Interest on Deficiency

If a refund is allowed due to a net operating loss carryback and subsequently it is determined that the amount of the net operating loss was in error, interest shall be computed on the amount of the incorrectly received refund (tax and interest) beginning on the day after the date the refund was issued.

Example: A taxpayer carried a 1983 net operating loss of $10,000 back to the 1980 return and received a refund of $1,000 tax plus $200 interest. During an audit of the 1983 return it was determined that the correct loss to carryback was $4,000 resulting in a corrected refund of $400 plus interest. The taxpayer will need to repay $600 of the refund and $120 (60 percent) of the interest for a total of $720. Interest shall be computed on this amount beginning the day after the date the refund was issued by the Department.