Which describes deficiency interest?

Which describes deficiency interest?

• A. It accrues at 12% per annum from the original due date to the FAN/FDDA.
• B. It accrues from the FAN/FDDA date to the final payment date.
• C. It accrues at 6% per annum from due date to FAN/FDDA.
• D. It does not accrue interest.

Answer: (A)

Deficiency interest is the interest charged on an underpayment from the time the tax was due until the amount is finally assessed. The key point is that it starts from the original due date and ends at the FAN/FDDA (the date the deficiency is finally determined/assessed). The rate used for deficiency interest is 12% per year, not the lower rate or a post-assessment period. So the statement that deficiency interest accrues at 12% per annum from the original due date to the FAN/FDDA correctly captures both the start and end points and the correct rate.

Deficiency interest is the interest charged on an underpayment from the time the tax was due until the amount is finally assessed. The key point is that it starts from the original due date and ends at the FAN/FDDA (the date the deficiency is finally determined/assessed). The rate used for deficiency interest is 12% per year, not the lower rate or a post-assessment period. So the statement that deficiency interest accrues at 12% per annum from the original due date to the FAN/FDDA correctly captures both the start and end points and the correct rate.