21.4.6  Refund Offset (Cont. 1)

21.4.6.5 
Refund Offset Procedures

21.4.6.5.11  (07-01-2013)
Allocation of Injured Spouse Form 8379

  1. Form 8379 Allocation worksheets are located on SERP under Local/Sites/Other, Accounts Management Services (AMS), Community Property Worksheets and Non-Community Property Worksheets. A few paper copies should be kept in each area that works Form 8379, Injured Spouse Allocation, to photocopy when there is a problem with one of the electronic worksheets or the computers may be down. When you have an unusual situation and the figures cannot be plugged in the SERP Accounts Management Services (AMS) electronic worksheets, use the paper version to determine the injured spouse share of the refund.

  2. Use Form 8379, Injured Spouse Allocation Worksheet to compute the injured spouse share of the refund. You must attach all applicable Form 8379 Injured Spouse Allocation Worksheets to your case file, unless one of the shortcuts apply. The use of the shortcut methods is optional, see paragraphs (4), (5) and (6) below. The computation is carried out to four decimal places throughout the entire calculation, then rounded to two decimal places after figuring the injured spouse’s share of the joint tax.

    Note:

    If the taxpayer inquires as to how we determined the injured spouses share of the refund, provide them with a copy of Form 8379 Injured Spouse Allocation Worksheet. If one of the shortcuts methods was used, send the taxpayer an explanation of how the refund was allocated. You should verify the computation is correct, before sending the Form 8379 Injured Spouse Allocation Worksheet to the taxpayer. If you do not work injured spouse, send a Form 4442, Inquiry Referral, to the campus where the case was originally worked.

    Exception:

    Injured Spouse cases originally worked and closed in Atlanta, Brookhaven, Fresno and Philadelphia should be directed to Memphis Accounts Management.


    If you are on Application 20, Application 137, or Application 186 and a call meets the criteria in IRM 21.4.6.5.3(8), transfer the call to Application 35.

  3. When using the Accounts Management Services (AMS) worksheet and the base tax after non-refundable credits is zero, allocate the entire non-refundable credit to the injured spouse, regardless of who is claiming the credit or dependents on Form 8379. The additional child tax credit is a refundable credit and is entered, based upon whom is claiming the dependents. If the taxpayer attached Form 8901, Information on Qualifying Children Who Are Not Dependents, to the tax return, allocate the child tax credit as the taxpayer determines. In community property states, all joint amounts are divided equally, with the exception of EITC.

    Note:

    Base tax is the tax from the tax tables, less any non-refundable credits, prior to the addition of any other taxes.

  4. Non-Community Property Allocation Shortcuts:

    1. When the injured spouse earned all of the income and credits, all of the overpayment is the injured spouse's. Notate Non-Community Property (NCP) Short Cut (SC) 1 on CIS cases.

    2. If joint tax is zero, and no EITC is involved, the injured spouse's portion of the overpayment is his/ her portion of the other refundable credits. Notate NCP SC 2 on CIS cases.

    3. When the injured spouse has none of the income or refundable credits, none of the overpayment is the injured spouse's. Notate NCP SC3.

  5. Community Property Allocation Shortcuts. For all of the Community Property Shortcut methods listed below, all conditions must be met before the shortcut can be used. These shortcuts are applicable to all Community Property States for Non-Tax Debt only, and:

    1. The only debt involved is a non-tax debt owed by the other spouse.

    2. There are no separate property items in the allocation, including EITC.

    The injured spouse is entitled to one-half the joint overpayment. Notate CP SC 1 on CIS cases.

  6. These shortcuts are applicable to Nevada, New Mexico and Washington tax and non-tax debt, all conditions must be met before the shortcut can be used.

    1. The only debt involved is a non-tax and/or premarital tax debt owed by the other spouse.

    2. The are no separate property items in the allocation. This includes EITC.

    The injured spouse is entitled to one-half of the joint overpayment, Notate CP SC 2 on CIS case.

  7. These shortcuts are applicable to California, Idaho and Louisiana tax debt only, all conditions must be met before the shortcut can be used.

    1. The only debt owed is a tax debt owed by the other spouse.

    2. There are no separate property items in the allocation. This includes EITC.


    All of the overpayment may be applied to a tax debt, if necessary. Divide the overpayment in half. If the other spouse's half does not pay all of the tax debt, deduct from the injured spouse's half. Notate CP SC 3 on CIS case. See IRM 21.4.6.5.16(1)(d), Form 8379 Disallowance.

    Note:

    You do not need to complete Form 8379 Injured Spouse Allocation Worksheet when one of the shortcut methods apply. Notate, on the CIS case notes, the shortcut method used.

    Exception:

    See IRM 21.4.6.5.10, Community Property Allocation.

21.4.6.5.11.1  (01-01-2001)
Allocation of Tax

  1. Allocate items of income, deductions, and exemptions, as determined by the taxpayer on Form 8379, Injured Spouse Allocation, or as reported on their original return to arrive at the taxable income for each spouse. This is in accordance with Rev. Rul. 80–7 .

