175,000.00200512, 03122007, Begin additional 2% interest rate200612, Form 1120, Overpayment, 03152007, ($250,000.00)200512, Payment, 07072007, ($195,046.74)200612, Refund, 01012008, $261,363.60From 1 to 3: Unnetted periodFrom 3 to 4: Overlapping period; Underpayment interest at GATT rateFrom 4 to 5: Unnetted period Please click here for the text description of the image. To determine the unnetted amount that is available for use for a future net rate adjustment, identify the amount of overpayment or underpayment at the beginning of the unnetted period that was not used for the net rate adjustment as follows: As of the end of the overlapping period (which is the beginning of the unnetted period when an unnetted amount and period exists), determine the total overpayment or underpayment amount plus accrued interest that is available for netting during the overlapping period. Subtract from this amount, the overpayment or underpayment plus accrued interest that was used for the net rate adjustment. The difference represents the balance of overpayment or underpayment plus accrued interest that was not used for the net rate adjustment. This is the amount of unnetted overpayment or underpayment plus accrued interest that is available for another net rate adjustment. When an underpayment or overpayment accrues interest before the overlapping period, the amount of overpayment or underpayment as of the beginning of that computation period is the unnetted amount available for another net rate adjustment. The time line illustrates that the net rate was not applied on the underpayment from 03152006 to 03152007. Therefore, 03152006 to 03152007 also represents the unnetted underpayment period. The unnetted amount represents the underpayment of $175,000 as of the beginning of this unnetted period. If another overpayment overlaps this unnetted period, and a timely request is filed, the net rate can be applied to the $175,000 from 03152006 to 03152007. Refer to the following exhibits for additional information: Exhibit 20.2.14-6, Special Net Rate Interest Computations - More than One Overpayment Period. Exhibit 20.2.14-7, Special Net Rate Interest Computations - Overlapping Amount Completely Used. Exhibit 20.2.14-9, Net Rate Interest Computation - Later Underpayment Interest Period Overlaps a Previously Unnetted Overpayment Amount.
ACT/DMI "Netting Status" (Open, Closed, Use, Unsettled)
20.2.14.6.6 (08-18-2025) ACT/DMI "Netting Status" (Open, Closed, Use, Unsettled) In order for the ACT/DMI software to accurately apply the statute rules to net rate computations, the appropriate "Netting Status" must be determined and entered for the underpayment interest ("Underpay" ) and the overpayment interest ("Overpay" ) on each tax module involved in the computation. The available "Netting Status" designations for "Underpay" (underpayment interest decrease), and "Overpay" (overpayment interest increase) are: "OPEN" , "CLOSED" , "USE" , and "UNSETTLED" . See IRM 20.2.14.6.6.1 and IRM 20.2.14.6.6.2 which provide information on determining the ACT/DMI netting statuses for pre-enactment and post-enactment interest. The information is presented in an question and answer format to promote ease in making the status determinations. Figure 20.2.14-15 Figure 20.2.14-15 ACT/DMI Edit Selected Module Screen with Netting StatusThe Edit Selected Module screen provides information on the ACT/DMI netting statuses. The top left of the form shows two icons; one to Save and one to delete the file without saving. The top right of the screen shows a box to check for Comments Only. The next section of the screen provides boxes to select for Module Summary, Netting Status/Other and GATT/LCU. The screen reflects the Netting Status/Other box is checked with drop down boxes on the left for an Underpay or Overpay status. When the drop down is clicked, the ACT/DMI statuses for Open, Unsettled, Closed, Open and Use are shown and selected as applicable. To the right of the Underpay or Overpay netting status is shown heading titled First Netting Date Two boxes can be checked for All Dates shown to the right of the Underpay and Overpay status windows. To the right of this information are shown two screen windows to allow entering Comments and Internal Comments. Please click here for the text description of the image.
Determine the "Netting Status" for Overpayment or Refund of Underpayment Interest
20.2.14.6.6.1 (02-01-2017) Determine the "Netting Status" for Overpayment or Refund of Underpayment Interest This section provides information on how to determine the ACT/DMI netting status based on pre-enactment and post-enactment interest periods. The information is provided in a question and answer format to allow a determination on the applicable ACT/DMI netting status. Does the request involve netting Any underpayment interest that accrued before October 1, 1998 (Pre-enactment interest)? If NO see IRM 20.2.14.6.6.1, Determine the "Netting Status" for Underpayment Interest -Post enactment (Interest Accruing of After October 1, 1988) to determine whether the status is Open or Use for the entire tax period. If YES, see IRM 20.2.14.6.6.1.1, Determine the "Netting Status" for Underpayment Interest - Pre-enactment (Interest Accruing Before October 1, 1988). to determine whether the tax period must be split into separate modules, and determine whether the status is Open, Use, or Closed for each module.
Determine the "Netting Status" of Underpayment Interest — Post-enactment (Interest Accruing On or After October 1, 1998)
20.2.14.6.6.1.1 (08-18-2025) Determine the "Netting Status" of Underpayment Interest — Post-enactment (Interest Accruing On or After October 1, 1998) When the request does not involve pre-enactment interest: Item If Then A Was the request filed within 3 years from the filing date of the original tax return? Yes - The underpayment netting status for the entire tax year or module is OPEN. However, the amount of credit or refund may not exceed the portion of the tax year paid within the period immediately preceding the filing of the request equal to three years plus the period of any extension of time for filing the return. See IRC 6511(b)(2)(A) No - See Paragraph (B) below. Note: Pre-payment credits are considered paid on the return due date for this purpose. B Are there any payments or credits on the module dated within two years immediately preceding the filing of the request (i.e., two years from the payment date of a TC 610, TC 650, TC 670 etc., two years from the cycle date of a TC 700, TC 706, TC 730, TC 736, or if a 6603 deposit or cash bond, two years from the date the deposit or bond is converted to a payment of tax)? Note: Carryback credits (TC 295, TC 299, TC 305, TC 309) are not considered when making this determination. A carryback credit is not a payment for purposes of the 2-year look back period under IRC 6511(b)(2)(B). Yes - The underpayment netting status for the entire tax year or module is OPEN. However, the amount of refund or credit may not exceed the portion of the tax that was paid within the two year period immediately preceding the filing of the request. See IRC 6511(b)(2)(B). No - See Paragraph (D) below. C Was an agreement made between the taxpayer and the IRS to extend the period of time for assessment (i.e.,Form 872, Consent to Extend the Time to Assess Tax ), and has the taxpayer filed the request within 6 months of the expiration of the extended ASED? Yes - the underpayment netting status for the entire tax year or module is OPEN. However, the amount of credit or refund may not exceed the portion of the tax paid after the execution of the agreement and before he filing of the request, plus the portion of the tax that would have been open under the two or three year period of limitations as described in Paragraph (A) and (B) above, if a request had been filed on the date the agreement was executed. IRC 6511(c)(2). No - See Pargraph (D) below. D If you answered NO to questions (A), (B), and (C) above, the underpayment netting status of the entire tax year or module is USE. - Caution: A refund or credit of underpayment interest cannot be made. However, the underpayment period may be used to equalized any "OPEN" overpayment.
Determine the "Netting Status" for Underpayment Interest – Pre-enactment (Interest Before October 1, 1998)
20.2.14.6.6.1.2 (08-18-2025) Determine the "Netting Status" for Underpayment Interest – Pre-enactment (Interest Before October 1, 1998) Examine each payment or credit on the module and ask - Was the underpayment period of limitations "OPEN" as of July 22, 1998 (the date of enactment)? The term "open" includes periods of limitations that have not expired or started running as of July 22, 1998. YES, because the original tax return was filed on or after July 22, 1995 (IRC 6511(b)(2)(A)). Go to paragraph (b) below. YES, because the only payments or credits were made on or after July 22, 1996. If it is an offset credit (TC 700, TC 706, TC 730, etc.), the 2-year rule is based on the cycle. Cycle 9630 or later (IRC 6511(b)(2)(B)). Go to Question B below. YES, because an agreement to extend the time for assessment expired on January 23, 1998, or (IRC 6511(c)(2)). Go to Question B below. NO, because (1) the return was filed before July 22, 1995; (2) all payments or credits were made before July 22, 1996; and (3) any agreements to extend the time for assessment expired before January 23, 1998. The underpayment netting status of the entire tax period or module is CLOSED. Adjust ACT/DMI accordingly to prevent netting of statute barred underpayment interest. UNCLEAR, because payments or credits were made both before July 22, 1996 and after July 22, 1996. In this type of case, split the underpayment year into two separate modules if the later payment(s) was made after July 22, 1998. If the year is split, the separate module containing the payment(s) or credit(s) made prior to July 22, 1996 will be CLOSED. The status of the separate module containing the remaining payment(s) or credit(s) will be evaluated under Question B below. Example: (Split Modules Required) - The tax year is 1992 and the return was filed on March 15, 1993. There is an underpayment in the amount of $1,000,000.00 as of March 15, 1993. The taxpayer made a $ 500,000.00 payment on February 1, 1996. The taxpayer made a second payment of $500,000.00 on February 1, 2000. The taxpayer filed an interest netting request on January 15, 2002. As of July 22, 1998, the period of limitations for claiming a refund had expired, because the February 1, 1996 payment had been made more than two years before that date. The 1992 tax year must be split into two separate modules. Module 1 will run from March 15, 1993 to February 1, 1996 and include the $500,000.00 liability that was satisfied by the 1996 payment. Module 1 is CLOSED and cannot be netted. Module 2 will run from March 15, 1993, and include only the $500,000.00 liability that was satisfied by the February 1, 2000 payment. To determine the netting status of Module 2, go to Question B below. Example: (Split Modules Not Required) The underpayment tax period is 1993 and the return was filed March 15, 1994. The tax reported on the return was satisfied with payments dated April 25, 1994 and August 1, 1996. The request for pre-enactment interest netting was filed December 14, 1999. The underpayment does not need to be split into two separate modules. As of July 22, 1998, the period of limitations for claiming a refund had not expired, due to the payment made on August 1, 1996, which is less than two years prior to July 22, 1998. To determine the netting status of the 1993 underpayment year, go to Question B below. QUESTION B - Designate either the entire tax year or the separate module as OPEN, CLOSED OR USE. Was the request filed by December 31, 1999? If YES, then the underpayment netting status is "OPEN" . If NO, was the refund period of limitations open for the year when the netting request was filed? If YES, then the netting status of the underpayment year or the separate module is "OPEN" . If NO, then the netting status of the underpayment year or the separate module is "USE" . A refund or credit of underpayment interest cannot be made. However, the underpayment period may be used to equalize an "OPEN" overpayment on another tax module. See Rev. Proc. 99-43 section 4.04(2) and Rev. Proc. 2000-26, section 4.03(2). Caution: When an underpayment period or module is designated OPEN, the amount of credit or refund may not exceed the portion of the tax paid: Note: If NO, then the netting status of the underpayment year or the separate module is "USE" . A refund or credit of underpayment interest cannot be made. However, the underpayment period may be used to equalize an "OPEN" overpayment on another tax module. See Rev. Proc. 99.43, section 4.04(3) and Rev. Proc. 2000-26, section 4.03(2). When an underpayment period or module is designated OPEN, the amount of credit or refund may not exceed the portion of tax paid: Within the period immediately preceding the filing of the request equal to 3 years plus the period of any extension of time for filing the return (IRC 6511(b)(2(A)); or Within the two-year period immediately preceding the filing of the request IRC 6511(b)(2)(B); or After the execution of an agreement to extend the time for assessment and before the filing of the request for netting, plus the portion of the tax that would have been open under the two or three year period of limitations as described in IRC 6511(b)(2)(A) or IRC 6511(b)(2)(B), if a request had been filed on the date the agreement was executed. Example: 1 - The underpayment year is 1993 and the return was filed March 15, 1994. Therefore, the 3-year limitations period expired March 15, 1997. The taxpayer made a payment on January 1, 1996 (2-year limitations expired January 1, 1998). The taxpayer made a subsequent payment on January 1, 2000 (2-year limitations period expired January 1, 2002). The request for pre- and post-enactment interest netting was filed on December 1, 2011. For net rate purposes, the 1993 tax year must be split into two modules. The module containing the January 1, 1996 payment and the liability satisfied by that payment, is "CLOSED" . The module containing the January 1, 2000 payment, and the liability satisfied by that payment, is "USE" . Example: 2 - The facts are the same as in Example 1, except there is no payment dated January 1, 2000; the payment dated January 1, 1996 is dated August 1, 1996; and the netting request was filed by December 31, 1999. Because all payments were made on or after July 22, 1996 (July 22, 1998 minus the 2-year look-back period), tax year 1993 is OPEN for purposes of applying the net rate. Example: 3 - The underpayment year is 2005 and the return was filed March 15, 2006 (3-year limitations period expired March 15, 2009). The taxpayer made a payment of $500.00 on May 1, 2009 (2-year limitations expired May 1, 2011). The taxpayer made a subsequent payment of $100.00 on August 1, 2012. A request for post-enactment interest netting was filed on July 1, 2013. For net rate purposes, tax year 2005 is OPEN. The amount of the refund is limited to the amount of the August 1, 2012 payment. If the amount of the netting benefit exceeds $100.00 and the status of the overpayment is OPEN, then the full adjustment is made on the overpayment side as additional overpayment interest. This is accomplished by designating the underpayment year or module as USE. If the netting benefit exceeds $100.00 and the status of the overpayment side is USE, then the adjustment is made on the underpayment side as a refund of $100.00 in underpayment interest. The status designation of the underpayment year or module is maintained as OPEN.
Determine the "Netting Status" for Credit or Refund of Overpayment Interest
20.2.14.6.6.2 (08-18-2025) Determine the "Netting Status" for Credit or Refund of Overpayment Interest Each overpayment within a tax module or period must be evaluated separately to determine if it is "OPEN" , "USE" or "CLOSED" under the 6-year period of limitations. If the tax year or module contains no overpayment interest, the ACT/DMI status does not matter. Any status may be input as there is no overpayment interest to net. The questions in the following paragraphs must be answered to determine the netting status for credit or refund of overpayment interest. Was the request received within six-years from the date of scheduling of the overpayment? (This is generally the 23C date of the TC 840 or TC 846, and the cycle date of TC 820 or TC 826). YES — The overpayment netting status is "OPEN" . Additional interest may be allowed on the overpayment in which the period of limitations is open. See Title 28 U.S.C. sections 2401 and 2501, and IRC 6407. NO— Go to Paragraph (3). If the status of the overpayment cannot be designated as "OPEN" based on the criteria in Paragraph (2) above, does the request involve overpayment interest that accrued before October 1, 1998 (pre-enactment interest)? NO — The status of any overpayment where interest accrued solely on or after October 1, 1998 is "USE" . A refund or credit of interest attributable to the overpayment may not be made. However, an overpayment with USE status may be used to equalize an OPEN underpayment period or module. YES — Go to Paragraph (4) Was the 6-year period of limitations "OPEN" for the specific overpayment as of July 22, 1998? Note: The term "open" includes periods of limitations that have not expired or have not started running as of July 22, 1998. For a refund (TC 840, TC 846), the scheduling date of the refund must be July 22, 1992 or later. For an offset (TC 820, TC 826), the 6-year rule is based on the cycle (Cycle 9230 or later.) See Title 28 U.S.C. sections 2401 and 2501, and IRC 6407. NO — The netting status of the specific overpayment is "CLOSED" for pre-enactment interest netting. Adjust ACT/DMI accordingly to prevent the calculation of any statute barred overpayment interest. YES — Was the request filed by December 31, 1999? If Yes If No The netting status of the specific overpayment is "OPEN" . Allow additional overpayment interest. See Rev. Proc. 99-43, section 4.02(3). The netting status of the specific overpayment is "USE" . No refund or credit of overpayment interest can be made. However, the overpayment may be used to equalized an "OPEN" underpayment period or module. See Rev. Proc. 2000-26, sections 4.03(1) and (2). Example: 1- The tax period is 1991. Overpayments were scheduled on March 1, 1992 and March 1, 1999. The underpayment period to be netted was open as of July 22, 1998. A request for pre and post enactment interest netting was filed on September 2, 2000. For net rate purposes, interest attributable to the March 1, 1992 overpayment is CLOSED. Interest attributable to the March 1, 1999 overpayment is OPEN. The overpayment year must be split into two modules to reflect these separate statuses. Example: 2- The facts are the same as in Example 1, except the overpayment schedule on March 1, 1992 was scheduled August 1, 1992, For net rate purposes, interest attributable to the August 1, 1992 overpayment is USE. Interest attributable to the March 1, 1999 overpayment is OPEN. If the netting request had been filed by December 31, 1999, interest attributable to the August 1, 1992 overpayment would also be OPEN and there would be no need to split the overpayment year into two separate modules. Example: 3- The tax period is 2004. Overpayments were scheduled on May 1, 2005 and May 1, 2007. A request for post enactment interest netting was filed on June 1, 2001. For net rate purposes, interest attributable to the may 1, 2005 overpayment is USE. Interest attributable to the March 1, 2007 overpayment is OPEN. The 2004 overpayment year must be split into two modules to reflect the separate statuses.
Determine "Unsettled" Netting Status
20.2.14.6.6.3 (08-18-2025) Determine "Unsettled" Netting Status The "UNSETTLED" status is intended to be selected when there are module balances, either underpayments or overpayments. ACT/DMI will automatically offset overpayments to any outstanding underpayments provided there is a benefit to the taxpayer from offsetting. These offsets are shown on the ACT/DMI reports to suggest how the offsets or credit transfers should be done. The ACT/DMI software does not perform the actual offsets or credit transfers on IDRS or Master File. See IRM 20.2.14.6.8, for information on offsets.
Net Rate Adjustments Involving More Than Two Tax Periods
20.2.14.6.7 (02-01-2017) Net Rate Adjustments Involving More Than Two Tax Periods There will be occasions where multiple tax periods are involved in a net rate adjustment that can result in more than one overlapping or net rate period. There can be multiple overlapping periods that cannot be used in making a net rate interest adjustment. Note: An overlapping period may not be used to the extent it involves an overpayment that was issued without interest. Example: On September 30, 2009, Garfield Incorporated filed a request to have the net rate applied to Form 1120 for tax year 200609. On December 23, 2008, Garfield Inc. agreed to, and fully paid, an underpayment of $97,000.00 for its 200609 Form 1120. A $27,000.00 overpayment was allowed for Garfield Inc.'s Form 1120 for 200709, based on an amended return. A refund with interest was issued on October 15, 2008. On April 3, 2009, an audit of the taxpayer's Form 941 for the fourth quarter of 2007 determined an IRS-initiated overpayment of $5,000.00, which was refunded with interest on August 22, 2009. See Figure 20.2.14-16, Garfield Incorporated Overlapping Period Time Line. Figure 20.2.14-16 Figure 20.2.14-16 Overlapping Period Time Line with More than Two Tax PeriodsThe following display shows a time line as described in the text reflecting the overlapping and unnetted periods of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200609, Form 1120, Underpayment, 12152006, $97,000.00200709, Form 1120X, Overpayment, 12152007, ($27,000.00)200712, Form 941, Overpayment, 01312008, ($5,000.00)200709, Refund, 10062008, $27,924.52200609, Payment, 12232008, ($111,817.16)200712, Refund, 06292009, ($5,320.59)From 1 to 2: Unnetted periodFrom 2 to 4: First overlapping periodFrom 3 to 5: Second overlapping periodFrom 5 to 6: Unnetted period Please click here for the text description of the image. 200609 Form 1120 underpayment period is from 12152006 to 12232008 (normal corporate rate). 200709 Form 1120-X overpayment period is from 12152007 to 10062008 (normal and GATT rate). 200712 Form 941 overpayment period is 01312008 to 06292009 (Refund date minus 54-Day back-off period at the corporate overpayment rate). First overlapping period is 12152007 to 10062008. Second overlapping period is 01312008 to 12232008. Unnetted overpayment period remains from 12232008 to 06292009 based on the 200712 Form 941 overpayment. Unnetted underpayment period remains from 12152006 to 12152007 based on the 200609 Form 1120 underpayment.
Offset Methodology
20.2.14.6.8 (08-18-2025) Offset Methodology Whenever possible [except as stated in IRM 20.2.14.6.8 (3), offset a credit against a liability. When an underpayment and an overpayment are processed concurrently, offsets will take place systemically if no restrictions exist on the modules involved with the offset. If Master File restrictions do not allow systemic offset, the offset must be made manually. See Exhibit 20.2.14-3, Offset Methodology Examples, to illustrate the impact of the offset process on the net rate provision. To the extent that an underpayment has been partially or fully paid, the liability is not considered to be "outstanding" for purposes of offsetting an overpayment with an earlier availability date. Example: A TC 640 is posted to a 200612 Form 1120 underpayment module on 08262009 (the payment could also be posted with other transaction codes such as TC 670, TC 680, TC 706, etc.), but does not full pay the liability. An overpayment from 200812 later becomes available, and is for an amount greater than the remaining balance due on 200612. Only offset an amount from 200812 to 200612 to fully satisfy the "outstanding" portion of the 200612 liability. Do not offset excess credit on 03152009 that will cause a refund of all or part of the TC 640 dated 08262009. The remaining 200812 overpayment will then be refunded with interest from the 200812 credit availability date. Note: The limitation on the amount offset creates an overlapping period between 03152009 and 08262009. There is no authority to increase the offset amount to avoid the interest rate differential.
Identifying Modules Involved in Net Rate Adjustments
20.2.14.6.9 (08-18-2025) Identifying Modules Involved in Net Rate Adjustments The following information is available on IDRS to identify a module affected by net rate interest adjustments: A TC 34X with a correspondence date of 07221998 (IRC 6621(d) enactment date). This date will appear only if the adjustment was input using IDRS Command Code (CC) ADJ54. It is not input with CC AMCLS. A control base closed with the activity code "netrate" and or Control Category INTC. Transaction Code 971, Action Code 355 (BMF modules only). Accounts Management Services (AMS) [previously Desktop Integration (DI)] can be used to determine if netting occurred and identify the tax periods involved. Caution: The above information may not be present on all affected modules. Regardless of the information that appears on IDRS, the net rate source document(s) must be secured before proceeding with a subsequent adjustment. The complexity of net rate adjustments requires extensive documentation of the facts used to make the computation. In addition, all interest computations described in IRM 20.2.14.6.10 must be included with the work papers for each tax period involved with the net rate request. The relevant ACT/DMI computation reports and the information they contain that is specific to net rate interest adjustments are described as follows: ACT/DMI Report 020 - Principal and Interest Adj. Summary -The "Computed Individual Modules" section of the ACT/DMI Report 020 summarizes the results of all modules without net rate interest netting, while "Computed Modules with Netting," shows the modules after netting has taken place. The "Deficiency Interest," "Overpayment Interest," and "Principal" columns correspond to the "Adjustment" columns in the final sections of the pre- and post-netting Reports 490. The "Netting Benefit" that appears in the lower right hand corner of the ACT/DMI Report 020 is the difference between the "Total" columns in the top and bottom sections of the report. ACT/DMI Report 490 Activity Summary - This report header does not differ from the non-netting report. However, the module's underpay or overpay status (open, use, or closed) in the upper right hand corner is significant for net rate purposes. When Report 490 is created based on the net rate, it will differ from a single module report because of the transactions added as a result of the netting adjustment(s). The netting transactions, numbered in the 1500 and 1600 series, are unique numbers to the ACT/DMI program and do not correspond to any actual transaction codes found on IDRS transcripts. The first section of the report will show all the transaction numbers with their descriptions, while the second section of the report will show how the transactions were used in the net rate computation. The transaction numbers themselves will not be displayed in the second section, but their effect upon the computation will appear with the letters "NR" for net rate (e.g., NR underpay @ GATT, NR overpay @ underpay, etc.), and correspond to the overlapping periods and amounts on the Report 530. The third and final section on this report shows the total overpayment and underpayment interest with "Adjustment" column figures that correspond to the amounts of the second section of the Report 020. ACT/DMI Report 530 Adjustments/Positions - This report is used to show the net rate information (see Exhibit 20.2.14-6, and Exhibit 20.2.14-7). The Report 530 shows: "N-Amt/Net Rate Amount" – provides the amount of overpayment or underpayment that the net rate was applied to. The same "N-Amt" information is shown for each year involved with the net rate adjustment. "N-Beg/Beginning Overlapping Period" - provides the beginning date of the overlapping interest period used in the net rate computation. The same "N-Beg" information is shown on the year that caused the net rate adjustment to be made (usually the overpayment year) and the year on which the net rate adjustment was made (usually the underpayment year). "N-End/Ending Overlapping Period" - provides the ending date of the overlapping interest period used in the net rate computation. The same "N-End" information is shown on the year that caused the net rate adjustment to be made (usually the overpayment year) and the year on which the net rate adjustment was made (usually the underpayment year). "N-MFT/Net Rate MFT" – provides the Master File Tax Class Code for the return to which the net rate was applied and the return that caused the net rate adjustment. On the return to which the net rate adjustment was made, the MFT Code is the return that caused the net rate adjustment to be made. On the return that caused the net rate adjustment, the MFT Code is the return to which the net rate adjustment was made. "N-Per/Net Rate Tax Period" - provides the tax period for the return to which the net rate adjustment was made and the tax period of the return that caused the net rate adjustment. For the return to which the net rate adjustment was made, the "N-Per" is the return that caused the net rate adjustment to be made. For the return that caused the net rate adjustment to be made, the "N-Per" is the return to which the net rate was applied. Unnetted - Provides the tax period(s) and amount(s) that are unnetted. Any portion of the interest computation period not used for netting is deemed unnetted. Note: Attaching the ACT/DMI Report 530 to net rate adjustment documents replaced the need for the "N-Information" fields on CC ADJ54, so those fields were removed.
Processing Actions for Posting Net Rate Interest Adjustments
20.2.14.6.10 (08-18-2025) Processing Actions for Posting Net Rate Interest Adjustments Specific actions must be taken to post the required adjustment(s) to all tax modules involved with the net rate request. When processing a net rate request for abatement or refund and no current tax adjustment activity exists, post the adjustment as follows: CC REQ54 Item Description Blocking Series (BLK) Use BLK 00 if the original return or controlling DLN is included with the adjustment document. If the original or controlling DLN is NOT included but needs to be pulled and added to the adjustment, use BLK 18. If the module has an open AMS base and the documents do not need to be retained, use BLK 05 for IMF cases or BLK 15 for BMF cases. TC 34X Underpayment interest adjustment (TC 340 for "zero" is required if no decrease or increase is applicable). See note below. DB-INT-TO-DT Input the date underpayment interest was last assessed (RDD is used if no underpayment interest exists on that year). TC 770 Overpayment interest adjustment (input is not required if interest adjustment amount is zero) TC 772 can be input as long as the module will be in a balance due status after posting. If the module will be overpaid after the TC 772 posts, consider IRM 20.2.14.6.10(4). CR-INT-TO-DT The date overpayment interest is computed to (input is not needed if amount is zero or if TC 772 is input). CORRESP-DT Input 07221998 (IRC 6621(d) enactment date). AMD-CLMS-DT Receive date of the request. Activity Netrate Hold CD Use 3 (Do not allow a generated notice to be issued to the taxpayer. Send the taxpayer the appropriate letter). TC 971 Action Code 355 To identify the module resulting from a net rate adjustment. Note: Even when the net rate adjustment is made to the underpayment year, it is necessary to input a TC 340 with a "zero" amount on all overpayment years involved with the net rate adjustment(s). This action is required to identify all overpayment periods included in the current net rate adjustment so that used overlapping periods may not be used again in a subsequent netting adjustment. If a year contained in the net rate request is unnetted because of no overlapping periods, input a TC 290 for "zero" with Blocking Series 18 to properly identify that the module was not used for a net rate adjustment. For tax periods in which current tax adjustment activity exists, there are two types of input formats to consider. Enter the adjustments based on the input format your area uses. A two-step process is required to allow for a notice of adjustment to be issued that does not contain a correspondence date of July 22, 1998. For non-Examination or non-Appeals related tax adjustments. Step 1 input the following information using CC REQ54: Item Description BLK Use BLK 00 if the original return or controlling DLN is included with the adjustment document. If the original return or controlling DLN is NOT included but needs to be pulled and added to the adjustment, use BLK 18. If the module has an open CII base and the documents do not need to be retained, use BLK 05 for IMF cases or BLK 15 for BMF cases. TC 29X Tax adjustment. TC 34X Underpayment interest adjustment (TC 340 for "zero" is required if no interest decrease or increase is applicable. See not below). DB-INT-TO-DT Input the date underpayment interest was last assessed (RDD if no underpayment interest exists on that year). TC 770 Overpayment interest adjustment ( input is not needed if interest adjustment amount is zero). A TC 772 can be input if the module will be in balance due status after posting. If the module will be overpaid after the TC 772 posts, follow procedures in IRM 20.2.14.6.10(4). CR-INT-TO-DT The date overpayment interest is computed to (input is not needed if the amount is zero or if TC 772 is input). CORRESP-DATE The date of the correspondence. AMD-CLMS-DT The receive date of the net rate request. Note: A notice may need to be issued for purposes of triggering the large corporate underpayment (LCU) interest rate. Attach all appropriate documentation to the adjustment. See IRM 20.2.14.6.10(6). Step 2: Use CC REQ54 and post delay one cycle the following information: Item Description BLK use 05 or 15. TC 340 Enter zero. DB-INT-TO-DT Input the same underpayment interest date used in Step 1 above (RDD is used if no underpayment interest is due on that year). CORRESP-DATE Input 07221998 (IRC 6621(d) enactment date). AMD-CLMS-DT Input the request receive date. Activity Input netrate. Hold CD Input 3. Remarks Notate that the "interest computations are attached to the previous interest adjustment made one cycle earlier" . Note: Even when the net rte adjustment is made to the underpayment year, it is necessary to input a TC 340 with a "zero" with Blocking Series 18, to properly identify that the module was not used for netting. For Examination or Appeals related adjustments, a two-step process is required Step 1 Input the following information on the appropriate adjustment, Form 5344, Examination Closing Record or Form 5403, Appeals Closing Record, and submit for processing. Item Description TC 30X Input the tax adjustment. TC 34X Input the underpayment interest adjustment TC 340 for "zero" is required if no interest decrease/increase is applicable. See not below). DB-INT-TO-DT Input the date underpayment interest was last assessed (RDD is used if no underpayment interest exists on that year). TC 770 Input the overpayment interest adjustment (input is not needed if the amount is zero). A TC 772 can be input if the module will be in a balance due status after posting. If the module will be overpaid after the TC 772 posts, consider IRM 20.2.14.6.10(4). If the tax adjustment is an incease of $100,000 or more do not use a hold code to suppress the adjustment notice. Note: A notice may need to be issued for purposes of trigging the LCU interest rate. Any and all other pertinent or required entries per IRM 4.4.1, AIMS/Processing Handbook, Introduction and IRM 2.8.7, Audit Information Management Systems (AIMS), validity and Consistency-Introduction, etc. Attach all appropriate documentation to the adjustment. See IRM 20.2.14.6.10. Step 2. Use CC REQ54 and post delay one cycle the following information: Item Description BLK Input 05 for IMF or 15 for BMF. TC 340 Enter "zero" . DB-INT-TO-DT Input the same underpayment interest date used in Step 1 above (RDD is used if no underpayment interest is due on that year). CORRESP-DATE Input 07221998 (IRC 6621(d) enactment date). AMD-CLMS-DT Input the receive date of the request, if applicable. Activity Input netrate. Hold CD Input 3. PSTING-DLAY-CD Input 1. Remarks Notate that the "interest computations are attached to the previous interest adjustment entered one cycle earlier" . Note: Even when the net rate adjustment is made to the underpayment year, it is necessary to input a TC 340 with a "zero" amount on all overpayment years involved wit the net rate adjustment(s). This action is required to identify all overpayment periods included in the current net rate adjustment so that used overlapping periods may not be used again in a subsequent net rate adjustment. If a year requested in the request is unnetted because of no overlapping periods, input a TC 290 for "zero" with Blocking Series 18, to properly identify that the module was not used. Master File does not recognize a TC 772 as a total consideration of all overpayment interest (i.e., an overpayment interest combination adjustment which may include netted or additional overpayment interest etc.). As a result, if the tax period has an overpayment at the time of posting, it will calculate overpayment interest again, post an erroneous TC 776 amount, and issue a refund with too much interest. To avoid this, it is necessary to cycle the adjustment into two parts. The first part will be to calculate your interest to the 23C date of the following cycle, post the necessary adjustments including the TC 772 to the current cycle, using a hold code to prevent Master File from posting a TC 776 and releasing the credit. The second part is to cycle delay one week (to match the interest to date) and input a TC 340 for "zero" and TC 770 for "zero" to release the credit for refund. Be sure to use a hold code that only holds the notice. Note: Unlike a TC 772, Master File recognizes a TC 770 as the current total computation of overpayment interest and generally will not post a TC 776. Transaction Code (TC) 971 Action Code 355 is used to readily identify BMF modules affected by net rate interest computations. Master File programming does not allow input of this information for IMF modules. If a tax period included with the request is unnetted due to no overlapping period(s), input of TC 971 AC 355 is not necessary. The latest adjusted tax period is cross-referenced by the input of TC 971 AC 355 using CC REQ77 on all other modules (see exception below for cases involving multiple TINs). Referencing the latest adjusted tax period will identify where the complete copy of the case file is located. The following information is required for input on all but the tax period where the case file is to be located: TC - 971 TRANS-DT - The received date of the request. TC 971/151-CD - 355 XREF-TIN - The EIN where the case file is to be located. XREF-X-PRD - The tax period where the case file is to be located. XREF-MFT - The MFT where the case file is to be located. The literal NET-RATE is automatically move into the MISC field. Note: On the tax period where the complete copy of the case file is to be located, input separate Transaction Codes 971 AC 355 to cross-reference each module for every tax period involved in the request. Exception: When multiple TINs are involved, the case file should be associated with the latest adjusted tax period for the parent corporation or surviving entity. In addition to the actions described above, ensure the following information is part of the source documents filed with all but the last tax year involved with the net rate adjustment. See Exhibit 20.2.14-17, Net Rate Request Processing, which provides additional documentation requirements. The latest adjusted tax period should be cross-referenced with TC 971 AC 355. See the TC 971 AC 355 procedures above in IRM 20.2.14.7.10(5) including the exception for multiple TIN cases. A copy of the written request or claim Form 843. The original is to be attached to the last year of adjustment. ACT/DMI Report 490(post-netting). Only for the tax year in which the adjustment pertains. A copy of the appropriate power-of-attorney (POA) form. A copy of the current allow or partial allowance letter from the IRS. The taxpayer's copy of the letter must include copies of the ACT/DMI Reports 020, 490, and 530. Any re-file documents that you have in your possession. In addition to the attachments described above, the last year of adjustment must have the following information attached: ACT/DMI Report 490 (pre and post-netting) and ACT/DMI Report 530(post-netting), as well as all interest computations made by the taxpayer, for all tax periods involved. ACT/DMI Report 020. Any pertinent correspondence and information from the taxpayer or the representative. Any personal notes or observations pertaining to the request that would be helpful to the next tax examiner who may have to update the interest or process a subsequent adjustment on the account. Note: These source documents are in addition to any normal attachments required in the work process, regardless of the area working the account. Exception: If a request includes adjustments to two types of tax, for example, both Form 941 and Form 1120 accounts, the attachments for the last year of the adjustment should be associated with the most recent tax year Form 1120 account. This is because the retention period for Form 1120 is much longer than for Form 941 (e.g., a net rate request is filed that results in adjustments to Form 1120 accounts for tax periods ending December 31, 2003, through December 31, 2006, and a Form 941 account for the period that ends March 31, 2009. Although the Form 941 is the last year of adjustment, the attachments will be associated with the Form 1120 account for the tax period ending December 31, 2006).
Special Net Rate Interest Computations
20.2.14.6.11 (02-01-2017) Special Net Rate Interest Computations When a net rate adjustment has previously been made and only part of the overpayment or underpayment period was used, you must be aware of the overpayment or underpayment amount available during the unnetted overpayment or underpayment period(s). If a subsequent underpayment or overpayment occurs that overlaps any of the unnetted period(s), a determination of the available overpayment or underpayment amount that can be used during the subsequent or new overlapping period(s) must be made. This information will reflect how much of an underpayment or overpayment that can be netted during this time frame. See Exhibit 20.2.14-5 for examples illustrating the special computations required in this situation. See Exhibit 20.2.14-6 for net rate computations involving more than one overpayment period. The exhibit provides the interest computation using ACT/DMI and explains how to determine whether the net rate computation was accurately computed. When using ACT/DMI, special information is provided that must be considered when verifying the accuracy of a net rate adjustment. See Exhibit 20.2.14-8 for non-corporate computations before and after the 01/01/1999 rate equalization provided by section 3302 of the Restructuring and Reform ACT (RRA) of 1998. The exhibit also explains how to verify unnetted amounts and the accuracy of a net rate computation. See Exhibit 20.2.14-10 for applying the net rate to a settled underpayment year when currently working on an overpayment year that creates an overlapping period. This example also explains verifying the accuracy of the net rate computation using ACT/DMI. See Exhibit 20.2.14-11 for net rate computations when Form 2285 is used reflecting the tax liability adjustments. See Exhibit 20.2.14-12 for net rate computations involving a subsequent interest adjustment after the net rate was applied. The exhibit provides a two-part example to illustrate that a taxpayer can only receive a one-time benefit of a net rate interest period that is used to the extent of equivalent amounts of overpayment and underpayment.
TETR (Telephone Excise Tax Refund) Overpayment Interest
20.2.14.6.11.1 (08-18-2025) TETR (Telephone Excise Tax Refund) Overpayment Interest In May of 2006, the IRS agreed that amounts paid by taxpayers for the one time-only telephone service as defined in IRC 4252(b)(1) are not subject to the tax imposed by IRC 4251. Taxpayers may be entitled to request credit or refund of the excise taxes paid for the services and time frames covered in Notice IRB 2006-50. Notice IRB 2006-50 states that for taxes billed after February 28, 2003, a Form 8913, Credit for Federal Excise Tax Paid, must be filed with the tax return for 2006. This covers tax periods 200612 through 200711. Form 8913 instructs taxpayers to enter the amount of refundable tax paid in column (d). Interest is computed by the taxpayer on the amount in column (d) and entered in column (e). Interest is computed from the dates indicated in the chart shown in Figure 20.2.14-17to 45 days beyond the due date or the filing date, whichever is later. Example: Diamond Communications had an extension to file their Form 1120 for 200612 to 09152007. They filed the return on 09152007 and computed interest for each line of Form 8913 to 10302007, which is 45 days beyond the date they filed their return. This example will be used throughout this section. Figure 20.2.14-17 Line from Form 8913 Interest Begins to Accrue on Line 01 August 1, 2003 Line 02 November 1, 2003 Line 03 February 1, 2004 Line 04 May 1, 2004 Line 05 August 1, 2004 Line 06 November 1, 2004 Line 07 February 1, 2005 Line 08 May 1, 2005 Line 09 August 1, 2005 Line 10 November 1, 2005 Line 11 February 1, 2006 Line 12 May 1, 2006 Line 13 August 1, 2006 Line 14 November 1, 2006 Form 8913 was developed to incorporate all 14 periods covered by Notice IRB 2006-50 into the 2006 tax return instead of requiring the taxpayer to file tax returns for each individual period. Each line represents a 3-month period with the exception of line 14 which represents 2 months. When applying the GATT rate, each of the 14 periods are entitled to the first $10,000 dollars of the overpayment interest at the high rate. Instructions for computing overpayment interest on Form 8913 can be found in IRM 20.2.10.4.4, Telephone Excise Tax Refund (TETR) Claims, and adjustment procedures can be found in IRM 21.7.4.4.2.2, Telephone Excise Tax Refund (TETR).
Net Rate Netting of TETR Overpayment Interest
20.2.14.6.11.1.1 (02-01-2017) Net Rate Netting of TETR Overpayment Interest Each line of Form 8913 (lines 1-14) must be set up in ACT/DMI as a separate module. Master File information for tax year 2006 cannot be automatically imported into ACT/DMI because of the special handling required for the Form 8913 information. The tax year is 2006 for all 14 lines from Form 8913, so a description must be entered in the Desc column of ACT/DMI for each line to distinguish the line number. Figure 20.2.14-18 provides the top portion of the ACT/DMI screen for lines 01 through 03 of Form 8913. Figure 20.2.14-18 SEL Jurisdiction TIN Tax Type Tax Period Additional Description Status GATT LCU Box Checked Federal 99-9999999 1120 200612 Line 01-Form 8913 Open/Open GATT ON LCU OFF Box Checked Federal 99-9999999 1120 200612 Line 02-Form 8913 Open/Open GATT ON LCU OFF Box Checked Federal 99-9999999 1120 200612 Line 03-Form 8913 Open/Open GATT ON LCU OFF
Entering Form 8913 Module Information into ACT/DMI
20.2.14.6.11.1.1.1 (08-18-2025) Entering Form 8913 Module Information into ACT/DMI ACT/DMI and CC COMPA begin charging interest 1 day after the date entered as the start date. Therefore, the start date entered in ACT/DMI must be 1 day prior to the dates shown in the chart in Figure 20.2.14-17. Example: Line 01 of the chart in Figure 20.2.14-17 shows a start date of August 1, 2003. The date entered into ACT/DMI for line 01 is July 31, 2003. Using the amounts from the mock-up of Form 8913 shown in the Figure 20.2.14-19 table for Diamond Communications, enter the amount of tax credit shown in column (d) as a TC 766 and a date of 07/31/2003. This date is used for the Line 01 module only. Figure 20.2.14-19 Item (a)-Billis dated during (b) Long distance service (c) Bundled service (d) Tax credit or refund (add columns (b) and (c)) (e) Interest (see Instructions) 01 March, April and May 2003 - - $30,330.00 $5,987.69 02 June, July and August 2003 - - 30,330.00 5,743.35 03 September, October and November 2003 - - 30,330.00 5,560.87 04 December 2003: January and February 2004 - - 28,675.00 5,096.24 05 March, April and May 2004 - - 28,675.00 4,867.53 06 June, July and August 2004 - - 28,675.00 4,667.79 07 September, October and November 2004 - - 28,675.00 4,413.93 08 December 2004: January and February 2005 - - 26,750.00 3,893.73 09 March, April and May 2005 - - 26,750.00 3,580.74 10 June, July and August 2005 - - 26,750.00 3,245.56 11 September, October and November 2005 - - 26,750.00 2,864.66 12 December 2005: January and February 2006 - - 24,500.00 2,311.29 13 March, April and May 2006 - - 24,500.00 1,945.08 14 June and July 2006 - - 18,900.00 1,224.71 Enter the amount shown on column (e) of the mock-up Form 8913 into ACT/DMI as a TC 776 with the date the interest was computed TO. Example: Using Figure 20.2.14-19, the TC 776 amount would be $5,987.69 for Line 01 (Module 01) with a date of October 30, 2007. In the example, overpayment interest has been computed to 10/30/2007 and given to the taxpayer as of the due date of the return (03/15/2007). Therefore, the entire amount of the credit allowed (TC 766 plus TC 776) must be removed from the module as of the date interest was computed to; 10/30/2007. Use TC 1112 (Miscellaneous Debit) with the date interest was computed TO. See Figure 20.2.14-20. Figure 20.2.14-20 Ref Code Description Date Amount Start Adj/End Balance Add Excl SOL 10 766 Generated Refundable Credit Allowance 07312003 (30,330.00) - - (30,330.00) Box Checked - - 20 776 Generated Interest due on Overpayment 10302007 (5,987.69) - - (36,317.69) Box Checked O - 30 1112 Miscellaneous Debit 10302007 36,317.69 - - .00 Box Checked - - The above information must be input for each line 01 through 14 of Form 8913 in a separate ACT/DMI module for each line item.
Enter Non-TETR Data for Tax Year 2006
20.2.14.6.11.1.1.2 (02-01-2017) Enter Non-TETR Data for Tax Year 2006 If the tax period for 2006 contains any periods of overpayment or underpayment other than the TETR refund, it must also be entered into ACT/DMI as a separate module. Enter "Main Module" in the description line when creating this module. Remove the "O" in the "Excl" column of ACT/DMI for the TC 776 that represents the total interest computed on Form 8913. This amount of overpayment interest is for the periods represented on Form 8913 and should not be included in the total amount of overpayment interest computed for tax period 2006. Master file posts the TETR TC 766 and TC 776 with the due date of the return. However, the interest is computed to 45 days beyond the due date or filing date, whichever is later. Therefore, the total amount of the TC 766 and TC 776 that represents the TETR refund must have any additional overpayment interest suspended from the due date of the return to the date the interest was computed to on Form 8913. Example: Diamond Communications has a TC 766 and TC 776 which totals $435,993.17. This amount will be entered into ACT/DMI with a TC 1011, Suspend Overpayment interest, and suspension dates from 03152007 to 10302007. All other information for tax year 2006 will be entered normally. Because of the special handling required for this module, the automatic import feature of ACT/DMI is NOT recommended.
Netting TETR and Non-TETR Modules
20.2.14.6.11.1.1.3 (02-01-2017) Netting TETR and Non-TETR Modules Once the modules for Form 8913 and tax year 2006 have been entered into ACT/DMI, all other years included on the net rate request will be entered as they are for any normal net rate request. Netting will be performed using the modules for each line of Form 8913, the 2006 non-TETR data module and all other years in the net rate request. Example: Diamond Communications filed a net rate request on February 15, 2010, for tax years ending December 31, 2003, December 31, 2004 and December 31, 2006. The 200612 tax year contains overpayment interest paid on Form 8913. After the information for Form 8913 and tax year 200612 have been entered, enter all information into ACT/DMI for tax years December 31, 2003, and December 31, 2004. The automatic import feature can be used on these tax years. Follow normal net rate procedures as found in IRM 20.2.14.6.
Coordination with IRM 4.10.26
20.2.14.6.12 (08-18-2025) Coordination with IRM 4.10.26 IRM 4.10.26, Examination of Returns, Net Rate Netting Procedures for LB&I Cases, provides background information on net rate procedures to process taxpayer requests. The procedures therein apply to campus processing tax examiners and other similar technicians. The procedures in IRM 4.10.26, Examination of Returns, Net Rate Netting Procedures for LB&I Cases, apply only to examination personnel in LB&I and revenue agents who receive a taxpayer's net rate request before the case is closed. To the extent that inconsistencies are found, follow IRM 20.2.14.
Request for Abatement vs. Claim for Refund
20.2.14.6.13 (08-18-2025) Request for Abatement vs. Claim for Refund A request for abatement is a request for abatement of unpaid tax, penalty or interest. See IRC 6404(b). A claim for refund is a request for abatement and refund of tax, penalty or interest that has been paid. One of the exceptions to IRC 6404(b) is the application of the net rate during overlapping underpayment and overpayment periods under Rev. Proc. 2000-26, 2000-1 C.B. 1257, and IRC 6621(d), which allows for submission of a net rate request without the "tax" being paid. For more information, see IRM 25.6.1.10.1, Requests for Abatement. Claims for refund must be filed before the last applicable period of limitations expires. Refer to Exhibit 20.2.14-15 and Exhibit 20.2.14-16 for specific request processing procedures.
Computer Generated Within Module (Annual) Netting
Exhibit 20.2.14-1 Computer Generated Within Module (Annual) Netting TC POSTED TRANS-AMOUNT CYC DLN 150 05262008 2,500,000.00 200822 00311-302-00002-8 660 06152007 5,000,000.00- 200726 00397-101-00000-7 776 "05262008" 16,231.85- 200822 00311-302-00002-8 846 05262008 2,516,231.85 200822 00311-302-00002-8 420 09192009 0.00 200944 00977-000-00000-9 PBC>000 SBC>00000 EGC>00 300 12072009 729,890.00 200950 00347-532-00000-9 336 12072009 55,806.10 200950 00347-532-00000-9 777 "05262008" 4,731.39 200950 00311-"999" -00002-8 TC 776 and TC 777 contains the same date - - Julian Date 999 denotes netted interest
Manually Computed Within Module (Annual) Netting
Exhibit 20.2.14-2 Manually Computed Within Module (Annual) Netting TC POSTED TRANS-AMOUNT CYC DLN 150 05262008 2,500,000.00 200822 00311-302-00002-8 660 06152007 5,000,000.00- 200726 00397-101-00000-7 776 "05262008" 16,231.85- 200822 00311-302-00002-8 846 05262008 2,516,231.85 200822 00311-302-00002-8 420 09192009 0.00 200944 00977-000-00000-9 - PBC>000 SBC>00000 EGC>00 - 300 12072009 729,890.00 200950 00351-532-00000-9 772 "05262008" 4,731.39 200950 00351-532-00000-9 340 12072009 55,806.10 200950 00351-532-00000-9 TC 772 is input with the same date as the TC 776 - - - -
Offset Methodology Examples
Exhibit 20.2.14-3 Offset Methodology Examples Example: 1. Jasper Manufacturing's 2004 and 2005 corporate income tax returns are examined and an overpayment of $50,000.00 is determined on its 2004 return. The 2004 $50,000.00 overpayment was comprised of prepayment credits and was processible and timely filed. Jasper agreed to an underpayment of $30,000.00 on its 2005 tax return. There are no restrictions on either module. The appropriate closing documents are completed and input to Master File in the same cycle. Overpayment interest on the amount offset to year 2005 is computed from the due date of the 2004 return to the due date of the 2005 underpayment. Interest on the portion of the overpayment not offset accrues from the due date of the 2004 return to the refund schedule date. No underpayment interest is charged on the 2005 liability because it was paid in full by an overpayment that has an earlier availability date. No overlapping period of underpayment and overpayment interest exists because the offset process avoids creation of an overlapping period. Example: 2. In 2008, Dunn Dental agrees to an underpayment of $33,000.00 on its 200612 Form 1120 and files a Form 1120-X claiming an overpayment of $65,000.00 on the 200712 return. The Form 1120-X is reviewed, allowed, and processed at the same time as the 2006 underpayment. There are no restrictions on either module. The appropriate closing documents are completed and input to Master File in the same cycle. The underpayment interest is charged from the due date of the 2006 return to the availability date of the 2007 overpayment. The amount of overpayment needed to pay the tax and interest liability is offset, and the remaining overpayment has interest allowed to the refund schedule date. Even though both underpayment and overpayment interest were computed, no overlapping interest period exists because the offset process avoids creation of an overlapping period. Example: 3. Greene Corporation previously agreed to, but did not pay, an underpayment of $45,000.00 determined on its 200508 corporate return. The tax is assessed and underpayment interest is computed to the waiver date plus 30 days. There are no restrictions on the module, and when the subsequent notices are issued, Master File updates the underpayment interest accordingly. Greene Corporation timely files a Form 1120-X claiming an overpayment of taxes in the amount of $24,000.00 on its 200608 return. The Form 1120-X is accepted and processed. When the overpayment is posted, it will offset to the 200508 module. Since an overpayment is being used to reduce an earlier liability, no interest is allowed on the overpayment, and the underpayment interest assessed on the 200508 module is reduced. No overlapping period of underpayment and overpayment interest exists. Note: When a previously assessed, but unpaid, underpayment exists, any subsequently determined overpayment from another module is offset to the underpayment, preventing creation of an overlapping period. If computer restrictions prohibit a systemic offset, a manual offset must be made. Example: 4. On September 19, 2008, an overpayment of $527,000.00 is determined for Morgan Corporation's 2005 Form 1120. A tax increase of $200,000.00 on Morgan Corporation's 2003 Form 1120 is also determined. The 2005 overpayment is offset to pay the $200,000.00 tax increase. An overlapping interest period does not occur (between 2003 and 2005) because, as a result of the offset, interest on the overpayment and underpayment does not accrue during the same time period. The remainder of the 2005 overpayment is refunded with interest. Before Morgan Corporation's offset is made, the taxpayer advises the examining officer of the previously paid $50,000.00 tax underpayment on its 2004 Form 1120 on November 30, 2007. Morgan Corporation requests that the net rate be applied to the 2004 underpayment based on the overlapping interest period caused by the 2005 overpayment that refunded after offsetting the $200,000.00 to 2003. Exhibit 20.2.14-3 Offset Methodology Time LineThe following display shows a time line as described in the text examples concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200412, Form 1120, 03152005, Underpayment200512, Form 1120, 03152006, Overpayment200412, Payment date, 11302007200512, Refund date, XXXX2008, Note: the Xs represent the yet to be determined refund dateFrom 1 to 3: Underpayment interest periodFrom 2 to 4: Overpayment interest periodFrom 2 to 3: Overlapping Net Rate period Please click here for the text description of the image. The time line determines that an overlapping interest period exists from March 15, 2006, (the availability date of the 2005 overpayment), to November 30, 2007 (the date the 2004 underpayment was paid). The previously paid underpayment interest that was due during the overlapping period will be partially abated after applying the net rate to the underpayment period. The amount abated represents the interest differential paid by the taxpayer. Note: To the extent that an overpayment is offset against an underpayment, an overlapping period does not occur "between" the modules involved with the offset. However, either the overpayment or underpayment involved in the offset can have an overlapping interest period caused by another module in which an overpayment was refunded or offset with interest or an underpayment was determined or previously paid with interest.
Net Rate Computations - More than One Taxpayer Identification Number
Exhibit 20.2.14-4 Net Rate Computations - More than One Taxpayer Identification Number 1 - The examiner must review the net rate request to determine whether it includes more than one taxpayer identification number (TIN). A net rate adjustment cannot be made between different taxpayers. If the request involves more than one TIN, a determination must be made as to whether the different TINs can be treated as the "same taxpayer" for purposes of making a net rate interest adjustment. Caution: If making the determination is unclear, contact the revenue agent or Chief Counsel for advice. 2 - The examiner must ascertain the facts surrounding the relationships between TIN holders and analyze the facts in terms of applicable law. Note: Pursuant to IRC 1504(b)(3), a foreign corporation is excepted from being included in an affiliated gourp with its related domestic corporation. Accordingly, net rate adjustments between such entities is not allowed because they are not considered to be the "same taxpayer" . 3 - If it is determined that the multiple TINs are not the "same taxpayer" , the IRS will disallow the request. A formal disallowance letter that indicates the reason for the denial of the netting between TINs must be sent to the taxpayer if the request is a claim for refund. See IRM 21.5.3.4.6.1, Disallowance and Partial Disallowance Procedures. LB&I and revenue agents should follow instructions found in IRM 4.10.26.8.3. Letter 4128, Net Rate Netting Request Involving More Than One Tin, for specific instructions. Note: Netting may be applicable under each TIN separately even though the IRS cannot allow cross-TIN netting. 4 - The following example may assist in making determinations in the taxpayer relationship: Example: Parent Corporation A files a net rate request for overlapping periods of underpayment and overpayment interest involving Corporation A and its subsidiaries B and C. these three entities have separate TINs. The IRS determines that Corporation A is not the same taxpayer as Corporation B and C for purposes of interest netting because Corporation A's underpayment was incurred before Corporation B and C became members of a consolidated group with Corporation A as the parent. Therefore, Corporations B and C are not jointly liable with Corporation A for the income tax underpayment. However, the IRS determines that Corporation A can file a net rate request for its own underpayment and its own overpayment, IRS will advise Parent Corporation A (the entity that filed the net rate request) that is request will not be approved, but that Corporation A must refile its request using only its own overlapping periods.
Special Net Rate Interest Computations
Exhibit 20.2.14-5 Special Net Rate Interest Computations When a net rate adjustment has previously been made and only part of the overpayment or underpayment period was used, a determination must be made of the available overpayment or underpayment amount that remains for use for another netting adjustment(s). If a subsequent overpayment or underpayment occurs that overlaps any of the unnetted underpayment or overpayment periods(s), a determination must be made of the available underpayment or overpayment amount that can be netted during the subsequent or new overlapping period(s). Example: On May 4, 2008, Nickel's Notions paid a previously agreed to underpayment of tax for $73,000.00 and interest of $18,686.35 on its 200412 Form 1120. On August 25, 2008, the taxpayer filed a Form 1120-X on its 200612 Form 1120. A refund was issued on November 30, 2008, for $45,000.00 plus overpayment interest of $3,780.76 (computed to the refund date, less the 9-Day back-off period). On January 6, 2009, the taxpayer filed a Form 843 and requested a net rate adjustment based on the overlapping period on the 200612 overpayment and the 200412 underpayment interest. The IRS complied and issued the taxpayer a refund of overpaid underpayment interest on March 15, 2009. A TC 341 was input for the amount of interest to be refunded to the taxpayer. Overpayment interest was allowed on this amount from the availability date of the released credit(s) to March 6, 2009 (the refund date, less the 9-Day back-off period). Subsequently, on April 2, 2009, the taxpayer signed an agreement for an underpayment of $60,000.00 on its 200512 return. The taxpayer has requested that the net rate be applied based on the 200612 unnettted overpayment period (05042008 to 11212008) and the 200412 overpayment period that resulted from the previous net rate adjustment TC 341 (05042008 to 03062009). Exhibit 20.2.14-5 Time Line for Nickel's NotionsThe following display shows a time line as described in the text example concerning the overpayment amounts and periods available for netting. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200412, Form 1120, 03152005, $73,000.00200512, Form 1120, 03152006, $60,000.00200612, Form 1120X, 03152007, ($45,000.00)200412, Payment, Full paid date, 05042008, ($91,686.35)200612, Refund minus 9 days, 11212008, ($48,780.76)200412, Refund of first net rate adjustment with interest, minus 9 days, 03062009200512, interest computed to 870 waiver date plus 30 days, 05022009From 1 to 4: 200412 underpayment interest period (03152005 to 05042008)From 2 to 7: 200512 underpayment interest period for current adjustment (03152006 to 05022009)From 3 to 5: 200612 overpayment interest period (03152007 to 11212008)From 3 to 4: Overlapping period previously netted (03152007 to 05042008)From 4 to 5: Unnetted overlapping period (05042008 to 11212008)From 4 to 7: Unnetted overlapping periodThe current adjustment can overlap with $47,883.37 plus $1,194.70 available at the beginning of the unnetted period. Please click here for the text description of the image. In reviewing the time line, the entire overpayment interest computation period that caused the original net rate adjustment, runs from 03152007 to 11212008. However, only part of the overpayment period was used to make the original net rate adjustment: from 03152007 to 05042008. The unnetted part of the overpayment period runs from 05042008 to 11212008. Because only part of an overpayment period was used, the date that the original net rate computation ended (05042008), becomes the beginning date of the overpayment period for any future net rate adjustment (if a subsequent underpayment "overlaps" this unnetted period). In this situation, the overpayment plus accrued interest as of the end of the previously netted period, becomes the overpayment amount available as of 05042008, now the beginning of the subsequent or new overpayment period. In this example, the overlapping period for the current adjustment runs from 05042008 to 11212008. This former unnetted overpayment period is now being "used" to apply the net rate to the current adjustment. When computing underpayment interest on the current adjustment, compute underpayment interest from the 03152006 start date to the beginning of the current overlapping period (05042008). At the beginning of the overlapping period, the amount of underpayment equal to the overpayment on 05042008 will accrue underpayment interest at the overpayment rate to the end of the "overlapping" period (11212008). To determine the amount of underpayment subject to the net rate, the available overpayment amount as of 05042008 (the beginning of the overlapping period) must be computed. This amount can be determined by looking at the work papers for the previous net rate computation, or run a computation on the overpayment amount from the beginning of the overpayment period (03152007) to the beginning of the new or subsequent overlapping period (05042008). In the previous underpayment interest computation (200412), underpayment interest at the overpayment rate was computed from 03152007 to 05042008 on the amount of underpayment equal to the overpayment on 03152007 ($45,000.00), resulting in netted interest of $2,883.37. The overpayment principal amount ($45,000.00) added to the accrued interest ($2,883.37) to 05042008 (the end of the overlapping period) now becomes the overpayment available ($47,883.37) as of 05042008 (the beginning of the new overlapping period). The accrued interest during the unnetted part of the overpayment period from 05042008 to 11212008 is $897.39. The netted and accrued interest amounts ($2,883.37 + $897.39) total $3,780.76, which is the amount of interest that was originally allowed on the $45,000.00 overpayment. Therefore, underpayment interest computed at the overpayment rate on the current adjustment would run from 05042008 to 11212008 (the end of the current overlapping period) on $47,883.37 (the amount of underpayment equal to the overpayment on 05042008), for a netted interest amount of $897.39. The entire 200612 overpayment period has now been completely used. In addition to the original overpayment used for netting purposes, there is also an overpayment created by the first netting benefit refund. So there is now an additional overlapping period from 05042008 to 03062009 available for netting. The amount available at the beginning of the overlapping period is the amount of the TC 341 ($1,194.70) entered on tax period 200412. Interest will be charged at the overpayment rate from 05042008 to 11212008 on $47,883.37 and from 05042008 to 03062009 on $1,194.70. The netting periods and amounts on the 200412 and 200612 tax periods are now completely "used." Note: Whenever interest is computed, a complete module recomputation is required. However, with the intent on brevity for this IRM, these examples are shown using additional tax adjustments only. Exhibit 20.2.14-5 ACT/DMI 490 Report for First Net Rate Tax Period 200412This is the example of the ACT/DMI interest computations 490 report for the net rate underpayment as explained in the text for tax year 200412. The top section of the report provides the title with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title - 490 Activity SummaryTaxpayer Identifying Information:FED - **_***9999 Nickel's Notions 1120 Tax Period: 200412Top Left:Run Method: IRS DefaultInterest To: 03152009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance05042008-03152005300 Additional Tax Assessment by Examination-73,000.0073,000.0005042008--670 Subsequent Payment-(91,686.35)(18,686.35)0306200903152007050420081545 Equalize to GATT XREF: 99-9999999 1120 20061235,000,00-(18,686.35)0306200903152007050420081555 Equalize to Overpay XREF: 99-9999999 1120 20061210,000.00-(18,686.35)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-300 Additional Tax Assessment by Examination73,000.00--73,000.000316200503152007Underpay73,000.000.15161377811,067.8184,067.810316200705042008NR Underpay at GATT35,000.000.0600171202,100.60---NR Underpay at Over10,000.000.078276755782.77---Underpay39,067.810.0906238313,540.4790,491.6505042008-670 Subsequent Payment(91,686.35)--(1,194.70)0505200803152009Overpay(1,194.70)0.039268439(46.91)(1,241.62)The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest17,491.6518,686.35(1,194.70)Overpayment Interest(46.91)-(46.91)Principal Balance--(0.01)Totals17,444.7418,686.35(1,241.62) Please click here for the text description of the image. Exhibit 20.2.14-5 ACT/DMI 490 Report for First Net Rate Tax Period 200612This is the example of the ACT/DMI interest computations 490 report for the net rate overpayment as explained in the text for tax year 200612. The top section of the report provides the title with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title - 490 Activity SummaryTaxpayer Identifying Information:FED - **_***9999 Nickel's Notions 1120 Tax Period: 200612Top Left:Run Method: IRS DefaultInterest To: 03152009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance08252008-03152007291 Abatement of Prior Tax Assessment-(45,000.00)(45,000.00)0306200903152007050420081540 Use Prin GATT to Equal XREF: 99-9999999 1120 200412(35,000.00)-(45,000.00)0306200903152007050420081550 Use Prin Over to Equal XREF: 99-9999999 1120 200412(10,000.00)-(45,000.00)113020081121200811302008846 Refund of Overpayment(45,000.00)45,000.00-1130200811212008113020081004 Refund Interest High(3,780.76)3,780.763,780.76The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152007-291 Abatement of Prior Tax Assessment(45,000.00)--(45,000.00)0316200705042008Overpay(10,000.00)0.078276755(782.77)---Overpay GATT(35,000.00)0.0600171202,100.60(47,833.37)0505200811212008Overpay(10,782.77)0.025257488(272.35)---Overpay GATT(37,100.60)0.016847279(625.04)(48,780.76)1122200811302008Overpay Suspended(48,780.76)--(48,780.76)11302008-846 Refund of Overpayment45,000.00-----1004 Refund Interest High3,780.76---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(3,780.76)(3,780.76)-Principal Balance---Totals(3,780.76)(3,780.76)0.00 Please click here for the text description of the image. Exhibit 20.2.14-5 ACT/DMI 490 Report for Second Net Rate Tax Period 200412This is the example of the ACT/DMI interest computations 490 report for the 200412 net rate underpayment as explained in the text. The top section of the report provides the title with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title - 490 Activity SummaryTaxpayer Identifying Information:FED - **_***9999 Nickel's Notions 1120 Tax Period: 200412Top Left:Run Method: IRS DefaultInterest To: 05022009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance05042008-03152005300 Additional Tax Assessment by Examination-73,000.0073,000.0005042008--670 Subsequent Payment-(91,686.35)(18,686.35)0306200903152007050420081545 Equalize to GATT XREF: **_***9999 1120 20061235,000.00-(18,686.35)0306200903152007050420081555 Equalize to Overpay XREF: **_***9999 1120 20061210,000.00-(18,686.35)N/A05042008112120081550 Use Prin Over to Equal XREF: **_***9999 1120 200512(1,194.70)-(18,686.35)N/A11212008113020081550 Use Prin Over to Equal XREF: **_***9999 1120 200512(1,194.70)-(18,686.35)N/A11212008113020081551 Use Int Over to Equal XREF: **_***9999 1120 200512(30.18)-(18,686.35)N/A11302008030620091550 Use Prin Over to Equal XREF: **_***9999 1120 200512(1,194.70)-(18,686.35)N/A11302008030620091551 Use Int Over to Equal XREF: **_***9999 1120 200512(31.68)-(18,686.35)031520090306200903152009846 Refund of Overpayment(1,194.70)1,194.70(17,491.65)0315200903062009031520091004 Refund Interest High(45.69)45.69(17,445.96)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-300 Additional Tax Assessment By Examination73,000.00--73,000.000316200503152007Underpay73,000.000.15161377811,067.8184,067.810316200705042008NR Underpay at GATT35,000.000.0600171202,100.60---NR Underpay at Overpay10,000.000.078276755782.77---Underpay39,067.810.0906238313,540.4790,491.6505042008-670 Subsequent Payment(91,686.35)--(1,194.70)0505200811212008Overpay(1,194.70)0.025257488(30.18)(1,224.88)1122200811302008Overpay(1,224.88)0.001230180(1.51)(1,226.39)1201200803062009Overpay(1,226.39)0.011422323(14.01)(1,240.39)0307200903152009Overpay Suspended(1,240.39)--(1,240.39)03152009-846 Refund of Overpayment1,194.70-----1004 Refund Interest High45.69---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest17,491.6517,491.65-Overpayment Interest(45.69)(45.69)-Principal Balance---Totals17,445.9617,445.960.00 Please click here for the text description of the image. Exhibit 20.2.14-5 ACT/DMI 490 Report for Second Net Rate Tax Period 200612This is the example of the ACT/DMI interest computations 490 report for the 200612 net rate overpayment as explained in the text. The top section of the report provides the title with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title - 490 Activity SummaryTaxpayer Identifying Information:FED - **_***9999 Nickel's Notions 1120 Tax Period: 200612Top Left:Run Method: IRS DefaultInterest To: 05022009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance08252008-03152007291 Abatement of Prior Tax Assessment-(45,000.00)(45,000.00)0306200903152007050420081540 Use Prin GATT to Equal XREF: 99-9999999 1120 200412(35,000.00)-(45,000.00)0306200903152007050420081550 Use Prin Over to Equal XREF: 99-9999999 1120 200412(10,000.00)-(45,000.00)N/A05042008112120081540 Use Prin GATT to Equal XREF: 99-9999999 1120 200512(35,000.00)-(45,000.00)N/A05042008112120081541 Use Int GATT to Equal XREF: 99-9999999 1120 200512(2,100.60)-(45,000.00)N/A05042008112120081550 Use Prin Over to Equal XREF: 99-9999999 1120 200512(10,000.00)-(45,000.00)N/A05042008112120081551 Use Int Over to Equal XREF: 99-9999999 1120 200512(782.77)-(45,000.00)113020081121200811302008846 Refund of Overpayment(45,000.00)45,000.00-1130200811212008113020081004 Refund Interest High(3,780.76)3,780.763,780.76The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152007-291 Abatement of Prior Tax Assessment(45,000.00)--(45,000.00)0316200705042008Overpay(10,000.00)0.078276755(782.77)---Overpay GATT(35,000.00)0.060017120(2,100.60)(47,833.37)0505200811212008Overpay(10,782.77)0.025257488(272.35)---Overpay GATT(37,100.60)0.016847279(625.04)(48,780.76)1122200811302008Overpay Suspended(48,780.76)--(48,780.76)11302008-846 Refund of Overpayment45,000,00-----1004 Refund Interest High3,780.76---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(3,780.76)(3,780.76)-Principal Balance---Totals(3,780.76)(3,780.76)0.00 Please click here for the text description of the image. Exhibit 20.2.14-5 ACT/DMI 490 Report for Second Net Rate Tax Period 200512This is the example of the ACT/DMI interest computations 490 report for the 200512 net-rate underpayment as explained in the text. The top section of the report provides the title with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title - 490 Activity SummaryTaxpayer Identifying Information:FED - **_***9999 Nickel's Notions 1120 Tax Period: 200512Top Left:Run Method: IRS DefaultInterest To: 05022009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance04022009-03152006300 Additional Tax Assessment by Examination-60,000.0060,000.00N/A05042008112120081545 Equalize to GATT XREF: **-***9999 1120 20061235,000.00-60,000.00N/A05042008112120081545 Equalize to GATT XREF: **-***9999 1120 2006122,100.60-60,000.00N/A05042008112120081555 Equalize to Overpay XREF: **-***9999 1120 2004121,194.70-60,000.00N/A05042008112120081555 Equalize to Overpay XREF: **-***9999 1120 20061210,000.00-60,000.00N/A05042008112120081555 Equalize to Overpay XREF: **-***9999 1120 200612782.77-60,000.00N/A11212008113020081555 Equalize to Overpay XREF: **-***9999 1120 20041230.18-60,000.00N/A11212008113020081555 Equalize to Overpay XREF: **-***9999 1120 2004121,194.70-60,000.00N/A11302008030620091555 Equalize to Overpay XREF: **-***9999 1120 20041231.68-60,000.00N/A11302008030620091555 Equalize to Overpay XREF: **-***9999 1120 2004121,194.70-60,000.00The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152006-300 Additional Tax Assessment By Examination60,000.00--60,000.000316200605042008Underpay60,000.000.17799069210,679.4470,679.440505200811212008NR Underpay at GATT37,100.600.016847279625.04---NR Underpay at Over11,977.470.025257488302.52---Underpay21,601.370.030902710667.5472,274.551122200811302008NR Underpay at Over1,224.880.0012301801.51---Underpay71,049.670.001476378104.9072,380.951201200803062009NR Underpay at Over1,226.390.01142232314.01---Underpay71,154.570.0140832991,002.0973,397.050307200905022009Underpay73,397.050.006955156510.4973,907.54The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest13,907.54-13,907.54Overpayment Interest---Principal Balance--60,000.00Totals13,907.54-73,907.54 Please click here for the text description of the image.
Special Net Rate Interest Computations - More than One Overpayment Period
Exhibit 20.2.14-6 Special Net Rate Interest Computations - More than One Overpayment Period The following example illustrates a situation where more than one overpayment period is involved. Example: The examination of Talcum Corporation's 200112 Form 1120 results in a tax assessment of $5,000,000.00 (plus interest), to which the corporation agrees and fully pays on July 12, 2008. A 30-Day letter is issued on August 21, 2006 (LCU applicable date is September 20, 2006). The Talcim Corporation filed a 200712 carryback claim for $2,500,000.00 to be applied to its 200412 tax year, which is allowed and a manual refund issued with interest on December 30, 2008. In addition, an examination of its 200212 Form 1120 rerturn results in a $1,000,000.00 manual refund, which is issued with interest on May 21, 2009. Talcim Corporation files a Form 843 to request that the interest computed on the underpayment be recomputed using the net rate. The period of limitations for all of the years involved are open, so the interest previously assessed and paid must be recomputed. The refund is schedule to be issued on September 30, 2009. Interest Computations Prior to Application of the Net Rate Year Form Amount Comments 200112 1120 $5,000,000.00 Large Corp. Underpayment (LCU) rate applicable date is 09202006. - - $2,651,930.25 Interest 03152002 to 07122008 (full paid date). 200212 1120 ($1,000,000.00) Overpayment refund with interest 05212009. - - ($245,863.81) Interest 03152003 to 04062009 (manual refund/IRS initiated). - - ($65,088.86) Interest 03152008 to 12302008 (manual refund/TP initiated). Exhibit 20.2.14-6 Special Net Rate Interest Computations - More than One Overpayment PeriodThe following display shows a time line as described in the text example when there is more than one overpayment period. This time line is presented using numbers from left to right to help explain the data on the page. This data is displayed from where the time span begins to where the time span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200112, Form 1120, 03152002, $5,000,000.00200212, Form 1120, 03152003, ($1,000,000.00)200112, Additional 2% (LCU) interest date 09202006200412, Carryback from 200712, 03152008, ($2,500,000.00)200112, Full Paid date, 07122008200412, Carryback refunded, 12302008200212, Manual Refund, minus 45 days, 04062009From 1 to 5: Underpayment at corporate rate, $5,000,000.00 additional 2% (LCU) interest beginning on 09202006From 2 to 5: Underpayment at overpayment rate, first net rate periodFrom 2 to 7: Overpayment at normal and GATT rate, ($1,000,000.00)From 4 to 5: Underpayment at overpayment rate, second net rate periodFrom 4 to 6: Overpayment at normal and GATT rate, ($2,500,000.00) Please click here for the text description of the image. Application of the Net Rate to the Previously Paid Underpayment. Note: The net rate is computed at normal rates until the effective or applicable date for GATT or Large Corporate (LCU) interest has been reached. Underpayment Interest Computation Amount Comments $5,000,000.00 03152002 to 03152003 (normal corp. rate) = 298,405.31 (computed at the normal rate since LCU applicable date has not yet been reached) 298,405.31 Add accrued interest 5,298,405.31 Balance due 03152003 (1,000,000.00) Subtract underpayment amount equal to the overpayment amount on 03152003 4,298,405.31 03152003 to 09202006 (normal corp. rate) and 09202006 to 03152006 (LCU rate) = 1,749,299.32 1,749,299.32 Add accrued interest 6,047,704.63 Balance due 03152008 (2,500,000.00) Subtract underpayment amount equal to the overpayment amount on 03152008 3,547,704.63 03152008 to 07122008 (LCU rate) = 93,877.19 93,877.19 Add accrued interest 3,641,581.82 Balance due 07122008 Net Rate Interest Computation Amount Comments $1,000.000.00 03152003 to 07122008 (normal and GATT rate) = 220,227.18 220,227.18 Add accrued interest 1,220,227.18 Balance due 07122008 2,500,000.00 03152008 to 07122008 (normal and GATT rate) = 28,936.33 28,936.33 Add accrued interest $2,528,936.33 Balance due 07122008 Application of Net Rate to Previously Paid Amount Comments $298,405.31 1,749,299.32 93,877.19 220,227.18 28,936.33 $2,390,745.33 Total Revised Interest $2,651,930.25 Posted Interest $2,390,745.33 Revised Interest (261,184.92) Netting Benefit/Interest to be abated (TC 341) (7,591.66) Add: Accrued interest at the prevailing rate to 09302009 $268,776.58 Total Refund (manual refund/TP initiated) Note: Ensure statutory overpayment interest is computed on the amount of abatement that will refund or offset. Input the following transaction information using the appropriate adjustment document and include as part of the work papers. Adjustment Document Transaction 2001 2002 and 2004 TC 341 - ($261,184.92) TC 340 - (.00) to indicate that the net rate has been applied Db-Int-To-Dt - 07122008 Db-Int-To-Dt - Applicable date Correspondence Dt - 07221998 Correspondence Dt - 07221998 Activity Code - netrate Activity Code - netrate Amd-Clms-Dt - Claim Received Date Amd-Clms-Dt - Claim Received Date Always include the ACT/DMI 530 Report with the following information as part of the workpapers. IDRS "N" Information 200112: N-AMT - 1,000,000.00 N-BEG = 03152003 N-PER = 200212 N-END = 07122008 N-MFT = 02 200112: N-AMT - 2,500,000.00 N-BEG = 03152008 N-PER = 200412 N-END = 07122008 N-MFT = 02 200212: N-AMT - 1,000,000.00 N-BEG = 03152003 N-PER = 200112 N-END = 07122008 N-MFT = 02 200412: N-AMT - 1,000,000.00 N-BEG = 03152008 N-PER = 200212 N-END = 07122008 N-MFT = 02 Note: Refer to the time line in Exhibit 20.2.14-6. Always include the unnetted periods in your workpapers. The ACT/DMI 530 Report must be used for this purpose. For 200212, there is an unnetted overpayment interest period from 07132008 to 04062009. The amount of overpayment on 07122008 is $1,220,227.18 (overpayment plus interest accrued through 07122008). For 200412, there is an unnetted overpayment interest period from 07132008 to 12302008. The amount of overpayment on 07122008 is $2,528,936.33 (overpayment plus interest accrued through 07122008). Reminder: When using a time line, the following verification process should be used to determine whether the net rate adjustment was correctly computed: Add the net rate interest amount that was used to the interest amount that accrues during the unnetted overpayment period if the total does not equal the overpayment interest amount originally allowed, an error has been made in the interest computation. Unnetted underpayment interest periods exist from 03152002 to 03152003, from 03152003 to 03152008, and from 03152008 to 07122008. Exhibit 20.2.14-6 More Than One Overpayment Time LineThe following display shows a time line as described in the text example when there is more than one overpayment period. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.200112, Form 1120, 03152002, $5,000,000.00200212, Form 1120, 03152003, ($1,000,000.00)200112, Additional 2% (LCU) interest date 09202006200412, Carryback from 200712, 03152008, ($2,500,000.00)200112, Full Paid date, 07122008200412, Carryback refunded, 12302008200212, Manual Refund, minus 45 days, 04062009From 1 to 5: Underpayment Interest at Corporate rate, $5,000,000.00From 1 to 2: First, Underpayment rate: $5,000,000.00 plus $298,405.31 interest equals $5,298,405.31 minus $1,000,000.00 equals $4,298,405.31From 2 to 4: Second, Underpayment rate: $4,298,405.31 plus $1,749,299.32 interest equals $6,047,704.63 minus $2,500,000.00 equals $3,547,704.63From 4 to 5: Third, Underpayment rate: $3,547,704.63 plus $93,877.19 interest equals $3,641,581.82From 2 to 7: Overpayment interest at GATT rate on ($1,000,000.00)From 2 to 5: Fourth, Overpayment rate: $1,000,000.00 plus $220,227.18 interest equals $1,220,227.18From 4 to 6: Overpayment at GATT rate: $2,500,00.00From 4 to 5: Fifth, Overpayment rate: $2,500,00.00 plus $28,936.33 equals $2,528,936.33 Please click here for the text description of the image. Amount of unnetted overpayment at the beginning of the unnetted overpayment period 07122008 to 04062009 is $1,220,227.18. Amount of unnetted overpayment at the beginning of the unnetted overpayment period 07122008 to 12302008 is $2,528,936.33. Unnetted underpayment periods still exist from 03152002 to 03152003; from 03152003 to 03152008; and from 03152008 to 07122008. Exhibit 20.2.14-6 Tax Interest: 490 Report Backing Into Underpayment Interest Previously Assessed 200112This is the example of the ACT/DMI interest computations 490 report showing verification of the previously assessed 200112 underpayment interest as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity SummaryTaxpayer Identifying Information:FED ** ***9999TelluriteSiena 1120 Tax Period: 200112Top Left:Run Method: IRS DefaultInterest To: 07122008GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 09202006 Amount: $100,000Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152002--150 Return Filed and Assessed Tax Liability -10,000,000.0010,000,000.0003152002--610 Remittance with Return-(10,000,000.00)-07122008-03152002300 Additional Tax Assessment By Examination-5,000,000.005,000,000.0007122008--670 Subsequent Payment-(7,651,930.25)(2,651,930.25)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152002-150 Return Filed and Assessed Tax Liability 10,000,000.00-----300 Additional Tax Assessment By Examination5,000,000.00-----610 Remittance with Return(10,000,000.00)--5,000,000.000316200209202006Underpay5,000,000.000.2879278951,439,639.476,439,639.470921200607122008Underpay LCU6,439,639.470.1882544481,212,290.777,651,930.2507122008-670 Subsequent Payment(7,651,930.25)---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest2,651,930.252,651,930.25-Overpayment Interest---Principal Balance---Totals2,651,930.252,651,930.250.00 Please click here for the text description of the image. Exhibit 20.2.14-6 Tax Interest: 490 Report Backing Into Overpayment Interest Previously Allowed 200212This is an example of the ACT/DMI interest computations 490 report showing verification of the previously allowed overpayment interest for the 200212 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report:Report Title: 490 Activity SummaryTaxpayer Identifying Information:FED ** ***9999 Tellurite 1120 Tax Period: 200212Top Left:Run Method: IRS DefaultInterest To: 05212009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152003--150 Return Filed and Assessed Tax Liability -5,000,000.005,000,000.0003152003--610 Remittance with Return-(5,000,000.00)-05212009-03152003301 Abatement of Tax By Examination Division-(1,000,000.00)(1,000,000.00)052120090406200905212009840 Manual Refund(1,000,000.00)1,000,000.00-0521200904062009052120091004 Refund Interest High(245,863.81)245,863.81245,863.81The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152003-150 Return Filed and Assessed Tax Liability 5,000,000.00-----301 Abatement of Tax By Examination Division(1,000,000.00)-----610 Remittance with Return(5,000,000.00)--(1,000,000.00)0316200304062009Overpay(10,000.00).0363113337(3,631.13)---Overpay GATT(990,000.00)0.244679474(242,232.68)(1,245,863.81)0407200905212009Overpay Suspended(1,245,863.81)--(1,245,863.81)05212009-846 Refund of Overpayment1,000,000.00-----1004 Refund Interest High245,863.81---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(245,863.81)(245,863.81)-Principal Balance---Totals(245,863.81)(245,863.81)0.00 Please click here for the text description of the image. Exhibit 20.2.14-6 Tax Interest: 490 Report Backing Into Overpayment Interest Previously Allowed 200412This is an example of the ACT/DMI interest computations 490 report showing verification of the previously allowed overpayment interest for the 200412 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report:Report Title: 490 Activity SummaryTaxpayer Identifying Information:FED ** ***9999 Tellurtie 1120 Tax Period: 200412Top Left:Run Method: IRS DefaultInterest To: 12302008GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152005--150 Return Filed and Assessed Tax Liability-3,000,000.003,000,000.0003152005--610 Remittance with Return-(3,000,000.00)-03152008--299 Abatement of Prior Tax Interest Computation Date-(2,500,000.00)(2,500,000.00)12302008--840 Manual Refund-2,500,000.00-12302008--1004 Refund Interest High-65,088.8665,088.86The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-150 Return Filed and Assessed Tax Liability 3,000,000.00-----610 Remittance with Return(3,000,000.00)---03152008-299 Abatement of Prior Tax Interest Computation Date(2,500,000.00)--(2,500,000.00)0316200812302008Overpay(10,000.00)0.038251991(382.52)---Overpay GATT(2,490,000.00)0.025986481(64,706.34)(2,565,088.86)--846 Refund of Overpayment2,500,000.00-----1004 Refund Interest High65,088.86---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(65,088.86)(65,088.86)-Principal Balance---Totals(65,088.86)(65,088.86)0.00 Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Netting Interest Computation Analysis ScreenThis is an example of the Interest Computation Analysis screen as explained in the text. The top section of the screen reflects title heading and other information relating to the taxpayer and ACT/DMI status.Left Top: Jurisdiction: Federal (this is drop down box option only used by IRS)Right top: View All: Box is checkedTINTax TypeTax PeriodAdditional DescriptionStatusGATT/LCUSelectSelected Modules (The number of modules is entered): 3The middle of the Analysis screen reflects the Selected Modules without Netting section and next to it in parentheses states (double click to view module settings). Below this provides information related to the tax module. Amounts enclosed in parentheses represent a credit amount.Selected Modules without NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-999999911202001120.000.000.000.0099-999999911202002120.000.000.000.0099-999999911202004120.000.000.000.00Totals:--0.000.000.000.00Clear ModuleClear All-----The third section of the Analysis screen reflects Selected Modules with Netting. Amounts enclosed in parentheses represent a credit amount.Selected Modules with NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-99999991120200112(261,184.92)(7,591.66)0.00(268,776.58)99-999999911202002120.000.000.000.0099-999999911202004120.000.000.000.00--Totals:(261,184.92)(7,591.66)0.00(268,776.58)The bottom section of the Analysis screen has two rows of information showing from left to right:Row 1:Run to Date 09302009PostRemoveNetting Benefit (268,776.58)Row 2:ProcessNetting On: Box is checkedRun Method: IRS DefaultReportsModule Restrictions Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 020 Principal and Interest Adj. SummaryThis is the example of the ACT/DMI Report 020 as explained in the text. There are three sections to this report. The top section reflects the following information from left to right:Report Title: 020 Principal and Interest Adj Summary - 20.2.14-6 Tellurtie Jurisdiction: FederalRun Method: IRS DefaultInterest To: 09302009The second section of the report reflects the following information from left to right:Computed Individual ModulesTax IDTaxpayerYear/MonthTax TypeDeficiency InterestOverpayment Interest PrincipalTotal**_***9999Tellurite 20011211200.000.000.000.00**_***9999Tellurite 20021211200.000.000.000.00**_***9999Tellurite 20041211200.000.000.000.00Subtotal 1120---0.000.000.000.00Total---0.000.000.000.00The third or bottom section of the report reflects the following information from left to right (amounts enclosed in parentheses represent a credit amount).Computed Modules with NettingTax IDTaxpayerYear/MonthTax TypeDeficiency InterestOverpayment Interest PrincipalTotal**_***9999Tellurite 2001121120(261,184.92)(7,591.66)0.00(268,776.58)**_***9999Tellurite 20021211200.000.000.000.00**_***9999Tellurite 20041211200.000.000.000.00Subtotal 1120---(261,184.92)(7,591.66)0.00(268,776.58)Total---(261,184.92)(7,591.66)0.00(268,776.58)-----Netting Benefit:-(268,776.58) Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 490 Post Netting Underpayment Period (200112)This is the example of the ACT/DMI interest computations 490 report for the 200112 underpayment after netting has taken place as explained in the textPage 1 of 2. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report:Report Title: 490 Activity Summary - 20.2.14-6 SienaTaxpayer Identifying Information:FED ** ***9999 Siena 1120 Tax Period 200112Top Left:Run Method: IRS DefaultInterest To: 09302009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 09202006 Amount: $100,000.00Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152002--150 Return Filed and Assessed Tax Liability -10,000,000.0010,000,000.0003152002--610 Remittance with Return-(10,000,000.00)-07122008-03152002300 Additional Tax Assessment By Examination-5,000,000.005,000,000.00N/A03152003031520051545 Equalize to GATT XREF: 99-9999999 1120 200212990,000.00-5,000,000.00N/A03152003031520051555 Equalize to Overpay XREF: 99-9999999 1120 20021210,000.00-5,000,000.00N/A03152005092020061545 Equalize to GATT XREF: 99-9999999 1120 200212990,000.00-5,000,000.00N/A03152005092020061545 Equalize to GATT XREF: 99-9999999 1120 20021242,959.33-5,000,000.00N/A03152005092020061555 Equalize to Overpay XREF: 99-9999999 1120 20021210,000.00-5,000,000.00N/A03152005092020061555 Equalize to Overpay XREF: 99-9999999 1120 200212751.67-5,000,000.00N/A09202006031520081545 Equalize to GATT XREF: 99-9999999 1120 200212990,000.00-5,000,000.00N/A09202006031520081545 Equalize to GATT XREF: 99-9999999 1120 200212111,950.14-5,000,000.00N/A09202006031520081555 Equalize to Overpay XREF: 99-9999999 1120 2002121,733.86-5,000,000.00N/A09202006031520081555 Equalize to Overpay XREF: 99-9999999 1120 20021210,000.00-5,000,000.0007122008--670 Subsequent Payment-(7,651,930.25)(2,651,930.25)N/A03152008071220081545 Equalize to GATT XREF: 99-9999999 1120 200212990,000.00-(2,651,930.25)N/A03152008071220081545 Equalize to GATT XREF: 99-9999999 1120 200212203,233.41-(2,651,930.25)N/A03152008071220081545 Equalize to GATT XREF: 99-999999999 1120 2004122,490,000.00-(2,651,930.25)N/A03152008071220081555 Equalize to Overpay XREF: 99-9999999 1120 20021210,000.00-(2,651,930.25)N/A03152008071220081555 Equalize to Overpay XREF: 99-9999999 1120 2002122,991.89-(2,651,930.25)N/A03152008071220081555 Equalize to Overpay XREF: 99-9999999 1120 20041210,000.00-(2,651,930.25)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152002-150 Return Filed and Assessed Tax Liability 10,000,000.00-----300 Additional Tax Assessment by Examination5,000,000.00-----610 Remittance with Return(10,000,000.00)--(5,000,000.00)0316200203152003Underpay5,000,000.000.059681061298,405.315,298,405.310316200303152005NR Underpay at GATT990,000.000.04339326242,959.33---NR Underpay at Over10,000.000.075166781751.67- Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 490 Post Netting Underpayment Period (200112)This is the continuation of the ACT/DMI 490 report interest computation details for the 200112 underpayment after netting has taken place as explained in the text (amounts enclosed in parentheses represent a credit amount). Page 2 of 2.Report Title: 490 Activity Summary - 20.2.14-6 SienaTaxpayer Identifying InformationFED - **-***9999 Siena 1120 Tax Period 200112Interest Computation Details (continues as page 2)Interest Start DateInterest End DateDescriptionAmount FactorInterestBalance0316200303152005Underpay4,298,405.310.096884116416,447.205,758,563.500316200509202006NR Underpay at GATT1,032,959.330.06678947868,990.81---NR Underpay at Over10,751.670.091352386982.19---Underpay4,714,852.500.108040487509,394.966,337,931.460921200603152008NR Underpay at GATT1,101,950.140.08283792991,283.27---NR Underpay at Over11,733.860.1072142001,258.04---Underpay LCU5,224,247.460.157622158823,457.167,253,929.930316200807122008NR Underpay at GATT3,683,233.410.01155475242,558.85---NR Underpay at Over22,991.890.016499624379.36---Underpay LCU3,547,704.620.02646138893,877.197,390,745.3307122008-670 Subsequent Payment(7,651,930.25)--(261,184.92)0713200809302009Overpay(10,000.00)0.047297556(472.98)---Overpay GATT(251,184.92)0.028340413(7,118.68)(268,776.58)The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest2,390,745.332,651,930.25(261,184.92)Overpayment Interest(7,591.66)-(7,591.66)Principal Balance---Totals2,383,153.672,651,930.25(268,776.58) Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 530 Post Netting Underpayment Period (200112)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200112 underpayment period reflecting the rate equalizations after netting has taken place as explained in the text. Page 1 of 2. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-6 SienaIdentifying Information:FED ** ***9999 Siena 1120 Tax Period 200112ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 09302009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: 09202006 Amount: $100,000Overpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONS (page 1)Equalizations that affect 99-9999999 200112 1120 Tax ModuleChange:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT -N-Amt990,000.00Use Prin GATT to Equal-N-Beg03152003N-End03152005N-Beg03152003N-End03152005N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay -N-Amt10,000.00Use Prin Over to Equa-N-Beg03152003N-End03152005N-Beg03152003N-End03152005N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT-N-Amt990,000.00Use Prin GATT to Equal-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt42,959.33Equalize to GATT-N-Amt42,959.33Use Prin GATT to Equal-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equa-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt751.67Equalize to Overpay-N-Amt751.67Use Prin Over to Equal-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT-N-Amt990,000.00Use Prin GATT to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt111,950.14Equalize to GATT-N-Amt111,950.14Use Int GATT to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120 Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 530 Post Netting Underpayment Period (200112) Page 2This section provides page 2 of the ACT/DMI interest Adjustments/Positions 530 report for the underpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then continues the information on the rate equalizations for the impacted net rate modules.530 Adjustments/Positions - 20.2.14-6 SienaFED - **-***9999 Siena 1120 Tax Period: 200112COMPUTED OFFSETS/EQUALIZATIONS (page 2)Equalizations that affect 99-9999999 200112 1120 Tax ModuleChange:**-***99992001121120Change:**-***99992002121120N-Amt1,733.86Equalize to Overpay-N-Amt1,733.86Use Int Over to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT-N-Amt990,000.00Use Prin GATT to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt203,233.41Equalize to GATT-N-Amt203,233.41Use Int GATT to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992004121120N-Amt2,490,000.00Equalize to GATT-N-Amt2,490,000.00Use Prin GATT to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992004121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992004121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992004121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt2,991.89Equalize to Overpay-N-Amt2,991.89use Int Over to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Balances in selected module that are still available for potential nettingAvailable Underpayment at Underpay Rate 5,000,000.00 From 03162002 To 03152003Available Underpayment at Underpay Rate 4,298,405.31 From 03162003 To 03152005Available Underpayment at Underpay Rate 4,714,852.50 From 03162005 To 09202006Available Underpayment at LCU Rate 5,224,247.46 From 09212006 To 03152008Available Underpayment at LCU Rate 3,547,704.62 From 03162008 To 07122008Available Overpayment at GATT Rate (251,184.92) From 07132008 To 09302009Available Overpayment at Overpay Rate (10,000.00) From 07132008 To 09302009 Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 490 Post Netting Overpayment Period (200212)This is the example of the ACT/DMI interest computations 490 report for the 200212 overpayment after netting has taken place as explained in the text. Page 1 of 2. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-6 SienaTaxpayer Identifying Information:FED- ** *** 9999 Siena 1120 Tax Period 200212Top Left:Run Method: IRS DefaultInterest To: 09302009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995, Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152003--150 Return Filed and Assessed Tax Liability -5,000,000.005,000,000.0003152003--610 Remittance with Return-(5,000,000.00)-05212009-03152003301 Abatement of Tax By Examination Division-1,000,000.00(1,000,000.00)N/A03152003031520051540 Use Prin GATT to Equal XREF ** ***9999 1120 200112(990,000.00)-(1,000,000.00)N/A03152003031520051550 Use Prin Over to Equal XREF ** ***9999 1120 200112(10,000.00)-(1,000,000.00)N/A03152005092020061540 Use Prin GATT to Equal XREF ** ***9999 1120 200112(990,000.00)-(1,000,000.00)N/A03152005092020061541 Use Int GATT to Equal XREF** ***9999 1120 200112(42,959.33)-(1,000,000.00)N/A03152005092020061550 Use Prin Over to Equal XREF ** ***9999 1120 200112(10,000.00)-(1,000,000.00)N/A03152005092020061551 Use Int Over to Equal XREF ** ***9999 1120 200112(751.67)-(1,000,000.00)N/A09202006031520081540 Use Prin GATT to Equal XREF ** ***9999 1120 200112(990,000.00)-(1,000,000.00)N/A09202006031520081541 Use Int GATT to Equal XREF ** ***9999 1120 200112(111,950.14)-(1,000,000.00)N/A09202006031520081550 Use Prin Over to Equal XREF ** ***9999 1120 200112(10,000.00)-(1,000,000.00)N/A09202006031520081551 Use Int Over to Equal XREF ** ***9999 1120 200112(1,733.86)-(1,000,000.00)N/A03152008071220081540 Use Prin GATT to Equal XREF ** ***9999 1120 200112(990,000.00)-(1,000,000.00)N/A03152008071220081541 Use Int GATT to Equal XREF** ***9999 1120 200112(203,233.41)-(1,000,000.00)N/A03152008071220081550 Use Prin Over to Equal XREF ** ***9999 1120 200112(10,000.00)-(1,000,000.00)N/A03152008071220081551 Use Int Over to Equal XREF ** ***9999 1120 200112(2,991.89)-(1,000,000.00)052120090406200905212009840 Manual Refund(1,000,000.00)1,000,000.00-0521200904062009052120091004 Refund Interest High(245,863.81)245,863.81245,863.81The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152003-150 Return Filed and Assessed Tax Liability 5,000,000.00-----301 Abatement of Tax By Examination Division(1,000,000.00)-----610 Remittance with Return(5,000,000.00)--(1,000,000.00)0316200303152005Overpay(10,000.00)0.075166781(751.67)---Overpay GATT(990,000.00)0.043393262(42,959.33)(1,043,711.00)0316200509202006Overpay(10,751.67)0.091352386(982.19)---Overpay GATT(1,032,959.33)0.066789478(68,990.81)(1,113,684.00)0921200603152008Overpay(11,733.86)0.107214200(1,258.04)---Overpay GATT1,101,950.140.08283792991,283.27(1,206,225.31) Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 490 Post Netting Overpayment Period (200212) page 2This page continues the third section of the ACT/DMI 490 report and provides the balance of information on the interest computation details. The top of the report has the report title and taxpayer identifying information as follows:Report Title: 490 Activity Summary - 20.2.14-6 SienaFED: ** *** Talcim 1120 Tax Period: 200212Shown below is the balance of the report information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation Details page 2Interest Start DateInterest End DateDescriptionAmountFactorInterestBalance0316200807122008Overpay(12,991.89)0.016499624(214.36)---Overpay GATT(1,193,233.41)0.011554752(13,787.52)(1,220,227.18)0713200804062009Overpay(13,206.26)0.032172437(424.88)---Overpay GATT(1,207,020.93)0.020887585(25,211.75)(1,245,863.81)0407200905212009Overpay Suspended(1,245,863.81)--(1,245,863.81)05212009-840 Manual Refund1,000,000.00-----1004 Refund Interest High245,863.81---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(245,863.81)(245,863.81)-Principal Balance---Totals(245,863.81)(245,863.81)0.00 Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 530 Post Netting Overpayment Period (200212) page 1This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200212 overpayment period after netting has taken place as explained in the text. Page 1 of 2. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Taxpayer Identifying Information:FED ** ***9999 Talcim 1120 Tax Period 200212ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 09302009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET EQUALIZATIONS (page 1)Equalizations that affect 999999999 200212 1120 Tax ModuleChange:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT-N-Amt990,000.00Use Prin GATT to Equal-N-Beg03152003N-End03152005N-Beg03152003N-End03152005N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152003N-End03152005N-Beg03152003N-End03152005N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT-N-Amt990,000.00Use Prin GATT to Equal-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt42,959.33Equalize to GATT-N-Amt42,959.33Use Int GATT to Equal-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt751.67Equalize to Overpay-N-Amt751.67Use Int Over to Equal-N-Beg03152005N-End09202006N-Beg03152005N-End09202006N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT-N-Amt990,000.00Use Prin GATT to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt111,950.14Equalize to GATT-N-Amt111,950.14Use Int GATT to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120 Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 530 Post Netting Overpayment Period (200212) page 2This page continues the second section of the ACT/DMI interest Adjustments/Positions 530 report reflecting the rate equalizations for the impacted net rate modules. The top section reflects the title and taxpayer identifying information. Page 2 of 2.Report Title: 530 Adjustments/Positions - 20.2.14-6 SienaFED: **_***Talcim 1120 Tax Period: 200212COMPUTED OFFSET/EQUALIZATIONS (page 2)Equalizations that affect 99-9999999 200212 1120 Tax ModuleChange:**-***99992001121120Change:**-***99992002121120N-Amt1,733.86Equalize to Overpay-N-Amt1,733.86Use Int Over to Equal-N-Beg09202006N-End03152008N-Beg09202006N-End03152008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt990,000.00Equalize to GATT-N-Amt990,000.00Use Prin GATT to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt203,233.41Equalize to GATTBlackN-Amt203,233.41Use Int GATT to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992002121120N-Amt2,991.89Equalize to Overpay-N-Amt2,991.89Use Int Over to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992002121120N-XRef**-***99992001121120Balances in selected module that are still available for potential nettingAvailable Overpayment at GATT Rate (1,207,020.93) From 07132008 To 04062009Available Overpayment at Overpay Rate (13,206.26) From 07132008 To 04062009Available Suspended Overpay (1,245,863.81) From 04072009 To 05212009 Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 490 Post Netting Overpayment Period (200412)This is the example of the ACT/DMI interest computations 490 report for the 200412 overpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-6 SienaTaxpayer Identifying Information:FED - **-***Talcim 1120 Tax Period: 200412Top Left:Run Method: IRS DefaultInterest To: 09302009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152005--150 Return Filed and Assessed Tax Liability-3,000,000.003,000,000.0003152005--610 Remittance with Return-(3,000,000.00)-03152008--299 Abatement of Prior Tax Interest Computation -(2,500,000.00)(2,500,000.00)N/A03152008071220081540 Use Prin GATT to Equal XREF 99-9999999 1120 200112(2,490,000.00)-(2,500,000.00)N/A03152008071220081550 Use Prin Over to Equal XREF 99-9999999 1120 200112(10,000.00)-(2,500,000.00)12302008--840 Manual Refund-2,500,000.00-12302008--1004 Refund Interest High-65,088.8665,088.86The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-150 Return Filed and Assessed Tax Liability3,000,000.00-----610 Remittance with Return(3,000,000.00)---03152008-299 Abatement of Prior Tax Interest Computation(2,500,000.00)--(2,500,000.00)0316200807122008Overpay(10,000.00)0.016499624(165.00)---Overpay GATT(2,490,000.00)0.011554752(28,771.33)(2,528,936.33)0713200812302008Overpay(10,165.00)0.021399286(217.52)---Overpay GATT(2,518,771.330.014266878(35,935.00)(2,565,088.86)12302008-840 Manual Refund2,500,000.00-----1004 Refund Interest High65,088.86---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(65,088.86)(65,088.86)-Principal Balance---Totals(65,088.86)(65,088.86)0.00 Please click here for the text description of the image. Exhibit 20.2.14-6 ACT/DMI Report 530 Post Netting Overpayment Period (200412)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200412 overpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-6 SienaTaxpayer Identifying Information:FED ** ***9999 Talcim 1120 Tax Period 200412ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 09302009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONSEqualizations that affect 99-9999999 200412 1120 Tac ModuleChange:**-***99992001121120Change:**-***99992004121120N-Amt2,490,000.00Equalize to GATT-N-Amt2,490,000.00Use Prin GATT to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992004121120N-XRef**-***99992001121120Change:**-***99992001121120Change:**-***99992004121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152008N-End07122008N-Beg03152008N-End07122008N-XRef**-***99992004121120N-XRef**-***99992001121120Balances in selected module that are still available for potential nettingAvailable Overpayment at GATT Rate, (2,518,771.33) From 07132008 To 12302008Available Overpayment at Overpay Rate, (10,165.00) From 07132008 To 12302008 Please click here for the text description of the image. To verify accrued interest during the unnetted overpayment period, it is necessary to determine what the non-GATT and GATT overpayment balances are as of he end of the overlapping period in the net rate computation. This information is then used to compute interest during the unnetted overpayment period. When you add the net rate interest amount with the interest accrued during the unnetted overpayment period, the total interest amount determined. To verify accrued interest during the unnetted overpayment period, it is necessary to determine what the non-GATT and GATT overpayment balances are as of the end of the overlapping period in the net rate computation. This information is then used to compute interest during the unnetted overpayment period. When you add the net rate interest amount with the interest accrued during the unnetted overpayment period, the total interest amount determined must equal the interest originally allowed on the overpayment. If these amounts do not equal, an error has been made in either the net rate computation or when verifying the accrued interest. Note: This procedure may be used to verify the accuracy of a net rate computation made on ACT/DMI. However, it is not required because the verification process is automated within the program.
