Refusal of IRS To Pay Interest Charges on Its Past Due Accounts

B-197856: Published: Mar 5, 1980. Publicly Released: Jun 4, 1985.

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GAO was requested to explain the Internal Revenue Service's (IRS) refusal to pay interest charges on its past due accounts. A newspaper billed IRS for publication services in the amount of $72.85, plus $40.80 in interest charges covering 56 months at 1 percent per month. As per the newspaper's policy, the invoice stated that 1 percent per month would be added to accounts over 90 days past due. IRS paid the principal amount, but struck the associated interest charges and stated on the bottom of the invoice that it was not allowed to pay past due interest charges. Responding to further inquiries, an acting director of IRS stated that various decisions had held that there was no statutory provision authorizing payment of penalties, interest, or late charges on government accounts and contracts. Therefore, government agencies could not pay such charges. GAO supported IRS in the matter. It has been well established that the United States may not pay interest on its unpaid accounts unless the payment of interest is authorized by statute or provided for in a lawful contract. Particularly, interest is not authorized to be paid where the first notice of interest charges appears on a claimant's invoice and no law requires payment. Accordingly, regardless of the long delay in the payment of this debt by IRS, GAO knows of no basis on which the interest charges could be paid by IRS.

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