Reminder:

Previous restricted interest transactions must be verified before recomputing a module. If you are unable to verify the TC 34X/77X amount, secure the adjustment document or case file.

Compute interest on tax and interest on penalties at normal interest rates.

Interest computations on a subsequently determined deficiency, where an overpayment was previously refunded or offset, depend on the amount of interest, if any, paid or allowed on the original refund or offset. See the table below for interest computation.

If

Then compute interest on

The refund did not include interest

The part of the deficiency assessment up to the amount of the refund/offset from the refund date. See IRM 20.2.5.7, Revenue Ruling 99-40.

The refund did not include interest

Any part of the assessment greater than the amount of the refund/offset from the unextended due date of the return.

The refund did include interest

Any additional assessment from the unextended due date of the return. During the period interest was paid on the refund/offset, interest will be charged at the same rate on the portion of the underpayment (including accruing interest) that does not exceed the refund/offset principal. See IRM 20.2.14.4 , Within Module Interest Netting under Revenue Procedure 94-60.