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Part 21. Customer Account Services

Chapter 4. Refund Inquiries

Section 6. Refund Offset

21.4.6  Refund Offset

21.4.6.1  (02-23-2007)
Refund Offset Overview

  1. This section covers processing related to the offset of tax overpayments for outstanding Federal tax debts, child support, Federal agency non-tax debts or State Income Tax obligations. Also covered is the processing of Form 8379, Injured Spouse Allocation, and Offset Bypass Indicator (BPI).

21.4.6.2  (10-01-2007)
What Is a Refund Offset?

  1. Internal Revenue Code (IRC) section (§) 6402 (a), (c), (d) and (e) require a taxpayer's overpayment to be applied to any outstanding Federal tax, non-tax child support, Federal agency non-tax debt, or State income tax obligation prior to crediting the overpayment to a future tax or making a refund. This application of a tax overpayment is called a refund offset.

  2. Refund offsets to child support, Federal agency non-tax debts and State income tax obligations are handled by the Treasury's Financial Management Service (FMS) through the Treasury Offset Program (TOP). This occurs after a refund is certified by Internal Revenue Service (IRS) for payment by FMS, but before the refund check is issued or direct deposit is transferred to the taxpayer's bank account.

21.4.6.3  (10-01-2007)
Disclosure

  1. Before disclosing any tax information:

    • Be sure you are speaking with the taxpayer or authorized representative. See IRM 21.1.3.2, General Disclosure Guidelines, for more information.

    • Review procedures in IRM 11.3.2.6.1, Leaving information on Answering Machines/Voice Mail, before leaving a message on a taxpayer's or authorized representative's answering machine or voice mail.

    • Review procedures in IRM 11.3.1.10, Facsimile Transmission of Tax Information, before faxing confidential information to the taxpayer or authorized representative.

21.4.6.4  (10-01-2009)
Refund Offset Research

  1. There are three types of refund offsets:

    • Tax offset,

    • Treasury Offset Program (TOP) offset, effective 01/11/1999

    • Debtor Master File (DMF) offset, prior to 01/11/1999.

  2. You must thoroughly research for any outstanding IRS or TOP obligations. Always attach the appropriate screens for both spouses showing the debt indicator of (I) IRS Debt, (F) Financial Management Service Debt (FMS) Non-Tax Debt, (B) Both IRS & FMS Debt, or (N) No Debt, at the time the Injured Spouse Allocation is worked.

    Note:

    The (I) indicator is not always set for all IRS tax debts. To determine if there is an outstanding IRS debt, you must also research Command Code (CC) IMFOL, BMFOL, and/or TXMOD as well INOLES on all (N) indicator cases.

  3. A tax overpayment must offset to an outstanding tax debt before it offsets to non-tax debts or is applied to a credit elect. The priorities for offset are:

    1. Federal Tax, Primary Taxpayer Identification Number (TIN),

    2. Individual Retirement Account, Additional Tax Reported on Form 5329,

    3. Civil Penalty,

    4. Federal Tax (Secondary TIN),

    5. Business Master File (BMF),

    6. Non-Master File (NMF),

    7. Treasury Offset Program (TOP) - Debtor Master File (DMF),

    8. Credit Elect.

  4. The priority of offsets within TOP are:

    1. Office of Child Support Enforcement Temporary Assistance to Needy Families (TANF) (payments to the state).

    2. Federal Agencies.

    3. Office of Child Support Enforcement Non-TANF (payments to the custodial parent through the state).

    4. State tax debts.

  5. CC INOLE contains debt liability indicators based on information received from FMS. FMS debt records are updated daily; however, IRS CC INOLE is only updated weekly. Therefore, CC INOLE may not have the most current debt information. The indicators are used to identify an IRS freeze or tax debt, TOP non-tax debt, or both. These indicators are shared with Electronic Return Originators (EROs) on the Electronic Filing (ELF) acknowledgement file, and used by the EROs to determine whether to approve a Refund Anticipation Loan (RAL) The indicators are the letters: "N" ,"I" ,"F" ,"B" .

  6. An indicator of (N) means no debt.

    Note:

    When working a Taxpayer Advocate Service (TAS) case and TAS has contacted FMS and FMS states there is an active debt, even though no debt is present on CC INOLE, do not release the overpayment. You will work the injured spouse case and issue a refund to the injured spouse for his/her share of the overpayment. The status of a debt, at FMS, may change daily but the debt indicator found on CC INOLE is updated weekly. The debt may be inactivated or deleted within TOP before a refund is issued. Therefore, discrepancies may arise from one cycle to the next.

  7. Generally, the IRS indicator (I) is set when the taxpayer has any one of the following conditions present on his/her account:

    1. Individual Master File (IMF) primary or spousal tax debt.

    2. Business Master File (BMF) tax debt.

    3. Non Master File (NMF) tax debt (V— freeze, Transaction Code (TC) 130 on entity.

    4. Refund Freeze (TC 810).

    5. Taxpayer Delinquency Investigation (TDI).

    6. Bankruptcy (—V or —W freeze, TC 520 on account).

    7. Criminal Investigation Division (CID) (Z— or —Z freeze, TC 914/916/918).

      Caution:

      There are instances in which one of the above is valid, however if the (I) indicator is not set, See IRM 21.4.6.4.

  8. The TOP non-tax debt indicator (F) is set when FMS informs IRS that at least one TOP debt exists and an offset may occur if a refund is authorized. The presence of this indicator does not guarantee a TOP offset will occur. The status of a debt, at FMS, may change daily but the debt indicator found on CC INOLE is updated weekly. The debt may be inactivated or deleted within TOP before a refund is issued. Therefore, discrepancies may arise from one cycle to the next. Also, the refund name line may not match the debtor's name in TOP, allowing a refund to be issued despite the presence of a TOP debt.

  9. A fourth indicator, (B), is set when both IRS and TOP debt indicators are present.

  10. CC TXMOD also contains debt liability indicator, found directly below the TC 846 and is displayed in the form of the number "0" or "1" . The indicator is set at the time the TC 846 is generated on the module and is shown as: DMF-LIAB->1 or DMF-LIAB-IND>0.

    1. If the indicator on CC TXMOD is a "0" , the debt indicator on CC INOLE will be an "N" or an "I" . If the CC TXMOD debt liability indicator is a "1" the debt liability indicator on CC INOLE will be an "F" , or a "B"

    2. If a "0" or "1" debt liability indicator is set on CC TXMOD, it does not guarantee that an offset will or will not occur. This is due to the timing involved in the data exchange between FMS and the IRS.

    3. A TC 898 may be present on the tax module even though the indicator is set to 0. In addition, a TC 898 may not be present when the indicator is set to 1. The debt indicator on CC INOLE is updated on a weekly basis, whereas, FMS may update a debtor's status daily.

  11. Do not use the DMF-LIAB-IND> found on CC TXMOD for processing an injured spouse allocation, nor for advising the taxpayer of the existence/non-existence of a non-tax debt at FMS. The only purpose of this indicator is to provide necessary information for use in IRS automated telephone responses.

21.4.6.4.1  (10-01-2007)
Tax Offset

  1. A refund offset to an outstanding IMF, BMF, or NMF tax debt is referred to as a tax offset. Tax offsets appear on a tax module as:

    • Transaction Code (TC) 820, manual credit transfer

    • TC 826, computer-generated tax offset

    • TC 896, computer-generated tax offset from IMF to BMF or Individual Retirement Account File (IRAF)

      Note:

      A TC 896 with an Agency/Sub-Agency Code (AG/SA), is a computer generated offset to DMF. See IRM 21.4.6.4.3, Debtor Master File (DMF) Offsets.

  2. A tax offset will not occur in certain situations. See TC 386 in Document 6209.

21.4.6.4.2  (10-01-2007)
Treasury Offset Program (TOP) Offset

  1. FMS initiates refund offsets to outstanding federal agency debts or child support. These offsets are referred to as TOP offsets. A TOP offset appears on the module as:

    • TC 898 with an Offset Trace Number (OTN), an offset amount, and a debtor-TIN field, if the offset is for a secondary spouse.

    • OTN - Starting with 1 indicates primary taxpayer debt.

    • OTN - Starting with 2 indicates secondary taxpayer debt.

  2. TOP offsets occur after the IRS has certified a refund to FMS for payment (TC 840/846 on account), but before FMS directly-deposits the refund overpayment or mails the refund check.

  3. A TOP offset reduces the amount of the IRS refund by the amount of the TC 898 offset.

    Note:

    It is important to understand that the amount of a refund certified by IRS to FMS for payment may not be the amount that is issued by FMS to the taxpayer. The taxpayer may not receive any refund at all if the whole amount is offset.

  4. A TOP offset does not affect IRS' ability to stop a refund through (CC) NOREF, or the time frame involved to do so.

  5. See IRM 21.4.6.4.2.6 TOP Offset Research, for information on TOP offset transaction codes.

21.4.6.4.2.1  (10-01-2007)
TOP Offset Bypass Indicator (BPI)

  1. A TOP offset Bypass Indicator (BPI) is assigned to all manual and systemic refunds issued to FMS by IRS. The BPI is a one-digit indicator that identifies for FMS whether the refund is eligible for offset by TOP.

    Note:

    Certain BPIs also identify one of the spouses on a joint refund as eligible for offset. This is required for injured spouse allocation processing.

  2. Generally, a BPI is generated systemically, but when issuing a manual refund, you must input the BPI on CC REFUND. Write the BPI in the remarks section of Form 5792 or Form 3753 when a manual refund requires a BPI different from the one generated by CC RFUND. See (15) below.

    Caution:

    Non-Integrated Data Retrieval System (IDRS) manual refunds issued via Form 3753, Manual Refund Posting Voucher, are subject to TOP offset, a BPI is needed on these refunds, but is limited to BPI 0 & 3. If an offset occurs after Form 3753 has been issued, a TC 898 will not post to the account. A systemic offset reversal cannot be done. This will require a manual reversal. Contact the Fresno Liaison @ (559) 456–5464, for a manual reversal. Please allow 60 days for the manual reversal to post. The liaison phone number is for internal use and should not be given to taxpayers. This phone line is not staffed for taxpayer inquiries. Any taxpayer calls to this number will be referred to the appropriate toll free lines. When notating your case file do not input the name of the DMF/TOP Liaison. Notate " Contacted DMF/TOP Liaison."

  3. The BPI is posted/displayed along with the TC 840/846 on all output screens such as TXMOD, IMFOL, BMFOL, and on MFTRA transcripts. The BPI also shows with the pending transaction. See the following example.

    Example:

    TC POSTED AMT CYC DLN BPI>
    846 03062009 1,586.00 200808 28221–067–92005–9 0

  4. There are ten BPIs, 0 through 9.

    BPI Validity Eligibility for TOP Offset
    0 IMF & BMF Refund eligible for TOP Offset.
    1 IMF Bypass TOP offset for primary Social Security Number (SSN) debts. (Used when injured spouse is secondary filer.)
    2 IMF Bypass TOP offset for secondary SSN debts. (Used when injured spouse is primary filer.)
    3 IMF & BMF Refund not eligible for TOP Offset.
    4 IMF Bypass TOP offset for all debts other than child support. Eligible for TOP offset for child support only. (Used on all refunds other than injured spouse when combat zone —C Freeze is set.)
    5 IMF Bypass TOP offset for all primary SSN debts. Bypass TOP offset for all secondary SSN debts except child support. (Used when injured spouse is secondary and combat zone —C Freeze is set.)
    6 IMF Bypass TOP offset for all secondary SSN debts. Bypass TOP offset for all primary SSN debts except child support. (Used when injured spouse is primary and combat zone —C Freeze is set.)
    7 IMF & BMF Refund eligible for TOP offset to the Office of Child Support Enforcement and an automatic bankruptcy stay is in effect or when the creditor agency has obtained relief from the automatic stay.
    8 IMF Bypass TOP offset for primary SSN's debts and offset to the Office of Child Support Enforcement and automatic stay is in effect or when the creditor agency has obtained relief from the automatic stay. (Used when the injured spouse is secondary filer.)
    9 IMF Bypass TOP offset for secondary SSN's debts and offset to the Office of Child Support Enforcement and automatic stay is in effect or when the creditor agency has obtained relief from the automatic stay. (Used when the injured spouse is primary filer.)

  5. BPI (0) indicates that any refund should offset for all non-tax debts owed under the primary TIN, and secondary SSN if Filing Status 2 (FS2).

    1. It is generated on all refunds when no other condition or manual input results in the use of another BPI.

  6. BPI (1) indicates that any refund should bypass offsets to debts owed by the primary spouse and may offset to any debts owed by the secondary spouse.

    1. It generates on the first refund (TC 846) issued after the reversal of a TOP offset to a primary TIN's debt. This occurs when an input of TC 766 reverses a TC 898 with no debtor TIN. See IRM 21.4.6.4.2.8, TC 766 With OTN TOP Offset Reversal, and See IRM 21.4.6.5.13.1. Input of TOP Offset Reversals TC 766 with OTN, for more information.

    2. It must be input on all manual refunds resulting from an injured spouse allocation form filed by the secondary taxpayer unless combat zone, BPI (5), applies. See (10) below.

  7. BPI (2) indicates that TOP should bypass offsets to debts owed by the secondary spouse and may offset to any debts owed by the primary spouse.

    1. It generates on the first refund, (TC 846) issued after the reversal of a TOP offset to a secondary TIN's debt. This occurs when an input TC 766 reverses a TC 898 with a debtor TIN.

    2. It must be input on all manual refunds resulting from an injured spouse allocation form filed by the primary taxpayer, unless combat zone, BPI (6), applies. See (11) below.

  8. BPI (3) indicates that TOP should bypass the refund completely.

    1. It generates on systemic refunds not eligible for TOP offset. See IRM 21.4.6.4.2.2, IMF TOP Offsets, & See IRM 21.4.6.4.2.3, BMF and Civil Penalty TOP Offset, for conditions that result in the generation of BPI 3 on IMF and BMF refunds.

    2. It must be input when issuing a manual refund not eligible for TOP offset. These instances include bankruptcy, TC 520, Closing Code (cc) 83 or 89 and third party refunds issued from a tax account to a taxpayer not on that account.

  9. BPI (4) indicates that TOP should bypass all debts except child support for both the primary and secondary SSN.

    1. It generates on systemic refunds issued from modules with a combat zone —C Freeze in effect.

    2. It generates on all CC RFUND manual refunds issued from modules with the combat zone —C Freeze in effect.

  10. BPI (5) indicates that TOP should bypass all debts for the primary SSN and all debts except child support for the secondary spouse.

    1. BPI 5 is a required input when issuing a manual refund to an injured spouse who is secondary, from a module with a combat zone —C Freeze. A manual refund must be issued when BPI (5) is needed.

  11. BPI (6) indicates that TOP should bypass all debts for the secondary SSN and all debts except child support for the primary spouse.

    1. BPI 6 is a required input when issuing a manual refund to an injured spouse who is primary, from a module with a combat zone —C Freeze. A manual refund must be issued when BPI (6) is needed.

  12. BPI (7)Indicates that TOP should offset for all non-tax debts owed under the primary TIN (and secondary TIN if Filing Status 2 (FS 2) when the account module contains an unreversed TC 520 with closing code 6X (60-67), 83, or 89 with transaction date 10/17/2005 and subsequent.

    1. BPI 7 generates on all refunds when no other condition or manual input results in the use of another BPI and the creditor agency has obtained relief from the automatic bankruptcy stay.

  13. BPI (8)Indicates that TOP should bypass offsets to debts owed by the primary spouseand may offset to any debts owed by the secondary spouse, and the account module contains an unreversed TC 520 with closing code 6X (60-67), 83, or 89 with transaction date 10/17/2005 and subsequent.

    1. BPI 8 generates on the first refund, TC 846, issued after the reversal of a TOP offset to a primary TIN's debt. This occurs when an input TC 766 reverses a TC 898 with non debtor TIN. See IRM 21.4.6.4.2.8, TC 766 with OTN TOP Offset Reversal, and See IRM 21.4.6.5.13.1. Input of TOP Offset Reversals TC 766 with OTN, for more information.

    2. BPI 8 is a required input on all manual refunds resulting from an injured spouse form submitted by the secondary taxpayer unless combat zone, BPI (5) applies. See 10 above.

      Note:

      All injured spouse forms filed by the secondary taxpayer against a DMF or tax offset require a manual refund and the input of BPI (1) or (5). See IRM 21.4.6.5.11.7, Issuing the Injured Spouse Refund.

  14. BPI (9) Indicates that TOP should bypass offsets to debts owed by the secondary spouse and may offset to debts owed by the primary spouse, and the account module contains an unreversed TC 520 with closing code 6X (60-67), 83, or 89 with transaction date 10/17/2005 and subsequent.

    1. BPI 9 generates on the first refund, (TC 846) issued after the reversal of a TOP offset to a secondary TIN's debt. This occurs when an input TC 766 reverses a TC 898 with a debtor TIN.

    2. It must be input on all manual refunds resulting from an injured spouse allocation form filed by the primary taxpayer unless combat zone, BPI (6) applies. See (11) above.

      Note:

      All injured spouse allocation forms filed by the primary taxpayer against a DMF or Tax Offset require a manual refund and the input of BPI (2) or (6). See IRM 21.4.6.5.11.7, Issuing the Injured Spouse Refund.


  15. CC RFUND has a field entitled " BYPASS INDICATOR" . This indicator is normally set to (0). When CC RFUND is input on an Master File Tax (MFT) Code not eligible for offset, the indicator is set to (3). When CC RFUND is input on a module with a (—C) combat zone freeze, the indicator is set to (4). Refer to IMF and BMF TOP Offsets below for additional information. The following validity checks are made for BPI's on CC RFUND.

    • BPI (1), (2), (5), (6), (8) and (9) are not valid unless block 9 is used.

    • BPI (1) (2), (8) and (9) are not valid when the BPI was set to (4). BPI (5) or (6) must be used for injured spouse in combat zone

    • BPI (0) and (4) are not valid when block 9 is used

    • BPI (3) is always valid

    • BPI (4), (5), or (6) are valid, given the above conditions, even when the (—C) combat zone freeze is not on the module. This allows for manual verification of Combat Zone Status

21.4.6.4.2.2  (10-01-2007)
IMF TOP Offset

  1. TOP offsets are made against any refund issued from MFT 30, 55 or 29 unless a Bypass Indicator (BPI) is generated on the TC 846 or input on a manual refund TC 840.

  2. When married taxpayers file using the "married filing joint" status either taxpayer (or both) may have outstanding obligations that qualify for a TOP offset. As a result, there can be one or two TC 898s for each TC 840/846 refund issued; one TC 898 will be with the debtor TIN and one without a debtor TIN.

    Note:

    The IRS refund file transmitted to FMS contains both the primary and secondary Social Security Number (SSN) on an FS2 joint refund. However, the secondary SSN is not printed on the paper check.

  3. A bankruptcy —V Freeze, set by the posting of TC 520, cc 83 or 89, generates a BPI (3) on a TC 846 issued from that module.

  4. A combat zone —C Freeze generates a BPI (4) on a TC 846 issued from that module.

  5. BPI (3) generates on all systemic and manual refunds issued from an individual NMF account, preventing TOP offset.

    Reminder:

    All manual refunds from IMF accounts require the input of the appropriate BPI, except as noted in (5) above.

21.4.6.4.2.3  (10-01-2007)
BMF & Civil Penalty TOP Offsets

  1. TOP offsets are made against any refund issued from MFT 02, 07, 10, 13, 29, 34, 44, 52, 55, 60, 63, 64, 77, and 78, unless a BPI is systemically generated on the refund or input on a manual refund. See IRM 21.4.6.4.2.1, for TOP Offset Bypass Indicator (BPI).

  2. TOP offsets won't be made against refunds issued from an MFT not shown above. BPI (3) generates on all refunds from MFTs that are ineligible for TOP offset.

  3. BPI (3) generates on all systemic and manual refunds issued from a business NMF account to prevent a TOP offset.

21.4.6.4.2.4  (01-01-2001)
FMS TOP Offset Tolerance

  1. Any refund under $25 is not offset by TOP. This tolerance applies to both IMF and BMF.

21.4.6.4.2.5  (10-01-2007)
TOP Offset Notice

  1. FMS issues a TOP offset notice when a taxpayer's refund is offset for child support or a Federal agency non-tax debt or a state tax debt. This notice is the equivalent of the former DMF offset notices, Computer Paragraph (CP) 47 and CP 149.

    If And Then
    Refund is requested as a direct deposit Part or all of refund is offset Notice is sent the Thursday before direct deposit is or was to be made.
    Refund is issued as paper check Part of refund was offset Notice is sent as an attachment to paper refund.
    Refund was to be issued as paper check All of refund was offset Notice is sent by itself the day check was to be mailed.

  2. The notice of offset informs the taxpayer that his/her Federal tax refund was offset for a debt owed to a particular agency(s). The notice details are as follows:

    • Payee Name

    • Payment Agency Name (IRS)

    • Amount of each offset

    • Payment Amount before Offset

    • Debtor's TIN

    • Agency(s) receiving the offset

    • Address and phone number of the agency(s)

    • Injured spouse rights

    • Phone number of the TOP Call Center at FMS.

    • FMS offset trace number (this is not the same as the offset trace number posted with TC 898)

  3. Do not attempt to identify the agency(s) receiving the offset. Taxpayers who have not received the offset notice are referred to the TOP Call Center at FMS at 1-800-304-3107, TTD 1–866–297–0517 for information. See IRM 21.4.6.5.1, Taxpayer Inquiries on TOP Offsets.

21.4.6.4.2.6  (10-01-2005)
TOP Offset Research

  1. TOP offsets and related transactions post to the tax module where the refund creating the offset originated. The TOP transaction codes are completely different from those formerly used for DMF, but they serve similar purposes.

  2. The following transaction codes are used solely for TOP offsets:

    • TC 898 (TOP offset generated by FMS)

    • TC 766 with OTN (IRS reversal of TOP offset)

    • TC 899 with offset record type (FMS reversal or agency refund of TOP offset)

  3. IRS does not have a separate account for TOP offsets as it had for the DMF with CC DMFOL.

  4. IRS personnel do not have access to the TOP debtor database and cannot tell if a non-tax debt exists before a TOP offset occurs.

    Exception:

    In instances involving the Taxpayer Advocate Service's hardship offset bypass refunds, IRS personnel are required to contact FMS for debt information before issuing a refund. See IRM 21.4.6.5.6, Hardship Refund Request.

  5. IRS is not informed of the agency(s) receiving the offset. Only the total amount(s) offset for the primary TIN and/or secondary SSN is available. See IRM 21.4.6.4.2.7, TC 898, TOP Offset, below.

21.4.6.4.2.7  (10-01-2007)
TC 898, TOP Offset

  1. A TOP offset appears on CC TXMOD as a TC 898 with an offset trace number, the offset amount is shown as (OFFST-AMT). If the secondary spouse owes the debt, the debtor TIN will also be shown (DEBTOR-TIN). If there is no (DEBTOR-TIN) shown, the taxpayer with the primary TIN is the debtor.

  2. A TC 898 must be netted against the refund it came from to determine the actual refund amount that FMS sends or deposits for the taxpayer.

  3. A TC 898 will not identify the agency(s) receiving the offset.

  4. Each TC 898 can represent an offset to one or more agencies for the same TIN.

  5. There can be one or two TC 898s per refund.

    1. The Refund for both taxpayers on a joint return (FS2) could be offset for separate debts that are reported to IRS and shown as separate TC 898s.

    2. Both offsets must be subtracted from the original refund amount, TC 840/846, to determine how much of the refund the taxpayers actually received.

  6. This example shows a TOP offset to the primary spouse's debt for $1000. The taxpayer was sent a refund of $586 ($1586 - $1000). If the DEBTOR-TIN was present and filed with the secondary spouse's SSN, the offset would have been to the secondary spouse's debt.

    Example:

    TC POSTED AMT CYC DLN OTN
    846 03062009 1,586.00 20091209 28221-067-92009-9 BPI>0
    898 03062009 OFFST-AMT>1,000.00 20091209 28277–067–92009–9  
              OTN>12345–67890

  7. The TC 898 TOP offset is dated the same as the prior posted TC 840 from which it originated. A TC 898 originating from a computer generated refund, TC 846, is dated within 12 days of the prior posted TC 846, although it usually posts with the same date.

  8. The TC 898 Document Locator Number (DLN) is the same as the prior TC 840 from which it originated. A TC 898 originating from a computer generated refund, TC 846, has the same DLN except for the document code which is changed to 77.

  9. The OTN is an "offset trace number" used by IRS and FMS to "connect" offsets with related reversals and the refund from which they came. It is 10 characters in length separated by a hyphen in the middle. The OTN begins with a "1" if the offset was for a primary taxpayer and a "2" if the offset was for a secondary taxpayer.

  10. A TC 898 with document code 45, TOP offset of manual refund, re-sequences for 10 cycles, if C 840 with the same DLN is not posted. After 10 cycles it unposts as Unpostable Code (UPC) 137 or 437, RC 1.

  11. See IRM 21.4.6.5.25.1, UPC 137 or 437, for TC 898 UPC 137 and 437 resolution.

21.4.6.4.2.8  (10-01-2007)
TC 766 with OTN TOP Offset Reversal

  1. There are situations when, after an offset occurs, that we have to request that FMS reverse the offset so a refund can be issued to the taxpayer. See IRM 21.4.6.5.8 Reasons to Reverse DMF/TOP Offsets.

  2. An TOP offset reversal posts as a TC 766 with an OTN that is the same as the OTN of the TC 898 TOP offset being reversed. See IRM 21.4.6.5.13.1, Input of TOP Offset Reversals TC 766 with OTN.

  3. The TC 766 is a credit to the taxpayer's account and posts with an actual money amount. It creates an IRS accounts receivable which is reimbursed by FMS through the reversal of the agency offset.

  4. The TC 766 posts with the return due date or return received date, whichever is later.

    Exception:

    The TC 766 posts with the date of the refund creating the offset when that refund includes credit interest. This allows for the correct computation of credit interest when the subsequent injured spouse refund is computer-generated. See IRM 21.4.6.5.11.4, Injured Spouse Refund TOP Offset.

  5. The following example shows a posted TC 766, TOP offset reversal, for $550.00, resulting from an injured spouse allocation form filed by the secondary taxpayer. It reversed the prior posted TC 898 with the same OTN and no DEBTOR-TIN. The refund generated from this reversal has a BPI of 1. This allows TOP to offset the refund to any debt owed by the secondary spouse and it prevents TOP from offsetting the refund to any debt owed by the primary spouse.

    Example:

    TC POSTED AMT CYC DLN OTN
    846 03062009 1,586.00 20091209 28221–067–92005–9 BPI>0
    898 03062009 OFFST-AMT>1,000.00 20091209 28277–067–92005-9 OTN>12345–67890
    290 04192009 .00 20091214 28254–109–00001–9  
      ADJ-RSN-CD>86  
    766 04152009 550.00 20091214 28254–109–00001–9 OTN>12345–6789
    846 04192009 550.00– 20091214 28254–109–00001–9 BPI>1

  6. A TC 766 TOP offset reversal may post to the taxpayer's account and still be denied by FMS in whole or in part when:

    1. The agency issued a refund of the TOP offset and IRS did not have a TC 899, type 2, posted yet.

    2. FMS is initiating a TOP offset reversal, TC 899, type 1, resulting from a returned or undelivered refund.

  7. TC 766s that are rejected in whole or in part by FMS are output on a weekly FMS TC 766 Reject Listing and provided to the Campus Adjustments function having jurisdiction for the account. See caution below.

    Caution:

    NEVER input a TC 767 to reverse a TC 766 with an OTN. See See IRM 21.4.6.5.13.3. FMS TC 766 Reject Listing, for correcting these rejects.

21.4.6.4.2.9  (10-01-2007)
TC 899, FMS Reversal or Agency Refund of TOP Offset

  1. The TC 899 is generated by input from FMS and the participating agencies to report an action taken on a particular offset. The TC 899 posts to the tax module with a type code (OFFST-REC-TYPE), amount, and the OTN of the TOP offset with which it is associated.

  2. There are four types of TC 899:

    • Type 1 - FMS TOP offset reversal

    • Type 2 - Agency refund of TOP offset

    • Type 3 - FMS refund of TOP offset

    • Type 4 - Agency refund reversal

  3. TC 899, type 1, with negative money amount, is used by FMS to report a TOP offset reversal. FMS generates this transaction when a partial offset occurs and the remainder is refunded, but later returned. Reasons for this include refund checks that are undeliverable, returned, uncashed after 13 months, or lost and stolen and require reissuance.

  4. TC 899, type 2, with negative money amount, is used by the agencies participating in TOP to report a refund of a TOP offset.

    1. The agency is required to make the refund payable in the name or names that were on the IRS entity and refund file at the time the original refund and TOP offset occurred.

    2. The amount may be for all or part of the TC 898 with the same OTN.

    3. TC 899, type 2, serves the same purpose as the DMF TC 131 with negative money amount.

    Reminder:

    A TC 898 may consist of two or more offsets to different agencies. Therefore, the TC 899, type 2 amount may only be for part of the TOP offset.

  5. TC 899, type 3, with negative money amount, is used by FMS, if they are required to make a refund of a TOP offset.

    1. FMS is required to make the refund payable in the name or names that were on the IRS entity and refund file at the time the original refund and TOP offset occurred.

    2. The amount may be for all or part of the TC 898 with the same OTN.

    3. TC 899, type 3, is rarely used.

  6. TC 899, type 4, with positive money amount, is used by the agencies participating in TOP to correct a previously reported refund of a TOP offset.

    1. This transaction is netted against a prior TC 899, type 2, with same OTN, which is the true amount of the agency refund still remaining.

    2. TC 899, type 4, serves the same purpose as the DMF TC 131 with positive money amount.

    3. TC 899, type 4, is rarely used.

  7. In the following example, a TC 899, type 2, agency refund posted for $450.00. An agency refunded the remainder of the TOP offset originating from the TC 846 dated 03/08/2007 to the taxpayer. There is now no remaining TOP offset and the taxpayers received the following refunds totaling $1,586.00.

    • $586.00 dated 03/08/2007 (TC 846 $1,586.00 — TC 898 $1,000.00)

    • $550.00 to the injured spouse dated 04/19/2007

    • $450.00 from the agency that received the offset

    Example:

    TC POSTED AMT CYC DLN OTN
    846 03062009 1,586.00 20091209 28221-067-92005-9 BPI>0
    898 03062009 .00 20091209 28277-067-92005-9 OTN>12345-67890
        OFFSDT-AMT>1,000.00     XREF>OTN-CD>12345–67890
    290 04192009 .00   200114 29254–109–00001–9  
      ADJ-RSN-CD>86 …  
    766 04152009 550.00- 20091214 28254-109-00001-9 OTN-CD>12345-67890
    846 04192009 550.00 200914 28254-109-00001-9 BPI>1
    899 03062009 .00 20091222 28221-067-92005-9  
        OFFST-AMT> 450.00–OFFST-REC-TYPE>2     OTN-CD>12345–67890

  8. See IRM 21.4.6.5.25.1, UPC 137 or 437, for TC 899, UPC 137 or 437 resolution.

21.4.6.4.2.10  (01-01-2001)
Netting TOP Offsets and Reversals

  1. The net TOP offset amount is needed to:

    1. Inform the taxpayer of the actual amount offset from his/her refund and still outstanding.

    2. Determine the amount of offset available for reversal.

  2. You must take into consideration all TOP transaction codes with the same OTNs to determine the net TOP offset amount. Disregard the signs (+ or −) of each transaction code when completing the steps below.

    1. Determine the TOP offset, TC 898, and the OTN of the offset that is to be netted.

    2. Subtract from the TC 898: all TC 899s, type 1, 2, or 3, with the same OTN.

    3. Subtract from the TC 898: all TC 766s with the same OTN.

    4. Add to the TC 898: all TC 899s, type 4, with the same OTN

    5. Add to the TC 898: all TC 767s with the same OTN.

  3. Written as a formula, the above steps appear as follows:

    Net TOP Offset Amount
    TC 898 – TC 899 types 1, 2, or 3 – TC 766s + TC 899 type 4 + TC 767s (all with the same OTNs)

21.4.6.4.3  (01-01-2007)
Debtor Master File (DMF) Offset

  1. A refund offset to an outstanding child support or Federal agency debt made before 1999 is referred to as a DMF offset. A DMF offset appears on a tax module as:

    • TC 896 accompanied by an Agency/Sub-Agency (AG/SA) code

    • TC 820 with no cross-reference

  2. A TC 896 with an AG/SA code reflects a computer-generated offset to the DMF made from 1984 through January 11,1999. It is not a DMF offset if there is no AG/SA code present. See IRM 21.4.6.4.1, Tax Offset.

  3. A TC 820 may represent a manual DMF offset, but these were only used in a limited number of instances to effect an offset to an agency or repay an agency for an erroneous refund.

21.4.6.4.3.1  (10-01-2007)
DMF Offset Research

  1. CC DMFOL and MFTRA G are no longer available to research DMF offsets.

  2. Information about a DMF offset can be obtained from various sources. Use Command Codes (CC) IMFOL, BMFOL, INOLEX, and TXMOD to identify the DMF transactions. Refer to Document 6209 for a list of AG/SA codes.

  3. To get the address and phone number of DMF (TC 896) accounts, contact the liaison in Fresno @ (559) 456–5464. You need the AG/SA code. The liaison phone number is for internal use and should not be given to taxpayers. This phone line is not staffed for taxpayer inquiries. Any taxpayer calls to this number will be referred to the appropriate toll free lines. When notating your case file do not input the name of the DMF/TOP Liaison. Notate "Contacted DMF/TOP Liaison."

    Note:

    No assumptions or conclusions should be drawn from the existence of a prior year DMF offset and a current year TOP offset.