  2. Determine the married filing separate (MFS) tax for each spouse.

  3. Determine the injured spouse percentage of joint tax by dividing injured spouse MFS tax by the sum of the MFS tax for both spouses.

  4. Compute the injured spouse's share of tax liability by multiplying the injured spouse percentage of tax by the joint tax on the return before deducting credits and adding other taxes.

    Injured spouse’s MFS tax
    Combined MFS tax
    × Joint tax = Injured Spouse’s portion of tax

21.4.6.5.11.2  (04-24-2012)
Allocation of Earned Income Tax Credit (EITC)

  1. Rev. Rul. 87–52 allows for allocation of the Earned Income Tax Credit (EITC) shown on the joint return. If EITC is not shown on the joint return, do not figure EITC on the allocation.

  2. Use the appropriate EITC table and worksheet, or CC EICMP with definer R for the tax year for which the form is being worked.

  3. Determine a new, separate EITC that would be available for each spouse if that spouse had filed a separate return and if EITC were available on a MFS return. This is a theoretical situation used for computation only.

  4. Compute each spouse's separate EITC, with (Y) indicator, based on each individual’s earned income, using the same number of qualifying dependents used to compute the EITC on the joint return.

    1. Do not split the qualifying dependents between the spouses.

    2. Use the same column in the EITC table as used to determine the EITC on the original joint return.

  5. Figure the injured spouse percentage of EITC by dividing the injured spouse’s new separate EITC by the sum of the EITC for both spouses and multiply the percentage by the amount allowed on the joint return.

    Note:

    If the allocation using the above formula results in no EITC for both spouses due to a loss claimed on the joint return, the EITC is allocated to the spouse claiming the loss, since it is that loss that qualified the joint account for the EITC.

  6. Provisions of the Heartland Disaster Tax Relief Act of 2008 allow impacted taxpayers to use their 2007 earned income for purposes of figuring any EITC for 2008 if the 2008 earned income is less than the 2007 earned income and:

    • the main home on the applicable disaster date was in a Midwestern disaster area listed in Table 1 of Publication 4492-B,Information for Affected Taxpayers in the Midwestern Disaster Areas; or

    • the main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 2 and the taxpayer was displaced from that home because of the severe storms, tornadoes, or flooding.

  7. If the taxpayer qualifies to use their 2007 earned income, you will determine the EITC allocation based on the 2007 income not the 2008 income.

21.4.6.5.11.3  (10-01-2007)
Determining the Injured Spouse Refund

  1. Compute the injured spouse share of the joint overpayment by subtracting the injured spouse's share of the joint tax liability, as well as any previous refunds or offsets to other IRS obligations, from the injured spouse's contribution toward the joint liability.

    Note:

    The amount of the injured spouse's share of the joint overpayment is limited to the amount of the joint overpayment on the account prior to any offsets or refunds.

  2. Research for Outstanding Balance Liabilities (OBLs) for both spouses before completing the allocation. Any amount of the overpayment credit that will offset to another tax obligation, attributable either individually or jointly to the injured spouse, must be subtracted from the injured spouse's share of the joint overpayment.

  3. Subtract any previous offset or refund, such as TC 820/TC 826, TC 840/TC 846, BMF or IRAF TC 896, from the injured spouse's share of the joint overpayment.

    If Then
    Offset occurred after 01/11/99 Continue computing the injured spouse's refund based on TOP offset instructions below.
    Offset occurred on or before 01/11/99 Continue computing the injured spouse's refund based on DMF offset instructions below.
    Offset is a Tax offset Continue computing the injured spouse's refund based on Tax offset instructions below.

  4. Continue to determine the refund amount below depending upon the type of offset that was made.

21.4.6.5.11.4  (07-01-2013)
Injured Spouse Refund-TOP Offset

  1. After deducting prior tax offsets and refunds, subtract from the remaining amount:

    • Any injured spouse Treasury Offset Program (TOP) offset, TC 898 (TOP offset) or TC 971 AC 598 (manual input of TOP offset).

    • Agency refunds of the other spouse's offset, TC 899 (TOP offset reversal) or TC 971 AC 599 (manual input of TOP offset reversal) type 2 or 3.

    Caution:

    Be sure to reduce TC 899 or TC 971 AC 599 type 2 and 3 by any TC 899 or TC 971 AC 599 type 4 with the same OTN.

  2. If interest was included in the refund that was offset, further computation is needed when the injured spouse is not entitled to all the overpayment. See IRM 20.2.4.3 , Availability Dates for Overpayments.

    1. Compute the injured spouse's portion of the amount of credit interest (Form 8379 Injured Spouse Allocation Worksheet, line 20) included in the original refund. Use CC COMPA to determine the "FROM" and "TO" dates for computing interest on the injured spouse's portion.

    2. Add the amount of interest computed above to Form 8379 Injured Spouse Allocation Worksheet, line 20. The sum is the amount of the TOP offset reversal to be input as a TC 766. See IRM 21.4.6.5.11.7, Issuing the Injured Spouse Refund.

