Hi my name is Meli, and I received a statement for recipients of interest income for calendar year 2007 and at the bottom of the statement it states along these lines: "the amount of interest paid or credited to you in the calendar year shown is on an overpayment of federal tax. The amount may represent interest on an overpayment for more than one year, or more than one kind of tax."

Can someone be kind enough to tell me if the IRS is implying I owe them money or do they owe me?

It appears that you had a tax refund and the IRS delayed the payment of the refund. So they paid you interest also.

Agreed; the IRS started paying interest on late tax refunds in the late 90s.

That INTEREST is taxable income; hence, the 1099-INT from the IRS.

But how do I report this on the next year's taxes (I got a similar statement for 2010.) do I enter it like any regular "1099-interest" form with "IRS" as the "bank/brokerage." Can't believe there's not a clearer web site/form # for this since it's FROM IRS?

The IRS will send you a Form 1099-INT, and you enter it on the Schedule B, just like the bank interest.