Rev. Proc. 82-51

SECTION 1. PURPOSE

The purpose of this revenue procedure is to update Rev. Proc. 64- 13, 1964-1 (Part 1) C.B. 674, to clarify how taxpayers may make remittances in order to terminate the accrual of interest on deficiencies.

SEC. 2. BACKGROUND

.01 The increase in interest rates charged on delinquent taxes under section 6621 of the Internal Revenue Code has generated numerous questions from taxpayers who anticipate the Internal Revenue Service will assert income tax deficiencies upon completion of the examination of their returns. Some taxpayers may wish to terminate the accrual of interest before the proposed liability is assessed.

.02 Section 6213(b)(4) of the Code provides an assessment may be made of any amount paid as tax or in respect of a tax upon receipt of the payment, notwithstanding the provisions of section 6213(a). If a taxpayer makes a remittance after the notice of deficiency is mailed, the remittance constitutes a payment of tax and will be assessed. The assessment of the remittance does not deprive the Tax Court of jurisdiction.

.03 Various court decisions have distinguished between payments made in satisfaction of a tax liability and "deposits in the nature of a cash bond" made with the Service merely to stop the running of interest. A deposit in the nature of a cash bond is not a payment of tax, is not subject to a claim for credit or refund, and, if returned to the taxpayer, does not bear interest.

SEC. 3. PROCEDURE

.01 Post Statutory Notice Remittances.

A remittance made after the mailing of a notice of deficiency in complete or partial satisfaction of the deficiency is a payment of tax and will be assessed as soon as possible. A remittance made after the mailing o the notice of deficiency does not deprive the Tax Court of jurisdiction over the deficiency.

.02 Deposits in the nature of case bonds.

1. A remittance made before the mailing of a notice of deficiency designated by the taxpayer in writing as a deposit in the nature of a cash bond will be treated as such by the Service and not treated as a payment of tax. Such a deposit is not subject to a claim for credit or refund as an overpayment. The taxpayer may request the return of all or part (if the deposit any time before assessment. That amount will be returned without interest. If the Service determines assessment or collection of the tax determined to be due would be in jeopardy, or that the amount should be applied against any other liability, the deposit will not be returned, but will be applied against a jeopardy or termination assessment or against such other liability.

2. Upon completion of an examination, if a taxpayer who has made a deposit executes a waiver of restrictions on assessment and collection of the deficiency or otherwise agrees to the full amount of the deficiency, an assessment will be made and any deposit applied against the assessed liability. In such a case, no notice of deficiency will be mailed and the taxpayer will not have the right to petition the Tax Court for a redetermination of the deficiency.

3. Upon completion of an examination, if a taxpayer who has made a deposit does not execute a waiver of restrictions on assessments and collection or otherwise agree to the full amount of the deficiency, the Service will mail a notice of deficiency and the taxpayer will have the right to petition the Tax Court. An assessment will be made for the portion of any deposit not greater than the deficiency and such amount will be applied as a payment of tax.

4. If the amount of the deposit exceeds the assessed tax deficiency, the balance will be returned to the taxpayer upon request, without interest, provided the taxpayer has no outstanding liabilities.

5. Any remittance made by the taxpayer, after the date that the Tax Court files its opinion, in an amount greater than the amount of the deficiency determined by the Tax Court will be treated as a cash bond.

.03 Payments of tax.

1. A remittance not designated as a cash bond will be treated as a payment of tax if it is made in response to a proposed liability, for example after the issuance of a revenue agent' or examiner's report, and payment in full of such proposed liability is made, A partial remittance will not be created as a partial payment unless the taxpayer specifically designates the portion of the proposed liability the taxpayer intends to satisfy. If the remittance is treated as a partial payment. the amount will be taken into account in determining the amount for which a notice of deficiency must be mailed. If the Service is unable to determine whether a partial remittance is intended as a partial payment, the Service will follow the procedures described in section 3.02.

2. If the remittance equals or exceeds the proposed liability, no notice of deficiency will be mailed and the taxpayer will not have the fight to petition the Tax Court for a redetermination of the deficiency.

3. Remittances treated as payments of tax will be assessed upon receipt or as soon as possible thereafter, provided assessment will not imperil a criminal investigation or prosecution.

4. If the amount of the deposit exceeds the assessed tax deficiency, the balance will be returned to the taxpayer upon request, without interest, provided the taxpayer has no outstanding liabilities.

1. Any undesignated remittance not described in section 3.03 made before the written proposal of a liability, for example, the issuance of a revenue agent's or examiner's report, will be treated by the Service as a deposit in the nature of a cash bond. Such a deposit is not subject to a claim for credit or refund and the excess of the deposit over the liability will not bear interest under section 6611 of the Code. The taxpayer will be notified concerning the status of the remittance, and may elect to have the deposit returned, without interest. at any time before assessment of the deficiency. An undesignated remittance made prior to the issuance of a revenue agent's or examiner's report will be presumed to be a deposit in the nature of a cash bond.

2. If the taxpayer leaves an undesignated remittance on deposit until an examiner's or revenue agent's report is issued. the Service will follow the procedure described in section 3.02.

SEC. 4. INTEREST

.01 The running of interest on an assessed tax liability satisfied by application of a remittance (whether it is treated as a "payment" or a "deposit") will stop on the date the remittance is received. If an amount is deposited with the Service but is returned at the taxpayer's request and a deficiency is later assessed, the taxpayer will not receive credit for having made a "payment" for the period in which the funds were on deposit. If a waiver of restrictions on assessment and collection is executed for the amount covered by the remittance, the running of interest will stop on the date of receipt of the remittance or 30 days after the waiver is filed, whichever is earlier.

.02 If a remittance is treated as a payment of tax and no notice of deficiency is mailed under sections 3.03 or 3.04, any interest due will be assessed with the tax. If a remittance is made after the mailing of a notice of deficiency under section 3.01, or if the Service mails a notice of deficiency under sections 3.02, 3.03, or 3.04, any interest due will be assessed after the expiration of the period of time for filing a petition with the Tax Court, or, if a petition is filed, after the Tax Court decision becomes final.

.03 No interest will be allowed or paid on a deposit, or any portion of a deposit, returned to a taxpayer before or after assessment.

.04 Remittances assessed as payments will be treated as any other assessed amount and interest will be paid on any overpayment under section 6611 of the Code.

SEC. 5. DESIGNATION OF REMITTANCES

Any remittance treated as a payment of income tax under this Revenue Procedure will be consistent with any allocation designated by the taxpayer concerning tax, penalty, and interest. Where no designation is made, the remittance will be generally applied first to tax, then to penalties and interest.

SEC. 6. EFFECTIVE DATE

This Revenue Procedure is effective for all remittances made after 1982.

SEC. 7. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 64-13 remains in effect for remittances made before the effective date of this revenue procedure.