  3. If you are reversing a TOP Offset that includes computer generated credit interest and you are going to allow another computer generated refund, you must calculate the additional interest owed on the original offset manually. Calculate the interest (TC 770) from the 23C Date of the TC 898 to the 23C Date of the adjustment releasing the overpayment minus 11 calendar days. Otherwise, the computer may erroneously double the amount of allowable interest on the new refund. See example below:

    Example:

    Individual tax return for 201012:
    150 04/15/2011 $4,000.00
    806 04/15/2011 $5,000.00-
    846 06/13/2011 $1,005.05
    776 06/13/2011 $5.05-
    898 06/13/2011 $0.00 OFFST-AMT> $1,005.05
    770 05/21/2012 $30.85- DB-CR-INT-TO-DT 05/10/2012
    766 06/13/2011 $1,005.05- OTN-CD> XXXXX-XXXXX (TOP Offset Reversal)
    290 05/21/2012 .00
    846 05/21/2012 $1,035.90

    Exception:

    If CP 21B, Data Processing Adjustment Notice, Overpayment of $1 or more, is not generated or Priority Refund Transcript criteria is not met, the back-off period is 18 calendar days. See IRM 20.2.4.7.1.1(2), Systemic Refund Dates for IMF and BMF, for additional information.

  4. When the injured spouse is entitled to all or part of the joint refund and the overpayment is reduced in whole or part by an IRS tax offset, credit elect, or any prior refund, then send Letter 1290C, Refund/Overpayment Offset to Debtor Master File Organization, Letter 3179C, Refund Offset to Treasury Offset Program (TOP) Nontax Obligation, or Letter 285C , Refund/Overpayment Applied to Account, giving the injured spouse:

    • The amount of the allocation;

    • The reason(s) the overpayment was reduced; and

    • The amount of any refund that will be issued which may be subject to TOP offsets for any non-tax debts he/she owes.

    1. If required, tell the taxpayer that further explanation will be sent in two to four weeks, if the injured spouse's portion is applied in some manner that will result in notice issuance, such as a credit transfer.

    2. If no other action is required and you are closing the case with a 1290C, 3179C or 285C , input a TC 290 .00, SC7, RC 086.

21.4.6.5.11.5  (08-31-2012)
Injured Spouse Refund—DMF Offset

  1. After deducting prior tax offsets and refunds, subtract from the remaining amount any agency refund, TC 131, where the year offset matches the processing year. See IRM 21.4.6.5.25.3, UPC 142.

    Caution:

    NEVER refund any portion of the injured spouse's contribution to the joint tax (Line 12 of the Form 8379 Injured Spouse Allocation Worksheet).

  2. A manual refund with a BPI must be issued on all DMF injured spouse offset reversals. This is to identify eligibility for TOP offset for the injured spouse. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator.

21.4.6.5.11.6  (10-01-2013)
Injured Spouse Refund—Tax Offset

  1. If an offset has occurred to a separate tax liability for which the injured spouse is not responsible, compare the injured spouse's allocation to the amount of offset. The injured spouse's refund could be equal to or less than the amount that offset to the debt.

  2. A manual refund is required on most injured spouse refunds of tax offsets to keep the credit from offsetting back to the same tax debt. The manual refund must also have a BPI applicable to the injured spouse to show ownership of the refund for TOP offset eligibility. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

    Exception:

    See IRM 21.4.6.5.9.3(11), Form 8379 Filed with Original Return, for exceptions to manual refunds for tax debts.

  3. When working an injured spouse form for a tax offset (I) debt, the control base must be changed to something other than DMFC (97140 Paper)/DMFE ( 97144 Electronic). Change the control base for paper and electronic filed form to the appropriate category and program code; such as TPRQ 40000, DUPF 40050, or XRET 40051, etc. Refer to IRM 21.5.1.5.2, Cases Currently Assigned in CIS.

  4. When the injured spouse is entitled to all or part of the joint refund and the overpayment is reduced in whole or part by an IRS tax offset, credit elect, or any prior refund, then send Letter 1290C, Refund/Overpayment Offset to Debtor Master File Organization, Letter 3179C, Refund Offset to Treasury Offset Program (TOP) Nontax Obligation, or Letter 285C, Refund/Overpayment Applied to Account, giving the injured spouse:

    • The amount of the allocation;

    • The reason(s) the overpayment was reduced; and

    • The amount of any refund that will be issued which may be subject to TOP offsets for any non-tax debts he/she owes.

    1. If required, tell the taxpayer that further explanation will be sent in two to four weeks, if the injured spouse's portion is applied in some manner that will result in notice issuance, such as a credit transfer.

    2. If no other action is required and you are closing the case with a 1290C, 3179C or 285C , input a TC 290 .00, SC7, RC 086.

21.4.6.5.11.7  (05-09-2013)
Issuing the Injured Spouse Refund

  1. All injured spouse refunds must be issued in the joint name line unless the"one name only box" is checked onForm 8379, Injured Spouse Allocation. When issuing a manual refund to the injured spouse, in one name only, do not input both names on the 2nd name line of the Form 5792, Request for IDRS Generated Refund (IGR).

  2. Injured spouse refunds of TOP offsets generate systemically with the input of TC 766 with the appropriate Offset Trace Number (OTN). Injured spouse refunds of DMF and tax offsets must not be allowed to generate systemically. See IRM 21.4.6.5.11.5, Injured Spouse Refund - DMF Offset, or IRM 21.4.6.5.11.6, Injured Spouse Refund - Tax Offset. A manual refund must be issued for the injured spouse's portion of the overpayment in the following instances:

    1. A manual refund is required on all injured spouse forms filed against DMF or Tax offsets Debt indicator I or B whether it is issued in one or both names. This allows for the Bypass Indicator (BPI) to be input and assigns ownership of the refund to the injured spouse for TOP offset purposes. See IRM 21.4.6.5.10, Community Property Allocation, for exception to this rule.

      Exception:

      See IRM 21.4.6.5.9.3(14), Form 8379 Filed with Original Return, for exceptions to manual refunds for tax debts.

    2. A manual refund is required when Box 12 on Form 8379, Injured Spouse Allocation, is checked and the address on ENMOD is different than the address on the Form 8379.

    Note:

    Requests for refunds in one name only, resulting from the use of a prior revision of Form 8379, Injured Spouse Allocation, are honored.

  3. Follow instructions in IRM 21.6.3.4.2.1, Outstanding Balance Considerations Prior to Refund or Credit Elect, when reversing offsets and issuing a manual refund from an account where the taxpayer previously made a credit election.

  4. Research under both SSNs for Outstanding Balance Liabilities (OBLs) for which the injured spouse is liable. Use CC INOLE for cross- reference Taxpayer Identification Number (TIN) OBL checks. Also, check for any OBL that may have occurred with a prior year-spouse.

    Note:

    A manual refund is necessary when the injured spouse's portion of the joint overpayment will offset to a tax debt for which he/she is not liable.

  5. For manual refunds of DMF offset reversals, research under both SSNs for an agency refund, TC 131.

    1. For offsets occurring in 1986 and later, check CC ENMOD or CC IMFOLE for a posted TC 131 with YR OFFSET and money amount.

    2. If an agency refund has occurred, see IRM 21.4.6.5.13.4, Input of DMF Offset Reversals, TC 897.

    Note:

    If a TC 131 with a negative amount is posted on the entity, it negates a prior posted TC 131 with the same AG/SA and processing year.

  6. For manual refunds of TOP offset reversals, research the tax module where the offset was reversed for an agency refund (TC 899, type 2) and an agency refund reversal (TC 899, type 4) with the same OTN as the offset being reversed. If an agency refund has occurred, see IRM 21.4.6.5.13.1,Input of TOP Offset Reversals, TC 766 with OTN.

  7. Compute normal interest on manual refunds resulting from offset reversals.

    Exception:

    On manual refunds resulting from a TOP offset reversal, the "FROM" date is based on the refund that was offset.

    If Then
    TC 840/TC 846 did not include interest when originally offset The "FROM" date is determined via normal interest computation procedures. Refer to IRM 20.2, Interest.
    TC 840/TC 846 did include interest when originally offset See IRM 21.4.6.5.11.4, Injured Spouse Refund - TOP Offset.

  8. When determining the "TO" date, do not take into account the 45-day interest-free period that applies to claims for credit or refund.

    1. The injured spouse allocation does not represent a claim for credit or refund subject to the provisions of IRC § 6611(e)(2). The Form 8379, Injured Spouse Allocation, is an allocation of the taxpayer’s joint income, payments, deductions, exemptions, and credits used to determine each spouse’s share of the joint overpayment subject to offset for any eligible individual or joint, tax or non-tax debts.

  9. If the research shows no IRS Outstanding Balance Liabilities (OBLs) or an agency refund, continue processing the Manual Refund according to normal procedures as outlined in IRM 21.4.4, Manual Refunds.

    1. All injured spouse allocation refunds must be issued using Blocking Series (BS) 9.

    2. Input of the appropriate BPI is required on all refunds. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

    3. Use line number 1 or 2 as appropriate. See IRM 2.4.20-12 , Description of Line Item Numbers. Do not use line number 4.

    4. Use HC 1, 2, or 4 when reversing an offset and issuing a manual refund. See IRM 21.4.4.4(3), Preparation of Manual Refund Forms.

    5. If the manual refund is issued in a name, address or TIN different from the name, address or TIN on the Master File, and a change is not required on the entity, input the TC 971 AC 037 using the date that the CC RFUNDR is input. This includes manual refunds from joint accounts issued in one name only. For the X-REF, input the SSN of the person whose name is on the refund. When the address on a Form 8379, Injured Spouse Allocation, is different than on CC ENMOD, issue the refund to the address on the Form 8379, and send a Letter 104C , Address Change Acknowledged, asking the taxpayer if the address of record needs to be changed. Do not change the address on CC ENMOD.

    6. Monitor the account per IRM 21.4.4.5.1 , Monitoring Manual Refunds until the module balance is zero to avoid erroneous refunds and credit balances. If an erroneous refund occurs, follow erroneous refund procedures in IRM 21.4.5, Erroneous Refunds. If a credit balance remains on the module after the manual refund posts, release the remaining credit balance on the module by inputting a TC 290.00.

    7. All Form 5792, Request for IDRS Generated Refund (IGR), which relate to DMF/TOP forms, are batched separately from other IMF and BMF manual refunds. The batching is performed prior to routing to the Manual Refund Function. The remarks section of the Form 5792 must contain the reason for the manual refund.

21.4.6.5.12  (10-01-2013)
Hardship Manual Refunds

  1. Hardship manual refunds do not require Debtor Master File (DMF) or Treasury Offset Program (TOP) research, to determine the existence of a child support or non-tax Federal agency debt, prior to issuing the refund. Refer to IRM 21.4.4.3.2, Outstanding Balances/Duplicate Refunds. Employees of the Taxpayer Advocate Service follow procedures in IRM 13.1, Taxpayer Advocate Case Procedures, unless referred to this section for specific instructions.

    Exception:

    Anyone issuing a hardship refund, which qualifies as an Emergency Refund, or will bypass offset of an internal IRS tax debt, must have his/her work leader call Bureau of Fiscal Service to research for a TOP non-tax debt prior to making the refund. See paragraph (4) below for emergency refunds or see IRM 21.4.6.5.12.1, Offset Bypass Refunds (OBR), before taking action.

    Note:

    Not every refund based on hardship qualifies as an emergency refund. Emergency refunds are those based on hardship where the taxpayer needs the refund in less than 5 days. Refer to IRM 3.17.79.3.3, Issuing Hardship Refunds Taxpayer Advocate Service (TAS).

  2. All manual refunds issued on Form 5792, Request for IDRS Generated Refund (IGR), are subject to offset through TOP unless a specific BPI is assigned either systemically or through manual input. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator. Therefore, the issuance of an IDRS generated manual refund does not automatically bypass offset for non-tax debt, as it did prior to 1/11/99 when the IRS maintained the DMF. See IRM 21.4.6.4.2.7, TC 898 TOP Offset.

    Caution:

    You must make any necessary changes to the taxpayer's entity, based on the original return information, before issuing a manual refund from a module without a TC 150. CC ACTON is used to establish the account before the input of CC RFUNDR.

  3. When issuing a hardship refund for any reason, you must inform the taxpayer that if he/she owes a past-due child support or federal agency debt, his/her refund may be reduced in whole or in part by Bureau of Fiscal Service and applied to the agency debt through Treasury Offset Program (TOP). Bureau of Fiscal Service sends an offset notice to the taxpayer if this occurs. The IRS has no say in this matter. You can tell the taxpayer:

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

    2. Bureau of Fiscal Service maintains these debts and makes offsets through TOP.

    3. He or she may contact the TOP Call Center at 1-800-304-3107, TTD -866-297-0517 to determine if a debt is owed and an offset will occur.

    4. Only the agency owed the debt can honor a hardship request to prevent a TOP offset or make a refund of the offset due to hardship circumstances.

    Note:

    Bureau of Fiscal Service will not provide the taxpayer with the amount of debt submitted to TOP by the creditor agency. Any amount of a debt provided to you by Bureau of Fiscal Service or an Agency must not be given to the taxpayer. Refer the taxpayer to the creditor agency to obtain the debt amount.

  4. Emergency hardship refunds require coordination with Bureau of Fiscal Service to ensure that a non-tax debt is not bypassed. This is needed on Form 5792, Request for IDRS Generated Refund (IGR), and Form 3753, Manual Refund Posting Voucher. Non-IDRS manual refunds issued on Form 3753 are now subject to TOP offset.

    Caution:

    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 TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ , for a manual reversal. Please allow 60 days for the manual reversal to post.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡


    Due to systemic limitations only BPI 0 or 3 can be used.

    1. Your Lead Tax Examiner or an employee of the Taxpayer Advocate Service must contact Bureau of Fiscal Service at 1–800–304–3107, Monday through Friday from 7:30 AM to 5:00 PM CST , to determine if a TOP liability exists for the primary SSN and secondary SSN if it is a joint return.

    2. After getting through to Bureau of Fiscal Service, select the option "If you are calling from a government agency."

    3. Inform the Bureau of Fiscal Service CSR that you are an IRS employee processing a hardship manual refund and give your name, ID number, and the office you are calling from.

    4. Provide the name and SSN of the taxpayer(s) and request confirmation of the existence of a debt, the amount(s) owed, and to which agency. Notate this information on your case history along with the name of the Bureau of Fiscal Service CSR who provided it.

    5. Prepare Form 3753 for the amount of the overpayment in excess of the TOP liability.

    6. If the return has not been processed, "O" code the return for processing to prevent an erroneous refund.

    7. Monitor the account for the posting of the TC 840 and TC 150.

    8. The remainder of the overpayment refunds systemically when the "O" code return posts. Bureau of Fiscal Service initiates the offset at that time.