Special Net Rate Interest Computations - Overlapping Amount Completely Used
Exhibit 20.2.14-7 Special Net Rate Interest Computations - Overlapping Amount Completely Used The following example illustrates the situation where the overlapping period is completely used in the net rate computation. Orleans Corporation receives a manual refund of $117,858.64 on August 29, 2008 due to a tax decrease of $100,000.00 based on a Form 1120-X for its 200412 tax year that was filed on March 10, 2008. Interest in the amount of $17,858.64 is paid for the period from March 15, 2005 (return due date) to August 29, 2008. Due to an examination of the 2003 Form 1120, the amount of $350,000.00 is assessed and a notice is issued. The taxpayer pays the balance of $507,024.14 on February 15, 2009. The balance includes interest of $157,024.14, from March 15, 2004 (return due date) to February 15, 2009. The large corporate interest rate (LCU) is charged on the underpayment based on a 30-Day letter dated June 2, 2006 (applicable date of July 02, 2006). On July 30, 2009, the Orleans Corporation files a request to ask that the net rate be applied to its 2003 Form 1120, based on the 2004 overpayment that was manually refunded on August 29, 2008. Interest on the underpayment must be recomputed to allow the net rate adjustment. Interest Computations Prior to Application of the Net Rate Year Form Amount Comments 200312 1120 $350,000.00 LCU rate applicable date is 07022006 - - 157,024.14 Interest from 03152004 to 02152009 (full paid date) 200412 1120 ($100,000.00) Overpayment refunded with interest on 08292008 - - (17,858.64) Interest from 03152005 to 08292008 (manual refund/taxpayer initiated) Exhibit 20.2.14-7 Special Net Rate Interest Computations - Overlapping Period Completely Used Time LineSummary: The following display shows a time line as described in the text examples concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200312, Form 1120, 03152004, Underpayment200412, Form 1120, 03152005, Overpayment200312, LCU 2% Date 07022006200312, Manual Refund 08292008200312, Full Paid Date, 02152009From 1 to 5: Underpayment Interest PeriodFrom 2 to 4: Overpayment Interest PeriodFrom 2 to 4: Net Rate Period Please click here for the text description of the image. Application of the Net Rate to the Previously Paid Underpayment. Note: The net rate interest is computed at normal rates until effective for applicable date for GATT or LCU interest has been reached. Underpayment Interest Computation Amount Computation $ 350,000.00 03152004 to 03152005 (normal Corp. rate) = $16,819.67 16,819.67 Add accrued interest 366,819.67 Balance due 03152005 (100,000.00) Subtract the underpayment amount equal to the overpayment amount on 03152005 266,819.67 03152005 to 07022006 (normal corp. rate) 07022006 02152009 (LCU rate ) = $101,982.83 101,982.83 Add accrued interest $368,802.50 Balance due 02152009 Net Rate Interest Computation Amount Computation $100,000.00 03152005 to 08292008 (normal and GATT rate) = 17,858.64 17,858.64 Add accrued interest 117,858.64 08292008 to 02152009 (LCU rate) = 4,203.92 4,203.92 Add accrued interest $122,062.56 Balance due 02152009 $16,819.67 101,982.83 17,858.64 4,203.92 $140,865.06 Total Revised Interest $157,024.14 Posted Interest $140,865.06 Revised Interest ($16,159.08) Netting Benefit/Interest to be abated (TC 341) Note: Compute statutory overpayment interest accordingly on the amount of abatement that will refund/offset. Input the following transaction information using the appropriate adjustment document and include as part of the workpapers: Adjustment Document Transaction Information 2003 2004 TC 341 – ($16,159.08) TC 340 – ($.00) to indicate that the net rate has been applied Db-Int-To-Dt – 02152009 Db-Int-To-Dt – 03152005 Correspondence Dt – 07221998 Correspondence Dt - 07221998 Activity Code – netrate Activity Code – netrate Amd-Clms-Dt – 07/30/2009 AMD-CLMS-DT – 07/30/2009 Always include the ACT/DMI 530 Report with the following information as part of the work papers. IDRS "N" Information 200312: - N-AMT = 100,000.00 N-BEG = 03152005 N-PER = 200412 N-END = 08292008 N-MFT = 02 200412: - N-AMT = 100,000.00 N-BEG = 03152005 N-PER = 200312 N-END = 08292008 N-MFT = 02 Exhibit 20.2.14-7 Special Net Rate Interest Computations – Overlapping Period Completely Used Time LineSummary: The following display shows a time line as described in the text examples concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200312, Form 1120, 03152004, Underpayment200412, Form 1120, 03152005, Overpayment200312, LCU 2% Date 07022006200312, Manual Refund 08292008200312, Full Paid Date, 02152009From 1 to 5: Underpayment (corp rate) $350,000.00From 1 to 2: (1st) Underpayment rate: $350,000.00 plus 16,819.67 equals $366,819.67 minus 100,000.00 equals $266,819.67From 2 to 5: (2nd) Underpayment rate: $266,819.67 plus $101,982.83 equals $368,802.50From 2 to 4: Overpayment (GATT rate) $100,000.00From 2 to 4: (3rd) Overpayment rate: $100,000.00 plus 17,858.64 equals $117,858.64From 4 to 5: (4th) Underpayment rate: $117,858.64 plus 4,203.92 equals $122,062.56 Please click here for the text description of the image. No unnetted overpayment period or unnetted amount remains. An unnetted underpayment period exists from 03152004 to 03152005 on $350,000.00, from 03152005 to 08292008 on $266,819.67, and from 08292008 to 02152009 on $117,858.64. Exhibit 20.2.14-7 ACT/DMI Report 490 Activity Summary (200312)This is the example of the ACT/DMI interest computations 490 report showing verification of the previously assessed underpayment interest for the 200312 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-7 OrleansTaxpayer Identifying Information:FED - **-***Orleans 1120 Tax Period: 200312Top Left:Run Method: IRS DefaultInterest To: 02152009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 07022006 Amount: $100,000.00Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152004--150 Return Filed and Assessed Tax Liability-250,000.00250,000.0003152004--610 Remittance with Return-(250,000.00)-02152009-03152004300 Additional Tax Assessment By Examination-350,000.00350,000.0002152009--670 Subsequent Payment-(507,024.14)(157,024.14)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152004-150 Return Filed and Assessed Tax Liability 250,000.00-----300 Additional Tax Assessment By Examination350,000.00-----610 Remittance with Return(250,000.00)--350,000.000316200407022006Underpay350,000.000.14110606149,387.12399,387.120703200602152009Underpay LCU399,387.120.269505473107,637.02507,024.1402152009-670 Subsequent Payment(507,024.14)---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest157,024.14157,024.14-Overpayment Interest---Principal Balance---Totals157,024.14157,024.140.00 Please click here for the text description of the image. Exhibit 20.2.14-7 ACT/DMI Report 490 Activity Summary (200412)This is the example of the ACT/DMI interest computations 490 report showing verification of the previously assessed underpayment interest for the 200412 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-7 OrleansTaxpayer Identifying Information:FED - **-***Orleans 1120 Tax Period: 200412Top Left:Run Method: IRS DefaultInterest To: 08292008GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152005--150 Return Filed and Assessed Tax Liability-150,000.00150,000.0003152005--610 Remittance with Return-(150,000.00)-03102008-03152005291 Abatement Prior Tax Assessment Per Form 1120X from TP-(100,000.00)(100,000.00)08292008--1004 Refund Interest High-17,858.64(82,141.36)08292008--840 Manual Refund-100,000.0017,858.64The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-150 Return Filed and Assessed Tax Liability150,000.00-----291 Abatement Prior Tax Assessment(100,000.00)-----610 Remittance with Return(150,000.00)--(100,000.00)0316200508292008Overpay(10,000.00)0.234758469(2,347.58)---Overpay GATT(90,000.00)0.172345026(15,511.05)(117,858.64)08292008-840 Manual Refund100,000.00-----1004 Refund Interest High17,858.64---The bottom section of the report provides the "Account Summary" information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(17,858.64)(17,858.64)-Principal Balance---Totals(17,858.64)(17,858.64)0.00 Please click here for the text description of the image. Exhibit 20.2.14-7 ACT/DMI Netting Interest Computation Analysis ScreenThis is the example of the Interest Computation Analysis screen as explained in the text. The top section of the screen reflects title heading and other information relating to the taxpayer and ACT/DMI status.Left Top: Jurisdiction: Federal (this is drop down box option only used by IRS)Right top: View All: Box is checkedTINTax TypeTax PeriodAdditional DescriptionStatusGATT/LCUSelectSelected Modules: The number of modules is entered.The middle of the Analysis screen reflects the Selected Modules without Netting section and next to it in parentheses states (double click to view module settings). Below this provides information related to the tax module. Amounts enclosed in parentheses represent a credit amount.Selected Modules without NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-999999911202003120.000.000.000.0099-999999911202004120.000.000.000.00--Totals: 0.000.000.000.00-Clear ModuleClear All-----The third section of the Analysis screen reflects Selected Modules with Netting. Amounts enclosed in parentheses represent a credit amount.Selected Modules with NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-99999991120200312(16,159.07)0.000.00(16,159.07)99-999999911202004120.000.000.000.00--Totals:(16,159.07)0.000.00(16,159.07)The bottom section of the Analysis screen has two rows of information showing from left to right:Row 1:Run to Date 02152009PostRemoveNetting Benefit (16,159.07)Row 2:ProcessNetting On: Box is checkedRun Method: IRS DefaultReportsModule RestrictionsRun to Date02152009--PostRemoveNetting Benefit: (16,159.07)ProcessNetting OnRun Method IRS DefaultReportsModule Restrictions-- Please click here for the text description of the image. Exhibit 20.2.14-7 ACT/DMI Report 020 Principal and Interest Adj. SummaryThis is the example of the ACT/DMI Report 020 as explained in the text. There are three sections to this report. The top section reflects the following information from left to right:Report Title: 020 Principal and Interest Adj Summary - 20.2.14-7 OrleansJurisdiction: FederalRun Method: IRS DefaultInterest To: 02152009The second section of the report reflects the following information from left to right:Computed Individual ModulesTax IDTaxpayerYear/MonthTax TypeDeficiency InterestOverpayment Interest PrincipalTotal**_***9999Orleans20031211200.000.000.000.00**_***9999Orleans20041211200.000.000.000.00Subtotal 1120---0.000.000.000.00Total---0.000.000.000.00The third or bottom section of the report reflects the following information from left to right (amounts enclosed in parentheses represent a credit amount).Computed Modules with NettingTax IDTaxpayerYear/MonthTax TypeDeficiency InterestOverpayment Interest PrincipalTotal**_***9999Orleans2003121120(16,159.07)0.000.00(16,159.07)**_***9999Orleans20041211200.000.000.000.00Subtotal 1120---(16,159.07)0.000.00(16,159.07)Total---(16,159.07)0.000.00(16,159.07)-----Netting Benefit:-(16,159.07) Please click here for the text description of the image. Exhibit 20.2.14-7 ACT/DMI Report 490 Post Netting Underpayment Period (200312)This is the example of the ACT/DMI interest computations 490 report for the 200312 underpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-7 OrleansTaxpayer Identifying Information:FED ** ***9999 Orleans 1120 Tax Period 200312Top Left:Run Method: IRS DefaultInterest To: 02152009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 07022006 Amount: $100,000.00Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152004--150 Return Filed and Assessed Tax Liability-250,000.00250,000.0003152004--610 Remittance with Return-(250,000.00)-02152009-03152004300 Additional Tax Assessment By Examination-350,000.00350,000.00N/A03152005070220061545 Equalize to GATT XREF: 99-9999999 1120 20041290,000.00-350,000.00N/A03152005070220061555 Equalize to Overpay XREF: 99-9999999 1120 20041210,000.00-350,000.00N/A07022006082920081545 Equalize to GATT XREF: 99-9999999 1120 2004124,860.69-350,000.00N/A07022006082920081545 Equalize to GATT XREF: 99-9999999 1120 20041290,000.00-350,000.00N/A07022006082920081555 Equalize to Overpay XREF: 99-9999999 1120 200412747.38-350,000.00N/A07022006082920081555 Equalize to Overpay XREF: 99-9999999 1120 20041210,000.00-350,000.0002152009--670 Subsequent Payment-(507,024.14)(157,024.14)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152004-150 Return Filed and Assessed Tax Liability 250,000.00-----300 Additional Tax Assessment By Examination350,000.00-----610 Remittance with Return(250,000.00)--350,000.000316200403152005Underpay350,000.000.04805620816,819.67366,819.670316200507022006NR Underpay at GATT90,000.000.0540077084,860.69---NR Underpay at Over10,000.000.074737724747.38---Underpay266,819.670.08878326623,689.12396,116.870703200608292008NR Underpay at GATT94,860.690.11227367410,650.36---NR Underpay at Over10,747.380.1488928341,600.21---Underpay LCU290,508.790.22578277065,591.88473,959.310830200802152009Underpay LCU473,959.310.03566921016,905.75490,865.0702152009-670 Subsequent Payment(507,024.14)--(16,159.07)The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest140,865.07157,024.14(16,159.07)Overpayment Interest---Principal Balance---Totals140,865.07157,024.14(16,159.07) Please click here for the text description of the image. Exhibit 20.2.14-7 ACT/DMI Report 530 Post Netting Underpayment Period (200312)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200312 underpayment period reflecting the rate equalizations after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-7 OrleansIdentifying Information:FED ** ***9999 Orleans 1120 Tax Period 200312ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 02152009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: 07022006 Amount: $100,000Overpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONSEqualizations that affect 99-9999999 200312 1120 Tax ModuleChange:**-***99992003121120Change:**-***99992004121120N-Amt90,000.00Equalize to GATT-N-Amt90,000.00Use Prin GATT to Equal-N-Beg03152005N-End07022006N-Beg03152005N-End07022006N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00use Prin Over to Equal-N-Beg03152005N-End07022006N-Beg03152005N-End07022006N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt90,000.00Equalize to GATT-N-Amt90,000.00Use Prin GATT to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt4,860.69Equalize to GATT-N-Amt4,860.69Use Int GATT to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt747.38Equalize to Overpay-N-Amt747.38Use Int Over to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120Balances in selected module that are still available for potential nettingAvailable Underpayment at Underpay Rate, $350,000.00 From 03162004 To 03152005Available Underpayment at Underpay Rate, $266,819.67 From 03162005 To 07022006Available Underpayment at LCU Rate, $290,508.79 From 07032006 To 08292008Available Underpayment at LCU Rate, $473,959.31 From 08302008 To 02152009 Please click here for the text description of the image. Exhibit 20.2.14-7 ACT/DMI Report 490 Post Netting Overpayment Period (200412)This is the example of the ACT/DMI interest computations 490 report for the 200412 overpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-7 OrleansTaxpayer Identifying Information:FED- ** *** 9999 Orleans 1120 Tax Period 200412Top Left:Run Method: IRS DefaultInterest To: 02152009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995, Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152005--150 Return Filed and Assessed Tax Liability-150,000.00150,000.0003152005--610 Remittance with Return-(150,000.00)-03102008-03152005291 Abatement Prior Tax Assessment Per Form 1120X from TP-(100,000.00)(100,000.00)N/A03152005070220061540 Use Prin GATT to Equal XREF: **-***9999 1120 200312(90,000.00)-(100,000.00)N/A03152005070220061550 Use Prin Over to Equal XREF: **-***9999 1120 200312(10,000.00)-(100,000.00)08292008--1004 Refund Interest High-17,858.64(82,141.36)08292008--840 Manual Refund-100,000.0017,858.64N/A07022006082920081540 Use Prin GATT to Equal XREF: **-***9999 1120 200312(90,000.00)-17,858.64N/A07022006082920081541 Use Int GATT to Equal XREF: **-***9999 1120 200312(4,860.69)-17,858.64N/A07022006082920081550 Use Prin Over to Equal XREF: **-***9999 1120 200312(10,000.00)-17,858.64N/A07022006082920081551 Use Int Over to Equal XREF: **-***9999 1120 200312(747.38)-17,858.64The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-150 Return Filed and Assessed Tax Liability 150,000.00-----291 Abatement of Prior Tax Assessment(100,000.00)-----610 Remittance with Return(150,000.00)--(100,000.00)0316200507022006Overpay(10,000.00)0.074737724(747.38)---Overpay GATT(90,000.00)0.054007708(4,860.69)(105,608.07)0703200608292008Overpay(10,747.38)0.148892834(1,600.21)---Overpay GATT(94,860.69)0.112273674(10,650.36)(117,858.64)08292008-840 Manual Refund100,000.00-----1004 Refund Interest High17,858.64---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(17,858.64)(17,858.64)-Principal Balance---Totals(17,858.64)(17,858.64)0.00 Please click here for the text description of the image. Exhibit 20.2.14-7 ACT/DMI Report 530 Post Netting Overpayment Period (200412)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200412 overpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-7 OrleansTaxpayer Identifying Information:FED ** ***9999 Orleans 1120 Tax Period 200412ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 02152009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONSEqualizations that affect XX-XXX9999 200412 1120 Tax ModuleChange:**-***99992003121120Change:**-***99992004121120N-Amt90,000.00Equalize to GATT-N-Amt90,000.00Use Prin GATT to Equal-N-Beg03152005N-End07022006N-Beg03152005N-End07022006N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152005N-End07022006N-Beg03152005N-End07022006N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt90,000.00Equalize to GATT-N-Amt90,000.00Use Prin GATT to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt4,860.69Equalize to GATT-N-Amt4,860.69Use Int GATT to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120Change:**-***99992003121120Change:**-***99992004121120N-Amt747.38Equalize to Overpay-N-Amt747.38Use Int Over to Equal-N-Beg07022006N-End08292008N-Beg07022006N-End08292008N-XRef**-***99992004121120N-XRef**-***99992003121120 Please click here for the text description of the image.
Special Net Rate Interest Computations - Non-Corporate Computations before 01/01/1999 Rate Equalization
Exhibit 20.2.14-8 Special Net Rate Interest Computations - Non-Corporate Computations before 01/01/1999 Rate Equalization This example illustrates that, given the equalized rates effective January 1, 1999, a net rate adjustment may be allowed on "non-corporate" returns for interest periods prior to January 1, 1999. A $2,000.00 tax overpayment was refunded with $286.44 interest on February 5, 1999, on Pete and Petunia Flower's 1996 Form 1040, U.S. Individual Income Tax Return. On May 10, 1999, a $5,000.00 tax underpayment and $432.74 in interest was paid on their 1997 Form 1040 return. The time line illustrated below reflects the overlapping period during which the net rate can be allowed. Exhibit 20.2.14-8 Overlapping Period Time Line for Individual TaxpayerThe following display shows a time line as described in the text concerning the overlapping period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts enclosed in parentheses represent a credit amount.199612 1040, Overpayment, 04151997, ($2,000.00)199712 1040, Underpayment, 04151998, $5,000.00Rates Equalized on 01011999199612 1040, Refund minus 13 days 01231999199712 1040, Payment in Full on 05101999From 1 to 4: Overpayment Interest PeriodFrom 2 to 5: Underpayment Interest PeriodFrom 2 to 3: Overlapping Net Rate PeriodFrom 3 to 5: No overlapping period because interest rates were equalized on 01011999 Please click here for the text description of the image. An overlapping period exists from 04151998 to 01231999. However, the taxpayer is only entitled to a net rate adjustment from 04151998 to 01011999. This is because no interest rate differential exists after January 1, 1999 for non-corporate taxpayers. Interest Computations Prior to Application of Net Rate Interest Netting Year Form Amount Comments 199612 1040 ($2,000.00) Overpayment refunded with interest on 02051999 - - (286.44) Interest from 04151997 to 01231999 (13-Day back-off) 199712 1040 $5,000.00 Underpayment as of 04151998 - - 432.74 Interest from 04151998 to 05101999 (full pay date) Application of Net Rate to the Previously Paid Underpayment. Note: The net rate is applied on the underpayment up to January 1, 1999, at which time non-corporate interest rates were equalized. Overpayment Interest Computation - ($2,000.00) 04151997 to 04151998 (non-corporate overpayment rate) = $165.67 (2,165.67) Add accrued interest Underpayment Interest Computation - 5,000.00 Balance due 04151998 (2,165.67) Subtract the underpayment amount equal to the overpayment amount on 04151998 2,834.33 04151998 to 12311998 (normal non-corp. underpayment rate) = $166.19 166.19 Add accrued interest $3,000.52 Balance due 12311998 Net Rate Interest Computation - $2,165.67 04151998 to 12311998 (overpayment interest rate) = 110.71 110.71 Add accrued interest 2,276.38 Balance due 12311998 3,000.52 Add Underpayment rate total $5,276.90 TOTAL Balance due 123119998 139.14 110.71 166.19 $ 416.04 Regular Non-Corporate Interest Rate from 12311998 to 05101999 $ 432.74 Posted Interest $416.04 Revised Interest ($16.70) Netting Benefit/Interest to be abated (TC 341) Note: Ensure statutory overpayment interest is computed on the amount of abatement from 05101999 to refund 23C date minus any applicable back-off days.
Special Net Rate Interest Computations - Later Underpayment Interest Period Overlaps a Previously Unnetted Overpayment Amount
Exhibit 20.2.14-9 Special Net Rate Interest Computations - Later Underpayment Interest Period Overlaps a Previously Unnetted Overpayment Amount This example illustrates a net rate request for a previously assessed and paid tax liabiltiy. A 30-Day letter was issued on March 10, 2008, to Athens Corporation which agreed to a 200412 Form 1120 tax increase of $150,000.00. The tax, plus interest computed from March 15, 2005 to February 20, 2009, was paid in full on February 20, 2009. A claim was filed on January 22, 2009, and a manual refund of $79,000.00, plus interest, was allowed March 23, 2009, on the 200712 Form 1120. Interest on the refunded overpayment consisted of normal and GATT rates allowed on the overpayment. On August 1, 2009, Athens Corporation filed a request to ask that the net rate be applied on the 200412 underpayment as a result of the 200712 overpayment. Underpayment interest must be recomputed to apply the net rate. On the new request filed, a manual refund for $3,406.12 ($3,348.94 plus $57.18) was issued on September 1, 2009. During the overlapping period(s), interest on the underpayment is computed at the normal and GATT rate because interest on the 200712 overpayment was allowed at the normal and GATT rates. The recomputation of underpayment interest results in a decrease to the interest assessed and a refund of underpayment interest. The overpayment period is not adjusted. The interest rate differential is eliminated by recomputing underpayment interest at the overpayment rate during the overlapping interest period(s). Interest Computations Prior to Application of the Net Rate Year Form Amount Comments 200412 1120 $150,000.00 Large Corporate Underpayment (LCU) rate applicable date is 04-09-2007. - - 54,361.17 Interest from 03152005-02202009 payment date - - 204,361.17 Payment 200712 1120 ($79,000.00) $2,676.25) Overpayment manual refund dated 03232009 Interest 03152005 to 03232009 - - ($81,676.25) Taxpayer initiated Manual Exhibit 20.2.14-9 ACT/DMI Report 490 Activity Summary (200412)This is the example of the ACT/DMI interest computations 490 report showing verification of the previously assessed underpayment interest for the 200412 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-9 AthensTaxpayer Identifying Information:FED - **-***Athens 1120 Tax Period: 200412Top Left:Run Method: IRS DefaultInterest To: 02202009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 04092007 Amount: $100,000.00Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152005--150 Return Filed and Assessed Tax Liability-275,000.00275,000.0003152005--610 Remittance with Return-(275,000.00)-02202009-03152005300 Additional Tax Assessment By Examination-150,000.00150,000.0002202009--670 Subsequent Payment-(204,361.17)(54,361.17)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-150 Return Filed and Assessed Tax Liability275,000.00-----300 Additional Tax Assessment By Examination150,000.00-----610 Remittance with Return(275,000.00)--150,000.000316200504092007Underpay150,000.000.15794061523,691.09173,691.090410200702202009Underpay LCU173,691.090.17657831030,670.08204,361.1702202009-670 Subsequent Payment(204,361.17)---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest54,361.1754,361.17-Overpayment Interest---Principal Balance---Totals54,361.1754,361.170.00 Please click here for the text description of the image. Exhibit 20.2.14-9 ACT/DMI Report 490 Activity Summary (200712)This is the example of the ACT/DMI interest computations 490 report showing verification of the previously allowed overpayment interest for the 200712 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report:Report Title: 490 Activity Summary - 20.2.14-9 AthensTaxpayer Identifying Information:FED ** ***9999 Athens 1120 Tax Period: 200712Top Left:Run Method: IRS DefaultInterest To: 03232009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152008--150 Return Filed and Assessed Tax Liability-325,000.00325,000.0003152008--610 Remittance with Return-(325,000.00)-01222009-03152008291 Abatement Prior Tax Assessment-(79,000.00)(79,000.00)03232009--840 Manual Refund-79,000.000.0003232009--1004 Refund Interest High-2,676.252,676.25The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmount FactorInterestBalance03152008-150 Return Filed and Assessed Tax Liability325,000.00-----291 Abatement Prior Tax Assessment(79,000.00)-----610 Remittance with Return(325,000.00)--(79,000.00)0316200803232009Overpay(10,000.00)0.047766685(477.67)---Overpay GATT(69,000.00)0.031863551(2,198.59)(81,676.25)03232009-840 Manual Refund79,000.00-----1004 Refund Interest High2,676.25---The bottom section of the report provides the "Account Summary" information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(2,676.25)(2,676.25)-Principal Balance---Totals(2,676.25)(2,676.25)0.00 Please click here for the text description of the image. Exhibit 20.2.14-9 Special Net Rate Interest Computations – Later Underpayment Period Overlaps a Previously Unnetted Overpayment PeriodThe following display shows a time line as described in the text examples concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200412, 1120, 03152005, Underpayment200412, LCU 2% Date is 04092007200712, 1120, 03152008, Overpayment200412, Full Paid Date is 02202009200712, Manual Refund 03232009From 1 to 4: Underpayment Interest PeriodFrom 3 to 5: Overpayment Interest PeriodFrom 3 to 4: Net Rate Period Please click here for the text description of the image. Application of the Net Rate to the Previously Paid Underpayment Underpayment Interest Computation - $150,000.00 03152005 to 04092007 = 23,691.09 04092007 to 03152008 (LCU) = 16,605.81 40,296.90 Add accrued interest 190,296.90 Balance due 03152008 (79,000.00) Subtract the underpayment amount equal to the overpayment amount on 03152008 111,296.90 03152008 to 02202009 (LCU rate) = 8,225.62 8,225.62 Add accrued interest 119,522.52 Balance due 02202009 Net Rate Interest Computation - $79,000.00 03152008 to 02202009 (normal and GATT rate) = 2,489.71 2,489.71 Add accrued interest 81,489.71 Balance due 02202009 Underpayment Interest Computation continued - $40,296.90 8,225.62 2,489.71 $51,012.23 Total Revised Interest $54,361.17 Posted Interest 51,012.23 Revised Interest (3,348.94) Netting Benefit/Interest to be abated (TC 341) Input the following transaction information using the appropriate adjustment document and include as part of the workpapers. Adjustment Document Transaction Information 200412 200712 TC 341 – (3,348.94) TC 340 – To indicate that the net rate has been applied. Db-Int-To-Dt – 02202009 Db-Int-To-Dt = Applicable date Correspondence Dt – 07221998 Correspondence Dt – 07221998 Activity Code – netrate Activity Code – netrate Amd-Clms-Dt – request received date 08012009 Amd-Clms-Dt – request received date 08012009 Always include the ACT/DMI 530 Report with the following information as part of the work papers. IDRS N Information - 200412: N-AMT – 79,000.00 N-BEG = 03152008 N-PER = 200712 N-END = 02202009 N-MFT = 02 200712: N-AMT – 79,000.00 N-BEG = 03152008 N-PER = 200412 N-END = 02202009 N-MFT = 02 The $3,348.94 creates a potential new overpayment period for another net rate adjustment. For 200712, there is an unnetted overpayment interest period that exists from 02212009 to 03232009 for the $79,000.00, plus accrued interest of $2,489.71 as of the end of the current overlapping period. For 200412, an unnetted underpayment period exists from 03152005 to 03152008. Important Note: During the overlapping period, to correctly compute interest at the GATT rate on a subsequent assessment with an interest period that overlaps a previously unnetted period, the amount of interest accruing at the HIGH (non-GATT) rate as of the end of the previous overlapping period must be determined. Interest at the HIGH rate must continue to accrue on the original $10,000.00, plus accruals, to the end of the current overlapping period. Therefore, to correctly determine the amount of overpayment available at the beginning of the news/subsequent overlapping period, the GATT threshold amount will be the $10,000.00, plus accrued interest. The GATT threshold can be obtained from the overpayment interest computation that is used to make the net rate adjustment. Use the High Rate /non_GATT amount that consist of the $10,000.00 threshold plus accrued interest as of the date that was used as of the beginning of the news/subsequent overlapping period. Note: If an overpayment freeze (I-) exists on the module on which you are abating the previously paid interest, manually compute the overpayment interest on the abatement amount to the appropriate interest ending date. Exhibit 20.2.14-9 Special Net Rate Interest Computations – Request on a Previously Assessed and Paid Tax LiabilityThe following display shows a time line as described in the text examples concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200412, 1120, 03152005, Underpayment200412, LCU 2% Date is 04092007200712, 1120, 03152008, Overpayment200412, Full Paid Date is 02202009200712, Manual Refund 03232009From 1 to 4: Underpayment (corp rate) $150,000.00From 4 to 5: Unnetted Credit periodFrom 1 to 3: (1st) Underpayment rate: $150,000.00 plus $40,296.90 in interest equals $190,296.90 minus 79,000.00 equals $111,296.90From 3 to 4: (2nd) Underpayment rate: $111,296.90 plus $8,225.62 in interest equals $119,522.52From 3 to 5: Overpayment (GATT rate) $79,000.00From 3 to 5: (3rd) Overpayment rate: $79,000.00 plus $2,489.71 in interest equals $81,489.71 Please click here for the text description of the image. Amount unnetted at the beginning of the unnetted overpayment period 02202009 to 03232009 is $81,489.71. Unnetted underpayment interest period exists from 03152005 to 03152008. A net rate adjustment can be made if another overpayment period overlaps this time frame. Exhibit 20.2.14-9 ACT/DMI Netting Interest Computation Analysis ScreenThis is the example of the Interest Computation Analysis screen as explained in the text. The top section of the screen reflects title heading and other information relating to the taxpayer and ACT/DMI status.Left Top: Jurisdiction: Federal (this is drop down box option only used by IRS)Right top: View All: Box is checkedTINTax TypeTax PeriodAdditional DescriptionStatusGATT/LCUSelectSelected Modules: The number of modules is entered.The middle of the Analysis screen reflects the Selected Modules without Netting section and next to it in parentheses states (double click to view module settings). Below this provides information related to the tax module. Amounts enclosed in parentheses represent a credit amount.Selected Modules without NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-999999911202004120.000.000.000.0099-999999911202007120.000.000.000.00--Totals0.000.000.000.000.00Clear ModuleClear All-----The third section of the Analysis screen reflects Selected Modules with Netting. Amounts enclosed in parentheses represent a credit amount.Selected Modules with NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-99999991120200412(3,348.94)(57.18)0.00(3,406.12)99-999999911202007120.000.000.000.00--Totals:(3,348.94)(57.18)0.00(3,406.12)The bottom section of the Analysis screen has two rows of information showing from left to right:Row 1:Run to Date 09012009PostRemoveNetting Benefit (3,406.13)Row 2:ProcessNetting On: Box is checkedRun Method: IRS DefaultReportsModule RestrictionsRun to Date09012009--PostRemoveNetting Benefit: (3,406.13)ProcessNetting OnRun Method IRS DefaultReportsModule Restrictions-- Please click here for the text description of the image. Exhibit 20.2.14-9 ACT/DMI Report 020 Principal and Interest Adj. SummaryThis is the example of the ACT/DMI Report 020 as explained in the text. There are three sections to this report. The top section reflects the following information from left to right:Report Title: 020 Principal and Interest Adj Summary - 20.2.14-9 AthensJurisdiction: FederalRun Method: IRS DefaultInterest To: 09012009The second section of the report reflects the following information from left to right:Computed Individual ModulesTax IDTaxpayerYear/MonthTax TypeDeficiency InterestOverpayment InterestPrincipalTotal**_***9999Athens20041211200.000.000.000.00**_***9999Athens20071211200.000.000.000.00Subtotal 1120---0.000.000.000.00Total---0.000.000.000.00The third or bottom section of the report reflects the following information from left to right (amounts enclosed in parentheses represent a credit amount).Computed Modules with NettingTax IDTaxpayerYear/MonthTax TypeDeficiency InterestOverpayment Interest PrincipalTotal**_***9999Athens2004121120(3,348.94)(57.18)0.00(3,406.12)**_***9999Athens20071211200.000.000.000.00Subtotal 1120---(3,348.94)(57.18)0.00(3,406.12)Total---(3,348.94)(57.18)0.00(3,406.12)Netting Benefit: (3,406.12) Please click here for the text description of the image. Exhibit 20.2.14-9 ACT/DMI Report 490 Post Netting Underpayment Period (200412)This is the example of the ACT/DMI interest computations 490 report for the 200412 underpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-9 AthensTaxpayer Identifying Information:FED ** ***9999 Athens 1120 Tax Period 200412Top Left:Run Method: IRS DefaultInterest To: 09012009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 04092007 Amount: $100,000.00Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152005--150 Return Filed and Assessed Tax Liability-275,000.00275,000.0003152005--610 Remittance with Return-(275,000.00)-02202009-03152005300 Additional Tax Assessment By Examination-150,000.00150,000.0002202009--670 Subsequent Payment-(204,361.17)(54,361.17)N/A03152008022020091545 Equalize to GATT XREF: 99-9999999 1120 20071269,000.00-(54,361.17)N/A03152008022020091555 Equalize to Overpay XREF: 99-9999999 1120 20071210,000.00-(54,361.17)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152005-150 Return Filed and Assessed Tax Liability 275,000.00-----300 Additional Tax Assessment By Examination150,000.00-----610 Remittance with Return(275,000.00)--150,000.000316200504092007Underpay150,000.000.15794061523,691.09173,691.090410200703152008Underpay LCU173,691.090.09560540016,605.81190,296.900316200802202009NR Underpay at GATT69,000.000.0296750072,047.58---NR Underpay at Over10,000.000.044213383442.13---Underpay LCU111,296.900.0739070028,225.62201,012.2302202009-670 Subsequent Payment(204,361.17)--(3,348.94)0221200909012009Overpay(3,348.94)0.017074890(57.18)(3,406.12)The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest51,012.2354,361.17(3,348.94)Overpayment Interest(57.18)-(57.18)Principal Balance---Totals50,955.0554,361.17(3,406.12) Please click here for the text description of the image. Exhibit 20.2.14-9 ACT/DMI Report 490 Post Netting Overpayment Period (200712)This is the example of the ACT/DMI interest computations 490 report for the 200712 overpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-9 AthensTaxpayer Identifying Information:FED- ** *** 9999 Athens 1120 Tax Period 200712Top Left:Run Method: IRS DefaultInterest To: 09012009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995, Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152008--150 Return Filed and Assessed Tax Liability-325,000.00325,000.0003152008--610 Remittance with Return-(325,000.00)-01222009-03152008291 Abatement of Prior Tax-(79,000.00)(79,000.00)N/A03152008022020091540 Use Prin GATT to Equal XREF: **-***9999 1120 200412(69,000.00)-(79,000.00)N/A03152008022020091550 Use Prin Over to Equal XREF: **-***9999 1120 200412(10,000.00)-(79,000.00)03232009--840 Manual Refund-79,000.00-03232009--1004 Refund Interest High-2,676.252,676.25The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152008-150 Return Filed and Assessed Tax Liability325,000.00-----291 Abatement of Prior Tax Assessment(79,000.00)-----610 Remittance with Return(325,000.00)--(79,000.00)0316200802202009Overpay(10,000.00)0.044213383(442.13)---Overpay GATT(69,000.00)0.029675007(2,047.58)(81,489.71)0221200903232009Overpay(10,442.13)0.003402851(35.53)---Overpay GATT(71,047.58)0.002125471(151.01)(81,676.25)03232009-840 Manual Refund79,000.00-----1004 Refund Interest High2,676.25---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentOverpayment Interest(2,676.25)(2,676.25)-Principal Balance---Totals(2,676.25)(2,676.25)0.00 Please click here for the text description of the image. Exhibit 20.2.14-9 ACT/DMI Report 530 Post Netting Underpayment Period (200412)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200412 underpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-9 OrleansTaxpayer Identifying Information:FED ** ***9999 Orleans 1120 Tax Period 200412ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 09012009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: 04092007 Amount: $100,000Overpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONSEqualizations that affect 99-9999999 200412 1120 Tax ModuleChange:**-***99992004121120Change:**-***99992007121120N-Amt69,000.00Equalize to GATT-N-Amt69,000.00Use Prin GATT to Equal-N-Beg03152008N-End02202009N-Beg03152008N-End02202009N-XRef**-***99992007121120N-XRef**-***99992004121120Change:**-***99992004121120Change:**-***99992007121120N-Amt10,000.00Equlaize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152008N-End02202009N-Beg03152008N-End02202009N-XRef**-***99992007121120N-XRef**-***99992004121120Balances in selected module that are still available for potential nettingAvailable Underpayment at Underpay Rate 150,000.00, From 03162005 To 04092007Available Underpayment at LCU Rate 173,691.09 From 04102007 To 0315008Available Underpayment at LCU Rate 111,296.90, From 03162008 To 02202009Available Overpayment at Overpay Rate (3,348.94), From 02212009 To 09012009 Please click here for the text description of the image. Exhibit 20.2.14-9 ACT/DMI Report 530 Post Netting Overpayment Period (200712)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200712 overpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-9 AthensTaxpayer Identifying Information:FED ** ***9999 Athens 1120 Tax Period 200712ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 09012009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONSEqualizations that affect 99-9999999 200712 1120 Tax ModuleChange:**-***99992004121120Change:**-***99992007121120N-Amt69,000.00Equalize to GATT-N-Amt69,000.00use Prin GATT to Equal-N-Beg03152008N-End02202009N-Beg03152008N-End02202009N-XRef**-***99992007121120N-XRef**-***99992004121120Change:**-***99992004121120Change:**-***99992007121120N-Amt10,000.00Equalize to Overpay-N-Amt10,000.00Use Prin Over to Equal-N-Beg03152008N-End02202009N-Beg03152008N-End02202009N-XRef**-***99992007121120N-XRef**-***99992004121120Balances in selected module that are still available for potential nettingAvailable Overpayment at GATT Rate (71,047.58) From 02212009 To 03232009Available Overpayment at Overpay Rate (10,442.13) From 02212009 To 03232009 Please click here for the text description of the image.
