Interest Computation — Offset

# (1)

(1) An overpayment of any tax imposed and interest on the overpayment, if any, must be offset against any tax, penalty, or interest then due from the taxpayer. "Tax, penalty or interest then due from the taxpayer" means any amount of tax that has been assessed before the date the refund is applied or proposed to be applied and any penalty or interest incurred in connection with the tax.

# (2)

(2) If a Notice of Assessment is issued, the department must make the offset on the date the refund is issued.

# (3)

(3) If a Notice of Deficiency is issued, the department may offset upon receiving written authorization from the taxpayer. If the taxpayer submits a written authorization to offset, the authorization must include the taxpayer's name, social security number or other identifying number, current address, accounts (if known), and the signature of the taxpayer. The date on which the offset must be made is the date that either a net billing or a refund is issued, or the date a payment is received, whichever is earlier.

Example 1:On February 15, 1985 it was determined that a taxpayer had overpaid the 1982 tax by $500 and underpaid the 1983 tax by $800. Assume the underpaid account had not yet been assessed and on March 15, 1985 the department received a written authorization allowing the department to offset the refund to the nonassessed account. The net amount due from the taxpayer on April 15, 1985, the date the net billing is issued, is calculated as follows: [See PDF link below.]

Example 2:On February 1, 1985, it was determined that a taxpayer underpaid the 1983 tax by $800. On May 15, 1985, the account was assessed and a five (5) percent failure-to-pay penalty was imposed. On June 15, 1985, it was determined that the taxpayer overpaid the 1982 tax by $500. Since the 1983 account is an assessed account, the department may offset the total refund (including interest) to the assessed account on June 15, 1985. The net amount due from the taxpayer on June 15, 1985, the date the refund is offset to the assessed account, is calculated as follows: [See PDF link below.]

Example 3:

On February 15, 1986 it was determined by a field audit that a taxpayer underpaid the 1984 tax by $1,000 and overpaid the 1983 tax by $500. On that date, the taxpayer signed an authorization to offset and paid $515. In this example, the offset is made at the date of payment, which is earlier than the date the net billing is issued. The amount due on February 15, 1986 is calculated as follows: [See PDF link below.]

[ED. NOTE: To view attachments referenced in rule text, click here for PDF copy.]