    Note:

    If your unit or office processes several of these refunds on a daily basis, the work leader will contact Bureau of Fiscal Service to research each of the cases at the same time, thereby reducing the time spent encountering busy signals or waiting for the next available CSR.

  5. A hardship request to expedite the injured spouse's portion of an overpayment, resulting from Form 8379, Injured Spouse Allocation, filed with an unprocessed original return, may be honored prior to the return posting and a TOP offset.

    1. Review the Form 8379, Injured Spouse Allocation for completeness. See IRM 21.4.6.5.9.5, Review the Form 8379 for Completeness, and allocate the form per IRM 21.4.6.5.11.1, Allocation of Tax, and IRM 21.4.6.5.11.2, Allocation of EITC.

    2. Update the entity, if necessary, and use CC ACTON to establish a "dummy account."

    3. Issue a manual refund on Form 5792, Request for IDRS Generated Refund (IGR), for the injured spouse's portion of the refund. Use block series 9 and the appropriate BPI. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI), for more information.

    4. Inform the injured spouse that his or her refund can be offset through TOP for any past-due child support or non-tax Federal agency debts that he or she may owe.

    5. "O" code the return for processing to prevent an erroneous refund.

    6. Monitor the account for the posting of the TC 840 and TC 150.

    7. The remainder of the overpayment refunds systemically when the "O" code return posts. Bureau of Fiscal Service initiates the offset at that time.

21.4.6.5.12.1  (10-01-2013)
Offset Bypass Refund (OBR)

  1. Under certain hardship circumstances, the IRS may issue manual refunds of excess credits without first satisfying an IRS Outstanding Balance Liability (OBL). This type of refund is called an Offset Bypass Refund (OBR). Handle each OBR on a case by-case basis.

  2. Initiators of an Offset Bypass Refund (OBR) must input a TC 971 Action Code 036 prior to the manual refund (TC 840) to identify that the offset liability was bypassed.

    Caution:

    The IRS has no discretion, to determine whether an offset to a past-due child support or Federal agency non-tax debt should occur. If a TOP debt exists, the IRS has no authority to issue an OBR of any kind/amount. A manual refund due to hardship with BPI 3 must not be used to bypass a TOP offset . This includes refunds resulting from disaster claims or levy proceeds. See IRM 21.4.6.5.8.1, Allowable DMF/TOP Offset Reversals.

  3. OBR paper requests should generally not be referred to the Taxpayer Advocate Service. A request for an OBR must be worked immediately upon receipt. Only transfer to TAS OBR paper requests that cannot be resolved within 24 hours if the taxpayer requests TAS assistance and meets TAS criteria 1-4, see IRM 13.1.7.2.1, TAS Case Criteria 1-4 Economic Burden.

  4. Refer to TAS an OBR phone request received on the Customer Service line if the offset has not yet occurred .

  5. If the offset has already occurred, the employee should inform the customer that the overpayment has been applied to the balance due account and the IRS cannot undo it. This will resolve the OBR inquiry on the same day and therefore should not be transferred to TAS.

    Note:

    See IRM 21.4.6.5.12.1(9) below for an exception when the IRS can reverse the offset and issue the OBR.

  6. An OBR must be issued before the overpayment has been offset. The manual refund document must be received by Accounting no later than the Friday cut-off-time before the Assessment Document Date (23C Date, always a Monday) of the original return.

  7. Specific account conditions, such as freeze codes, will determine the date by which the OBR must be processed. For qualifying taxpayers with no freeze codes, the OBR request must be processed before the date on which the offset of the overpayment occurs Timing must be considered when processing an OBR and releasing an IDRS freeze condition. If there is a balance due module; a freeze release will prompt an offset to that account. The OBR must post to the account (TC 840) prior to the freeze release. There are certain conditions in which a TC 840 will release the freeze. Refer to Document 6209, Section 8A, Master File Codes.

  8. Certain IDRS freeze conditions will hold the overpayment beyond the return posting date (Assessment Document Date or the 23C Date) of the original return (TC 150). Any actions on the overpayment, either refund or offset, are prevented by the IDRS hold until the resolution of the IDRS Freeze condition. Determine whether the IDRS freeze condition can be released based on the applicable IRM provisions. This may include coordination with another IRS function. When the resolution of the IDRS freeze condition results in an overpayment, that overpayment can be issued in a manual refund, for those taxpayer eligible for an OBR as long as the OBR request is made before the freeze is released.

    Note:

    To prevent an erroneous refund on an OBR, allow posting of the manual refund to release a freeze instead of manually inputting an action on IDRS to release the freeze. Use hold codes 1, 2 or 4 when creating an overpayment on an IDRS adjustment that changes the tax, credits, or payments to hold an overpayment from offsetting. Use a secondary transaction code on the credit side of CC ADD24 or CC ADD34 (e.g. TC 570) to hold the overpayment when it is necessary to input a credit transfer on IDRS.

  9. If an OBR is requested before the offset of the overpayment; but a clerical error occurred preventing the processing of the request, the IRS can correct the clerical error by reversing the tax offset and issuing the OBR.

