Determining when overpayment interest begins for spouses changing their filing status

In a Program Manager Technical Advice (PMTA) memorandum, the IRS Office of Chief Counsel in two examples addressed what date interest begins to accrue on a tax overpayment when taxpayers change their filing status from joint to separate, or vice versa, with respect to the same tax year.

Generally, interest on a refund due begins no earlier than the date of the overpayment giving rise to the refund (Sec. 6611(b)(2)), which for a return filed before the last day prescribed for the return’s filing is that last prescribed day, without regard to extensions (Secs. 6611(d) and 6513(a)). For a return filed after the last day prescribed for its filing (a late return), interest begins on that date of filing the late return (Sec. 6611(b)(3)). However, no interest is payable on a return until it is in processable form (Sec. 6611(g)). Also, no interest is paid if the IRS refunds the overpayment on a timely filed return within 45 days of the last day prescribed for the return’s filing (without regard to extensions) or, for a late return, 45 days after it is filed (Sec. 6611(e)(1)).

In the PMTA’s first example, a couple file a joint return for the 2018 tax year on April 15, 2019, then file separate returns that the IRS receives on Dec. 4, 2019. They provide court documents that the IRS receives on Dec. 28, 2019, proving their marriage was not valid for the tax period. The PMTA reasoned that the joint return was not valid because the taxpayers were not legally married. If their separate returns were processable when received on Dec. 4, 2019, overpayment interest would start no earlier than that date. However, if the court documents received on Dec. 28, 2019, were necessary to satisfy the Sec. 6611(g) requirements, that would be the filing date and therefore the beginning of the interest period.

In the second example, two taxpayers file separate 2018 returns, one timely (April 15, 2019) and one late (Nov. 14, 2019), then file a joint return received Jan. 10, 2020, but not processed until additional necessary information is received on Jan. 25, 2020. In this case, the joint return controls, and overpayment interest would start no earlier than when it became processable on Jan. 25, 2020, the PMTA said, noting that Sec. 6013(b) provides an election by which spouses may file a joint return after one or both file separate returns if the filing is within a three-year period after the last date prescribed by law for filing a return, without regard to any extension granted either spouse (Sec. 6013(b)(2)(A)).

• PMTA 2021-03

— By Paul Bonner, a JofA senior editor.