Interest on Late Payment

[msmith7305]

For 2022 1040 tax returns the due date this year was April 18, 2023. For late payment of tax, shouldn't interest charges begin on April 18th and not April 15th? Pro Series computes the interest from April 18th forward. However, a client of mine just got dinged by the IRS for the 3 extra days from April 15th. Is the IRS wrong or Pro Series? The regs I looked at refer to interest from the due date of the return.

[Terry53029]

You are correct. 2022 interest charges should from 4/18/23. due date was April 18, 2023, because of the Emancipation Day holiday in Washington, D.C. Looks like you will be calling the IRS to correct their error. If a small amount I would tell client to forget it, as my charge would be more than his recovery, or client could handle it.

[BobKamman]

If they are cheating your client, they are cheating everyone.  I just looked at a notice that a client received. It shows interest from April 15 through June 16, a period of 62 days, figured at 7% per annum with an interest factor of 0.011960229.  I don't see how they get this number, but maybe it is from daily compounding.  

For 14 days, June 16 through June 30, they show the interest factor as 0.002688281.  Then for 80 days (June 30 through September 18, it's 0.015459272.

This is the kind of systemic problem that TAS is supposed to resolve, but they will probably show no interest.  

[msmith7305]

Well, I have found what appears to be the correct answer in Rev Ruling 74-235.

ProSeries is NOT calculating the interest correctly. April 15th is the proper date to begin the interest charge. Guess I will be getting more notices from clients now.

[BobKamman]

That's the IRS answer, not necessarily the correct answer.  I think it goes back to the days when the primitive IRS computers couldn't deal with different due dates in different years.  Of course, they're probably still using the same computers.  

So they're saying if you filed on April 14, the interest starts on April 15.  If you filed on April 18, the interest starts on April 18.  But if you filed on April 19, the interest starts on April 15.  You think a judge would agree?  

[msmith7305]

No, the RR says that if you filed April 18th and PAID the tax with the April 18th filing it's treated as though you had paid the tax on April 15th.

If you filed April 18th but did NOT pay the tax due until after you filed the return then the interest charge begins on April 15th.

Call me naive, but I do believe a judge would agree. 

[BobKamman]

@msmith7305  I won't call you naive, I'll just call you ambiguous.  I'm sure a judge would agree with someone.  But whom?