  10. OBRs may also be made if subsequent adjustments are made to a tax module. These may include: a payment or credit transfer, an audit tax adjustment, a math error correction, and an amended return or claim that is filed and processed. Therefore, the subsequent overpayment can be issued in a manual refund for those taxpayers eligible for an OBR.

    Note:

    To prevent an erroneous refund on an OBR, use hold codes or secondary transaction codes to hold the overpayment. It may be necessary to coordinate this with another IRS function.

  11. An OBR may not be issued if a Treasury Offset Program (TOP) offset will occur.

    1. Your Lead Tax Examiner must contact Bureau of the Fiscal Service at 1–800–304–3107, TTD 1–866–297–0517 Monday through Friday from 7:30 AM to 5:00 PM CST, to determine if a TOP liability exists for the primary SSN or the secondary SSN, if it is a joint return.

    2. After contacting Bureau of Fiscal Service, select the option "If you are calling from a government agency."

    3. Inform the Bureau of Fiscal Service CSR that you are an IRS employee processing a hardship manual refund and give your name, ID number, and the office from which you are calling.

    4. Provide the name and SSN of the taxpayer(s) and request confirmation of the existence of a debt, and the amount(s) owed, Notate the information on your case history along with the name of the Bureau of Fiscal Service CSR who provided it.

    5. A tax debt must not be bypassed if a TOP liability exists and a TOP offset will occur. Refer to IRM 3.17.79, Accounting Refund Transactions, for additional information.

    Note:

    If the amount of the taxpayer's overpayment exceeds the total of the IRS tax liability and the TOP non-tax liability, a manual refund may be issued with a BPI (3) for the amount by which the refund exceeds the debts. The portion not refunded will offset first to the tax debt and the remaining overpayment refunds via TC 846 and is offset by TOP for the non-tax debt.

  12. When the taxpayer provides the dollar amount of his/her hardship liability, the OBR is issued for that amount. Do not exceed the amount of the hardship request.

    Example:

    The taxpayer has an overpayment on their return showing $1,000. They have requested a hardship refund of $600 to avoid eviction. A review of their account shows a prior year tax liability of $500. If you decide to honor the hardship request for $600, you must treat $100 of the refund as an OBR. The remaining $400 overpayment offsets to the tax debt.

  13. Evidence of the credit condition and documentation must be provided when an OBR manual refund is submitted to the Accounting Branch. Evidence may be either a copy of the unfiled tax return (including all forms and W-2s) or an IDRS print showing the amount of the overpayment available for refund.

  14. Complete Form 5792, Request for IDRS Generated Refund (IGR), or Form 3753, Manual Refund Posting Voucher , as required and process as follows:

    1. Write in the remarks section, "OBR" and the specific reason for issuing the manual refund along with IRM references which apply, notate the Bureau of Fiscal Service contact name, the date of contact and no TOP debt. Refer to IRM 21.4.4.4, Preparation of Manual Refund Form.

    2. Update IDRS with the activity code "TC840/OBR."

    3. Attach a copy of the evidence provided by the taxpayer substantiating the overpayment.

    4. Attach TXMOD print showing the amount of liability(s) bypassed.

    5. Update the entity, if necessary, and use CC ACTON to establish a "dummy account" for IDRS generated refunds.

    6. Input a TC 971, AC 036, via CC REQ77, on the credit module to identify that an offset liability was bypassed prior to the TC 840 manual refund.

    7. Input the Form 5792, Request for IDRS Generated Refund (IGR), manual refund on CC RFUNDR with BPI 3. Note the BPI 3 and "OBR Significant Hardship" in the remarks section. A BPI 3 is also required on Form 3753, Manual Refund Posting Voucher, and notate "OBR Significant Hardship " in the remarks section. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

    8. Have the manual refund document signed by the authorized approving official.

    9. Hand carry the case with the refund request to the Taxpayer Advocate Coordinator Liaison with TAS (TAC) for immediate review.

    10. Monitor the case to stop any computer generated refund not anticipated, or reverse pending offsets to the tax liability bypassed.

  15. If the TAC or designee agrees with the OBR, he/she must initial in the remarks section of the manual refund form and forward the OBR to the Accounting Function.

  16. If the TAC or designee disagrees with the OBR, the case must be turned over to the Taxpayer Advocate Service for resolution.

  17. If the OBR is rejected, the OBR initiator must input on CC REQ77, TC 972, AC 036, to reverse TC 971, Input a history item on IDRS, "REJECT/OBR."

21.4.6.5.13  (10-10-2012)
TOP/DMF Offset Reversals

  1. You can only input an adjustment to withholding or EITC when inputting TC 897 or TC 766.

  2. Other adjustments resulting in a net debit to the tax module must be input before the TC 897 or TC 766 offset reversal.

