Interest paid to you by the IRS is taxable!

I just got a surprise 1099 in the mail from the IRS. I filed a 1040X (Amendment) to get my tax credit money for buying my house. Since I had to amend my 2008 return they paid my around $118 in interest. Apparently this is taxable!

I now have to claim the interest as income for this year's return. I cannot complain since it was money I would not have otherwise. I just think it is a bit odd for a tax authority to pay you interest on a refund then turn around and charge you tax for it. I do not follow the logic.

For any of you out there that fall into this situation check your mail for a 1099 from the IRS. It increases your taxable income and therefore lowers any refund due or raises tax due. Also note that there is no explanation in the 1099 of what it is for. I had to Google search the Tax ID to find out it was the IRS itself.