Restitution-based tax assessment bears interest from the original payment deadline

Plain-English summary

Chief Counsel advised how to calculate underpayment interest on a restitution-based assessment where the restitution order concerned unpaid tax. Under IRC § 6601(a), interest runs on the tax liability from the original statutory payment deadline through the payment date. The calculation should produce the total Title 26 underpayment interest due on that liability. If the restitution order already included and the IRS already assessed some Title 26 interest, the IRS must avoid assessing that amount a second time.

Ruling snapshot

• Question: How should the IRS calculate underpayment interest on the tax liability covered by a restitution order?
• Outcome: Advice given. Interest runs from the original payment deadline to payment, with credit to prevent duplicate assessment of interest already included.
• Key authorities: IRC §§ 6601(a), 6601(b)

Full text (IRS public release)

ID: CCA_2017021313531446
UILC: 6601.00-00

Number: 201722026
Release Date: 6/2/2017
From:
Sent: Monday, February 13, 2017 1:53:14 PM
To: -------------------
Cc: ----------------------------------------
Bcc:
Subject: Request for assistance regarding Title 26 underpayment interest on restitution-based
assessment; POSTF-132966-16

You asked for our advice regarding the correct determination of Title 26 underpayment
interest in the context of a restitution-based assessment.

In this case, the district court found a total loss to the government in the amount of -------

---------------------------------------------------------------------------------------------------- The court
clearly intended the restitution ----------------------------------------------------------------------------

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-------------------------------------------------------------------- Therefore, for purposes of
subsequently assessing underpayment interest, the -----------------------------------------------

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The taxes owed is the liability that is the subject of the restitution order, and the amount
upon which Title 26 interest accrues. Underpayment interest accrues on this amount of
liability from the last date prescribed for payment of the liability (as determined under
section 6601(b)) to the date of payment. IRC § 6601(a). Here, the last date prescribed
for payment was April 15, ------. Underpayment interest should be calculated on the tax
owed from April 15, ------ to the date of payment; the resulting amount is the total
amount of underpayment interest that should be assessed on the taxes owed. Because
in this case the restitution order included some form of Title 26 interest in the amount of

                                              2

-------------------------------------------------------------------, that has already been assessed,
care should be taken that this amount of underpayment interest is not assessed twice.

If you have any questions, please contact ------------------at (202) 317-6844.

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