  4. The following transaction codes were used for the DMF program:

    • TC 131, agency refund or refund reversal

    • TC 132, release of prior-year certification and —V Freeze

    • TC 896, computer-generated DMF offset to AG/SA

    • TC 820, manual DMF offset

    • TC 897, reversal of DMF offset to AG/SA

21.4.6.4.4  (01-01-2001)
TC 131, Agency Refund/Reversal

  1. A TC 131 is posted to the entity when an agency deletes or decreases the debt during the processing year (PY) or issues a refund of a prior offset. It is also used to correct a prior TC 131 agency refund that was not issued.

  2. TC 131 continues in use by agencies when issuing a refund of a prior-year DMF offset. Agency refunds of TOP offsets post as a TC 899, type 2.

  3. A TC 131 agency refund identifies the AG/SA, the amount of the refund, and the year of the offset being refunded. TC 131 posts with a positive money amount when it is a refund, and a negative money amount when it is a correction to a prior TC 131.

  4. See IRM 21.4.6.5.13.6, Multiple Tax Periods with Same-Year DMF Offset.

21.4.6.4.5  (01-01-2001)
TC 132, Certification Release

  1. A TC 132 is posted to the entity, overlaying the TC 130, when IRS releases all agency debt certifications in the last cycle of the year. The TC 132 posts with the same cycle as the TC 130. Cycle 199804 is the last posting for a DMF TC 132.

  2. The TC 132 is the only record of a prior-year DMF certification when no offset occurred in that PY.

21.4.6.4.6  (01-10-2008)
TC 896, DMF Offset

  1. All computer-generated offsets from TY 1984 through 01/11/1999 are shown as a TC 896 with an AG/SA code. If there is no AG/SA code present, the TC 896 is not a DMF offset.

  2. TC 896:

    1. Is an IDRS-generated transaction that posted as a debit to the IMF or BMF and resulted in a transfer of funds to the creditor agency.

    2. Generates an IMF CP 47 or a BMF CP 149, Notice of Offset, to the taxpayer.

    Example:

    A TC 896, 01/GA, is an offset to the Office of Child Support for the State of Georgia. Refer to Document 6209, Section 5–5, Debtor Master File Research for the DMF Agency and Subagency Codes.

21.4.6.4.7  (10-01-2005)
TC 820, Manual DMF Offset

  1. TC 820 manual DMF offsets were used to:

    1. Repay an erroneous refund to an agency.

    2. Offset an overpayment in excess of $500 that could not be initiated systemically.

    3. Make all offsets to child support prior to 1984.

  2. The TC 820 is a one-sided document and does not have a corresponding credit on another module. The credit posts on the NMF. You must request the source document DLN of a TC 820 to determine where it was applied. Have your Lead Tax Examiner contact Headquarters Customer Accounts Section at (202) 283–0635 only if it is a DMF (TC 896) offset and you are unable to confirm the offset. This phone number is for internal use and should not be given to taxpayers. This phone line is not staffed for taxpayer inquiries. Any taxpayer calls to this number will be referred to the appropriate toll free lines.

  3. Offsets for child support prior to 1984 were processed with a TC 820/824, and Blocking Series 000-099 in 1982 and (BS) 900-999 in 1983. Research the entity module to determine the state agency.

    1. If the TC 820 is not blocked as stated, it was not a child support offset.

    2. If the TC 820 is blocked as stated, inform the taxpayer that Health and Human Services referred a debt in his/her name due to a delinquent child support obligation and the amount offset was paid to the state shown on the entity.

21.4.6.4.8  (01-01-2001)
TC 897, DMF Offset Reversal

  1. The reversal of a posted TC 896 appears on the module as a TC 897 with corresponding AG/SA codes. TC 897 posts as a credit to the IMF or BMF account and results in a transfer of funds from the creditor agency back to IRS.

  2. DMF offsets are reversed by least priority; last offset out is first offset reversed, etc.

21.4.6.4.9  (01-01-2001)
DMF Manual Offset Reversal

  1. A manual offset reversal is required to bypass UPC 189 when:

    1. An agency reports a refund of a prior year offset, TC 131, and there was more than one offset to the same debt from separate tax periods. The TC 131 is netted against the offset from each period rather than just the offset to which it applies.

    2. An agency erroneously reported a refund of a prior year offset and the agency or IRS is unable to correct the TC 131 being netted against the offset reversal.

  2. Refer the case to the TOP/DMF Planning and Analysis Support Staff in your Campus when either of these conditions are identified. The analyst contacts DMF Headquarters to verify that a manual reversal is required.

  3. Take the following steps to prepare Form 3809, Miscellaneous Adjustment Voucher, if the reversal is approved:

    1. Credit the primary taxpayer’s account using the date of the TC 896 as the date of the TC 700.

    2. Debit the "6330 Account" (no other information is necessary).

    3. In remarks, write "debit reversal of offset to (AG/SA) for (obligor’s name and SSN)."

    4. Attach a copy of the TXMOD and ENMOD.

    5. Forward Form 3809, Miscellaneous Adjustment Voucher, to Accounting.

    6. Input a STAUP or other appropriate hold to delay balance-due notices.

    7. Input History item, "F3809ACCTG," "MANUAL-REV," "DMF/AG/SA."

    8. Monitor the case for the posting of the TC 700.

21.4.6.5  (01-01-2001)
Refund Offset Procedures

  1. This section discusses procedures for refund offsets. Inquiries regarding offsets may originate from the non-receipt or reduction of a refund, from the receipt of an offset notice, or from other issues on an account that may cause an erroneous offset.

  2. It is important to first research the taxpayer's account to verify what type of offset(s) occurred before attempting to answer questions about an offset.

21.4.6.5.1  (04-23-2008)
Taxpayer Inquiries on TOP Offset

  1. The taxpayer is sent a notice of offset by FMS for TOP offsets after 01/11/1999. Inquiries relating directly to the TOP offset are referred to the agency listed on the notice, or to the FMS TOP Call Center at 1-800-304-3107 or, TTD 1–866–297–0517, if a notice was not received. Spanish speaking Customer Service Representatives (CSR's) are available Monday - Friday, 12:30 PM - 5:00 PM. See IRM 21.4.6.4.2.5, TOP Offset Notice.

  2. The following tables can assist you in resolving taxpayer inquiries related to TOP offsets, TC 898. Use letter 3179C when responding to an inquiry in writing.

  3. For taxpayer inquiries regarding Refund Discrepancies:

    If Then
    Taxpayer claims he/she didn't receive a refund of overpayment 1. Advise the taxpayer to allow five days for direct deposit and 14 days for paper check to arrive.
    2. Provide the amount of the TC 846 issued.
    3. Advise the taxpayer to contact the agency on the notice if an offset occurs.
    Taxpayer claims his/her refund was less than expected, and amount received agrees with TC 846/840 amount Initiate internal procedures to resolve the discrepancy (processing error, math errors, or other offset).
    Taxpayer claims his/her refund was less than expected, amount disagrees with TC 846/840, and  
    1. The offset notice was not received 1. Refer Taxpayer to TOP Call Center at FMS 1-800-304-3107, TTD 1–866–297–0517 for offset information.
    2. The offset notice was received 2. Refer Taxpayer to agency on notice.
    Taxpayer claims offset made, but remainder of refund not received Advise taxpayer to allow five days for direct deposit or 14 days for paper check to arrive. If not received, send taxpayer Form 3911 to begin trace of refund check.
    Taxpayer claims agency has no record of offset Refer taxpayer to TOP Call Center at FMS for offset verification.

  4. For Taxpayers, Disputing the Debt or TOP Offset:

    If And Then
    Taxpayer inquires about existence of a debt   Refer taxpayer to agency that notified him/her of the debt, or if unknown, to TOP Call Center at FMS @ 1-800-304-3107, TTD 1–866–297–0517.
    Taxpayer claims he/she does not owe debt or he/she is not the debtor   Refer taxpayer to agency on the due process offset notice, or if unknown, to TOP Call Center at FMS (agency must determine who owes debt and issue any subsequent refund).
    Taxpayer claims debt was discharged in bankruptcy 1. IRS was not aware of bankruptcy prior to issuing refund 1. Refer taxpayer to agency on offset notice, or if unknown, to TOP Call Center at FMS (agency must issue refund). Contact Insolvency as necessary.
    2. IRS was aware of bankruptcy and should have placed a BPI 3 on refund 2. Refer case to Insolvency. They may request that you reverse TOP offset and issue a refund with BPI 3.
    Taxpayer is requesting a refund due to hardship and 1. Offset already occurred Refer taxpayer to agency on notice. IRS cannot bypass completed TOP offset for hardship.
    2. Offset has not occurred See IRM 21.4.6.5.6, Hardships Refund Request.

  5. For taxpayers inquiring about Other Issues:

    If Then
    Taxpayer indicates Form 8379, Injured Spouse Allocation, was filed Initiate procedures to verify offset and receipt of Form 8379. See IRM 21.4.6.5.3, Injured Spouse Inquiries.
    Taxpayer is requesting agency contact information Refer Taxpayer to FMS TOP Call Center at 1-800-304-3107, TTD 1–866–297–0517, for agency address and phone number.
    Taxpayer is unable to resolve problem through contact with office of creditor agency listed on offset notice Refer taxpayer to FMS TOP Call Center that may provide a more helpful contact.

21.4.6.5.2  (10-01-2007)
Taxpayer Inquiries on DMF Offset

  1. Research TXMOD, IMFOL, or BMFOL to determine if an offset occurred. Confirm the year and tax module from which the offset occurred. Identify the DMF offset, TC 896, in question and determine which AG/SA received the offset.

  2. IRS issues a notice (CP 47 for IMF; CP 149 for BMF) for DMF offsets at the time of offset.

  3. Use CC IMFOL, BMFOL, ENMOD and TXMOD to identify the DMF transactions. Contact the Liaison in Fresno @ (559) 456 5464, for the AG/SA address and phone number, if needed.The liaison phone number is for internal use and should not be given to taxpayers. This phone line is not staffed for taxpayer inquiries. Any taxpayer calls to this number will be referred to the appropriate toll free lines. When notating your case file do not input the name of the DMF/TOP Liaison. Notate "Contacted DMF/TOP Liaison."

  4. IRS transfers all offsets to the agencies in the same cycle the offset occurred. The federal agencies then transfer the funds to the sub-agencies on a weekly basis. Only Child Support transfers the funds on a monthly basis.

  5. The following table may assist you in resolving specific inquiries regarding DMF offsets.

    If Then
    Taxpayer states local agency has no record of offset Confirm offset information on TXMOD, IMFOL, or BMFOL. Provide the taxpayer with the amount, date, and cycle of TC 896. Advise taxpayer to call and confirm offset with agency headquarters.
    Taxpayer states DMF offset notice was not received 1. Contact the Liaison in Fresno @ (559) 456–5464, for the address and phone number of the AG/SA. The liaison phone number is for internal use and should not be given to taxpayers. This phone line is not staffed for taxpayer inquiries. Any taxpayer calls to this number will be referred to the appropriate toll free lines. When notating your case file do not input the name of the DMF/TOP Liaison. Notate "Contacted DMF/TOP Liaison."

    Note:

    You must have the AG/SA before contacting the Liaisons.


    2. Upon receipt of AG/SA information, provide the taxpayer with the name, address and phone number of the agency.
    3. Provide the taxpayer with the amount, date, and cycle of TC 896.
    4. Verify taxpayer address.
    Taxpayer requests another DMF offset notification in writing 1. Issue Letter 1290C to taxpayer with all applicable offset information.
    2. Verify taxpayer address.
    Taxpayer indicates that agency address or telephone number for a DMF offset is wrong Contact the Liaison in Fresno @ (559) 456–5464, for the address and phone number of the AG/SA. The liaison phone number is for internal use and should not be given to taxpayers. This phone line is not staffed for taxpayer inquiries. Any taxpayer calls to this number will be referred to the appropriate toll free lines. When notating your case file do not input the name of the DMF/TOP Liaison. Notate "Contacted DMF/TOP Liaison." The Liaison provides corrected information.

  6. When writing the taxpayer, give the amount, date, and cycle of the offset and refer taxpayer to the agency. A suggested reply is:

    "Your 2006 overpayment of $1,244.00 was sent to the Office of Child Support Enforcement, State of Louisiana, on March 13, 2007, in Cycle 20071209. If the agency cannot locate the offset after you furnish this information to them, request that they contact their state or headquarters office to confirm the IRS offset."

21.4.6.5.3  (02-12-2009)
Injured Spouse Inquiries

  1. An injured spouse may contact IRS before or after an offset occurs. Often, the spouse is aware that an offset will take place and wants to know how to get his/her share of the refund. The spouse may also call about the injured spouse Form 8379, Injured Spouse Allocation, Rights provided in the FMS offset notice. See IRM 21.4.6.5.9, Form 8379 Injured Spouse Allocation.

  2. When a taxpayer calls concerning the Economic Stimulus Payment (ESP), and more than 50% of the ESP has offset, send Form 4442 to your local Accounts Management (AM) function to be worked. See IRM 21.4.6.5.31, Injured Spouse Allocation/Stimulus Payment.

  3. When the taxpayer calls concerning his/her injured spouse allocation (TC 150 with Blocking 92 or TC 971 Action Code (AC) 071 and there is a math error on the account, refer to IRM 21.5.4.4.7, Math Error with Injured Spouse. Do not make any changes to the account or release the refund without first contacting the area that worked the injured spouse allocation.

    If And Then
    Taxpayer inquires about his/her portion of refund prior to filing original return   Advise the taxpayer it may be necessary to obtain Form 8379 and file it with original return. Remind taxpayer to write (Injured Spouse) in the upper left hand corner of their Form 1040 Advise taxpayer to allow up to 11 weeks for ELF returns and up to 14 weeks for paper returns processing time.
    Taxpayer inquires about his/her portion of refund after filing original return Form 8379 was not filed with the original return. Advise the taxpayer it may be necessary to obtain Form 8379 sign it, attach all Forms W-2's, W-2G, or 1099 showing federal income tax withholding and send it to campus where original return was filed. Remind taxpayer "DO NOT attach the Form 8379 to a copy of the tax return." Advise taxpayer to allow up to 8 weeks processing time.
    Taxpayer says Form 8379 was filed with his/her original return, and no refund was received   Check for TC 150, block 92.
    1. TC 150 is blocked 92 and TOP offset has not occurred. Advise taxpayer to allow 11 weeks for ELF returns and 14 weeks for paper processing time from the time the Form 1040 was received. If 11-14 weeks has passed and the case has not been worked, send 4442/e4442 to the CSR working the case. If the case is not, assigned send 4442/e4442 to the Campus where the case is located. Advise the taxpayer the CSR will contact them.

    Note:

    use the Julian date on TXMOD
    2. TC 150 is blocked 92 and TOP offset has occurred
    3. Form 8379 Allocation has been worked.     		1. Advise taxpayer of reason for offset. If unable to determine reason for offset pull the original return to determine reason for offset.

    Note:

    If you work at a remote call site, prepare Form 4442/e4442 and refer to the appropriate Accounts Management (AM) Function where the original return was processed.

    4. TC 150 is blocked 92 and TOP offset has occurred
    5. Form 8379 was not worked.
    2. Forward case to the AM Function where the block is located.
    3. AM requests the block to locate the form. AM works any forms found in the block. Advise taxpayer to allow 6 to 8 weeks. Indicate taxpayer's phone number and whether taxpayer can provide a copy of Form 8379

    Note:

    If you work at a remote call site, prepare Form 4442/e4442 and refer to the appropriate AM Function where the original return was processed.

    6. TC 150 is not blocked 92 4. Forward case to the appropriate AM Function where the taxpayer filed their original paper return. Indicate taxpayer's phone number and whether taxpayer can provide a copy of Form 8379. AM requests the block to try and locate any Form 8379's. AM works any Form 8379's found in the block. Advise taxpayer to allow 6 to 8 weeks. If the return was an ELF return, do not forward a referral. Explain to the taxpayer that our records show the Form 8379 was not filed with the return. Request the taxpayer provide a signed copy of the Form 8379
    Taxpayer says Form 8379 was filed after offset and no refund was received   Check for TC 971, AC 071
    1. TC 971, AC 071 is posted 1. Advise taxpayer to wait 45 days from transaction date (TC 971 posting date) for a response.
    2. 30 days have passed since TC 971, AC 071 was input, and there is no case control 2. Refer to AM where the TC 971 071 is posted to begin search for the Form 8379. Indicate taxpayer's phone number and whether taxpayer can provide a copy of Form 8379.
    3. There is no TC 971, AC 071 3. Advise the taxpayer it may be necessary to re-file Form 8379 if more than 30 days have passed. AM should work the Form 8379. Advise the taxpayer to allow up to 8 weeks from the time they re-file the Form 8379.
    Taxpayer says Form 8379 was filed with or without original return, A TC 840/846 posted after receipt of Form 8379; and IRS processed form and issued a refund. 1. Check for TOP offset to a debt of the spouse.
    2. Take necessary action if refund was not received. Follow refund trace procedures.
    Taxpayer says Form 8379 was filed with or without original return, A TC 290 for .00, block 98/99, was input after receipt of Form 8379; and IRS denied the Form 8379 (letter 105C/106C should have been sent). Advise the taxpayer it may be necessary to request an appeal if he/she disagrees with our findings.
    Taxpayer filed Form 8379 in any manner, 1. A refund was not issued, and
    2. Taxpayer meets Taxpayer Advocate Case Criteria Refer to IRM 13.1.7.2     		1. Prepare Form 911 and submit it to the Taxpayer Advocate Service (TAS) See IRM 21.4.6.5.6below.
    2. Advise taxpayer to be prepared to send a copy of Form 8379 to the TAS Office where the Form 911 was submitted.

  4. When there is an open control base with one of the above scenarios and more than 45 days have passed from the Form 8379, Injured Spouse Allocation, received date, send Form 4442/e4442 to the CSR working the case. Advise the taxpayer that the CSR will contact them if necessary and the referral should be resolved within 30 days.

    Note:

    Prepare Form 911 if Taxpayer Advocate Service (TAS) criteria met. See IRM 13.1.7.2. TAS Case Criteria

  5. There are always exceptions to the situations described above. Analyze each inquiry carefully to determine the correct course of action.

    Note:

    If the taxpayer's Form 8379 can be processed with a faxed copy of Form 8379 request a copy and work the case. In the event of a mis-blocked form, the block must still be pulled to look for other Form 8379's.

  6. Use a 1290C or 3179C letter when responding in writing to injured spouse inquiries regarding DMF and TOP offsets respectively.

    Exception:

    If Form 8379 was filed for any filing status other than Married Filing Joint (FS 2) release the refund with a TC 571.

21.4.6.5.4  (10-01-2005)
Congressional Correspondence

  1. Injured Spouse Congressional inquiries are referred to the appropriate Local Taxpayer Advocate Office (LTA) for control and assignment. See IRM 13.1.8.2, Control Principles.

    Note:

    For other types of Congressional inquiries, refer to IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines.

    The Local Taxpayer Advocate, (LTA) forwards Congressional inquires that deal strictly with TOP offsets (to child support or federal agency non-tax debts) to the Financial Management Service at the following address:

    Financial Management Service
    Legislative & Public Affairs Office
    401 14th Street SW
    Room 556 C
    Washington, DC 20227

21.4.6.5.5  (01-01-2001)
Agency Inquiries

  1. All letters or documents from an agency and addressed to IRS, are referred back to agency headquarters or FMS if they concern:

    • The amount of the debt owed

    • Removal of the debtor from the TOP program

    • A refund of the offset amount

  2. Agency correspondence "certifying " a debtor, or requesting that a debtor's tax refund be offset, is returned to the agency. Advise correspondents to contact their headquarters office for debt collection.

  3. The AM Function may receive copies of legal documents regarding support obligations. They are intended for the Full Collection program. Forward to the Non-Master File unit. See IRM 21.4.6.5.27, Non-Master-File Child Support.

  4. Any notices received by IRS from an agency must be returned to that agency. Do not call the agency.

    Exception:

    Notices received from an agency that are addressed to a taxpayer using the IRS Campus address are disposed of as classified waste. These are due process notices and there is no requirement that IRS return them to the agency or forward them to the taxpayer.

  5. Do not forward agency correspondence to IRS Headquarters unless directed to do so by Headquarters. Agency inquiries must be answered by the IRS campus or territory office receiving the correspondence.

21.4.6.5.6  (03-19-2008)
Hardship Refund Request

  1. Any taxpayer contact that meets any of the Taxpayer Advocate Service (TAS) criteria listed in IRM 13.1.7.2 should be worked by TAS. If criteria is met, follow procedures outlined in IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines, for preparation of Form 911 or Form e-911, Request for Taxpayer Advocate Service Assistance, and Application for Taxpayer Assistance Order.

  2. A taxpayer may submit a Form 911 or request a hardship refund of all or a portion of the overpayment on the return even though he/she may owe a tax or non-tax child support or Federal agency debt.

  3. In general, IRS may honor a hardship refund request if the taxpayer owes only Federal taxes or no debt at all.

  4. If you intend to honor a hardship and a tax debt exists, See IRM 21.4.6.5.12.1. Offset Bypass Refunds (OBR), before taking any action.

  5. When issuing a hardship refund under any circumstance, inform the taxpayer that if he/she owes a child support or Federal agency debt submitted for tax refund offset, FMS may apply his/her refund to the debt through TOP. IRS has no say in this matter. See IRM 21.4.6.5.8.1. Allowable DMF/TOP Offset Reversals for levy proceeds. You can tell the taxpayer:

    1. IRS no longer maintains non-tax child support or Federal agency debts.

    2. FMS maintains these debts and affects the offset through TOP.

    3. He/she may contact the FMS TOP Call Center at 1-800-304-3107, TTD 1–866–297–0517 to determine if a debt is owed and whether an offset will occur. See IRM 21.4.6.5.1, Taxpayer Inquiries on TOP Offsets.

    4. Only the agency, to which the debt is owed, can honor a hardship request for a TOP offset.

21.4.6.5.7  (10-01-2005)
Credit Elect

  1. IRC § 6402(b) provides that a taxpayer can elect to have an overpayment applied to a future tax, once all tax and non-tax debts subject to offset under IRC § 6402(a), (c), (d) and (e) are satisfied.

  2. FMS maintains non-tax debts subject to offset under IRC Section 6402(c), (d), and (e). FMS provides a file, with each debtor’s TIN, name control, and the total amount of debt owed, to the Enterprise Computing Center at Martinsburg (ECC-MTB) on a weekly basis.

  3. ECC-MTB searches this file after any applicable tax offsets are determined but before crediting the credit elect amount.

    1. The amount of credit elect is reduced by the total amount of debt owed.

    2. Any amount remaining in excess of debt owed is credited as requested.

    3. The amount of credit elect, up to the amount of the debt owed, is released for refund and includes any applicable interest.

    4. A CP 45 Reduced Credit Elect is issued to inform the taxpayer of the reduction in the amount of his/her credit elect and the possible need to make additional estimated tax payments.

    5. FMS matches the refund through TOP and offsets the amount to the agency debt(s).

  4. When the amount of a credit elect is reduced by a TOP offset, but the credit later becomes available as a result of an injured spouse allocation, no comparison is made against the FMS debtor file. If the tax year has not ended, the credit is applied systemically. If the tax year has ended, prepare a credit transfer, TC 830/710, using CC ADD48.

21.4.6.5.8  (01-01-2001)
Reasons to Reverse DMF/TOP Offset

  1. This information is intended as a guide to determine when it is acceptable to reverse a DMF or TOP offset and when the offset should remain on the account. It is not all-inclusive. You may encounter situations that require an opinion by IRS Chief Counsel.

21.4.6.5.8.1  (03-19-2008)
Allowable DMF/TOP Offset Reversals

  1. A reversal of a DMF or TOP offset can be done to:

    1. Issue a refund to an injured spouse.

    2. Correct IRS initiated processing errors such as math errors, data input errors, or misapplied payments. Levy proceeds that result in offsets are not considered misapplied payments. See IRM 21.4.6.5.8.1.(1) j) below.

    3. Satisfy the balance due on a superseding return.

    4. Resolve bankruptcy cases originating from Insolvency in the territory offices.

    5. Re-sequence an account when the offset is on the "from" account. See IRM 21.4.6.5.21 Re-sequence Cases

    6. Reprocess a return to another TIN.

    7. Reprocess a return to another tax period.

    8. Resolve Combat Zone cases.

    9. Recover a refund issued as a result of a totally false return; (e.g., returns detected by the Questionable Refund Program, Criminal Investigation).

    10. Levy proceeds which do not create an overpayment and are within 9 months of making the levy, must meet the criteria in IRC §6343 (d).

21.4.6.5.8.2  (03-19-2008)
Unallowable DMF/TOP Offset Reversals

  1. A reversal of a DMF or TOP offset cannot be input to:

    1. Solely to satisfy an audit or under-reporter deficiency posted after the offset occurs unless the offset resulted from a TC 640/670 payment intended specifically for the tax audit increase. The taxpayer must have specified that the payment is a cash bond.

    2. Satisfy a balance due on a tax return that posted after the return which created the offset; this includes multiple year filings where an overpaid return(s) posts before a balance due return(s).

    3. Satisfy a balance due that resulted from an amended return received after the due date on the module where the offset occurred.

    4. Refund or credit a tax account because the offset resulted from an over-collected or erroneously collected levy which creates overpayment per IRC § 6402, unless the IRS erroneously levied another taxpayer's account.

    5. Honor a credit election.

    6. Honor a disaster claim.

    7. Honor an Offset Bypass Refund (OBR) hardship request. See IRM 21.4.6.5.6, Hardship Refund Request and See IRM 21.4.6.5.12.1. Offset Bypass Refund (OBR).

    8. Reverse a non-tax offset to the Office of Child Support Enforcement that occurred after October 17, 2005 due to an automatic stay for bankruptcy.

    9. Reverse a non-tax offset to a creditor agency (other than the Office of Child Support Enforcement) that occurred after October 17, 2005 when the tax module contains an unreversed TC 520 with closing code 6X (60–67), 83 or 89. The creditor agency may have obtained relief from the automatic stay.

      Note:

      If it is determined that the creditor agency did not obtain relief from the automatic stay, then the TOP non-tax offset may be reversed.

  2. When working an Injured Spouse Allocation Form 8379 always reverse the injured spouse's share of the refund, if the injured spouse is not responsible for any part of the debt which offset. See IRM 21.4.6.5.8.1.Allowable DMF/TOP Offset Reversal

21.4.6.5.9  (10-01-2008)
Form 8379 Injured Spouse Allocation

  1. The spouse, whose portion of a joint income tax overpayment was or will be offset to a tax or non-tax debt for which he/she is not liable, is known as the "injured spouse." The injured spouse must file Form 8379, Injured Spouse Allocation, to request his/her portion of the joint refund.

    Caution:

    An injured spouse is not the same as an "innocent spouse." See IRM 25.15, Relief from Joint and Several Liability.

  2. When a taxpayer wants an Form 8379, Injured Spouse Allocation, but mistakenly uses Form 8857,"Request for Innocent Spouse Relief" , return the Form 8857 to the taxpayer, advising him/her of the mistake. Include a blank Form 8379 with instructions.

  3. When a taxpayer wants to claim innocent spouse relief but mistakenly uses Form 8379, Injured Spouse Allocation, return the Form 8379 to the taxpayer, advising him/her of the mistake. Include a blank Form 8857 with instructions.

  4. The injured spouse must have made payments such as Federal Income Tax Withheld from wages or Estimated Tax payments, unless Earned Income Tax Credit (EITC) or other refundable credits were claimed on the joint return.

    Exception:

    Joint filers whose principal home was in a community property state at any time during the tax year may not have to meet the requirement in (4) above. See IRM 21.4.6.5.10, Community Property Allocation.

21.4.6.5.9.1  (10-01-2007)
Filing Form 8379

  1. Form 8379, Injured Spouse Allocation may be filed as an attachment to the original individual tax return or by itself.

  2. A surviving spouse is entitled to file a Form 8379 and receive a refund on behalf of the deceased injured spouse even though the surviving spouse owes the obligation.

21.4.6.5.9.2  (10-01-2007)
Form 8379 Processing

  1. Prior to 01/01/1999, Forms 8379, Injured Spouse Allocation were processed as pre and post offset, using BS 920-929 when filed with original return, and 930-939 when filed by itself.

  2. Effective 01/01/1999, Forms 8379 received with the original return (Form 1040 series) used BS 920–929. Form 8379 filed with the original return and blocked in the 920–929 series with document code 05, 07, 09 or 11 did not generate a TC 570 freeze. The overpayment was allowed to refund. A CP 36 was generated to the Adjustment Function with the original return and Form 8379 attached for processing.

  3. Effective 01/01/1999, Forms 8379 received without the original return are not numbered. They are forwarded to the AM Function and require the input of a TC 971, AC 071, when the case is controlled. For instructions concerning Form 8379 filed by itself, see IRM 21.4.6.5.9.4 Form 8379 Filed by Itself .

  4. Effective 01/01/2000, Forms 8379 received with the original return (Form 1040 series) continue using BS 920–929 and the CP 36D notice generates to the AM Function when the TC 150 posts in BS 920–929. The BS sets a TC 570 freeze to hold the credit until the Form 8379 is worked. For instructions concerning Form 8379 filed with the original return, see IRM 21.4.6.5.9.3.

  5. Effective 01/01/2001, Form 8379 "Injured Spouse Allocation" was accepted into the Electronic Filing Program for tax year 2000 and subsequent. The electronic Form 8379 can only be filed with the original return, not by itself. Accepting Form 8379 electronically reduces the amount of time for the form to be received and worked by the campuses, and the amount of time for the refund to be issued. For instructions concerning Form 8379 filed with the original return. See IRM 21.4.6.5.9.3.

  6. Effective 01/01/2005, the CP 36D notice for electronic filed returns (ELF) received with an injured spouse allocation attached, (Block 92) system locally prints out to Accounts Management instead of to Files. The CP 36D notices for paper returns continue to print in Files to be associated with the original return and shipped to Accounts Management.

21.4.6.5.9.3  (10-01-2009)
Form 8379 Filed with Original Return

  1. Form 8379, Injured Spouse Allocation, filed with the original return must be processed within 45 days of the date received in Accounts Management.

    Note:

    When processing injured spouse allocation cases be aware of the 45 day interest free period. Every effort should be made to process Form 8379 by June 1st.

  2. Taxpayers may file an Injured Spouse Allocation by attaching a Form 8379 to the back of their original Form 1040/1040A/1040EZ, indicating "Injured Spouse" in the upper left corner of the Form 1040 series.

  3. Research CC INOLES, under both the primary and secondary SSN, for the no debt indicator (N), TOP non-tax indicator (F), IRS indicator (I), or indicator (B) for both IRS and TOP obligations. See IRM 21.4.6.4, Refund Offset Research. The (I) indicator is not always set for all IRS Tax debts. Additional research is needed when the (N) indicator is set. Research any cross reference SSN's along with CC IMFOL, BMFOL, TXMOD, MFT 29 and 31 etc. for any outstanding tax debts. If complete research shows no indicator (I), (F), (B), or other indication of an IRS debt on IMFOL, BMFOL, TXMOD or INOLE, input a TC 290 for .00 for paper returns to release the overpayment and re-file the return. For ELF returns, input a TC 571 to release the overpayment and destroy the CP 36D, notice. Always attach INOLES or IAT IS (Injured Spouse) screens for both spouses showing the debt indicator (I), (F), (B) or (N) at the time the Injured Spouse Allocation is worked along with IMFOL, and BMFOL prints to show no tax debt found when both taxpayers have an (N) indicator.

    Note:

    In all instances, research thoroughly for outstanding IRS obligations. Use CC IMFOL, BMFOL and/or TXMOD as well as INOLE to determine whether the Form 8379 was filed for a tax or TOP obligation. When the Debt Indicator is (N), you must attach all appropriate screens (for both taxpayers) showing completed research for any outstanding IRS obligations. All research for any outstanding tax debts must be completed before releasing the TC 570 on TXMOD. When working on Correspondence Imaging System (CIS), regardless of paper or ELF, if there is no IRS or FMS debt, release the overpayment with a TC 571. When working a TAS case and TAS has contacted FMS and FMS states there is an active debt, even though no debt is present on CC INOLE, do not release the overpayment. You will work the injured spouse case and issue a refund to the injured spouse for his/her share of the overpayment.

  4. If there is no indication of an FMS TOP or Tax debt you must change your control base to something other than DMFC/DMFE (97140 Paper or 97144 Electronic). Change the control base for paper and ELF to the appropriate category (program code), such as, TPRQ (40000), DUPF (40050) or XRET (40051), etc. You must also change your control base when there is a tax debt. See IRM 21.4.6.5.11.6(3), Injured Spouse Refund - Tax Offset. Refer to IRM 21.5.1.5.2, Cases Currently Assigned in CIS, when controlling CIS cases.

    Note:

    Do not change your control base for (B) debts which are both tax and TOP.

  5. A manual refund is required when the one name only box of Form 8379,Injured Spouse Allocation, is checked, "spouse has requested the refund in one name only and the address on ENMOD is different than the address on the Form 8379" or the form involves a DMF or tax offset.

  6. On all other Forms 8379 received with the original return:

    1. If the injured spouse is the primary taxpayer and the refund is requested in both names, input a TC 290 for .00 with reference number (RN) 808 and the dollar amount of the allocated refund. If the one name only box of Form 8379 is checked, input a TC 290 for .00 with reference number (RN) 810 and the dollar amount of the allocated refund. or

    2. If the injured spouse is the secondary taxpayer and the refund is requested in both names, input a TC 290 for .00 with reference number (RN) 809 and the dollar amount of the allocated refund. If one name only box of Form 8379 is checked, input a TC 290 for .00 with reference number (RN) 811 and the dollar amount of the allocated refund.