Net Rate Interest Computation - Settled Underpayment Year and Current Overpayment Year
Exhibit 20.2.14-10 Net Rate Interest Computation - Settled Underpayment Year and Current Overpayment Year This example illustrates applying the net rate to a "settled" underpayment module when currently processing an overpayment on a separate tax year. This will result in an overlapping period available for netting on the settled underpayment year. The Harmon Corporation had a prior examination on its 200512 Form 1120 return, which resulted in a tax assessment of $200,000.00. A 30-Day letter was issued on August 8, 2007 (applicable LCU date is September 7, 2007). The taxpayer paid both the tax and interest on December 17, 2008. The current examination of the 200712 Form 1120 has resulted in a tax decrease of $725,000.00. A manual refund for the overpayment, plus interest, is scheduled to be refunded on October 25, 2009. (Because this is an IRS initiated adjustment and issued as a manual refund, there is a 45-Day back-off period). In this situation, compute interest on the overpayment first, then recompute interest on the underpayment period applying the net rate. Overpayment interest currently being allowed 200712 1120 (725,000.00) Tax decrease - - 28,776.43 Interest from 03152008 to 09102009 (refund schedule date of 10252009 less the 45-day back-off period) Underpayment interest computed to prior to application of the net rate 200512 1120 $200,000.00 50,223.73 Tax increase Interest from 03152006 (LCU rate applicable date is 09072007) to 12172008 (full paid date) Since the 200712 overpayment is greater than the 200512 underpayment (plus accrued interest), the entire underpayment balance that is due during the net rate period is charged interest at the GATT rate. Exhibit 20.2.14-10 Special Net Rate Interest Computations – Settled Underpayment Year and Current Overpayment YearThe following display shows a time line as described in the text example concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200512, Form 1120, 03152006, Underpayment200512, LCU 2% date 09072007200712, Form 1120, 03152008, Overpayment200512, Full Paid Date 12172008200712, Manual Refund minus 45 days, 09102009From 1 to 4: Underpayment Interest PeriodFrom 3 to 5: Overpayment Interest PeriodFrom 3 to 4: Net Rate Period Please click here for the text description of the image. Application of the Net Rate to the Previously Paid Underpayment Note: Interest at the net rate is computed at normal rates until the effective or applicable date for GATT or Large Corporate (LCU) interest has been reached. Underpayment Interest Computation - $200,000.00 03152006 to 09072007 (normal corp. rate) and 09072007 to 03152008 (LCU) rate = 36,014.13 36,014.13 Add accrued interest $236,014.13 Balance due 03152008 Net Rate Interest Computation - $236,014.13 03152008 to 12172009 (GATT rate) = 5,832.35 5,832.35 Add accrued interest $241,846.48 Balance due 12172009 Underpayment Interest Computation continued - $36,014.13 5,832.35 $41,846.48 Total Revised Interest $50,223.73 Posted Interest 41,846.48 Revised Interest (8,377.25) Netting Benefit/Interest to be abated (TC 341) (213.55) Add: Accrued interest at the prevailing rate to 09102009 $8,590.79 Manual refund to 23C date 10252009 minus the 54-Day back-off period (Total is $.01 off due to rounding) Note: Compute statutory overpayment interest accordingly on the amount of abatement that will refund or offset. Input the following transaction information using the appropriate adjustment documents. Adjustment Document Transaction Information - 200512 200712 (A two-step process is required) TC 341 – ($8,377.25) Db-Int-To-Dt – 12172008 Correspondence date - 07221998 Activity Code - netrate Step 1: (CC AMCLS) TC 301 – $725,000.00 (Hold Code 1 to issue notice and hold credit for manual refund) TC 340 – (.00) to indicate that the net rate has been applied Db-Int-To-Dt – 03152008 Step 2: (CC ADJ54) TC 340 - $.00 (Hold Code 4, Posting Delay Code 1) Db-Int-To-Dt - 03152008 Correspondence date - 07221998 Activity Code - netrate Reminder: Remember to input TC 971 AC 355 on both tax modules using CC REQ77. See IRM 20.2.14.6.10(5). Always include the ACT/DMI 530 Report with the following information as part of the work papers. IDRS "N" Information 200512: - N-AMT = 236,014.13 N-BEG = 03152008 N-PER = 200712 N-END = 12172008 N-MFT = 02 200712: - N-AMT = 236,014.13 N-BEG = 03152008 N-PER = 200512 N-END = 12172008 N-MFT = 02 Exhibit 20.2.14-10 Special Net Rate Interest Computations – Settled Underpayment Year and Current Overpayment YearThe following display shows a time line as described in the text example concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200512, Form 1120, 03152006, Underpayment200512, LCU 2% date 09072007200712, Form 1120, 03152008, Overpayment200512, Full Paid Date 12172008200712, Manual Refund minus 45 days, 09102009From 1 to 4: Underpayment (corp rate) $200,000.00From 1 to 3: Underpayment rate: $200,000.00 plus $36,014.13 in interest equals $236,014.13From 3 to 4: Overpayment (GATT rate) $236,014.13From 3 to 4: Overpayment rate: $236,014.13 plus $5,832.35 in interest equals $241,846.48Amount of underpayment at the beginning of the unnetted underpayment period 03152006 to 03152008 is $200,000.00.Amount of unnetted overpayment at the beginning of the unnetted overpayment period 03152008 to 12172008 is $488,985.87.Amount of unnetted overpayment at the beginning of the unnetted overpayment period 12172008 to 09102009 is $742,916.10.Unnetted underpayment period still exists from 031520065 to 03152008.Unnetted overpayment period still exists from 03152008 to 12172008 and from 12172008 to 09102009. Please click here for the text description of the image. Exhibit 20.2.14-10 ACT/DMI Report 490 Activity Summary (200512)This is the example of the ACT/DMI interest computations 490 report showing verification of the previously assessed underpayment interest for the 200512 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-10 HarmonTaxpayer Identifying Information:FED - **-***Harmon 1120 Tax Period: 200512Top Left:Run Method: IRS DefaultInterest To: 12172008GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 09072007 Amount: $100,000.00Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152006--150 Return Filed and Assessed Tax Liability-300,000.00300,000.0003152006--660 Estimated Tax-(300,000.00)-09152006-03152006300 Additional Tax Assessment By Examination-200,000.00200,000.0012172008--670 Subsequent Payment-(250,223.73)(50,223.73)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152006-150 Return Filed and Assessed Tax Liability300,000.00-----300 Additional Tax Assessment By Examination200,000.00-----660 Estimated Tax(300,000.00)--200,000.000316200609072007Underpay200,000.000.12258206324,516.41224,516.410908200712172008Underpay LCU224,516.410.11450084625,707.32250,223.7312172008-670 Subsequent Payment(250,223.73)--0.00The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest50,223.7350,223.730.00Overpayment Interest---Principal Balance--0.00Totals50,223.7350,223.730.00 Please click here for the text description of the image. Exhibit 20.2.14-10 ACT/DMI Report 490 Activity Summary (200712)This is the example of the ACT/DMI interest computations 490 report showing verification of the previously allowed overpayment interest for the 200712 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-10 Harmon CorporationTaxpayer Identifying Information:FED - **-***Harmon Corporation 1120 Tax Period: 200712Top Left:Run Method: IRS DefaultInterest To: 09102009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152008--150 Return Filed and Assessed Tax Liability-1,000,000.001,000,000.0006152007-03152008660 Estimated Tax-(1,000,000.00)-10252009-03152008301 Abatement of Tax By Examination Division-(725,000.00)(725,000.00)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152008-150 Return Filed and Assessed Tax Liability1,000,000.00-----301 Abatement of Tax By Examination Division(725,000.00)-----660 Estimated Tax(1,000,000.00)--(725,000.00)0316200809102009Overpay(10,000.00)0.062829091(628.29)---Overpay GATT(715,000.00)0.039368024(28,148.14)(753,776.43)The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(28,776.43)-(28,776.43)Principal Balance--(725,000.00)Totals(28,776.43)-(753,776.43) Please click here for the text description of the image. Figure 20.2.14-10 ACT/DMI Netting Interest Computation Analysis ScreenThis is the example of the Interest Computation Analysis screen as explained in the text. The top section of the screen reflects title heading and other information relating to the taxpayer and ACT/DMI status.Left Top: Jurisdiction: Federal (this is drop down box option only used by IRS)Right top: View All: Box is checkedTINTax TypeTax PeriodAdditional DescriptionStatusGATT/LCUSelectSelected Modules: The number of modules is entered.The middle of the Analysis screen reflects the Selected Modules without Netting section and next to it in parentheses states (double click to view module settings). Below this provides information related to the tax module. Amounts enclosed in parentheses represent a credit amount.Selected Modules without NettingTINTax TypeTax PeriodDeficiency InterestOverpayment InterestPrincipalNet Due/(Refund)99-999999911202005120.000.000.000.0099-999999911202007120.00(28,776.43)(725,000.00)(753,776.43)--Totals0.00(28,776.43)(725,000.00)(753,776.43)-Clear ModuleClear All-----The third section of the Analysis screen reflects "Selected Modules with Netting." Amounts enclosed in parentheses represent a credit amount.Selected Modules with NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-99999991120200512(8,377.25)(213.55)0.01(8,590.79)99-999999911202007120.00(28,776.43)(725,000.00)(753,776.43)--Totals:(8,377.25)(28,989.98)(724,999.99)(762,367.22)The bottom section of the Analysis screen has two rows of information showing from left to right:Row 1:Run to Date 09102009PostRemoveNetting Benefit (8,590.79)Row 2:ProcessNetting On: Box is checkedRun Method: IRS DefaultReportsModule Restrictions Please click here for the text description of the image. Exhibit 20.2.14-10 ACT/DMI Report 020 Principal and Interest Adj. SummaryThis is the example of the ACT/DMI Report 020 as explained in the text. There are three sections to this report. The top section reflects the following information from left to right:Report Title: 020 Principal and Interest Adj Summary - 20.2.14-10 Harmon CorporationJurisdiction: FederalRun Method: IRS DefaultInterest To: 09102009The second section of the report reflects the following information from left to right. Amounts enclosed in parentheses represent a credit amount.Computed Individual ModulesTax IDTaxpayerYear/MonthTax TypeStatusDeficiency InterestOverpayment InterestPrincipalTotal**-***9999Harmon Corporation2005121120O/(O)0.000.000.000.00**-***9999Harmon Corporation2007121120O/(O)0.00(28,776.43)(725,000.00)(753,776.43)Subtotal 1120----0.00(28,776.43)(725,000.00)(753,776.43)Total----0.00(28,776.43)(725,000.00)(753,776.43)The third or bottom section of the report reflects the following information from left to right (amounts enclosed in parentheses represent a credit amount).Computed Modules with NettingTax IDTaxpayerYear/MonthTax TypeStatusDeficiency InterestOverpayment Interest PrincipalTotal**-***9999Harmon Corporation2005121120O/(O)(8,377.25)(213.55)0.00(8,590.79)**-***9999Harmon Corporation2007121120O/(O)0.00(28,776.43)(725,000.00)(753,776.43)Subtotal 1120----(8,377.25)(28,776.43)(725,000.00)(762,367.22)Total----(8,377.25)(28,776.43)(725,000.00)(762,367.22)Netting Benefit: (8,590.79) Please click here for the text description of the image. Exhibit 20.2.14-10 ACT/DMI Report 490 Post Netting Underpayment Period (200512)This is the example of the ACT/DMI interest computations 490 report for the 200512 underpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-10 Harmon CorporationTaxpayer Identifying Information:FED ** ***9999 Harmon 1120 Tax Period 200512Top Left:Run Method: IRS DefaultInterest To: 09102009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: 09072007 Amount: $100,000.00Overpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152006--150 Return Filed and Assessed Tax Liability -300,000.00300,000.0004152005-03152006660 Estimated Tax-(300,000.00)-09152006-03152006300 Additional Tax Assessment By Examination-200,000.00200,000.0012172008--670 Subsequent Payment-(250,223.73)(50,223.73)N/A03152008121720081545 Equalize to GATT XREF: 99-9999999 1120 200712236,014.14-(50,223.73)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152006-150 Return Filed and Assessed Tax Liability300,000.00-----300 Additional Tax Assessment By Examination200,000.00-----660 Estimated Tax(300,000.00)--200,000.000316200609072007Underpay200,000.000.12258206324,516.41224,516.410908200703152008Underpay LCU224,516.410.05121106011,497.72236,014.140316200812172008NR Underpay at GATT236,014.140.0247118595,832.35241,846.4812172008-670 Subsequent Payment(250,223.73)--(8,377.25)1218200809102009Overpay(8,377.25)0.025491101(213.55)(8,590.79)The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest41,846.4850,223.73(8,377.25)Overpayment Interest(213.55)-(213.55)Principal Balance--0.00Totals41,632.9450,223.73(8,590.79) Please click here for the text description of the image. Exhibit 20.2.14-10 ACT/DMI Report 530 Post Netting Underpayment Period (200512)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200512 underpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-10 Harmon CorporationTaxpayer Identifying Information:FED ** ***9999 Harmon Corporation 1120 Tax Period 200512ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 09102009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: 09072007 Amount: $100,000Overpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONSEqualizations that affect 99-9999999 200512 1120 Tax ModuleChange:99-99999992005121120Change:99-99999992007121120N-Amt236,014.14Equalize to GATT-N-Amt236,014.14Use Prin GATT to Equal-N-Beg03152008N-End12172008N-Beg03152008N-End12172008N-XRef99-99999992007121120N-XRef99-99999992005121120Balances in selected module that are still available for potential nettingAvailable Underpayment at Underpay Rate, 200,000.00 From 03162006 To 09072007Available Underpayment at LCU Rate 224,516.41 From 09082007 To 0315008Available Overpayment at Overpay Rate (8,377.25), From 12182008 To 09102009 Please click here for the text description of the image. Exhibit 20.2.14-10 ACT/DMI Report 490 Post Netting Overpayment Period (200712)This is the example of the ACT/DMI interest computations 490 report for the 200712 overpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-10 Harmon CorporationTaxpayer Identifying Information:FED- ** *** 9999 Harmon Corporation 1120 Tax Period 200712Top Left:Run Method: IRS DefaultInterest To: 09102009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995, Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152008--150 Return Filed and Assessed Tax Liability-1,000,000.001,000,000.0006152007-03152008660 Estimated Tax-(1,000,000.00)-10252009-03152008301 Abatement of Tax By Examination Division-(725,000.00)(725,000.00)N/A03152008121720081540 Use Prin GATT to Equal XREF: **-***9999 1120 200712(236,014.14)-(725,000.00)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152008-150 Return Filed and Assessed Tax Liability1,000,000.00-----301 Abatement of Tax By Examination Division(725,000.00)-----660 Estimated Tax(1,000,000.00)--(725,000.00)0316200812172008Overpay(10,000.00)0.036409863(364.10)---Overpay GATT(715,000.00)0.024711859(17,668.98)(743,033.08)1218200809102009Overpay(10,364.10)0.025491101(264.19)---Overpay GATT(732,668.98)0.014302718(10,479.16)(753,776.43)The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(28,776.43)-(28,776.43)Principal Balance--(725,000.00Totals(28,776.43)-(753,776.43) Please click here for the text description of the image. Exhibit 20.2.14-10 ACT/DMI Report 530 Post Netting Overpayment Period (200712)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200712 overpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-10 Harmon CorporationTaxpayer Identifying Information:FED ** ***9999 Harmon Corporation 1120 Tax Period 200712ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 09102009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET/EQUALIZATIONSEqualizations that affect 99-9999999 200712 1120 Tax ModuleChange:99-99999992005121120Change:99-99999992007121120N-Amt236,014.14Equalize to GATT-N-Amt236,014.14Use Prin GATT to Equal-N-Beg03152008N-End12172008N-Beg03152008N-End12172008N-XRef99-99999992007121120N-XRef99-99999992005121120Balances in selected module that are still available for potential nettingAvailable Overpayment at GATT Rate ($478,985.86) From 03162008 To 12172008Available Overpayment at Overpay Rate ($10,000.00) From 03162008 To 12172008Available Overpayment at GATT Rate ($732,668.98) From 12182008 To 09102009Available Overpayment at Overpay Rate ($10,364.10) From 12182008 To 09102009 Please click here for the text description of the image. Always include the unnetted periods in your work papers. (The ACT/DMI 530 Report must be used for this purpose). Computation to Verify Unnetted Amounts and Determine the Accuracy of Net Rate Computation. Refer to the time line in Exhibit 20.2.14-10. There is an unnetted overpayment period in 200712 from 03152008 to 12172008. The overpayment amount on 03162008 is $488,985.87. The amount of credit available at the beginning of the unnetted overpayment period from 12172008 to 09102009 is $742,916.10. There is an unnetted underpayment period from 03152006 to 03152008 on the $200,000.00 underpayment. Verification of Accuracy and Unnetted Amount 03152008 The unnetted overpayment amount at the beginning of the overlapping period is $488,985.87 (original $725,000.00 overpayment minus $236,014.13; the amount to which the net rate was applied). 12172008 The amount of the available overpayment at the beginning of the unnetted overpayment period from 12172008 to 09102009 is $743,033.08. This amount is obtained by taking the principal of $725,000.00 and adding the accrued overpayment interest from 03152008 to 12172008 of $18,033.08. - These are the amounts on which underpayment interest at the overpayment rate may be computed should a subsequent net rate adjustment be requested. Reminder: When using a time line, the following verification process should be used to determine whether the net rate adjustment was correctly computed: Add the net rate interest amount that was used to the interest amount that accrues during the unnetted overpayment period. If the total does not equal the overpayment interest amount originally allowed, an error has been made in the interest computation. Exhibit 20.2.14-10 Special Net Rate Interest Computations – Settled Underpayment Year and Current Overpayment YearThe following display shows a time line as described in the text example concerning the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the rest of the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200512, Form 1120, 03152006, Underpayment200512, LCU 2% date 09072007200712, Form 1120, 03152008, Overpayment200512, Full Paid Date 12172008200712, Manual Refund minus 45 days, 09102009From 1 to 2: Underpayment (corp rate) $200,000.00From 2 to 4: Underpayment at LCU 2% rate $200,00.00From 1 to 3: (1st) underpayment rate: $150,000.00 plus $36,014.13 in interest equals $236,014.13From 3 to 5: Overpayment (GATT rate):($715,000.00)From 3 to 5: Overpayment rate: ($10,000.00)From 3 to 5: (2nd) Overpayment rate: $236,014.13 plus $5,832.35 in interest equals $241,846.48 Please click here for the text description of the image. Amount of netted overpayment at the beginning of the overlapping period (03152008 is $488,985.87. Amount of available overpayment at the beginning of the unnetted overpayment period from 12172008 to 09102009 is $743,033.08. An unnetted underpayment period still exists from 03152006 to 03152008. The amount of underpayment tat the net rate can still be applied to at the beginning of the unnetted underpayment period from 03152006 to 03152008, is $200,00.00.
