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Part 21. Customer Account Services

Chapter 4. Refund Inquiries

Section 2. Refund Trace and Limited Payability

21.4.2  Refund Trace and Limited Payability

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21.4.2.1  (10-01-2006)
Refund Trace and Limited Payability Overview

  1. When a refund check is lost, stolen, destroyed or not received by the taxpayer, a refund trace can be initiated. This section of the Internal Revenue Manual (IRM) provides information and instructions for tracing. For Command Code (CC) CHKCL instructions, see Exhibit 21.4.2-1, CC CHKCL input. To access CC CHKCL, you must be able to access Integrated Data Retrieval System (IDRS). See IRM 21.4.3, Returned Refunds/Releases if there is an "S-" Freeze (Undelivered Refund) on the module. Additional IRM reference is IRM 21.5.6, Freeze Codes.

  2. The IRS works with other Federal agencies to trace refunds. Financial Management Service (FMS) and the Regional Financial Centers (RFCs) play key roles.

  3. Financial Management Service, an agency in the Treasury Department, issues and maintains records relating to United States (U.S.) Treasury checks and Electronic Funds Transfer (EFT) deposits. FMS headquarters are located in Hyattsville, MD.

  4. The Department of the Treasury delegates to FMS the authority to certify second payments to payees who did not receive their refund checks or whose check was lost, stolen or destroyed. In case of forgery, FMS certifies second payments, issues a refund check, and notifies the IRS to input Transaction Code (TC) 971, Code 078 or 079 on Master File.

  5. Effective January 1, 1999, FMS is responsible for making refund offsets for child support and federal agency non-tax debts. This is referred to as the Treasury Offset Program (TOP), formerly the Debtor Master File Program (DMF). Refunds will be offset after IRS certifies them to FMS for payment but before the refund check or direct deposit is issued/made. See IRM 21.4.6, Refund Offset, for information on the TOP.

  6. Austin Regional Operation Center (AROC) prints and mails the refund checks for all campuses. Sometimes during peak processing, AROC may ship to other FMS sites for check printing.

  7. The Regional Finance Center (RFC) keeps records for Treasury checks for seven years and on EFT deposit refunds for six years on the following information:

    • Check Number

    • Check Symbol

    • Social Security Number or Employer Identification Number

    • Amount of refund

    • Date refund was issued

    • Name and address on check

    • Routing transit number and account number

  8. If the actual refund amount differs from the amount the taxpayer claimed, the RFC inserts Notice 54, About Your Refund Check, into Individual Master File (IMF) refund checks and Notice 134, About Your Refund Check, into Business Master File (BMF) refund checks. In addition, FMS will attach a notice of offset if the original amount was reduced due to a TOP Offset.

  9. The Financial Processing Division (FPD) in Hyattsville, MD encompasses the total check claims process.

21.4.2.2  (10-01-2002)
What is a Refund Trace?

  1. A refund trace is the name of the procedures to track a stolen, lost, or misplaced refund check and replace an authorized refund to the taxpayer. Refund trace also includes initiating a forgery claim and verifying a direct deposit.

21.4.2.3  (11-15-2005)
Refund Trace Process

  1. The refund trace process is as follows:

    1. The taxpayer contacts the IRS and states his/her refund was lost, stolen, destroyed, or never received.

    2. An IRS employee inputs the trace Command Code (CC) "CHKCL" to IDRS (if oral statement criteria is met) or sends a Form 3911, Taxpayer Statement Regarding Refund, to the taxpayer (CC "CHKCL" is input when the taxpayer returns the Form 3911).

    3. CC "CHKCL" initiates the refund trace inquiry to the Financial Management Service (FMS).

    4. The original check is replaced or a photocopy of the cashed check along with a claim form is sent to the payee (taxpayer).

      Exception:

      If more than 4 weeks have passed since the TC 846 posted and the taxpayer is in bankruptcy, instruct the taxpayer to call the Insolvency Unit at 1-800-913-9358.

  2. The Spanish Form 3911 is now available. Customer Service Representatives (CSR) and Tax Resolution Representative (TRR) should offer this form when they determine it's the appropriate form and will provide the best service to the taxpayer.

21.4.2.3.1  (10-01-2005)
Processing and Controlling Refund Inquiries — Timeliness of Actions

  1. The processing steps on tracing a refund check will depend on whether the cutoff date for processing of the "check claim" has passed at Financial Management Service (FMS). If the cutoff date has passed, the case is referred to as a Limited Payability (LP), see IRM 21.4.2.4.7, Limited Payability Rules.

  2. The number of days allowed for timely processing of these cases is prescribed in IRM 3.30.123, Processing Timeliness: Cycles, Criteria and Critical Dates. At the campus option:

    1. Inquiries may be processed on a first-in, first-out basis.

    2. If the check claim involves an issued non-receipt refund check, a first read is acceptable to expedite processing.

  3. Cases resulting in check tracing actions must be (either a "check claim" or "LP Trace" ):

    1. Controlled within 14 calendar days of receipt by IRS.

    2. Controlled on Integrated Data Retrieval System (IDRS) within 3 work days of receipt from another function (include day of receipt).

    3. Initiated within 17 work days of the IRS received date.

      Note:

      Control using the earliest IRS received date.

    Send an interim response Letter 2645C, Interim Letter, when the check claim is not resolved within 30 days of the IRS received date, unless IRS has advised the taxpayer they will receive a response in a specific time frame. If the specific time frame is not met, send taxpayer an interim response.

21.4.2.3.2  (10-01-2006)
Non-Master File Refund Tracing

  1. If you cannot find a refund on the master file, it may have been a Non-Master File (NMF) refund. Use local established procedures to locate refund information. If no information is found using the following research procedures, ask the taxpayer to send copies of any correspondence about the refund. Information received may contain the necessary Document Locator Number (DLN). The Non-Master File DLN is tax class "6" and all refunds from NMF accounts must be manual refunds. Refer to IRM 21.4.4, Manual Refunds. Refund Inquiry employees can also find the required check information on Payments Claims and Enhanced Reconciliation (PACER) or Treasury Check Information System (TCIS).

  2. Most NMF accounts will now be found on the Automated Non Master File (ANMF). Depending on the location of terminals, Refund Inquiry employees may be able to do their own research on the ANMF accounts. Call sites should contact (by phone) their servicing center and request ANMF research. The center should FAX the research results back to the call site requesting the information.

  3. Employees must obtain a unique "login" through On Line 5081 requesting ANMF for research only. Request must be submitted through local management.

  4. The ANMF allows employees to read any entity or transaction on the file by following the instructions displayed with the "Research NMF" option.

    1. With the "Query" command, employees can research for a desired entity by entering the DLN or taxpayer identification number (TIN), Master File Transaction (MFT), and tax period of the desired record. If only partial information is available, enter the data for any fields shown on the screen page for the record you need.

    2. Use the "NMF Transcript" option to request a printed transcript (not a certified transcript) that will be delivered from the NMF unit on the following day. The ANMF system does not provide the "print screen" capability that would allow you to copy what you see on the research screen.

21.4.2.3.3  (10-01-2006)
Form 8599, Request for Missing Information Regarding Refund

  1. At times, taxpayers neglect to provide all necessary information when they return Form 3911, Taxpayer Statement Regarding Refund. Employees may either send the taxpayer the appropriate letter or may request the missing information by using the Form 8599, Request for Missing Information Regarding Refund.

  2. Upon receipt of incomplete Form 3911, (or Form 1310 or FMS 1133, etc.) action must be taken to return the form(s) to the taxpayer for the missing information. For example, when taxpayers file a joint return, both parties must sign the Form 3911. If only one signature is present, the Refund Inquiry Unit will return the Form 3911 and advise the taxpayer that both parties must sign the document.

  3. Refund Inquiry Unit will update the IDRS Activity Code with the form number, and "TOTP" (e.g., "3911TOTP" , "1310TOTP" , etc.). If this is the initial contact with the taxpayer and you have not initiated a claim with the Financial Management Service (FMS), "X" out the received date and close the case.

  4. If a claim has been initiated with FMS, Refund Inquiry Unit will use the appropriate Category Code and keep the case open in "B" status until the final disposition is received. This will provide an audit trail for any subsequent contact by the taxpayer that IRS returned the form as incomplete.

  5. The Form 8599, Request for Missing Information Regarding Refund is a two part form. Both parts will be forwarded to the taxpayer along with the incomplete form(s). Always include:

    • A PRE-ADDRESSED return envelope.

    • Unit Stop Number on the face of the return envelope.

21.4.2.4  (10-01-2006)
Refund Trace Actions

  1. The procedures for processing a refund trace request are the same for telephone, Taxpayer Assistance Centers, or written inquiries.

    1. If the refund is less than one year old, input of the Command Code (CC)"CHKCL" is required to begin the refund trace. See Exhibit 21.4.2-1, CC CHKCL Input.

    2. Beginning October 1, 2004, Limited Payability refunds over one year old no longer must be worked by the issuing center. Refunds over one year old must be processed by a Refund Inquiry Unit, because they do not meet oral statement criteria. Send taxpayer a Form 3911, Taxpayer Statement Regarding Refund, with a return envelope of your affiliated Refund Inquiry Unit. DO NOT input CC CHKCL. Advise the taxpayer they can either mail or fax their request. Provide the address and fax number of your affiliated Refund Inquiry Function. For fax numbers see the Campus Directory http://serp.enterprise.irs.gov/databases/who-where.dr/natdirectory.dr/srv-cntr-toc.htm located on Servicewide Electronic Research Program (SERP) under the Who/Where tab. Refund Inquiry employees see IRM 21.4.2.4.7, Limited Payability (LP) Rules.

  2. The following refund issues must be worked at the campus that issued the refund check. Send completed Form 3911 with taxpayer's signature or Form 4442, Inquiry Referral (those based on oral statement) to the appropriate campus.

    • Manual refunds (transaction code TC 840)

    • Incorrect taxpayer shown on ENMOD

    Note:

    When case must be sent to the center which originated the refund DO NOT request the original return. The center receiving the case must request the return. You may notify the center you are sending the case so they may immediately request the original return thereby reducing the time the taxpayer must wait for a response.

  3. All taxpayer inquiries concerning direct deposit should be treated as any other inquiry, except refunds issued through a Refund Anticipation Loan (RAL) or Refund Anticipation Check (RAC). Refer the taxpayer to the financial institution that issued the RAL/RAC. The input of the CC "CHKCL" will cause the generation of an Financial Management Service (FMS) Letter 150.2 (issued if trace request is within 60 days of the refund issue date) or 150.1 to the financial institution. This serves as an official request of the bank to search for the electronic funds transfer. See IRM 21.4.1.4.7.1, Direct Deposit of Refunds for more information on direct deposit refunds.

  4. Command Code (CC) CHKCL can be used to begin refund trace action if the taxpayer meets oral statement criteria and any one of the following conditions occur.

    • Research shows the refund was issued and taxpayer states the refund was lost, stolen or destroyed.

    • Research shows the refund check was issued four weeks ago and taxpayer has not received their refund.

    • Research indicates the refund by direct deposit was issued 5 days ago and the taxpayer has not received their refund and the financial institution has no record of the deposit.

      Reminder:

      The above criterion also applies to accounts on Customer Account Data Engine (CADE).

  5. You may accept an oral statement from only Individual Master File (IMF) taxpayers if all of the following conditions are met.

    • Refund issue date TC 846 date is within 12 months of the current date.

    • Caller is the taxpayer or the taxpayers authorized representative.

    • Tax return filed is an Individual tax return.

    • Filing Status is other than Married Filing Joint (MFJ).

    • Issuance of the refund check was at least four (4) weeks prior to inquiry, direct deposit issued at least 5 days prior to inquiry, or the taxpayer states the check was lost, stolen or destroyed, then no time frame would be involved.

    • Taxpayers with valid Taxpayer Identification Number (TIN).

    • Taxpayers module does not contain a TC 841 or TC 740 on the module for this specific refund.

    • Taxpayer resides at the address currently on record (ENMOD). If taxpayer resides at a different address DO NOT change the address. DO NOT input CC CHKCL. Advise taxpayer you are mailing them a Form 3911, Taxpayer Statement Regarding Refund to complete, sign and return the form in the envelope provided. Advise taxpayer they can either mail or fax their request. Provide the address and fax number of your affiliated Refund Inquiry Function. For fax numbers, see the campus directory located on SERP under the Who/Where tab, http://serp.enterprise.irs.gov/databases/who-where.dr/natdirectory.dr/srv-cntr-toc.htm. If Married Filing Joint, advise taxpayer both spouses must sign. Send taxpayer a return envelope with the address of your affiliated Refund Inquiry Function.

    Note:

    Form 3911 can be used as written documentation to change a taxpayer's address. Upon receipt of Form 3911, update the address and input CC CHKCL. However, if the refund check was returned undelivered by the Postal Service, do not input CC CHKCL. See IRM 21.4.3.4.3, Undeliverable Refund Checks.

    Note:

    Refer to IRM 21.1.3, Operational Guidelines Overview, for the appropriate disclosure authorization procedures.

  6. If oral statement criteria is met, see Exhibit 21.4.2-1, CC CHKCL Input.

21.4.2.4.1  (10-01-2005)
Form 3911, Taxpayer Statement Regarding Refund

  1. If the contact does not meet oral statement criteria.

    1. Send taxpayer a Form 3911, Taxpayer Statement Regarding Refund. Be sure to verify the taxpayer's mailing address. If taxpayer has moved since filing their return and their current address is not on record (ENMOD), send Form 3911. DO NOT UPDATE ADDRESS ON ENMOD.

    2. Advise taxpayer the Form 3911 is available through the internet on irs.gov. See IRM 21.3.6.4.2, Other Methods of Obtaining Forms and Publications.

    3. Advise taxpayers they must sign the Form 3911. If joint return, both taxpayers must sign.

    4. Advise taxpayer they can either mail or fax their request. Provide the address and fax number of your servicing Refund Inquiry function.
      For fax numbers, see the campus directory located on SERP under the Who/Where tab, http://serp.enterprise.irs.gov/databases/who-where.dr/natdirectory.dr/srv-cntr-toc.htm.

    5. Using Command Code (CC) "ACTON" ; input a History Item on Integrated Data Retrieval System (IDRS) - "H,39112TP."

    6. If forwarding the Form 3911 to another campus with an open Refund Inquiry Unit control, create a history item stating - 39112SC.

  2. If the taxpayer returns the Form 3911, review the form for completeness. If a joint return, both taxpayers must sign. Update ENMOD if an address change is required.

  3. If a Form 3911 mailed to the taxpayer is returned by the United States Postal Service as undeliverable, the Refund Inquiry function will research for a new or corrected address or a phone number to contact the taxpayer. If a corrected address is found, re-mail the Form 3911. If no new address is located, destroy the Form 3911.

21.4.2.4.2  (10-01-2006)
Input Command Code (CC) "CHKCL"

  1. CC "TXMOD" must precede input of CC "CHKCL" . If "TXMOD" is not available, use CC "MFREQC" . Input CC "CHKCLR" to request the "CHKCL" screen format. The following items generate from the preceding "TXMOD" :

    • CC "CHKCL"

    • Social Security Number (SSN)

    • Master File Transaction (MFT)

    • Tax Period

    • Name Control

    Caution:

    DO NOT input CC "CHKCL" if one or more Treasury Offset Program (TOP) offsets, TC 898s, were done for the full amount of the refund TC 840/846. Refer the taxpayer to the Financial Management Service (FMS) Help Desk or the creditor agency as described in IRM 21.4.6.4.1, Taxpayer Inquiries on TOP Offset. FMS Help Desk telephone number to be provided to the taxpayer is 1-800-304-3107. This is the only FMS number that can provide the taxpayer information regarding their TOP issue. Do not provide the taxpayer with other FMS numbers to call.

  2. For the input of the CC "CHKCL" , see Exhibit 21.4.2-1, CC "CHKCL" Input.

  3. Input information on the CC "CHKCL" format. Advise taxpayers they will receive either a replacement refund check or a copy of the check with a claim form within six weeks.

21.4.2.4.3  (10-01-2005)
Processing the Command Code (CC) "CHKCL" Trace Request

  1. When CC "CHKCL" is input, the request is sent electronically to the Regional Finance Center (RFC). The request is then forwarded to Hyattsville, Maryland, where Financial Management Service (FMS) determines the status of the check, cashed or not cashed. Trace request for direct deposits are processed at RFC. Refer to the table below for resulting action.

    If And Then
    Check has not been cashed. Check is less than one year old. Credit is returned to the taxpayer’s account and a new refund is issued.
    Check is more than one year old. Check is automatically cancelled (TC 740) and reissued.
    Check has been cashed. Check is less than one year old. FMS will send photocopy and claim Form 1133 to the taxpayer.
    Check meets Limited Payability criteria. A photocopy of the cashed check is sent to the Refund Inquiry Unit to determine forgery.

    Note:

    Unlike the processing of regular check traces, "Limited Payability" procedures do not apply to direct deposit cases. It does not matter if the direct deposit is older than 14 months old. A "Non-receipt Code" of "N" should be used regardless of the age of the direct deposit.

    Reminder:

    When a taxpayer states he is inquiring about his refund and the refund was a Refund Anticipation Loan (RAL) or a Refund Anticipation Check (RAC), refer taxpayer to their preparer or the financial institution where their refund was deposited.

    Caution:

    Remember, all taxpayer authentication rules and security requirements are the same for all refund accounts. It does not make a difference how the refund was issued, either direct deposit to the taxpayer's account, a "RAL or RAC" from the preparer, or issued via paper check.

21.4.2.4.4  (10-01-2006)
Responding to Taxpayers Subsequent Inquiries

  1. The taxpayer may subsequently inquire after initiation of a refund trace on their missing refund check or non-receipt of a direct deposit refund. Use the following table in your attempt to resolve the taxpayer's issues.

    If Then
    Taxpayer calls to check the status of his/her case. 1. Research Integrated Data Retrieval System (IDRS) to determine the Disposition Code of the claim.
    2. Customer Service Representative (CSR) should only refer case to the tax examiner with control if after complete research, he/she cannot answer the taxpayer's inquiry.
    Taxpayer finds his/her refund after Form 3911, Taxpayer Statement Regarding Refund, was sent. Check the Disposition and Status Codes to determine if the taxpayer can cash the check. See Exhibit 21.4.2-2, Reason for Cancellation Codes and Generated Account Information.

    Note:

    A refund trace cannot be interrupted if the campus deadline to "DQ" the trace has passed. If it is too late to cancel the trace and the trace was valid, advise the taxpayer to wait for a replacement check and return the original when the replacement is received.

    More than three weeks from the History item "3911TORDCC" . 1. Advise taxpayer you are checking the status of their claim.
    2. Advise taxpayer he/she will receive a contact within 30 days.
    3. PrepareForm 4442, Inquiry Referral, and send to the responsible Refund Inquiry Function.
    Six weeks after taxpayer sends Form 3911, Taxpayer Statement Regarding Refund. 1. Research IDRS for the claim status.
    2. Determine the latest disposition or status code. Frequently used disposition and status codes are described in Exhibit 21.4.2-5, Disposition and Status Codes - Additional Action Time Frames.
    3. If you are a CSR at a call site and you cannot resolve the taxpayer's inquiry, you may need to refer (FAX) the case to the Refund Inquiry Unit which either now controls or had a prior control on the account. Advise the taxpayer to expect a response within 15 days.
    Taxpayer received FMS Form 1133 and check was cashed by someone other than the taxpayer. Advise the taxpayer to complete the claim form (FMS Form 1133) and return it to FMS to pursue the claim.
    Taxpayer received FMS Form 1133 and does not wish to pursue the claim. Advise the taxpayer no further action is required. Taxpayers may keep the copy of the check for personal records.
    Taxpayer finds the original check and also receives a replacement. Advise the taxpayer to return the original as soon as possible. Input a History Item on TXMOD:H:CHKFOUND.

  2. Upon receipt of cases from the field where it has been more than three weeks since the CC "CHKCL" was input and no Disposition Code received, the Refund Inquiry Unit is to reinput the CC "CHKCL" and advise the taxpayer of the action.

21.4.2.4.4.1  (10-01-2007)
Subsequent Inquiries, With Status Codes, Without Prior Forgery Determination (CSR's and Refund Inquiry Unit)

  1. If a subsequent claim has been initiated, Command Code (CC)"CHKCL" was input, complete the following:

    1. If the Disposition Code "11" is on IDRS, provide the check information (check and serial numbers) using CC IMFOL# and have the taxpayer contact the Financial Management Service (FMS) by phone (800) 826-9434 (only English speaking assistance is available on the Check Claims toll free number) or by sending a letter to FMS at the following address:

      Department of Treasury
      Financial Management Service
      Check Claims Branch
      P.O. Box 515
      Philadelphia, PA 19106

    2. If you cannot determine the Disposition Code (history has fallen off of IDRS), a "Transaction Code (TC) 971 and Action Code (AC) 011" is on the module and the refund does not meet Limited Payability criteria, provide the check information (check and serial numbers) using CC IMFOL# and refer the taxpayer to FMS per paragraph (1) (a) above.

    3. Close the case.

  2. This applies only to refunds checks issued within 14 months of the TC 971, AC 011 date and there is not a TC 841 or TC 740 matching the TC 846/840 date.

  3. For more information on refund checks issued more than 12 months from the current date, see IRM 21.4.2.4.7, Limited Payability (LP) Rules.

  4. If a refund was direct deposit, refer to IRM 21.4.1.4.7.1, Direct Deposit of Refunds.

21.4.2.4.5  (10-01-2006)
Disposition Status Codes

  1. The Refund Inquiry Unit will monitor cases after input of Command Code (CC) "CHKCL" to ensure proper actions. See Exhibit 21.4.2-2, Disposition Code Chart Non-Receipt Claims CHKCL Claims Only and see Exhibit 21.4.2-3, Disposition and Status Codes Additional Action Time Frames to determine if follow-up action(s) is required.

  2. The following actions occur once the refund trace reveals the check has been cashed:

    1. Financial Management Service (FMS) sends a copy of the check with a FMS 1133 Claim Form directly to the taxpayer.

    2. The taxpayer returns the Form 1133 directly to FMS, except in case of Limited Payability.

    3. IRS will receive a Disposition Code "11" and, if no prior letter advising taxpayer of the trace was sent, Refund Inquiry will send Letter 206C, Refund Inquiry; Copy of Check Requested/Check Being Traced (Form 1133), with paragraph "K" . Provide the check information and close case.

    4. Refund Inquiry will forward subsequent claims received to FMS and notify the taxpayer.

    5. Depending on FMS' response, taxpayer may receive either a replacement refund, denial letter, or interim response.

  3. FMS sends a Claims Disposition Notice to the IRS showing the final or interim disposition. In addition, FMS notifies taxpayer of the status of the claim.

    Note:

    For more information on the Claims Disposition Notice, see IRM 21.4.2.4.13, Financial Management Service (FMS) Claims Disposition Notice (CDN).

21.4.2.4.6  (10-01-2006)
Refund Inquiry Unit Processing

  1. Input of Command Code (CC) "CHKCL" generates a request of non-receipt claims and stop payment information. This information is transmitted to the Regional Finance Center (RFC) for processing. The RFC will:

    1. Compare information with their records.

    2. Transmit information to IRS indicating status or disposition of claim.

  2. RFC procedures for processing the request are given in the table below:

    If Then
    RFC is unable to read the information transmitted. RFC requests the campus to transmit again.
    RFC is able to read the information. RFC retains the information for 15 days.
    Claims information is processed by RFC. Information is used to update open control bases with Status of claim.

  3. The non-receipt claim must:

    1. Be processed in five (5) working days.

    2. Include date of receipt, releasing stop, and disposition.

    3. Determine status of payment or any previous action taken.

    Note:

    The Disposition Code listing goes back to the Refund Inquiry Unit of the center that inputs CC "CHKCL" or center affiliated with the office which input the CC "CHKCL" .

    Note:

    When there is a discrepancy between the payee name on the refund check and non-receipt claim, the RFC will use the payee name.

  4. Depending on the Status of the refund check one of the following occurs:

    If And Then Generated Code at FMS
    Non-receipt Codes: "N" , "L" , "D" , "S" , or "E" . Check is outstanding. A recertified refund is automatically issued. D
    Non-receipt Codes: "H" or "X" Check is outstanding. Sets "P" Freeze. Credit must be released (i.e., manual refund, credit transfer).
    Note: If the trace involves an Advance Child Tax Credit refund, refer to IRM 21.6.3.4.1.36.5.3, Erroneous Refunds.     		D
    "P" for Photocopy request for spousal dispute. Check outstanding Disposition "33" . Send Letter 1219C, Refund Inquiry; (Joint Form 3911) Requires Certification: Form 1040, with appropriate paragraphs. K
    "P" for Photocopy request for taxpayer’s records. Check outstanding Disposition "33" . 1. Send appropriate "C" letter.
    2. Advise the taxpayer the check has not been paid.
    3. Include a Form 3911, Taxpayer Statement Regarding Refund.
    4. Advise the taxpayer if they wish to request a replacement check to complete the Form 3911 and return it to the center which issued the check.
    5. If an open control base, close with Activity Code "3911TOTP" .     		K
    Non Receipt Code of "C" . Check Cashed FMS sends Certified photocopy of the cashed check. L
    All non-receipt codes except "C" or
    "P" .     		Refund less than 14 months old and check cashed. FMS sends photocopy and 1133 Claim Form to taxpayer.  
    Non-receipt code "P" and Limited Payability.
    Note: Use of any other non-receipt code on a Limited Payability check will cause a Disposition 18 and FMS will not send a check copy.     		  1. FMS sends photocopy only to the campus.
    2. The campus determines whether the check was forged or sends a Form 13818, Claim Against the United States for the Proceeds of an Internal Revenue Refund Check, and the check photocopy to the taxpayer.     		 

21.4.2.4.7  (10-01-2006)
Limited Payability (LP) Rules

  1. The Competitive Equality Banking Act of 1987, commonly referred to as Limited Payability (LP), established rules for cashing government checks:

    • All government checks issued on or after the effective date of October 1, 1989, are valid for 12 months after the issue date of the check.

    • Refund checks issued prior to October 1, 1989, were to be cashed by September 30, 1990.

    • After 12 months and the cancellation of the refund checks, the credits are returned to the taxpayer’s accounts.

    • The law also places a limitation on the time IRS can recover funds from the banks or financial institutions.

  2. Prior to the Competitive Equality Banking Act, a government check could be cashed regardless of the time lapse since its issue. The act did not erase the underlying responsibility to pay.

  3. Under the Limited Payability provision, checks expire (are not negotiable) the last business day of the 12th month from the issue date. See table in paragraph (5) below.

  4. Taxpayers may submit claims for refund checks after the one-year time limit has expired. These claims are subject to Limited Payability provisions. Claims must be submitted to the Financial Management Services (FMS) by the 15th day of the 14th month, by using command code (CC) CHKCL with Non-Receipt codes N, L, S, D, E, H, or X. See chart in paragraph (5) below.

  5. The chart below provides the refund issue date, the date a check can no longer be negotiated, and the last date an LP claim can be submitted.

    Refund Issue Date is 12 Months after check date. Check cannot be cashed 15th day of the 14th month after issue date
    January February 1 March 15 (of the following year)
    February March 1 April 15
    March April 1 May 15
    April May 1 June 15
    May June 1 July 15
    June July 1 August 15
    July August 1 September 15
    August September 1 October 15
    September October 1 November 15
    October November 1 December 15
    November December 1 January 15
    December January 1 (second subsequent year) February 15

  6. The CP 32, IMF New Refund Check, and CP 32A, BMF New Refund Check, is sent to the taxpayer when an expired check is reissued. Refer to IRM 21.3.1, Taxpayer Contacts Resulting From Notice Issuance.

  7. LP claims received after the 15th day of the 14th month, Non-Receipt code P or C must be used. FMS will only provide a photocopy of the check. Before inputting CC CHKCL to request a photocopy on an LP check, research the Payments Claims and Enhanced Reconciliation (PACER) or TCIS systems. If not available on either system, input CC CHKCL. All LP claims must be processed by IRS.

  8. Any CC CHKCL input after the 15th day of the 14th month with a Non-Receipt code other than P or C will receive a Disposition Code 18 (if check is cashed) and will NOT create an FMS claim. See Exhibit 21.4.2-2, Disposition Code Chart Non-Receipt Claims CHKCL Claims Only, for Disposition Code 18.

    Note:

    FMS only keeps records of Treasury checks for seven years after the issue date and six years for Electronic Funds Transfer (EFT) deposits. A forgery claim submitted after seven years cannot be honored.

  9. If FMS records show the refund check is still outstanding on the 15th day of the 14th month, then FMS will cancel the refund and return the credit to IRS. It takes about three weeks for the credit to post on the tax module as a TC 740 with Blocking Series 66666. See IRM 21.4.2.4.7.2, Limited Payability CP 32/237.

