Computing Credit Interest on Manual Refunds

Credit interest is mandatory on an overpayment or refund if certain conditions specified in the Internal Revenue Code (IRC 6611) are met. Compute credit interest using CC COMPA, CC COMPAC and/or CC COMPAG. The IRS currently approves and supports the use of IDRS (e.g., CC COMPA) and a commercial off-the-shelf (COTS) software program, Interest Net by Decision Modeling, Inc., which is commonly referred to as ACT/DMI, to perform manual interest computations. See IRM 20.2.4, Overpayment Interest, for more details.

An overpayment is defined as an amount paid in excess of the tax liability. Tax liability includes tax, penalties and interest. Interest is paid on the available net overpayment.

Generally, no interest is allowed for overpayments on an original return if the overpayment is refunded within 45 days of the later of the return due date, return received date, or the date the return was received in processable form.

If the return is not in processable form, suspend the 45 day interest-free period. The return or case is not considered to be in processable form until, among other requirements, all the required information, correspondence, or supporting documentation needed to permit the mathematical verification of tax liability shown on the return is received. The start date for the 45 day interest-free period, for these cases, is the correspondence received date (CRD). See IRM 20.2.4.6, Unprocessable Returns, for more information.

To determine whether the 45-day period has been met, consider these dates:

The original return due date (determined without regard to any extension of time for filing the return).

The original return received date (used when the return is received after the return due date, determined without regard to any extension of time for filing the return)

The date the original return was received in processable form (Return Processable Date (RPD), or Correspondence Received Date (CRD) may be present).