Special Net Rate Interest Computations - Net Rate Computation when a Form 2285 is Used
Exhibit 20.2.14-11 Special Net Rate Interest Computations - Net Rate Computation when a Form 2285 is Used On December 31, 2009, Opal Foundations filed a Form 843 requesting the application of the net rate on its 200612 Form 1120. An overpayment from its 200712 Form 1120 creates an overlapping interest period. The 2006 and 2007 adjustments were a combination of a general adjustment and a carryback adjustment. The account transaction information for the 2006 and 2007 tax periods are shown below. Interest Computations Prior to Application of the Net Rate 200612: General Adjustment Underpayment 200812 Partial Carryback Recapture $35,000.00 $27,000.00 200712: General Adjustment Overpayment 200812 Carryback Recapture ($58,000.00) Original return was timely filed and paid. $16, 000.00 The taxpayer previously received a refund on 063082009 of $37,000.00 without interest, based on a carryback to 200612 from its 200812 loss year return. The taxpayer paid the balance de of $38.709.052, which includes interest of $6,709.05 on 12132006. The taxpayer previously received a refund on 06082009 of $16,000.00 without interest, based on a carryback applied to 200712 from its 200812 loss year return. On 11302009, an IRS initiated refund is issued for $44,368.08, which included interest of $2,368.08 based on the general adjustment overpayment and its 200812 carryback recapture. Opal Foundations Tax Account Transaction Information 200612 Module Information - - TC 150 50,000.00 - TC 806 50,000.00- - TC 309 37,000.00- 200812 carryback allowed TC 846 37,000.00 Refunded 06082009 TC 300 35,000.00 General adjustment TC 308 27,000.00 200812 carryback recapture TC 190/340 21,712.26 - TC 670 83,712.26 Payment received 200712 Module Information - - TC 150 60,000.00 - TC 660 60,000.00- - TC 309 16,000,00- 200812 Carryback allowed TC 846 16,000.00 C/B Refunded 06082009 TC 301 58,000.00- General Adjustment TC 308 16,000.00 200812 Carryback recapture TC 776 2,368.08 23C 11302009 (54-day back-off to 10072009) TC 846 44,368.08 23C 11302009 Exhibit 20.2.14-11 Special Net Rate Interest Computations - Net Rate Computation When a Form 2285 is Used The following display shows a time line as described in the text example when there is more than one overpayment period. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts displayed in parentheses represent a credit amount.200612, Form 1120, General Adjustment, 03152007200712, Form 1120, General Adjustment, 03152008200612, Carryback from 200812, 03152009, Original Carryback ($37,000.00), Carryback Recapture $27,000.00200712, Carryback from 200812, 03152009, Original Carryback ($16,000.00), Carryback Recapture $16,000.00200612 and 200712, Carrybacks from 200812 refunded without interest on 06082009200712, General Adjustment refund, minus 54 days, 10072009200612, Full paid date, 12132009From 1 to 7: Underpayment interest period on $35,000.00From 3 to 7: Underpayment interest period on $35,000.00 plus $27,000.00 carryback recaptureFrom 2 to 6: Overpayment interest period on ($58,000.00)From 3 to 6: Overpayment interest period on ($58,000.00) minus $16,000.00 carryback recaptureFrom 2 to 6: Net rate periodFrom 2 to 5: Underpayment interest-free period on $10,000.00From 3 to 5: Overpayment interest-free period on ($16,000.00) Please click here for the text description of the image. Application of the Net Rate to the General and Carryback Adjustment (200612) Underpayment Interest Computation - $35,000.00 03152007 to 03152008 (underpayment rate) = 2,843.71 2,843.71 Add accrued interest 37,843.71 Balance due 03152008 03152008 to 03152009 (overpayment rate) = 1,184.44 1,184.44 Add accrued interest 39,028.15 Balance Due 03152009 (10,000.00) Subtract carryback amount not subject to recapture 03152009 (Use of money) 29,028.15 03152009 to 06082009 (credit rate) = 114.35 114.35 Add accrued interest 10,000.00 Add carryback previously used for the interest-free period on the refund date 06082009 27,000.00 Add the carryback recapture underpayment 66,142.50 Balance Due 06082009 (44,145.66) Subtract the amount on 06082009 that is subject to the net rate (see (Cont. 5) section of Exhibit 20.2.14-11 for the Time Line Breakdown) 21,996.84 06082009 to 12132009 (underpayment rate) = 457.87 457.87 Add accrued interest $22,454.71 Balance due 12132009 Net Rate Interest Computation - $ 44,145.66 06082009 to 10072009 (overpayment rate) = 222.43 222.43 Add accrued interest 44,368.09 10072009 to 12132009 (underpayment rate) = 326.95 326.95 Add accrued interest $ 44,695.04 Balance due 12132009 $ 2,843.71 1,184.44 114.35 457.87 222.43 326.95 $20,447.11 Total Revised Interest $6,709.05 Posted Interest 5,149.75 Revised Interest (1,559.30) Netting Benefit/Interest to be abated (TC 341) Note: Compute statutory overpayment interest accordingly on the amount of abatement that will refund or offset. Input the following transaction information using the appropriate adjustment documents. Adjustment Document Transaction Information 200612 200712 TC 341 - ($1,559.30) TC 340 – ($.00) to indicate that the net rate has been applied Db-Int-To-Dt – 12132009 Db-Int-To-Dt – 03152008 Correspondence Dt – 07221998 Correspondence Dt – 07221998 Activity Code – netrate Activity Code – netrate Amd-Clms-Dt – 12312009 Amd-Clms-Dt – 12312009 Always include the ACT/DMI 530 Report with the following information as part of the workpapers. IDRS "N" Information 200612: N-AMT = 37,843.71 N-BEG = 03152008 N-PER = 200712 N-END = 10072009 N-MFT = 02 200712: N-AMT = 37,843.71 N-BEG = 03152008 N-PER = 200612 N-END = 10072009 N-MFT = 02 Always include the unnetted periods in the workpapers. The ACT/DMI 530 Report must be used for this purpose. The time line in Exhibit 20.2.14-11 reflects the unnetted periods and amounts. Reminder: When using the time line, the following verification process should be used to determine whether the net rate adjustment was correctly computed: Add the net rate interest amount that was used to the interest amount that accrues during the unnetted overpayment period if the total does not equal the overpayment interest amount originally allowed, an error has been made in the interest computation. Verification of Unnetted Amount(s), Unnetted Period(s) and Net Rate Adjustment Unnetted Overpayment Period 1 Overpayment Available 03152008 03152008-03152009 20,156.29 (58,000.00 overpayment less the 37,843.71 net rate amount) Unnetted Overpayment Period 2 Overpayment Available 03152009 03152009-06082009 14,942.66 (58,000.00 overpayment plus 1,970.81 interest accrued from 03152008 to 03152009 (59,970.81) less the 29,028.15 that the net rate was applied to as of 03152009, and less the overpayment interest suspension of 16,000.00) Unnetted Underpayment Interest Periods - 03152007 to 03152008 on $35,000.00 06082009 to 10072009 on $21,996.84 10072009 to 12132009 on $66,658.54 Exhibit 20.2.14-11 Special Net Rate Interest Computations - Net Rate Computation When a Form 2285 is UsedThe following display shows a time line as described in the text example when there is more than one overpayment period. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented. Amounts displayed in parentheses represent a credit amount.200612, Form 1120, General Adjustment, 03152007200712, Form 1120, General Adjustment, 03152008200612, Carryback from 200812, 03152009, Original Carryback ($37,000.00), Carryback Recapture $27,000.00200712, Carryback from 200812, 03152009, Original Carryback ($16,000.00), Carryback Recapture $16,000.00200612 and 200712, Carrybacks from 200812 refunded without interest on 06082009200712, General Adjustment refund, minus 54 days, 10072009200612, Full paid date, 12132009From 1 to 7: Underpayment interest period at the corporate rateFrom 1 to 2: (1st) Underpayment rate: $35,000.00 plus interest of $2,843.71 equals $37,843.71From 2 to 6: Overpayment interest at GATT rateFrom 2 to 3 and 4: (2nd) Overpayment rate on $37,843.71 plus interest of $1,184.44 equals $39,028.15 minus $10,000.00 equals $29,028.15From 3 and 4 to 5: (3rd) Overpayment rate on $58,000.00 plus interest of $2,145.66 minus $16,000.00 carryback recapture equals $44,145.66. Also, $29,028.15 plus interest of $114.35 equals $29,142.50 plus $37,000.00 equals $66,142.50 minus the previous $44,145.66 equals $21,996.84From 5 to 7: (4th) Underpayment rate on $21,996.84 plus interest of $457.87 equals $22,454.71From 5 to 6: (5th) Overpayment rate on $44,145.66 plus interest of $222.43 equals $44,368.09From 6 to 7: (6th) Underpayment rate on $44,368.09 plus interest of $326.95 equals $44,695.04Amount of unnetted overpayment at the beginning of the 03152008 overlapping period is $28,971.85 ($58,000.00 overpayment less the $29,028.15 net rate amount).Amount of unnetted overpayment as of 03152009 is $14,942.66. This equals the $58,000.00 overpayment plus $1,970.81 overpayment interest accrued from 03152008 to 03152009 ($59,970.81) LESS the $29,028.15 that the net rate was applied to as of 03152009 and LESS the overpayment interest suspension of $16,000.00. ($58,000 + $1,970.81 - $29,028.15 - $16,000).General Adj. overassessment plus interest accruals on $58,000.00 (03152008 to 06082009) including an overpayment interest suspension of $16,000.00 from 03152009 to 06082009, less the 2007 C/B recap. from 2008 equals the amount available as of 06082009 subject to net rate. Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Update Module Screen (200612)Summary: This is the example for entering the tax module information for Opal Foundations into the ACT/DMI Update Module screen to verify the previous underpayment interest assessed on the general adjustment and carryback recapture for 200612. The top of the report reflects the following information from left to right. Amounts enclosed in parentheses represent a credit amount.SelJurisdictionTINTax TypeTax PeriodAdditional DescriptionStatusGATTLCUBox CheckedFederal99-99999991120200612-Open(Open)GATT ONLCU OFFBox CheckedFederal99-99999991120200712-Open(Open)GATT ONLCU OFFThe middle section of the report provides the transaction information for the tax module. Amounts enclosed in parentheses represent a credit amount.---Federal 99-99999991120200612--Included and Interest--RefCodeDescriptionDateAmountStartAdj/EndBalanceAddExclSOL10150Return Filed and Assessed Tax Liability0601200750,000.00-0315200750,000.00Box checked--20660Estimated Tax03152007(50,000.00)--0.00Box checked--30309Abatement of Prior Tax Assessment by Exam06082009(37,000.00)-03152009(37,000.00)Box checked--40846Refund of Overpayment0608200937,000.0003152009060820090.00Box checked--50300Additional Tax Assessment By Exam1213200935,000.00-0315200735,000.00Box checked--60308Additional Tax Assessment With Interest Date1213200927,000.00-0315200962,000.00Box checked--70340Restricted Interest Assessment121320096,709.05--68,709.05Box checkedD-80670Subsequent Payment12132009(68,709.05)--0.00Box checked--From left to right, the bottom section of the report provides the following information. Amounts enclosed in parentheses represent a credit amount.Run To: 12312009--Computed InterestTranscript InterestInterest Adjustment---Run MethodDeficiency6,709.056,709.05(0.00)PrincipalTotalProcessIRS DefaultOverpayment0.000.000.000.000.00 Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Report 490 Activity Summary (200612)This is the example of the ACT/DMI interest computations 490 report showing verification of the previously assessed underpayment interest for the 200612 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-11 FreemontTaxpayer Identifying Information:FED - **-***9999 Freemont 1120 Tax Period: 200612Top Left:Run Method: IRS DefaultInterest To: 12312009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted (amounts enclosed in parentheses represent a credit amount).Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance06012007-03152007150 Return Filed and Assessed Tax Liability-50,000.0050,000.0003152007--610 Remittance with Return-(50,000.00)-12132009-03152007300 Additional Tax Assessment By Examination-35,000.0035,000.0006082009-03152009309 Abatement of Prior Tax Assessment By Examination-(37,000.00)(2,000.00)12132009-03152009308 Additional Tax Assessment with Interest-27,000.0025,000.00060820090315200906082009846 Refund of Overpayment(37,000.00)37,000.0062,000.0012132009--670 Subsequent Payment-(68,709.05)(6,709.05)The third section of the report provides information on the interest computation details (amounts enclosed in parentheses represent a credit amount).Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152007-150 Return Filed and Assessed Tax Liability50,000.00-----300 Additional Tax Assessment By Examination35,000.00-----610 Remittance with Return(50,000.00)--35,000.000316200703152009Underpay35,000.000.1432531305,013.8640,013.8603152009-308 Additional Tax Assessment with Interest27,000.00-----309 Abatement of Prior Tax Assessment By Exam(37,000.00)--30,013.860316200906082009Underpay30,013.860.009800574294.1530,308.0106082009-846 Refund of Overpayment37,000.00--67,308.010609200912132009Underpay67,308.010.0208152891,401.0468,709.0512132009-670 Subsequent Payment(68,709.05)---The bottom section of the report provides the Account Summary information.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest6,709.056,709.05-Overpayment Interest---Principal Balance---Totals6,709.056,709.050.00 Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Update Module Screen (200712)Summary: This is the example for entering the tax module information for Opal Foundations into the ACT/DMI Update Module screen to verify the interest previously allowed on the general adjustment overpayment and carryback recapture for 200712. The top of the report reflects the following information from left to right. Amounts enclosed in parentheses represent a credit amount.View All--Total Modules: 2-Selected Modules: 2---SELJurisdictionTINTax PeriodAdditional DescriptionStatusGATTLCU-Box CheckedFederal99-9999999200612-Open/OpenGATT OnLCU OFF-Box CheckedFederal99-9999999200712-Open/OpenGATT/OnLCU OFF-The middle section of the report provides the transaction information for the tax module. Amounts enclosed in parentheses represent a credit amount.RefCodeDescriptionDateAmountStartAdj/EndBalanceAddExclSOL---Federal 99-99999991120200612--Included and Interest--10150Return Filed and Assessed Tax Liability0315200860,000.00-0315200860,000.00Box Checked--20610Remittance with Return03152008(60,000.00)--0.00Box Checked--30309Abatement of Prior Tax Assessment by Exam06082009(16,000.00)-03152009(16,000.00)Box Checked--40846Refund of Overpayment0608200916,000.0003152009060820090.00Box Checked--50301Abatement of Tax By Examination Division11302009(58,000.00)-03152008(58,000.00)Box Checked--60308Additional Tax Assessment with Interest Date1130200916,000.00-03152009(42,000.00)Box Checked--70776Generated Interest Due on Overpayment11302009(2,368.08)--(44,368.08)Box CheckedO-80846Refund of Overpayment1130200942,000.001007200911302009(2,368.08)Box Checked--901003Refund Interest113020092,368.0810072009113020090.00Box Checked--From left to right, the bottom section of the report provides the following information. Amounts enclosed in parentheses represent a credit amount.Run To: 11302009--Computed InterestTranscript InterestInterest Adjustment---Run MethodDeficiency0.000.000.00PrincipalTotalProcessIRS DefaultOverpayment(2,368.08)(2,368.08)(0.00)0.00(0.00) Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Report 490 Activity Summary (200712)This is an example of the ACT/DMI interest computations 490 report showing verification of the previously allowed overpayment interest for the 200712 tax year as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report:Report Title: 490 Activity Summary - 20.2.14-11 FreemontTaxpayer Identifying Information:FED ** ***9999 Freemont 20.2.14-11 1120 Tax Period: 200712Top Left:Run Method: IRS DefaultInterest To: 11302009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted. Amounts enclosed in parentheses represent a credit amount.Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance03152008-03152008150 Return Filed and Assessed Tax Liability-60,000.0060,000.0003152008--610 Remittance with Return-(60,000.00)-11302009-03152008301 Abatement of Tax By Examination Division-(58,000.00)(58,000.00)06082009-03152009309 Abatement of Prior Tax Assessment by Exam-(16,000.00)(74,000.00)11302009-03152009308 Additional Tax Assessment With Interest Date-16,000.00(58,000.00)060820090315200906082009846 Refund of Overpayment(16,000.00)16,000.00(42,000.00)113020091007200911302009846 Refund of Overpayment(42,000.00)42,000.00-1130200910072009113020091003 Refund Interest(2,368.08)2,368.082,368.08The third section of the report provides information on the interest computation details. Amounts enclosed in parentheses represent a credit amount.Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152008-150 Return Filed and Assessed Tax Liability60,000.00-----301 Abatement of Tax By Examination Division(58,000.00)-----610 Remittance with Return(60,000.00)--(58,000.00)0316200803152009Overpay(10,000.00)0.046848548(468.49)---Overpay GATT(48,000.00)0.031298320(1,502.32)(59,970.80)03152009-308 Additional Tax Assessment With Interest Date16,000.00-----309 Abatement of Prior Tax Assessment by Exam(16,000.00)--(59,970.80)0316200906082009Overpay(468.49)0.007451957(3.49)---Overpay GATT(43,502.32)0.003939149(171.36)---Overpay Suspended(16,000.00)--(60,145.66)06082009-846 Refund of Overpayment16,000.00--(44,145.66)0609200910072009Overpay(471.98)0.009994411(4.72)---Overpay GATT(43,673.68)0.004984884(217.71)(44,368.08)1008200911302009Overpay Suspended(44,368.08)--(44,368.08)11302009-846 Refund of Overpayment42,000.00-----1003 Refund Interest2,368.08---The bottom section of the report provides the Account Summary information. Amounts enclosed in parentheses represent a credit amount.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(2,368.08)(2,368.08)-Principal Balance---Totals(2,368.08)(2,368.08)0.00 Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Netting Interest Computation Analysis ScreenThis is an example of the Interest Computation Analysis screen as explained in the text. The top section of the screen reflects title heading and other information relating to the taxpayer and ACT/DMI status.Left Top: Jurisdiction: Federal (this is drop down box option only used by IRS)Right top: View All: Box is checkedTINTax TypeTax PeriodAdditional DescriptionStatusGATT/LCUSelectSelected Modules (the number of modules is entered): 2The middle of the Analysis screen reflects the Selected Modules without Netting section and next to it in parentheses states (double click to view module settings). Below this provides information related to the tax module. Amounts enclosed in parentheses represent a credit amount.Selected Modules without NettingTINTax TypeTax PeriodDeficiency InterestOverpayment InterestPrincipalNet Due/(Refund)99-999999911202006120.000.000.000.0099-999999911202007120.000.000.000.00Totals:--0.000.000.000.00Clear ModuleClear All-----The third section of the Analysis screen reflects Selected Modules with Netting. Amounts enclosed in parentheses represent a credit amount.Selected Modules with NettingTINTax TypeTax PeriodDeficiency InterestOverpayment Interest PrincipalNet Due/(Refund)99-99999991120200612(1,559.30)0.000.00(1,559.30)99-999999911202007120.000.000.000.00---Totals:0.000.00(1,559.30)The bottom section of the Analysis screen has two rows of information showing from left to right:Row 1:Run to Date 12132009PostRemoveNetting Benefit (1,559.30)Row 2:ProcessNetting On: Box is checkedRun Method: IRS DefaultReportsModule Restrictions Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Report 490 Post Netting Underpayment Period (200612)This is the example of the ACT/DMI interest computations 490 report for the 200612 underpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report:Report Title: 490 Activity Summary - 20.2.14-11 FreemontTaxpayer Identifying Information:FED ** ***9999 Freemont 20.2.14-11 1120 Tax Period 200612Top Left:Run Method: IRS DefaultInterest To: 12132009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted. Amounts enclosed in parentheses represent a credit amount.Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance06012007-03152007150 Return Filed and Assessed Tax Liability-50,000.0050,000.0003152007--610 Remittance with Return-(50,000.00)-12132009-03152007300 Additional Tax Assessment By Examination-35,000.0035,000.0006082009-03152009309 Abatement of Prior Tax Assessment By Exam-(37,000,00)(2,000.00)12132009-03152009308 Additional Tax Assessment With Interest Date-27,000.0025,000.00N/A03152008031520091545 Equalize to GATT XREF **-***9999 1120 20071237,843.71-25,000.00060820090315200906082009846 Refund of Overpayment(37,000.00)37,000.0062,000.00N/A03152009060820091545 Equalize to GATT XREF **-***9999 1120 20071229,028.15-62,000.00N/A06082009100720091545 Equalize to GATT XREF **-***9999 1120 2007121,673.68-62,000.00N/A06082009100720091545 Equalize to GATT XREF **-***9999 1120 20071242,000.00-62,000.00N/A06082009100720091555 Equalize to Overpay XREF **-***9999 1120 200712471.98-62,000.0012132009--670 Subsequent Payment-(68,709.05)(6,709.05)The third section of the report provides information on the interest computation details. Amounts enclosed in parentheses represent a credit amount.Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterest Balance03152007-150 Return Filed and Assessed Tax Liability50,000.00-----300 Additional Tax Assessment By Examination35,000.00-----610 Remittance with Return(50,000.00)--35,000.000316200703152008Underpay35,000.000.0812488592,843.7137,843.710316200803152009NR Underpay at GATT37,843.710.0312983201,184.4439,028.1503152009-308 Additional Tax Assessment With Interest Date27,000.00-----309 Abatement of Prior Tax Assessment By Exam(37,000.00)--29,028.150316200906082009NR Underpay at GATT29,028.150.003939149114.3529,142.5006082009-846 Refund of Overpayment37,000.00--66,142.500609200910072009NR Underpay at GATT43,673.680.004984884217.71---NR Underpay at Over471.980.0099944114.72---Underpay21,996.840.013347845293.6166,658.541008200912132009Underpay66,658.540.007369082491.2167,149.7512132009-670 Subsequent Payment(68,709.05)--(1,559.30)The bottom section of the report provides the Account Summary information. Amounts enclosed in parentheses represent a credit amount.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest5,149.756,709.05(1,559.30)Overpayment Interest---Principal Balance---Totals5,149.756,709.05(1,559.30) Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Report 530 Post Netting Underpayment Period (200612)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200612 underpayment period reflecting the rate equalizations after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-11 FreemontIdentifying Information:FED ** ***9999 Freemont 20.2.14-11 1120 Tax Period 200612ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 12132009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.Equalizations that affect 99-9999999 200612 1120 Tax ModuleChange:**-***99992006121120Change:**-***99992007121120N-Amt37,843.71Equalize to GATT-N-Amt37,843.71Use Prin GATT to Equal-N-Beg03152008N-End03152009N-Beg03152008N-End03152009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt29,028.15Equalize to GATT-N-Amt29,028.15Use Prin GATT to Equal-N-Beg03152009N-End06082009N-Beg03152009N-End06082009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt42,000.00Equalize to GATT-N-Amt42,000.00Use Prin GATT to Equal-N-Beg06082009N-End10072009N-Beg06082009N-End10072009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt1,673.68Equalize to GATT-N-Amt1,673.68Use Int GATT to Equal-N-Beg06082009N-End10072009N-Beg06082009N-End10072009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt471.98Equalize to Overpay-N-Amt471.98Use Int Over to Equal-N-Beg06082009N-End10072009N-Beg06082009N-End10072009N-XRef**-***99992007121120N-XRef**-***99992006121120Balances in selected module that are still available for potential nettingAvailable Underpayment at Underpay Rate 35,000.00 From 03162007 To 03152008Available Underpayment at Underpay Rate 21,996.84 From 06092009 To 10072009Available Underpayment at Underpay Rate $66,658.54 From 10082009 To 12132009 Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Report 490 Post Netting Overpayment Period (200712)This is the example of the ACT/DMI interest computations 490 report for the 200712 overpayment after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 490 Activity Summary - 20.2.14-11 FreemontTaxpayer Identifying Information:FED- ** *** 9999 Freemont 20.2.14-11 1120 Tax Period 200712Top Left:Run Method: IRS DefaultInterest To: 12132009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995, Amount $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides information on the types of transaction codes being adjusted. Amounts enclosed in parentheses represent a credit amount.Date TranscriptDate StartDate Adj/EndDescriptionSusp/EqualPrincipalBalance06022008-03152008150 Return Filed and Assessed Tax Liability-60,000.0060,000.0003152008--610 Remittance with Return-(60,000.00)-11302009-03152008301 Abatement of Tax By Examination Division-(58,000.00)(58,000.00)06082009-03152009309 Abatement of Prior Tax Assessment By Exam-(16,000.00)(74,000.00)11302009-03152009308 Additional Tax Assessment With Interest Date-16,000.00(58,000.00)N/A03152008031520091540 Use Prin GATT to Equal XREF **-***9999 1120 200612(37,843.71)-(58,000.00)060820090315200906082009846 Refund of Overpayment(16,000.00)16,000.00(42,000.00)N/A03152009060820091540 Use Prin GATT to Equal XREF **-***9999 1120 200612(29,028.15)-(42,000.00)N/A06082009100720091540 Use Prin GATT to Equal XREF **-***9999 1120 200612(42,000.00)-(42,000.00)N/A06082009100720091541 Use Int GATT to Equal XREF **-***9999 1120 200612(1,673.68)-(42,000.00)N/A06082009100720091551 Use Int Over to Equal XREF **-***9999 1120 200612(471.98)-(42,000.00)113020091007200911302009846 Refund of Overpayment(42,000.00)42,000.00-1130200910072009113020091003 Refund Interest(2,368.08)2,368.082,368.08The third section of the report provides information on the interest computation details. Amounts enclosed in parentheses represent a credit amount.Interest Computation DetailsInterest Start DateInterest End DateDescriptionAmountFactorInterestBalance03152008-150 Return Filed and Assessed Tax Liability60,000.00-----301 Abatement of Tax By Examination Division(58,000.00)-----610 Remittance with Return(60,000.00)--(58,000.00)0316200803152009Overpay(10,000.00)0.046848548(468.49)---Overpay GATT(48,000.00)0.031298320(1,502.32)(59,970.80)03152009-308 Additional Tax Assessment With Interest Date16,000.00-----309 Abatement of Prior Tax Assessment By Exam(16,000.00)--(59,970.80)0316200906082009Overpay(468.49)0.007451957(3.49)---Overpay GATT(43,502.32)0.003939149(171.36)---Overpay Suspended(16,000.00)--(60,145.66)06082009-846 Refund of Overpayment16,000.00--(44,145.66)0609200910072009Overpay(471.98)0.009994411(4.72)---Overpay GATT(43,673.68)0.004984884(217.71)(44,368.08)1008200911302009Overpay Suspended(44,368.08)--(44,368.08)11302009-846 Refund of Overpayment42,000.00-----1003 Refund Interest2,368.08---The bottom section of the report provides the Account Summary information. Amounts enclosed in parentheses represent a credit amount.Account SummaryAccount Summary:As ComputedPer TranscriptAdjustmentDeficiency Interest---Overpayment Interest(2,368.08)(2,368.08)-Principal Balance---Totals(2,368.08)(2,368.08)0.00 Please click here for the text description of the image. Exhibit 20.2.14-11 ACT/DMI Report 530 Post Netting Overpayment Period (200712)This is the example of the ACT/DMI interest Adjustments/Positions 530 report for the 200712 overpayment period after netting has taken place as explained in the text. The top section of the report provides the title section with taxpayer identifying information and then the ACT/DMI status reflected on the left and right of the report.Report Title: 530 Adjustments/Positions - 20.2.14-11 FreemontTaxpayer Identifying Information:FED ** ***9999 Freemont 20.2.14-11 1120 Tax Period 200712ACT/DMI Status:Top Left:Run Method: IRS DefaultInterest To: 12132009GATT Method: Retain Character (New)LCU Method: Default IRSUnderpay Net Start: All Dates IncludedTop Right:Module Status: Open/(Open)GATT Date: 01011995 Amount: $10,000LCU Interest Date: LCU Interest is OFFOverpay Net Start: All Dates IncludedThe second section of the report provides the information on the rate equalizations for the impacted net rate modules.COMPUTED OFFSET EQUALIZATIONSEqualizations that affect 99-9999999 200712 1120 Tax ModuleChange:**-***99992006121120Change:**-***99992007121120N-Amt37,843.71Equalize to GATT-N-Amt37,843.71use Prin GATT to Equal-N-Beg03152008N-End03152009N-Beg03152008N-End03152009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt29,028.15Equalize to GATT-N-Amt29,028.15Use Prin GATT to Equal-N-Beg03152009N-End06082009N-Beg03152009N-End06082009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt42,000.00Equalize to GATT-N-Amt42,000.00Use Prin GATT to Equal-N-Beg06082009N-End10072009N-Beg06082009N-End10072009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt1,673.68Equalize to GATT-N-Amt1,673.68Use Int GATT to Equal-N-Beg06082009N-End10072009N-Beg06082009N-End10072009N-XRef**-***99992007121120N-XRef**-***99992006121120Change:**-***99992006121120Change:**-***99992007121120N-Amt471.98Equalize to Overpay-N-Amt471.98Use Int Over to Equal-N-Beg06082009N-End10072009N-Beg06082009N-End10072009N-XRef**-***99992007121120N-XRef**-***99992006121120Balances in selected module that are still available for potential nettingAvailable Overpayment at GATT Rate (10,156.29) From 03162008 To 03152009Available Overpayment at Overpay Rate (10,000.00) From 03162008 To 03152009Available Overpayment at GATT Rate (14,474.16) From 03162009 To 06082009Available Overpayment at Overpay Rate (468.49) From 03162009 To 06082009Available Suspended Overpay (16,000.00) From 03162009 To 06082009Available Suspended Overpay (44,368.08) From 10082009 To 11302009 Please click here for the text description of the image.
Net Rate Interest Computation Involving a Subsequent Interest Adjustment after the Net Rate was Applied
Exhibit 20.2.14-12 Net Rate Interest Computation Involving a Subsequent Interest Adjustment after the Net Rate was Applied This is a two-part exmaple. The first part is a request and the second part applies to a future adjustment. The taxpayer can only receive netting one-time for each overlapping period and amount However, if an overpayment interest period (bearing overpayment interest) is not fully used, the net rate may be allowed for a subsequent underpayment if that underpayment period overlaps with the overpayment period not previously used for the net rate and the applicable periods of limitations are still open. Example: On June 15, 2009, a refund of $78,000.00 (plus interest) was issued for Topaz Corporation's Form 1120-X (filed on April 23, 2009) for its 200708 return. On July 16, 2009, Topaz Corporation agrees to and pays an underpayment of $113,000.00 (plus interest), for its 200808 Form 1120. A 30-Day letter dated March 10, 2009, was sent to the taxpayer. On August 19, 2009, Armstrong filed a net rate request for its 200808 Form 1120. Interest Computations Prior to Application of the Net Rate 1120 200708 ($78,000.00) (4,314.82) Overpayment refunded with interest Interest 11152007–06062009 (back-off date) 1120 200808 $113,000.00 4,254.95 Underpayment 30-Day letter dated 03102009 Interest 11152008–07162009 (full paid date) Exhibit 20.2.14-12 Special Net Rate Interest Computations - Computation with a Subsequent Interest Adjustment After Net Rate was AppliedSummary: The following display shows a time line as described in the text example concerning the period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200708, Form 1120, 11152007, Overpayment200808, Form 1120, 11152008, Underpayment200808, LCU 2% Date is 04092009200708, Refund, minus 9 days, 06062009200808, Full Paid Date, 07162009From 1 to 4: Overpayment interest periodFrom 2 to 5: Overpayment interest periodFrom 2 to 4: Net rate period Please click here for the text description of the image. Subsequent Interest Adjustment after Net Rate was Applied Refer to the overlapping period time line in Exhibit 20.2.14-12. Reminder: When the overpayment accrues interest before interest begins on the underpayment AND the start of the overlapping period, a determination must be made of the overpayment amount available at the beginning of the overlapping period (11152008). Review the time line computation breakdown in Exhibit 20.2.14-12, which provides the net rate interest computation periods for this example. Input the following transaction information using the appropriate adjustment documents. Adjustment Document Transaction Information 200708 200808 TC 340 — ($00) to prevent within module netting on future underpayment computations TC 341 — $1,335.12 Db-Int-To-Dt — Applicable date Db-Int-To-Dt – 07162009 Correspondence Dt – 07221998 Correspondence Dt – 07221998 Amd-Clms-Dt — 08192009 Amd-Clms-Dt – 08192009 Unnetted Overpayment Period and Amount – 11152007 -11152008 — $78,000.00 Unnetted Underpayment Period – 06062009 to 07162009 Exhibit 20.2.14-12 Special Net Rate Interest Computations - Computation with a Subsequent Interest Adjustment After Net Rate was AppliedSummary: The following display shows a time line as described in the text example concerning the period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to help explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200708, Form 1120, 11152007, Overpayment200808, Form 1120, 11152008, Underpayment200808, LCU 2% Date is 04092009200708, Refund, minus 9 days, 06062009200808, Full Paid Date, 07162009From 1 to 4: Overpayment interest period at the corporate and GATT rateFrom 1 to 2: (1st) Overpayment rate on $78,000.00 plus interest of $3,137.74 equals $81,137.74 minus $113,000.00 equals $31,862.27From 2 to 5: Underpayment interest at the corporate and LCU rateFrom 2 to 4: (2nd) Overpayment rate on $81,137.74 plus interest of $1,177.09 equals $82,314.83From 2 to 5: (3rd) Underpayment rate on 31,862.27 plus interest of $1,199.76 equals $33,062.03From 4 to 5: (4th) Underpayment rate on $82,314.83 plus interest of $542.99 equals $85,857.82Amount of unnetted overpayment as of 11152007 is $78,000.00 overpayment.Amount of unnetted underpayment from 11152008 to 06062009 is $31,862.27. This equals the $78,000.00 overpayment plus $3,137.74 interest accrued from 11152007 to 11152008 ($81,137.74) LESS the $113,000.00 that the net rate was applied to as of 11152008.Amount of unnetted underpayment from 06062009 to 07162009 is $115,160.18. This equals the $113,000.00 underpayment plus $2,160.18 underpayment interest accrued from 11152008 to 06062009. Please click here for the text description of the image. The facts are the same as described in Exhibit 20.2.14-12 Topaz Corporation is currently undergoing an examination of its 200608 Form 1120 and on October 10, 2009, an agreement was signed for an $85,000.00 underpayment. Armstrong advises the examiner that a net rate period still exists based on the overpayment issued on its 200708 Form 1120. An unnetted overpayment period remains from 11152007 to 11152008 that can be used for the net rate adjustment on the current underpayment. Refer to the detailed time line in Exhibit 20.2.14-12 for the interest computation and adjustment information. Note: Prior to adding tax period 200608 to your netting computation, be sure to "post" the previous netting computations for tax years 200708 and 200808. This is done by clicking on the "Post" button located at the bottom of the Netting Analysis screen of the ACT/DMI program. Exhibit 20.2.14-12 Special Net Rate Interest Computations - Computation with a Subsequent Interest Adjustment After Net Rate was AppliedSummary: The following display shows a time line as described in the text examples concerning the period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200608, Form 1120, 11152006, Underpayment200708, Form 1120, 11152007, Overpayment200808, Form 1120, 11152008, Underpayment200808, LCU 2% Date is 04092009200708, Refund, minus 9 days, 06062009200808, Full Paid Date, 07162009200608, Waiver plus 30 days 11092009From 1 to 7: New underpayment interest periodFrom 2 to 5: Overpayment interest periodFrom 3 to 5: Previously used underpayment interest periodFrom 2 to 3: Current net rate periodFrom 3 to 5: Previously used net rate period Please click here for the text description of the image. Exhibit 20.2.14-12 Special Net Rate Interest Computations - Computation with a Subsequent Interest Adjustment After Net Rate was AppliedSummary: The following display shows a time line as described in the text example concerning the period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200608, Form 1120, 11152006, Underpayment200708, Form 1120, 11152007, Overpayment200808, Form 1120, 11152008, Underpayment200808, LCU 2% Date is 04092009200708, Refund, minus 9 days, 06062009200808, Full Paid Date, 07162009Net rate request filed, 08192009200808, Refund minus 9 days, 10122009200608, Waiver plus 30 days 11092009From 1 to 9: Underpayment interest at the corporate rateFrom 1 to 2: (1st) Underpayment rate on $85,000.00 plus interest of $7,078.59 equals $92,078.59 minus $78,000.00 at the overpayment rate equals $14,078.59From 2 to 6: (2nd) Underpayment rate on $14,078.59 plus interest of $1,389.16 equals $15,467.75 minus $1,335.12 at the overpayment rate equals $14,132.63From 6 to 8: (3rd) Underpayment rate: on $14,132.63 plus $180.80 interest equals $14,313.43From 2 to 3: (4th) Overpayment rate: on $78,000.00 plus $3,137.73 interest equals $81,137.73From 3 to 9: (5th) Underpayment rate: on $81,137.73 plus $3,675.66 interest equals $84,813.39From 6 to 8: (6th) Overpayment rate: on $1,335.12 plus $9.69 interest equals $1,344.81From 8 to 9: (7th) Underpayment rate: on $1,344.81 plus $4.14 interest equals $1,348.95Total interest on the module is $15,475.77 (7,078.59 plus 1,389.16 plus 180.80 plus 3,137.73 plus 3,675.66 plus 9.69 plus 4.14) and will be the TC 340 amount input with the 200608 tax adjustment. Please click here for the text description of the image.
