[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 449-450]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6425-3  Allowance of adjustments.

    (a) Limitation. No application under section 6425 shall be allowed 
unless the amount of the adjustment is (1) at least 10 percent of the 
amount which, at the time of filing Form 4466 the corporation estimates 
as its income tax liability for the taxable year, and (2) at least $500.
    (b) Time prescribed. The Internal Revenue Service shall act upon an 
application for an adjustment of overpayment of estimated income tax 
within a period of 45 days from the date on which such application is 
filed.
    (c) Examination. Within the 45-day period described in paragraph (b) 
of this section, the Internal Revenue Service shall make, to the extent 
it deems practicable in such period, a limited examination of the 
application to discover omissions and errors therein. The Service shall 
calculate the adjustment, which calculation must be set forth in the 
application for such adjustment, in the manner provided in section 
6425(c)(2) for the determination by the corporation of such adjustment. 
The

[[Page 450]]

Service, however, may correct any material error or omission that is 
discovered upon examination of the application. In determining the 
adjustment, the Service may correct any mathematical error appearing on 
the application, and it may likewise make any modification required by 
the law to correct the corporation's computation of the adjustment. If 
the required modification has not been made by the corporation and the 
Service has available the necessary information to make such 
modification within the 45- day period, it may make such modification. 
The examination of the application and the allowance of the adjustment 
shall not prejudice any right of the Service to claim later that the 
adjustment was improper.
    (d) Disallowance in whole or in part. If the Internal Revenue 
Service finds that an application for an adjustment of overpayment of 
estimated tax contains material omissions or errors, the Service may 
disallow such application in whole or in part without further action. 
If, however, the Service deems that any omission or error can be 
corrected by it within the 45-day period, it may do so and allow the 
application in whole or in part. In the case of a disallowance or 
modification, the Service shall notify the corporation of such action. 
The Service's determination as to whether it can correct any omission or 
error shall be conclusive. Similarly, its action in disallowing, in 
whole or in part, any application for an adjustment of overpayment of 
estimated income tax shall be final and may not be challenged in any 
proceeding. The corporation in such case, however, may file a claim for 
credit or refund under section 6402, and may maintain a suit based on 
such claim if it is disallowed or if the Service does not act upon the 
claim within 6 months from the date it is filed.
    (e) Application of adjustment. If the Internal Revenue Service 
allows the adjustment, it may first credit the amount of the adjustment 
against any liability in respect of an internal revenue tax on the part 
of the corporation which is due and payable on the date of the allowance 
of the adjustment before making payment of the balance to the 
corporation. In such a case, the Service shall notify the corporation of 
the credit, and refund the balance of the adjustment.
    (f) Effect of adjustment. (1) For purposes of all sections of the 
Code except section 6655, relating to additions to tax for failure to 
pay estimated income tax, any adjustment under section 6425 is to be 
treated as a reduction of prior estimated tax payments as of the date 
the credit is allowed or the refund is paid. For the purpose of section 
6655 (a) through (f) credit or refund of an adjustment is to be treated 
as if not made in determining whether there has been any underpayment of 
estimated income tax and, if there is an underpayment, the period during 
which the underpayment existed. However, an excessive adjustment under 
section 6425 shall be taken into account in applying the addition to tax 
under section 6655(g).
    (2) Excessive adjustment. For the effect of an excessive adjustment 
under section 6425, see Sec.  1.6655-5.

[T.D. 7059, 35 FR 14547, Sept. 17, 1970]

   ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES