Definition of Underpayment

ID:
Office:
UILC:
CCA_2012110717165371
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6664.01-00
Number: 201302036
Release Date: 1/11/2013
From: ---
Sent: Wednesday, November 07, 2012 5:16:58 PM
To: ---
Cc: ---
Subject: Overstated Withholding and Penalties
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---asked me to respond to your question.
Under §1.6664-2(c)(1)(i), overstated withholding may result in an underpayment subject to section 6662 or 6663, even without a deficiency. There may not be a deficiency because, unlike underpayments, deficiencies are determined without regard to section 31 credits. Using facts from your example:
W ("Amount of income tax imposed") = 3,000 (per 1.6664-2(b))
X ("Amount shown as the tax by the tax payer on his return") = 3,000 (the amount shown as the tax by the taxpayer on his return) - (8,000 "the amounts shown by the taxpayer on his return as credits for tax withheld under section 31" - 0 "the amounts actually withheld")= -5,000 per 1.6664-2(c)(1) Y ("Amounts not so shown previously assessed") = none per 1.6664-2(d) Z ("the amount of rebates made") = none per 1.6664-2(e) Underpayment = 3,000 - (-5,000 + 0 - 0) =$8,000 Please contact me if you have any further questions.
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