CCA 200931053: Interest accrues on penalty even when underlying employment tax is interest-free

Plain-English summary

Chief Counsel advised that a penalty accrues interest under IRC § 6601(e)(2)(B) from the date the return is required to be filed until the addition to tax is paid. The advice states that section 6205 applies only to tax imposed by sections 3101, 3111, 3201, 3221, or 3402, and does not apply to penalties. Therefore, interest accrues on the section 6662 penalty even though the underlying tax is interest-free.

Ruling snapshot

• Question: Does interest accrue on a section 6662 penalty when the underlying employment tax is interest-free?
• Outcome: Advice given
• Key authorities: IRC §§ 6205, 6601, and 6662

Full text (IRS public release)

ID: CCA_2009062911494817 Number: 200931053
Release Date: 7/31/2009
Office: -----------------------------
UILC: 6205.00-00

From: ------------------
Sent: Monday, June 29, 2009 11:49:50 AM
To: ----------------------------
Cc: -------------------------------------------------------------------------------------- Subject: FW: Question Regarding IRS CCA 200846022 Special Rules Applicable to Certain Employment Taxes

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In response to your question, the penalty will accrue interest in accordance with section 6601(e)(2)(B) from the date the return is required to be filed until the date the addition to the tax is paid. Section 6205 only applies to tax imposed by § 3101, 3111, 3201, 3221, or 3402, and does not apply to penalties. As such, interest will accrue on the section 6662 penalty even though the underlying tax is interest-free.

If you have any further questions, please let me know.

Thanks.