    This results in the systemic generation of 2 refunds (TC 846). The appropriate BPI will automatically be set with the input of the RN 808/810 or 809/811. Do not use the Amended Claims Date field.

  7. Verify the Form 8379 has been processed in BS 920–929. All Forms 1040 series indicating "Injured Spouse" in the upper left corner are blocked in BS 920–929. This blocking series permits the CP 36D, notice to be issued. Two copies of the CP 36D notice, with a transcript of the account are generated. One copy of the CP 36D notice is used as a"charge out" in files; the other is scanned into CIS or forwarded to the Accounts Management Function with the Form 8379, Injured Spouse Allocation. If the Form 8379 has not been processed in BS 920–929, you must input a TC 971 AC 071.

  8. If there is an outstanding IRS obligation for the primary or secondary taxpayer, compute the Injured Spouse refund. See IRM 21.4.6.5.11 Allocation of Injured Spouse Form 8379. After the computation is complete follow the procedures below.

    Note:

    For each scenario below, upon posting of a TC 840 with BS 9, any remaining overpayment is released to the appropriate debt.

    If And Then
    There is an IRS obligation on the primary taxpayer's account The injured spouse is the primary taxpayer, and the injured spouse's portion of the overpayment is more than the obligation Issue a manual refund to the injured spouse for the difference using BPI 2, and BS 9.
    There is an IRS obligation on the primary taxpayer's account The injured spouse is the primary taxpayer, and the injured spouse's portion of the overpayment is less than the obligation and the secondary taxpayer is entitled to a portion of the overpayment. Issue a manual refund to the secondary taxpayer using BPI 1 and BS 9, any remaining overpayment will release to any outstanding debt.
    There is an IRS obligation on the primary taxpayer's account The injured spouse is the secondary taxpayer Issue a manual refund using BPI 1 and BS 9, any remaining overpayment will release to any outstanding debt.
    There is an IRS obligation on the secondary taxpayer's account The injured spouse is the secondary taxpayer, and the injured spouse's portion of the overpayment is more than the obligation Transfer his/her share of the credit (up to the amount of the obligation) to the balance due module. Issue a manual refund to the injured spouse for the difference using BPI 1 and BS 9.
    There is an IRS obligation on the secondary taxpayers account The injured spouse is the secondary taxpayer, and the overpayment is less than the obligation Transfer his/her share to the balance due module and issue a manual refund with BPI 2 and BS 9, to the primary taxpayer. This allows for offset to the primary taxpayer's non IRS debt.
    There is an IRS obligation on the secondary taxpayer's account The injured spouse is the primary taxpayer Issue a manual refund to the injured spouse using BPI 2 and BS 9. Transfer the remaining credit up to the amount of the obligation to the secondary taxpayers account.

    Note:

    In all instances above, issue the manual refund in both names unless the one name only Box is checked on Form 8379.

  9. Update the address information on the secondary module if necessary. Send an explanation of the action taken to the taxpayers. Send letter 1290C, 3179C or 285C for tax offsets

  10. If CC INOLES research indicates there is a TOP Non-Tax Debt indicator (F), compute the Injured Spouse refund following current procedures. See IRM 21.4.6.5.11, Allocation Of Injured Spouse Form 8379. Input a RN 808/810- 809/811 or issue a manual refund (TC 840). Use the appropriate BPI and BS 9. If no adjustments are needed on the account, for paper returns, re-file the return and close your case. For CIS users, close your base.

  11. Some entity or module freeze may need to be resolved before the Injured Spouse Form 8379 can be processed. Some freezes and the actions required to process the injured spouse allocation are:

    1. Invalid SSN entity freeze: Resolve problem with the SSN before processing the Form 8379.

    2. (I—) Credit Interest Freeze, sometimes set by the posting of TC 150, CCC U, indicating no reply by taxpayer to IRS letter requesting missing information: Identify the missing information on the original return, if available, and write the taxpayer requesting it, explaining that the injured spouse Form 8379 can’t be processed until the information is received. Suspend the case for 40 days with a new IRS received date. Send no-consideration letter and re-file the Form 8379 with the original return if no reply is received.

    3. (—R with Julian date 999) TDI Refund Freeze: Contact TDI to determine if the freeze will be released or whether the injured spouse may have his/her portion of the overpayment by issuing a manual refund.

    4. (—V) Bankruptcy Freeze: Contact Insolvency to determine if the injured spouse’s portion of the refund may be issued manually and whether a BPI 3 is necessary due to the bankruptcy.

    5. (V—) Outstanding Liability Freeze: Research to determine the liable spouse and issue a manual refund to the injured spouse for the amount of his/her portion of the refund that exceeds the amount for which he/she is liable.

    6. (—W) Litigation/Bankruptcy Freeze: Contact Insolvency to determine if the injured spouse’s portion of the refund may be issued manually and whether a BPI 3 is necessary due to the bankruptcy.

    7. (—Y) Offer in Compromise: Contact Collections to determine if the injured spouse’s portion of the refund can be issued manually.

  12. Forms 8379 received with an original return that shows a math error on the return should not be processed without first attempting to resolve the math error. Refer to IRM 21.5.4.4.7, Math Error with Injured Spouse. If you are unable to resolve the math error, work the allocation based on the information you have.

  13. When Form 8379 is filed electronically, the 150 DLN is assigned BS 920–929. This generates a CP 36D notice. The blocking series 920–929 sets a TC 570 freeze to hold the credit until the Form 8379 is worked. The CP 36D notice prints out in Files and Files sends the CP 36D notice only to the AM Function. If CC INOLE research indicates there is no debt, the indicator is N for both taxpayers. on Electronic Returns (ELF) input a TC 571 only to release the overpayment and destroy the CP 36D notice.

    Note:

    In all instances, research for outstanding IRS obligations. Use CC INOLES, IMFOL, BMFOL, TXMOD to determine whether the allocation was filed for a tax or TOP obligation. When the Debt Indicator is (N) you must attach all appropriate screens showing completed research for any outstanding IRS obligations.

  14. When the CP 36D notice is received in the AM Function, use Command Code "CC" TRDBV to view the return on-line and work the Form 8379. You must complete Form 8379-A and attach it to the CP 36D notice as the source document. Input the adjustment with a TC 290 .00, the appropriate Hold Code (HC), and Posting Delay Code (PDC) for 3 cycles, when issuing a manual refund. Input a RN 808/810 or 809/811 when the refund will be computer generated. In both situations use the appropriate blocking series, source code, and reason code.

    Note:

    When working on CIS, you must attach the worksheet within CIS. However, a TC 290 .00 Hold Code or Posting Delay Code are not needed when issuing a manual refund for CIS cases provided that Block Series 9 is input on your manual refund document. See IRM 21.5.1.5.2, Cases Currently Assigned in CIS.

21.4.6.5.9.4  (02-23-2007)
Form 8379 Filed by Itself

  1. Form 8379, Injured Spouse Allocation, filed by itself must be processed within 45 days of receipt.

  2. A TC 971, AC 071, is input upon receipt of Form 8379 without the original return for Tax, TOP or DMF.

  3. Input TC 971, AC 071, using CC REQ77 when a Form 8379 is received without the original return and the clerical function has not already input the transaction. The transaction date is the stamped received date on the Form 8379.

  4. Research for the Tax, DMF, and TOP offset. Use CC IMFOL, BMFOL, TXMOD, INOLEX, or ENMOD to obtain information about the offset type, source, and where it was applied.

  5. When a TC 971, AC 071 was input on the wrong account, change the category code to TPRQ 40000. Input TC 971, AC 071 on the appropriate account.

21.4.6.5.9.5  (02-23-2007)
Review the Form 8379 for Completeness

  1. Revenue Ruling 80-7 intends that income, deductions, exemptions, credits, and payments shown on the joint return be allocated to the spouse to whom they belong.

  2. Total income must be math-verified with the original tax figures and must be properly allocated. Forms 8379, Injured Spouse Allocation, received without the original return can be worked if W–2 forms or the allocated items can be verified with information shown on CC IRPTR, SUPOL, IMFOL, RTVUE, or TRDBV.

  3. The taxable amount of Unemployment Compensation or Social Security Benefits shown on the original return must be used when allocating the separate Adjusted Gross Income (AGI) for each spouse who received the benefit(s).

  4. Deductions, exemptions, tax credits, other taxes, and payments must be allocated according to the instructions on Form 8379.

  5. Withholding credits must be verified and allocated to the spouse to whom they belong.

    If verification reveals Then
    Withholding credit is more than reported Allow the additional credit (TC 806) with the injured spouse adjustment.
    Withholding credit is less than reported Do not adjust if within IRS tolerance guidelines per IRM 21.5.1, General Adjustments.

  6. When a breakdown is not provided by the taxpayer, allocate estimated tax payments as follows: Divide the injured spouse's Married Filing Separate (MFS) tax by the sum of the MFS tax for both spouses and multiply that amount by joint ES payments.

    Injured spouse’s MFS tax Both spouses' MFS tax × Joint ES payments = Injured spouse’s portion of ES.

  7. Earned Income Tax Credit (EITC) must be allocated if the injured spouse has qualifying earned income and EITC was included on the original tax return.

    Reminder:

    We are responsible for correcting the taxpayers account to reflect the correct information. See IRM 21.5.1, General Adjustments, for tolerance considerations.

  8. If the Form 8379 is filed with the original return and the account is in zero or debit balance with no math error, do not consider the Form 8379. If the Form 8379 is filed by itself, and there was no offset on the module or a corrected math error has created a balance due, you should not consider the Form 8379. Send Letter 916C, using appropriate blocking series. Advise the taxpayer that the Form 8379 cannot be processed when there is a balance due or no overpayment exists on the account. If, at a later date, they file an amended return and a credit or overpayment is generated from the amended return, he/she could, at that time, file a new injured spouse allocation.

21.4.6.5.9.6  (02-23-2007)
Incomplete Form 8379 Signed or Filed with Original Return

  1. Review the form for the signature of the injured spouse, unless it was filed with an original signed return.

  2. If the Form 8379, Injured Spouse Allocation or original return is signed, contact the taxpayer by phone or letter, to request missing information such as:

    • Allocation of income to each taxpayer

    • Allocation of itemized deductions (Schedule A)

    • Allocation of exemptions other than personal exemptions

    • Allocation of credits to each taxpayer

    • Forms W-2. If unable to verify with original return, use CC IRPTR, SUPOL, IMFOL, RTVUE, or TRDBV

      Note:

      Request the original return from Files, if it was not received with Form 8379 and the TC 150 is blocked 92.

  3. Review question 5 on Form 8379 to determine if the taxpayer resides in a community property state.

    If Question 6 is And Then
    Checked "yes" or "no" Box checked is correct for state (or if none is listed) on line 6 Process Form 8379 based upon taxpayer's response.
    Checked "yes" A non-community property state is entered on line 6 Process Form 8379 without regard to community property laws.
    Checked "no" A community property state is entered Process Form 8379 based upon community property laws of that state.
    Left blank Information on return, W-2s, or entity indicates taxpayer resided solely in a non-community property state Process Form 8379 without regard to community property laws.
    Left blank Information indicates taxpayer resided solely in a community property state Process Form 8379 according to community property laws of that state.
    Left blank Information indicates taxpayer may have resided in both types of states, or in two or more community property states 1. Attempt to telephone taxpayer. If unable, proceed with (4) below.
    2. Accept an oral response to line 6.

