When a taxpayer files an amended New York income tax return to claim a refund based on federal changes, does interest on the overpayment start running from the date of the original return or the date of the amended return?

Plain-English summary

The Petitioners filed an amended New York State personal income tax return for tax year 1994 on January 3, 2007, claiming an overpayment based on federal changes to their tax liability. The amended state return was filed within 90 days of their amended federal return, as required by Tax Law § 659 and § 687. The Tax Department paid the refund on May 7, 2007, but it paid interest only for the period between the amended return's filing date and the refund date - not for the years between the original 1994 return and the 2007 amended return.

The Petitioners asked whether interest should instead run all the way back to the original filing of their 1994 return. The Department said no. Tax Law § 687(c), as in effect for 1994, required a claim for refund based on federal changes to be filed within two years of when the notice of change or an amended return was due under § 659, and it stripped interest entirely if that notice or amended return wasn't filed within 90 days. Separately, Tax Law § 688(a)(3) governs how interest is calculated once a claim is timely: for an overpayment claimed on a late-filed return, an amended return, or a refund claim, "no interest shall be allowed or paid for any day before the date on which such return or claim is filed."

Applying § 688(a)(3), the Department explained that the Petitioners' amended 1994 return - filed in January 2007 - was the first notice the Department received of any refund claim; nothing before that date put the Department on notice. So interest began accruing on the date the amended return was filed, and the Petitioners were not entitled to interest running back to the original 1994 filing date.

What this means for you

Taxpayers filing amended returns for federal changes

If you file an amended New York return to claim a refund based on a federal audit, amended federal return, or other federal change, interest on any resulting overpayment does not reach back to your original filing date. It starts running from the day you file the amended state return (or refund claim), even if that filing itself was timely made within the 90-day window under Tax Law § 659 and § 687.

Accountants and tax professionals

When computing interest on a client's overpayment refund tied to a federal change, apply Tax Law § 688(a)(3) literally: the interest clock starts on the date the amended return or refund claim was filed, not the date of the original return or the date the federal change occurred. Confirm separately that the amended return met the 90-day notice requirement under § 659 and § 687(c), because missing that deadline can eliminate interest altogether rather than merely shortening it.

Common questions

Q: We filed our amended return within the 90-day window required after a federal change - shouldn't interest run from our original filing?
A: No. Timely filing within the 90-day window (Tax Law § 659, § 687) preserves your right to interest, but Tax Law § 688(a)(3) still bars interest for any day before the amended return or claim is actually filed.

Q: What happens if the amended return isn't filed within 90 days of the federal change?
A: Under Tax Law § 687(c), as in effect for the 1994 tax year, no interest at all is paid on the overpayment if the notice of change, correction, or amended return was not filed within the 90-day period.

Q: When did interest start accruing in this case?
A: On January 3, 2007 - the date the Petitioners filed their amended 1994 tax return - because that filing was the first notice the Department had of the refund claim.

Q: Does it matter that years had passed between the original 1994 return and the 2007 amended return?
A: No. The gap in time doesn't matter for interest purposes; what matters under Tax Law § 688(a)(3) is the date the amended return or claim was filed, which is when interest begins.

Citations and references

• Tax Law § 659 - requires notice or an amended return after a federal change or correction to income
• Tax Law § 687(c) (as in effect for tax year 1994) - two-year window to claim a refund based on federal changes, and denial of interest if the 90-day notice/amended-return requirement is missed
• Tax Law § 688 - governs interest on overpayments of tax
• Tax Law § 688(a)(3) (as in effect for tax year 1994) - no interest allowed for any day before a late-filed return, amended return, or refund claim is filed

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a09_3i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(3)I
Income Tax
March 3, 2009

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I081008B

On October 8, 2008, a Petition for Advisory Opinion was received from name and address
redacted.
The Petition asks whether interest on the overpayment of New York State personal income tax
for taxable year 1994 is owed from the date of the original tax return filing, when an amended state tax
return reflecting federal changes and requesting a refund was subsequently filed within 90 days of the
filing of an amended federal return, as prescribed by Tax Law §659 and §687. We conclude that interest
on the overpayment of tax is due only from the date of the filing of the amended return.
Petitioners filed an amended New York State tax return for tax year 1994 on January 3, 2007,
claiming an overpayment as a result of federal changes. The amended return was filed within 90 days of
the filing of petitioners’ amended federal return, as prescribed by Tax Law §659 and §687. The refund
was paid on May 7, 2007. No interest on the overpayment was paid to Petitioners for the period between
the original state tax return filing and the amended state tax return filing. Interest was allowed for the
period from the date the amended state return was filed to the date the refund was paid.
Tax Law §687(c), as in effect for taxable year 1994, provided that a claim for credit or refund for
payment of a tax later determined to be an overpayment of tax as a result of federal changes must be filed
by the taxpayer within two years from the time the notice of change or correction or an amended return
was required to be filed with the Tax Department pursuant to Tax Law §659. Section 687(c) provided
that no interest will be paid on the overpayment if the notice of change or correction or amended return
was not filed within 90 days as provided in section 659. Tax Law §688 contains the interest provisions
concerning the overpayment of taxes. Tax Law §688(a)(3), as in effect for taxable year 1994, provided
that in the case of an overpayment of tax claimed on a late filed return, an amended return of tax, or a
claim for credit or refund, “no interest shall be allowed or paid for any day before the date on which such
return or claim is filed.” No interest was allowed on the overpayment if it was refunded within forty-five
days of filing of the amended return.
In the present case, as a result of federal changes, Petitioners filed an amended tax return for
taxable year 1994 requesting a refund within the 90-day period prescribed by Tax Law §659. The filing
of Petitioners’ amended tax return for tax year 1994 placed the Tax Department on notice of Petitioners’
refund claim. No notice of refund claim was made before the filing of Petitioners’ amended tax return
for tax year 1994. Accordingly, filing Petitioners’ amended tax return for tax year 1994 triggered the
accrual of interest on overpayment pursuant to §688(a)(3), as in effect for tax year 1994. Interest started

TSB-A-09(3)I
Income Tax
March 3, 2009

-2-

accruing on the overpayment on the date the amended tax return was filed. Petitioners are not entitled to
interest on overpayment of tax dating from the original tax return filing.

DATED: March 3, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to
the facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion.