Here is where IRS screwed up.
Code Section 7508A, which deals with disaster areas and allowed IRS to permit last year’s 3-month extension and this year’s 1-month extension, says
(c)Special rules for overpayments
The rules of section 7508(b) shall apply for purposes of this section.
And Section 7508(b) says
(b)Special rule for overpayments
(1)In general
Subsection (a) shall not apply for purposes of determining the amount of interest on any overpayment of tax.
(2)Special rules
If an individual is entitled to the benefits of subsection (a) with respect to any return and such return is timely filed (determined after the application of such subsection), subsections (b)(3) and (e) of section 6611 shall not apply.
So what are these two parts of Section 6611 that should be disregarded?
The second one mentioned, 6611(e) has the 45-day rule. So IRS can’t rely on that.
But the first one, 6611(b)(3), deals only with “late returns”. That still leaves Section 6611(b)(2), which gives IRS 30 days to issue a refund with no interest:
(b)Period
Such interest shall be allowed and paid as follows: . . .
(2)Refunds
In the case of a refund, from the date of the overpayment to a date (to be determined by the Secretary) preceding the date of the refund check by not more than 30 days, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer.
So the 45-day rule is out, but the 30-day rule should still be followed. Payments issued April 23, like your client’s, and April 28, like mine, were less than 30 days from April 15, so should not have included interest.