  4. If unable to reach the taxpayer or no reply is received:

    • If the Form 8379 is blocked 92, make a copy of the Form 8379. Keep the original Form 8379 with the return and input TC 290 for .00 with the appropriate blocking series. Send a letter of rejection, along with the copy of the Form 8379 to the taxpayer requesting the missing information.

    • If the Form 8379 is not blocked 92, make a copy of the Form 8379 input TC 971, AC 071 if needed, and input TC 290 for .00 with the appropriate blocking series, using the copy as a source document. Send a letter of rejection and return the unnumbered Form 8379 to the taxpayer requesting the missing information.

  5. For ELF returns, try to contact the taxpayer for the missing information via phone or 3179C letter. If no reply is received, send a letter of rejection to the taxpayer advising him/her we cannot process the injured spouse form until we receive the missing information. Input a TC 290.00 with appropriate blocking series. Use the CP 36D notice as your source document.

  6. When the wrong spouse is identified as the injured spouse on Form 8379 and the form is filed with the original signed return, work the form without contacting the taxpayer if either the following apply:

    1. You can determine without doubt who is the injured spouse and the one name only box has not been checked on Form 8379.

    2. The taxpayers main home was in a community property state and the one name only box on Form 8379 has not been checked.

21.4.6.5.9.7  (10-01-2005)
Form 8379 Unsigned and Filed Without Original Return

  1. If a Form 8379, Injured Spouse Allocation is unsigned and was not filed with the original signed return or attached to a signed Form 1040X.

    1. Determine all other missing information.

    2. Input a TC 971, AC 071 if needed.

    3. Request that the taxpayer send a signed copy of the form via fax or mail and provide any other missing information.

    4. If the taxpayer does not provide the missing information within 30 days, return the form to the taxpayer using Letter 3179C,Letter 178C,Form 8009, Quick-note, or other appropriate letter.

    5. Input a TC 290 .00, BS 05, and use a copy of the form as the source document.

    Exception:

    If Form 8379 is physically numbered and no reply is received after 30 days, follow "no consideration" instructions in IRM 21.5.3.4.6 No Consideration and Disallowance of Claims and Amended Returns and send a copy of the incomplete form to the taxpayer.

21.4.6.5.9.8  (02-23-2007)
Statute of Limitations for Processing Form 8379 and Reversing DMF, TOP, or TAX Offsets

  1. Form 8379, Injured Spouse Allocation is not a separate claim, but instead is the avenue the non-debtor spouse uses to provide additional information regarding his or her share of the overpayment shown on a jointly filed original tax return (Form 1040) or amended return (Form 1040X) that claims a credit or refund.

    Note:

    This represents a change from prior processing procedures. The title of Form 8379 has been changed accordingly (1-2006 revision) as it no longer includes the word "claim" but is simply titled "Injured Spouse Allocation."

  2. Overview.

    1. If Form 8379 is submitted with the jointly filed Form 1040 or Form 1040X there are no special statute of limitations considerations. The Form is simply part of the information for the claim on Form 1040/1040X. The claim is subject to IRC § 6511(b). See IRM 21.4.6.5.9.8.1, Form 8379, Attached to Joint Form 1040/1040X.

      Note:

      IRC § 6511(a) provides that a claim must be filed within three years from the filing of the tax return or two years from the date of payment. Although a claim may be submitted within the preceding time periods, the amount of the overpayment that may be credited or refunded is subject to limitation by IRC § 6511(b). See IRM 25.6.1.10 Claims, Abatements and Refunds, for more details.

    2. If IRS disagrees with the claim (including the allocation), it issues a Notice of Disallowance starting a 2-year period under IRC § 6532(a) during which a taxpayer may file a tax refund suit. A standard Notice of Disallowance (which is sent by certified or registered mail) informs a taxpayer that he or she may go to Appeals during the 2-year period, but the time for filing suit is not suspended. IRS and taxpayer, however, may enter an agreement to extend the period.

    3. If the Form 8379 is not submitted with the jointly filed Form 1040 or Form 1040X, the non-debtor spouse may submit Form 8379 at anytime for any portion of the overpayment for which no Notice of Disallowance was issued. See IRM 21.4.6.5.9.8.2, Form 8379 not Attached to Joint 1040/1040X. If a Notice of Disallowance was issued, then the non-debtor spouse has two years to submit Form 8379. See IRM 21.4.6.5.9.8.2. (2) b) Form 8379 not Attached to Joint 1040/1040X.

      Note:

      AT the time the offset occurs, if there is no Form 8379, IRS/FMS presume an allocation of the overpayment in favor of the debtor's creditors. This, in effect is a disallowance of the claim to the non-debtor spouse. When an offset occurs, the IRS does not send a Notice of Disallowance to the non-debtor spouse. Without such a notice, no period of limitation for the non-debtor spouse to obtain administrative review of that allocation ever begins to run.

  3. At present, a TOP/DMF offset reversal will not post to Master File if the offset occurred more than 6 years prior to the offset reversal request. To effectuate the offset reversal, you will:

    1. Contact the Fresno Liaison at (559) 456-5464, and that office will initiate manual reversal procedures. The Liaison phone number is for internal use only, and should not be given to taxpayers. Liaison phone lines are not staffed for taxpayer inquiries. Any taxpayer calls to this number will be referred to the appropriate toll free lines. When notating your case file do not input the name of the DMF/TOP Liaison. Notate "Contacted DMF/TOP Liaison."

    2. Do not close your base to the Liaison office

    3. Allow at least 60 days for the manual reversal to post.

21.4.6.5.9.8.1  (10-01-2007)
Form 8379 Attached to Joint Form 1040/1040X

  1. Initial processing.

    1. If the jointly filed claim on Form 1040 or Form 1040X was not timely (IRC § 6511(a), or IRS determines an overpayment does not exists, or no amount is available for credit or refund (IRC § 6511 (b), then the Form 8379 would not be processed as there would be no joint credit or refund to offset and the allocation irrelevant.

    2. If the jointly filed claim on Form 1040 or Form 1040X was timely (IRC § 6511(a), and IRS determines an overpayment exists, and an amount is available for credit or refund (IRC § 6511(b), then the Form 8379 is forwarded to Accounts Management (AM) for processing. See (2) below if AM disallows the allocation on Form 8379.

  2. Disallowance of Allocation on Form 8379.

    1. If AM rejects the allocation the Form 8379 and a Notice of Disallowance is issued to the non-debtor spouse, the Notice of Disallowance starts the 2-year IRC § 6532(a) period.

    2. If the non-debtor spouse resubmits the Form 8379 with required documentation for Appeals consideration during this period, AM may reconsider its rejection of the allocation before forwarding the new Form 8379 to Appeals. If AM accepts the resubmitted allocation it is unnecessary to forward the case to Appeals. See IRM 21.4.6.5.11,Allocation of Injured Spouse Form 8379.

21.4.6.5.9.8.2  (10-01-2007)
Form 8379 not Attached to Joint Form 1040/1040X

  1. Initial processing.

    1. If the jointly filed claim on Form 1040 or Form 1040X was not timely ( IRC § 6511(a), or IRS determines an overpayment does not exists, or no amount is available for credit or refund (IRC § 6511 (b), then there would be no joint credit or refund to offset and the allocation is irrelevant.

    2. If the jointly filed claim on Form 1040 or Form 1040X was timely (IRC § 6511(a), and IRS determines an overpayment exists, and an amount is available for credit or refund ( IRC § 6511(b), then IRS and FMS will offset the joint overpayment by allocating it in favor of the debtor spouses's creditors. The non-debtor spouse may submit Form 8379 to contest the allocation.

  2. Period of Limitations for Contesting the IRS/FMS Allocation.

    1. No Notice of Disallowance is issued regarding the IRS/FMS presumptive allocation. In order to trigger a period of limitations for submitting Form 8379 the non-debtor spouse is entitled to a Notice of disallowance to inform him/her that all or part of the amount requested on the joint return has been offset. As no Notice of Disallowance is issued to the non-debtor spouse, the non-debtor spouse has an unlimited period to file Form 8379 with the IRS.

      Example:

      The Form 1040 (tax year 1997) has been filed timely and had claimed a refund, but it was offset. The Form 1040 filing did not include Form 8379. No Notice of Disallowance was issued to the non-debtor spouse regarding the allocation IRS/FMS made in favor of the debtor spouse's creditors. In 2007, IRS receives the Form 8379 for the 1997 tax year. The Form 8379 is eligible for processing because the spouses filed the Form 1040 on time under IRC § 6511 and a Notice of Disallowance was not issued to the non-debtor spouse regarding the offset.

    2. If a Notice of Disallowance was issued, it would trigger the 2-year IRC § 6532(a) period. Extra information would have to be included in any such notice to explain to the non-debtor spouse that IRS will consider Form 8379 during this 2-year period. Normally the only formal administrative consideration given to a claim by IRS after an IRC § 6532(a) notice is issued is given by Appeals. See IRM 21.4.6.5.16, Form 8379 Disallowance.

21.4.6.5.9.9  (04-23-2008)
Exam & CI Cases

  1. Forms 8379, Injured Spouse Allocation are not sent to EXAM. However an EXAM freeze on an account, which also has an injured spouse freeze, may affect the timing when the injured spouse allocation is worked. The following table may assist you in resolving EXAM Injured Spouse cases when an EXAM freeze (-L, -Q, - E) or CI freeze (-Z or Z-) is present.

    Note:

    Do not route a copy or your original Injured Spouse case to EXAM or CI.

    IF And Then
    Taxpayer's overpayment is being held by EXAM (-LQ or -LE freezes) pending review of his/her tax return AIMS status is 08 or less and no EITC is involved Work your case.
    Taxpayer's overpayment is being held by EXAM (-LQ or -LE freezes) pending review of his/her tax return AIMS status is 08 or less and EITC is involved Work your case up to the amount of EITC.
    Issue a letter to the taxpayer informing them upon completion of his/her Examination they can resubmit a new Form 8379 if needed. Explain to the taxpayer that any amount of EITC allowed will be allocated to the spouse who earned the income upon which the EITC is based.
    Taxpayer's overpayment is being held by EXAM (-LQ or -LE freezes) pending review of his/her tax return AIMS status is greater than 08 Issue a letter to the taxpayer informing him/her that the allocation of Form 8379 will be computed after the examination is completed.
    Suspend your case and change your control base to a monitor (M) status.
    Upon completion of the examination, work your case. Secure a copy of the return, if necessary.
    Contact Exam for a copy of the return.
    Contact the taxpayer to obtain a copy of the return, if not readily available from Exam.
    Taxpayer's overpayment is being held by CI pending review of his/her tax return There is a -Z or Z- Freeze on the account Questionable Refund Program (QRP) Issue a letter to the taxpayer informing him/her that the allocation of Form 8379 will be computed after the examination is completed.
    Suspend your case and change your control base to a monitor (M) status.
    Upon completion of the examination, work your case. Secure a copy of the return, if necessary.
    Contact Exam or CI for a copy of the return.
    Contact the taxpayer to obtain a copy of the return, if not readily available from Exam or CI.
    If offset has occurred   Work the case regardless of EXAM status.
    Taxpayer's overpayment is not being held by EXAM, however, there may be a -L or -LR freeze on the account by EXAM pending review of his/her tax return The TC 570 creating the -R freeze has the same DLN as the original return with blocking series 92 Process the case regardless of the AIMS status.

    Caution:

    Use appropriate Priority Codes when adjusting accounts with an open -L freeze.

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