Treatment of IRS-paid Interest on Overpayments of Tax Credits

During COVID-19, a number of tax credits were created, including the employee retention credit, the paid sick leave credit, and the paid family leave credit. Now, proposed regulations explain the tax treatment of interest that was paid when credits were mistakenly claimed. The overpayment interest paid to taxpayers on erroneous refunds of COVID-19 credits is treated as an underpayment of the applicable employment taxes. The interest may be assessed and collected by the IRS in the same manner as the taxes. #IdeaoftheDay