Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 75-58

1975-1 C.B. 374

Sec. 6332
Sec. 6601
Sec. 6602
Sec. 6611
Sec. 6621
Sec. 7426

IRS Headnote

Interest rate on underpayments and overpayments. Examples are provided for the computation of the 9 percent interest rate on underpayments and overpayments of tax, effective on July 1, 1975, under the provisions of section 6621 of the Code as added by Pub. L. 93-625.

Full Text

Rev. Rul. 75-58 [fn1]

The Internal Revenue Service has been asked to explain the effect of Pub. L. 93-625, section 7, 93 Cong. 2nd Sess. (January 3, 1975) by giving examples of how interest on underpayments and overpayments of tax is to be computed under the new law.

Section 6621(a) of the Internal Revenue Code of 1954, added by Pub. L. 93-625, provides that the rate of interest under sections 6601(a), 6602, 6611(a), 6332(c)(1), and 7426(g) is 9 percent per annum, or such adjusted rate as is established by the Secretary or his delegate under subsection (b).

Section 6621(b) of the Code provides, generally, that the Secretary or his delegate shall establish an adjusted rate of interest for the purpose of subsection (a) not later than October 15 of any year if the adjusted prime rate charged by banks during September of that year is at least a full percentage point more or less than the interest rate which is then in effect. Such adjusted rate shall become effective on February 1 of the succeeding year. An adjustment provided for under this subsection may not be made prior to the expiration of 23 months following the date of any preceding adjustment under this subsection.

The provisions of section 6621 take effect on July 1, 1975, and apply to amounts outstanding on such date or arising thereafter.

The following examples show the manner in which interest is to be computed under the new law:

Example 1:

A taxpayer files his 1974 Form 1040, U. S. Individual Income Tax Return, on April 15, 1975, but fails to pay a balance of tax due shown thereon. On September 1, 1975, he pays the total unpaid balance. Under section 6601(a) of the Code, interest is due on the underpayment at the rate of 6 percent per annum from April 15, 1975, the due date of the return, to June 30, 1975. By reason of the application of section 6621 to section 6601(a), interest is due on the underpayment at the rate of 9 percent per annum after June 30, 1975, to September 1, 1975, the date the total balance due was paid.

Example 2:

A corporate taxpayer filed a 1973 Form 1120, U. S. Corporation Income Tax Return, on March 15, 1974, and paid the balance of tax due shown thereon. On August 1, 1975, a deficiency is assessed against the corporation, which is paid on October 1, 1975. Under section 6601(a) of the Code, interest at the rate of 6 percent per annum is due on the deficiency from March 15, 1974, the due date of the return, to June 30, 1975. By reason of the application of section 6621 to section 6601(a), interest at the rate of 9 percent per annum is due on the deficiency after June 30, 1975, to October 1, 1975; the date the deficiency is paid.

Example 3:

An individual files a Form 1040X, Amended U. S. Individual Income Tax Return, on October 1, 1975, for the refund of an overpayment of income tax he made on April 15, 1975. The overpayment is refunded on December 1, 1975. Under section 6611 of the Code, interest is allowable at the rate of 6 percent per annum from April 15, 1975, the date of overpayment, to June 30, 1975. By reason of the application of section 6621 to section 6611, interest is allowable on the overpayment at the rate of 9 percent per annum after June 30, 1975, to December 1, 1975, the date the refund is made.

[fn1] Also released as TIR-1345, dated February 4, 1975.