    Note:

    The Limited Payability limitations do not apply to direct deposit traces. Use Non-Receipt code N on all direct deposit traces using CC CHKCL, regardless of the age of the refund.

21.4.2.4.7.1  (10-01-2006)
Refund Credits/Debits TC740/TC841/TC843 — Financial Management Service Reason/Cancellation Codes

  1. Financial Management Service (FMS) returns credits to IRS through the Government On-Line Accounting Link Systems (GOALS). FMS Headquarters Operations in Hyattsville, Maryland sends detailed supporting information to Martinsburg Computing Center (MCC).

  2. The Treasury Receivable, Accounting and Collection System (TRACS) replaces the SF1081 and includes three types of transactions:

    • Limited Payability.

    • Reclamation credits.

    • Payment Over Cancellation (POC) debits.

  3. MCC sorts the transactions as either Individual Master File (IMF), Business Master File (BMF), or Miscellaneous. IMF and BMF transactions are directly posted to taxpayer's Master File accounts and MCC forwards three separate listings for each of the three categories to the campus for further processing. These listings are to be used by the Refund Inquiry employees as research tools.

  4. The listings are titled as follows:

    • TRACS LISTINGS: RECLAMATIONS (REC)

    • TRACS LISTINGS: UNAVAILABLE CHECK CANCELLATION (UCC)

    • TRACS LISTINGS: PAYMENT OVER CANCELLATION (POC)

  5. Transactions are posted as:

    • Transaction Code (TC) 740 – Limited Payability (LP) cancellations — Block and Serial "66666" , "S-" Freeze is set. Credit returned on checks automatically cancelled after expiration of one (1) year negotiability period as provided by the Limited Payability Law.

      Exception:

      Must be the same credit, see paragraph (8) below.

    • TC 841: – Reclamation Credits — Block and Serial "88000" , "P-" Freeze is set.

    • TC 841: – Unavailable Check Cancellations ( Form 1184 request) — Block and Serial "88111" , "P-" Freeze is set.

    • TC 841 - Unavailable Check Cancellations (non-receipt codes H or X) -- Block and Serial "88888" , no P- Freeze set.

    • TC 843: – Payments Over Cancellations — Block and Serial "55111" .

      Note:

      See Exhibit 21.4.2-3, Reason for Cancellation Codes and Generated Account Information.

  6. The Reason Codes for the TC 740 are:

    • Code 02 – Checks returned to the Regional Finance Center (RFC) by the Postal Service as undeliverable. Credits will post as TC 740 with the Block and Serial Number "99999" and set an "S-" Freeze.

    • Code 40 – (Used in 1992 only) Credit returned on checks automatically cancelled after the expiration of 1-year negotiability period as provided by Limited Payability Law. Credits will post as TC740 with a Block and Serial Number "666XX" . Credits under $10.00 and over $1,000 will set an "S-" Freeze.

  7. The Reason Codes for the TC 841 are:

    • Code 01 – Checks intercepted per IRS request. Credits will post as TC 841 with the Block and Serial Number "55555" and set a "P-" Freeze.

    • Code 03 – Checks returned to the RFC for reasons other than undeliverable. Credits will post as TC 841 with the Block and Serial Number "99999" and set a "P-" Freeze.

    • Code 08 – Checks returned on outstanding check as a result of a Check Claim ( "CHKCL" Status "32" ), input with non-receipt codes "H" or "X" . Credits will post as TC 841 with the Block and Serial Number "88899" and set a "P-" Freeze.

    • Code 09 – Credits returned as the result of a check claim when the check is outstanding. Credits will post as TC 841 with the Block and Serial Number "88888" and does NOT set a freeze.

    Note:

    IMFOL and TXMOD will display Financial Management Service (FMS) Cancellation Dates for TC 740 and 841.

  8. Limited Payability (LP) cancellation credits between $10 and $1,000 will not set a freeze unless the same credit was previously returned as an LP cancellation credit. A refund check is automatically reissued on first time LP cancellations. A second or subsequent LP cancellation remains frozen on the account and eventually results in a TC 388 "Statute Expiration Clearance" to zero balance if credit is never released.

21.4.2.4.7.2  (10-01-2005)
Limited Payability Computer Paragraph (CP) 32/237