Examples Illustrating how to Determine Timely Filing of a Net Rate Request
Exhibit 20.2.14-13 Examples Illustrating how to Determine Timely Filing of a Net Rate Request Example: 1 - Pre-Enactment Interest - Only One Period of Limitations Open On November 9, 1998, the Alum Corporation filed a net rate interest request. Alum Corporation requested that the net rate be applied to the tax underpayment for its 1993 Form 1120 based on an overlapping interest period resulting from an overpayment allowed with interest for its December 31, 1994 Form 941 return. The tax underpayment plus interest was paid on January 10, 1996. The overpayment on the Form 941 was refunded on July 9, 1996. For the underpayment year, the 3-year period of limitations expired on March 15, 1997, three years after the return filing date of March 15, 1994. The two year period expired on January 10, 1998, two years after the payment dated January 10, 1996. For net rate adjustments involving periods beginning before July 22, 1998 (i.e., interest accruing before October 1, 1998), both the underpayment and overpayment periods of limitation must be open on July 22, 1998. Since only the overpayment period of limitations is open, a net rate adjustment cannot be allowed. Example: 2 - Pre-Enactment Interest - Both Periods of Limitations Closed Before 12/31/1999 The IRS examined Sheeling Incorporated's Form 1120 for the 199012 and 199212 tax years. For 199012, Sheeling Incorporated was entitled to a refund of $40,000.00. The IRS-initiated refund was made on November 21, 1993, with interest computed from March 15, 1991, to September 28, 1993. For the 199212 tax year, an underpayment of $60,000.00 was determined. Sheeling Incorporated was issued a notice and demand for payment dated October 3, 1996, which was paid on October 12, 1996, with interest computed from March 15, 1993, to October 3, 1996. On July 22, 1998, both the 6-year period of limitations for claiming additional overpayment interest on the 1993 issued refund and the 2-year period of limitations for claiming a refund of underpayment interest paid in 1996 were open. However, both these periods of limitations will be closed before December 31, 1999. Sheeling Incorporated must have filed a Form 843 on or before December 31, 1999, to request a net rate adjustment during the overlapping period from March 15, 1993, to September 28, 1993. Since the Form 843 was filed on or before December 31, 1999, the net rate adjustment will be made to the underpayment year and the taxpayer will receive a refund of the overpaid underpayment interest amount. Example: 3 - Post-Enactment Interest - Both Periods of Limitation Open The IRS examined Mica Corporation's Form 1120 returns for the 200612 and 200812 tax years. For the 200812 tax year, Mica Corporation was entitled to a refund of $30,000.00. The IRS initiated refund was made on September 21, 2009, with interest computed from March 15, 2009, to July 29, 2009, which is the 45-Day plus 9-Day back-off date. For the 200612 tax year, a tax underpayment of $80,000.00 was determined. The IRS sent a notice and demand for payment dated May 3, 2010, which Corporation paid on March 12, 2010, with interest computed from March 15, 2009, to March 3, 2010. On April 27, 2011, Hesston Corporation filed a Form 843 requesting the net rate during the overlapping interest period from March 15, 2009, to July 29, 2009. The period of limitations for the underpayment period is open because the Mica taxpayer's request for netting was received by the IRS within two years of the payment dated March 12, 2010. The period of limitations for the overpayment period is also open because the request for netting was received by the IRS within six years of the refund dated September 21, 2009. In applying the net rate, the IRS will refund underpayment interest in an amount equal to the difference between the underpayment interest paid on $30,000.00 for the period from March 15, 2009, to July 29, 2009, and the overpayment interest computed and paid on $30,000.00 for that period. Example: 4 - Post-Enactment Interest - One Period of Limitations Open Feldspar Research Labs Form 1120 for the 200312 and 200512 tax years were examined. For the 200312 tax year, the taxpayer was entitled to a refund of $80,000.00. The IRS-initiated refund was made on November 21, 2006, with interest computed from March 15, 2004, to September 28, 2006. For the 200512 tax year, an underpayment of $97,240.00 was determined. A notice and demand for payment dated October 3, 2008, was sent and the tax was paid on October 12, 2008. A net rate request involving these two tax periods was received by the IRS on December 15, 2010. The period of limitations for the overpayment period is open because the netting request was received within six years of the refund dated November 21, 2006. The period of limitations for the underpayment period is closed because the request was received outside the three-year period from the filing date of the 2005 return and the two-year period from the payment dated October 12, 2008. However, netting may still occur because only one period of limitations must be open for post-enactment interest. A net rate adjustment for the overlapping interest period from March 15, 2006 to September 28, 2006 is allowed on the overpayment tax module.
Procedures for Processing Net Rate Requests or Claims for Abatement - Claim Reject
Exhibit 20.2.14-14 Procedures for Processing Net Rate Requests or Claims for Abatement - Claim Reject Net Rate requests which do not contain enough information to process must be rejected (not disallowed). (1) Form 843 must be filed to request the net rate for both pre-enactment interest periods and post-enactment interest periods. Informal requests may be accepted and worked provided the tax years are under consideration by any function of the IRS (see note at IRM 20.2.14.6.3.4(1)) and they contain all relevant information. (2). At a minimum, the taxpayer must provide the following information: Types(s) of tax and/or type(s) of return(s). Tax periods involved. Underpayment amount(s) and approximate date of payment, if paid. Overpayment amount(s) and approximate date of refund or offset. Approximate overlapping period(s). A statement that the full amounts of the underpayment and overpayment for the periods identified have not previously been used in a request to obtain the net rate under IRC 6621(d). Signature. Note: The IRS cannot assume the taxpayer's intent, so only include overlapping periods that are addressed by the request. (3) Return an incomplete request to the taxpayer/representative with Letter 916-C (or local letter, or for Exam procedures, see IRM 4.10.26, Net Rate Netting Procedures for LB&I Cases), including Paragraph Q (open paragraph) along with a copy of Rev. Proc. 99-43 or Rev. Proc. 2000-26 (as applicable) using the following language: "Your request did not provide the following necessary information." Include only the applicable information that was not provided by the taxpayer from the list provided in Paragraph (2) above. (4) If the request is for additional overpayment interest, (net rate adjustment to overpayment year) include in Paragraph Q (open paragraph) the following statement: "This request does not extend the 6-year period of limitations for filing suit for the recovery of allowable interest provided for in sections 2401 and 2501 of Title 28 of the United States Code."
Procedures for Processing Net Rate Requests or Claims for Abatement - Full or Partial Disallowance
Exhibit 20.2.14-15 Procedures for Processing Net Rate Requests or Claims for Abatement - Full or Partial Disallowance Full or Partial Disallowance (1). Full Disallowance The following information reflects some of the reasons for fully disallowing a net rate request. The period of limitations is not open for refunding underpayment interest or allowing additional overpayment interest. Refer to IRM 20.2.14.7.2 for information regarding the period of limitations (IRC 6511 or sections 2401 and 2501 of Title 28 of the United States Code). There are no overlapping periods of differential underpayment and overpayment interest periods for the specified tax years. Request is for two or more taxpayer identification numbers (TINs) that do not qualify as the same taxpayer for purposes of claiming a net rate interest adjustment under IRC 6621(d). Counsel or revenue agent advice must be requested if this determination cannot be made. Underpayment interest overlaps a period when no overpayment interest was allowed on an amount refunded or offset. Request was not timely filed. (2) Partial Disallowance - The following information reflects some of the reasons for partially disallowing a net rate request. The major reason for partially disallowing a net rate request is that the application of the net rate differs from the taxpayer's request and the discrepancy is attributable to an issue that is not allowable based on law or regulations (e.g, Open. ACT/DMI module status requested by the taxpayer was changed to Use or Closed). There may also be other specific reasons for the partial disallowance of the request for which an explanation must be provided to the taxpayer. (3) Full Disallowance Processing. Send a certified full disallowance letter including appeal rights Letter 105-C, a local letter or for Area Offices, use the Letter 906. Note: Add the following paragraph if the request is for additional overpayment interest. "This request does not extend the 6-year period of limitations for filing suit for the recovery of additional overpayment interest provided for in sections 2401 and 2501 of Title 28 of the United States Code" . Input a TC 290 for zero, Blocking Series 98/99 (this is a claim disallowance blocking series: 98 without return, 99 with return), Reason Code 74 (interest). Attach a copy of the full disallowance letter to your adjustment document (TC 290 for zero from Paragraph 3(b) above). Close case. Add history to AMS (Accounts Management Services), if applicable. (4) Partial Disallowance Processing. Send a certified partial disallowance letter, including appeal rights (Letter 106-C, local letter, or for area offices, use Letter 905). Note: Add the following paragraph if the request is for additional overpayment interest: "This request does not extend the 6-year period of limitations for filing suit for the recovery of additional overpayment interest provided for in sections 2401 and 2501 of Title 28 of the United States Code" . Input a TC 34X/77X for the interest adjustment to be made, Blocking Series 00 (with return) or 18 (without return), Reason Code 74 (interest). Refer to IRM 20.2.14.6.10 (2) for more detailed information. Attach a copy of the partial disallowance letter, net rate request, interest computations (such as ACT/DMI Report Numbers 490, 530, 020) and other pertinent information to the adjustment document (TC 290 for zero from Paragraph 4(b) above). Refer to IRM 20.2.14.6.10 for more detailed information. Add history to AMS (Accounts Management Services), screen if available. (5) Taxpayer Appeal Processing. The taxpayer responds and wants to appeal the administrative decision. Open a control base. Order the administrative file of the fully or partially disallowed claim. When the administrative file is received, close the control base leaving a history of where the case was sent (e.g., C 01, Appeals, DO 86, C). Send the appropriate transfer letter (Letter 86-C or local letter). Send the case to the appropriate Appeals Office with a Form 3210, Document Transmittal, and recharge any documents to Appeals. Add history to AMS (Accounts Management Services) screen if available.
Net Rate Request Processing
Exhibit 20.2.14-16 Net Rate Request Processing Identifying Overlapping Interest Periods IRC 6621(d) applies only when there are overlapping periods of both underpayment and overpayment interest running simultaneously. To determine if this situation exists, verify the underpayment and overpayment interest computations. Determine the overlapping periods by: Reviewing the ACT/DMI Report Number 530 (see Exhibit 20.2.14-17). Or prepare a time line. Note: It is recommended that the ACT/DMI Report Number 530 be used for this purpose. However, a time line will also show the overlapping periods. If no overlapping period(s) exists, disallow the request (see Exhibit 20.2.14-15). If an overlapping period(s) exists, process the request. See request allowance processing procedures below. Request Allowance Processing When processing a net rate request for abatement or refund and: Current tax adjustment (TC 29X, 30X) activity exists - See IRM 20.2.14.6.10 (3). No current tax adjustment (TC 29X, 30X) activity exists - see the instructions below. Command Code REQ54 Item Description Blocking Series (BLK) Use BLK 00 with controlling DLN. Without controlling DLN, use BLK 18. If the module has an open AIMS base, use BLK 05 for IMF or 15 for BMF. TC 34X - Underpayment Interest Adjustment (TC 340 for "zero" is required on those tax modules where no decrease or increase is applicable). See not below. DB-INT-TO-DT Input the date the underpayment was last assessed (RDD is used if no underpayment interest exists on that year). TC 770 - Overpayment Interest Adjustment (Input is not needed if interest adjustment amount is zero). TC 772 can be input as long as the module will be in balance due after posting. If the module will be overpaid after the TC 772 posts, consider IRM 20.2.14.6.10(4). CR-INT-TO-DT Input the date the overpayment interest is computed to (input is not needed if zero or TC 772 is input). CORRESP-DATE Input 07221998 IRC 6621(d) enactment date). AMD-CLMS-DT Input the receive date of the request. Activity Input Netrate. Hold CD Input 3. (Do not allow a generated notice to be issued to the taxpayer. Send the taxpayer the appropriate letter). ACT/DMI Report 530 Attach to the adjustment document ( the 530 Report shows all "N" amount information). Attach any relevant information pertaining to the request. Note: When the net rate adjustment is made to the underpayment year, it is necessary to input a TC 340 with a "zero" amount on all overpayment years involved with the net rate adjustment(s). This action is required on all of the overlapping periods that are used in the current net rate adjustment to identify them as no longer being available for subsequent within module of net rate adjustments for those years. If a year requested in the request in unnetted because of no overlapping periods, input TC 290 for "zero" with Blocking Series 18, to properly identify the tax module(s). 3. When any net rate adjustment is being made, use IDRS CC REQ77 to input TC 971 with AC 355 to identify all modules involved in the net rate adjustment. 4. Ensure all of the following information is part of the source documents sent with each tax year involved with the net rate adjustment: A copy of the written request or claim Form 843. ACT/DMI Reports 490 and 530 (these reports must be attached to the adjustment document of the tax period they are for). ACT/DMI Report 020. Any pertinent correspondence and information from the taxpayer or the representative. A copy of the power of attorney (POA) form. Any personal notes or observations pertaining to the request that would be helpful to the next examiner, who may have to update the interest or process a subsequent adjustment on the account. A copy of the current allowance or partial allowance letter from the IRS (the taxpayer's copy of this letter must include copies of the ACT/DMI Reports 020, 490 and 530 for all the tax periods involved). Any refile documents you may have in your possession. Note: These are in addition to any normal attachments required in the work process, regardless of the area working the account.
Preparing a Time Line and Creating ACT/DMI Report 530
Exhibit 20.2.14-17 Preparing a Time Line and Creating ACT/DMI Report 530 Preparing a Time Line and Creating ACT/DMI Report 530 to Identify Overlapping Interest Periods Case Scenario The Delphinium Corporation timely filed a 200712 return with a balance due at filing of $25,000.00. The taxpayer paid the balance due and the interest that accrued from 3/15/2008 on 10/20/2008. An examination of the taxpayer's 200612 return resulted in an overpayment of $27,000.00. The refund has not yet been processed. A manual refund will be issued on 02/14/2009. The overlapping interest period runs from 03/15/2008 to 10/20/2008. The overlapping period involves an underpayment that was previously paid. Therefore, when the 200612 overpayment is processed, netting will apply for the underpayment period. This case scenario will be used in preparing a time line and creating ACT/DMI Report Number 530 which identifies the overlapping interest period(s). The Delphinium Corporation Tax Account Transaction Information T/C 200612 Module Information Amount TC 150 03152007 71,660.00 TC 660 04152006 25,000.00- TC 660 06152006 25,000.00- TC 660 12152006 25,000.00- TC 846 03302007 3,340.00 TC 301 03152007 27,000.00- Blank 200712 Module Information Blank TC 150 03152008 75,000.00 TC 660 09152007 50,000.00- TC 196 04092008 113.64 TC 670 10202008 25,860.02- TC 196 10202008 746.38 Exhibit 20.2.14-17 Preparing a Time Line Creating ACT/DMI Report 530Summary: The following display shows a time line for the Delphinium Corporation example to describe the period of underpayment and overpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200612, Form 1120, 03152007, Overpayment200712, Form 1120, 03152008, Underpayment200712, Full Paid Date, 10202008200612, Pending overpayment by manual refund, 02142009, ($27,000.00)From 1 to 4: Overpayment interest periodFrom 2 to 3: Underpayment interest periodFrom 2 to 3: Overlapping period Please click here for the text description of the image. The overlapping period occurs between 03/15/2008 and 10/20/2008. Exhibit 20.2.14-17 Preparing a Time Line and Creating ACT/DMI Report 530Summary: The following display shows a time line for the Delphinium Corporation example to describe the net rate period of overpayment and underpayment interest accrual. This time line is presented using numbers from left to right to explain the data on the page. This data is displayed from where the time span begins to where the span ends (by numbers) and then what information is presented.200612, Form 1120, 03152007, Overpayment200712, Form 1120, 03152008, Underpayment200712, Full Paid Date, 10202008200612, Pending overpayment by manual refund, 02142009, ($27,000.00)From 2 to 3: Underpayment interest originally assessed on 200712 is $860.02From 2 to 3: With Netting: Underpayment Interest at the Overpayment Rate is $100.26From 2 to 3: With Netting: Underpayment Interest at the GATT Rate is $408.47From 2 to 3: The netting benefit and the TC 341 amount for 200712 is $351.29 (860.02 minus 100.26 minus 408.47 equals 351.29) Please click here for the text description of the image. During the overlapping period, interest on the underpayment for the 2007 tax year is charged at the same rate that interest was allowed on the 2006 overpayment. $25,000.00 03/15/2008 (Balance due at the start of the overlapping period) 100.26 Underpayment Interest at the Overpay Rate (03/15/2008 to 10/20/2008) 408.47 Underpayment Interest at the GATT rate (03/15/2008 to 10/20/2008) 25,508.73 Due as of 10/20/2008 25,860.02 Underpayment as Originally Assessed $(351.29) Underpayment Interest to be abated (TC 341) USED amounts are the amounts from both the underpayment and overpayment years that have been used to "NET" or equalize interest rates during an overlapping period. Always attach the ACT/DMI 530 report to the adjustment document to indicate these amounts. IDRS "N" Information 200612 - 200712 - N-AMT $25,000.00 N-AMT $25,000.00 N-BEG 03152008 N-BEG 03152008 N-TXPD 200612 N-TXPD 200712 N-MFT 02 N-MFT 02 N-END 10202008 N-END 10202008 Unnetted amounts are what has not been used and are still available to be netted with another overlapping period. Since the credit balance on the 200612 year was not entirely used in netting the 2007 tax year, there is a remaining balance that may still be netted. This unnetted credit is shown below. Breakdown of Unnetted Overpayment Type of Overpay Amount Date Available overpayment at GATT rate (20,340.00) From 03/16/07 to 03/30/07 Available overpayment at Overpay rate 6,660.00 From 03/16/07 to 03/30/07 Available Suspended Overpay 3,340.00 From 03/16/07 to 03/30/07 Available overpayment at GATT rate 20,386.02 From 03/31/07 to 03/15/08 Available overpayment at Overpay rate 6,679.18 From 03/31/07 to 03/15/08 Available overpayment at Overpay rate 3,577.85 From 03/16/07 to 10/20/08 Available overpayment at GATT rate (21,857.00) From 10/21/2008 To 02/14/2009 Available overpayment at Overpay rate (7,330.59) From 10/21/2008 To 02/14/2009 The following screens illustrate the input of the 200612 and 200712 account data (before netting) and the resulting 530 reports generated (after netting) for each year. Exhibit 20.2.14-17 ACT/DMI Update Module Screen (200612)Summary: This is an example of how to enter the Delphinium Corporation tax module information into the input screen of ACT/DMI to verify the previous overpayment interest allowed for 200612.Taxpayer name: Delphinium CorporationTaxpayer TIN: 9999Module Status: Open/(Open)Form 1120Tax year 200612Amounts enclosed in parentheses represent a credit amount.Ref numberCodeDescriptionDateAmountStartAdj/EndBalExcl10150Return Filed and Assessed Tax Liability0315200771,660.00--71,660.00-20660Estimated Tax04152006(25,000.00)-0315200746,660.00-30660Estimated Tax06152006(25,000.00)-0315200721,660.00-40660Estimated Tax12152006(25,000.00)-03152007(3,340.00)-50846Refund of Overpayment033020073,340.0003152007033020070.00-60301Abatement of Tax By Exam03152007(27,000.00)--(27,000.00)--Run To Date10202008----Net Due (Refund)- Please click here for the text description of the image. Exhibit 20.2.14-17 ACT/DMI Update Module Screen (200712)Summary: This is an example of how to enter the tax module information into the input screen of the ACT/DMI interest program to verify the previous underpayment interest assessed for 200712, as explained in the text.Taxpayer name: Delphinium CorporationTaxpayer TIN: 9999Module Status: Open/(Open)Form 1120Tax year 200712Amounts enclosed in parentheses represent a credit amount.Ref numberCodeDescriptionDateAmountStartAdj/EndBalExcl10150Return Filed and Assessed Tax Liability0315200875,000.00--75,000.00-20660Estimated Tax09152006(50,000.00)-0315200825,000.00-30196Interest Assessed04092008113.64--25,113.64-40670Subsequent Payment10202008(25,860.02)--(746.38)-50196Interest Assessed10202008746.38--0.00-Run To Date10202008----Net Due (Refund)0.00 Please click here for the text description of the image. Exhibit 20.2.14-17 ACT/DMI Report 530 Post Netting Overpayment Period (200612)This is an example of a print out of ACT/DMI interest Adjustments/Positions for the overpayment period after netting has taken place as explained in the text. Taxpayer name: Delphinium CorporationTaxpayer TIN: 9999Module Status: Open/(Open)Form 1120Tax Year 200612GATT Method New, GATT Date 01011995, GATT Amount $10,000Interest to Date: 02142009Computed EqualizationsEqualizations that affect XX-XXX9999 200612 1120 Tac ModuleChange**-***99992006121120Change**-***99992007121120N-Amt20,340.00Use Prin GATT to Equal-N-Amt20,340.00Equalize to GATT-N-Beg03152008N-End10202008N-Beg03152008N-End10202008N-XRef**-***99992007121120N-XRef**-***99992006121120--------Change**-***99992006121120Change**-***99992007121120N-Amt1,108.53Use Int GATT to Equal-N-Amt1,108.53Equalize to GATT-N-Beg03152008N-End10202008N-Beg03152008N-End10202008N-XRef**-***99992007121120N-XRef**-***99992006121120--------Change**-***99992006121120Change**-***99992007121120N-Amt3,551.47Use Prin GATT to Equal-N-Amt3,551.47Equalize to GATT-N-XRef**-***99992007121120N-XRef**-***99992006121120Balances in selected module that are still available for potential nettingAvailable Overpayment at GATT Rate, ($20,240.00), From 03162007 To 03302007Available Overpayment at Overpay Rate, ($6,660.00), From 03162007 To 03302007Available Suspended Overpay, ($3,340.00), From 03162007 To 03302007Available Overpayment at GATT Rate, ($20,386.02), From 03312007 To 03152008Available Overpayment at Overpay Rate, ($6,679.18), From 03312007 To 03152008Available Overpayment at Overpay Rate, ($3,577.85), From 03162008 To 10202008Available Overpayment at GATT Rate, ($21,857.00), From 10212008 To 02142009Available Overpayment at Overpay Rate, ($7,330.59), From 10212008 To 02142009Available Underpayment at LCU Rate, $473,959.31, From 08-30-08 To 02-15-09 Please click here for the text description of the image. Exhibit 20.2.14-17 ACT/DMI Report 530 Post Netting Underpayment Period (200712)This is an example of a print out of ACT/DMI interest Adjustments/Positions for the underpayment period after netting has taken place as explained in the text.Taxpayer name: Delphinium CorporationTaxpayer TIN: 9999Module Status: Open/(Open)Form 1120Tax Year 200712LCU Interest Date: LCU Interest is OFFInterest to Date: 02142009Computed EqualizationsEqualizations that affect XX-XXX9999 200712 1120 Tax ModuleChange**-***99992006121120Change**-***99992007121120N-Amt20,340.00Use Prin GATT to EqualBlankN-Amt20,340.00Equalize to GATTBlankN-Beg03152008N-End10202008N-Beg03152008N-End10202008N-XRef**-***99992007121120N-XRef**-***99992006121120BlankBlankBlankBlankBlankBlankBlankBlankChange**-***99992006121120Change**-***99992007121120N-Amt1,108.53Use Int GATT to EqualBlankN-Amt1,108.53Equalize to GATTBlankN-Beg03152008N-End10202008N-Beg03152008N-End10202008N-XRef**-***99992007121120N-XRef**-***99992006121120BlankBlankBlankBlankBlankBlankBlankBlankChange**-***99992006121120Change**-***99992007121120N-Amt3,551.47Use Prin GATT to EqualBlankN-Amt3,551.47Equalize to GATTBlankN-XRef**-***99992007121120N-XRef**-***99992006121120Balances in selected module that are still available for potential nettingAvailable Overpayment at Overpay Rate, ($351.29), From 10212008 To 02142009 Please click here for the text description of the image.
Statute Highlights for Net Rate Requests
Exhibit 20.2.14-18 Statute Highlights for Net Rate Requests Requests for Credit or Refund of Underpayment Interest IRC 6511(a) provides that a request for refund of an overpayment must be filed within 3 years from the time the return was filed or 2 years from the time the tax (including interest) was paid, whichever period expires later. If no return is filed by the taxpayer, the request must be filed within 2 years from the time the tax was paid. See IRC 6511(c) for additional information on the applicable rules in case of extension of time by agreement on additional assessments. When a return is filed after the return due date under an extension of time for filing and a request is filed within 3 years after the return is filed, amounts to be refunded include not only payments made within the 3 years preceding the date of the request, but those made within that 3 years plus the extension for filing the return. See IRC 6511(b) for a full explanation of the limitations on amount of credit or refund. Apply IRC 6621(d) to Such Periods. For interest periods beginning before July 22, 1998, the period of limitations must be open for both the underpayment and overpayment tax periods involved with the net rate request. If the period of limitations is closed for either the underpayment or overpayment, a net rate interest adjustment is not allowed. Determine if the Period of Limitations is Open on July 22, 1998. (1). The credit that would refund, as a result of your TC 341, must be dated less than two years prior to July 22, 1998. If it is a payment (TC 640 not an IRC 6603 deposit, TC 670, TC 680, ets.), the date of the payment must be July 22, 1996 or later. If it is an offset credit (TC 706, TC 700, TC 736. etc.) the 2-year rule is based on the cycle Cycle 9630 or later. Note: The 2 years from the cycle date applies only to true offsets. If it is a misapplied payment, the period of limitations is 2 years from the date of the misapplied payment. (2). A TC 30X created the underpayment on the module. If the TC 300 audit adjustment was posted within 6 months of the enactment date (July 22, 1998), the period of limitations is open on the amount of the audit adjustment. A TC 341 may be input. The agreement to extend the time to assess the tax (ASED) must have been January 23, 1998 or later. (3). The overpayment year TC 77X must be dated less than 6 years prior to July 22, 1998. If the TC 77X were dated July 22, 1998 or later, the period of limitations would be open up to the amount of the TC 77X.
Source: official text