    1. Input the net debit adjustment (TC 29X) with the appropriate blocking series and use HC 3.

    2. Input the offset reversal with block 00 with original return or 05 without original.

    3. Use HC 4 for offset reversals that will be manually refunded to the injured spouse.

    4. Use HC 3 on TOP offset reversals if the refund will be computer generated.

    5. Advise the taxpayer of the adjustment action taken.

  3. An adjustment resulting in a net credit must be input after the offset reversal.

    1. Input the offset reversal using HC 1 with the correct blocking series.

    2. Input the net credit adjustment (TC 29X) using HC 1 and a Posting Delay Code (PDC) for 1 cycle.

    3. For Form 8379, Injured Spouse Allocation, input RN 808/RN 810 or RN 809/RN 811 with a PDC for 2 cycles or issue a manual refund if applicable.

      Note:

      Be sure to take into account the credit resulting from the adjustment when computing the injured spouse's portion of the total overpayment.

  4. A taxpayer is requesting a refund in "one name only" .

    1. Input the offset reversal using HC 1 with the correct blocking series.

    2. Input RN 810/RN 811 with a PDC for 1 cycle with HC 0 if processing Form 8379, Injured Spouse Allocation.

21.4.6.5.13.1  (04-01-2013)
Input of TOP Offset Reversals TC 766 with OTN

  1. Compare the injured spouse's refund allocation with the TC 898 on the module and reverse only the portion needed. If all of the offset is needed, reverse the entire amount.

    Exception:

    If there is a TC 971 AC 598 (manual input of Top offset record) on the account, you cannot input a TC 766 with an OTN to reverse the TOP offset. See IRM 21.4.6.5.13.2, Manual Reversal of TOP Offset.

  2. Use TC 766 with an Offset Trace Number (OTN) to reverse a Treasury Offset Program (TOP) offset (TC 898, with the same OTN). Input the reversal using CC REQ54, blocking series (BS) 00 with original return or BS 05 without original, source code (SC) 7, and the appropriate reason code. See IRM 21.4.6.5.15, TOP/DMF Source and Reason Codes. CC ADJ54 has a field for input of the OTN. It occupies positions 64–74 of line 6 on CC ADJ54. The OTN field is 10 characters long separated by a hyphen (-) in the middle. You must always input the OTN when inputting a TC 766 involving a TOP offset.

    Caution:

    Failure to input the OTN will cause an unpostable.

  3. The TC 766 amount may not exceed the net TOP offset amount. A TC 766 input for more than the net amount results in an UPC 189. See IRM 21.4.6.4.2.10, Netting TOP Offsets and Reversals.

  4. The OTN input with TC 766 must match an OTN of a prior posted TC 898. Multiple TC 898 offsets from the same refund must be reversed separately. The order in which they are input does not matter.

    Example:

    When a TOP offset occurs for both the primary and secondary SSNs on an account, the two TC 898(s) may have OTN(s) that differ by only one digit. You must be sure you input the OTN of the specific TC 898 offset you are reversing, especially when you are reversing only one of the offsets due to an injured spouse allocation.

  5. A TC 766 reversing a TC 898 with an OTN starting with 1 (indicates primary taxpayer debt) results in the generation of a TC 846 with BPI 1. This prevents a TOP offset to any debts owed by the primary filer and allows for offset to any debts owed by the secondary filer.

  6. A TC 766 reversing a TC 898 with an OTN starting with 2 (indicates secondary taxpayer debt) results in the generation of a TC 846 with BPI 2. This prevents a TOP offset to any debts owed by the secondary filer and will allow offset to any debts owed by the primary filer.

  7. Do not input the Amended Claims Date (Amd-Clms-Dt) field on CC ADJ54 when working injured spouse allocation forms. The 45-day interest-free period does not apply to injured spouse allocation refunds. See IRM 21.4.6.5.11.7, Issuing the Injured Spouse Refund.

    Caution:

    NEVER input TC 767 with an OTN for any reason other than correcting a reject on the TC 766 reject listing. See IRM 21.4.6.5.13.3, TC 766 Reject Listing.

  8. Do not use HC 1, 2, or 4 when inputting a TOP offset reversal unless:

    • A manual refund is being issued.

    • The credit is to be transferred to another module or account, or.

    • When the conditions are met to input a RN 808/RN 810 or RN 809/RN 811 in IRM 21.4.6.5.13(3) and (4), TOP/DMF Offset Reversals.

    Exception:

    Use HC 1 on your adjustment and issue a manual refund using BPI 5 or 6 if a (-C) combat zone freeze is on the module. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI), BPI 5 and 6 do not generate with the posting of TC 766.

21.4.6.5.13.2  (10-01-2013)
Manual Reversal of TOP Offset

  1. A manual reversal is required when you have an IMF/BMF offset which was sent to Bureau of Fiscal Service in error and cannot be reversed with a TC 766 (IRS reversal) or TC 899 (Bureau of Fiscal Service reversal).

  2. Examples of offsets which can never be reversed using a TC 766 are:

    1. MFT 55

    2. MFT 31

    3. All BMF MFTs

    4. MFT 29

    5. Form 3753

    6. Offsets over 6 years

    7. Deleted TC 898

      Note:

      A TC 971 AC 598 (manual input of TOP offset record) is input on an account for audit trail purposes for an erroneously deleted TC 898. A manual reversal is required.

  3. On occasion, you may have a TC 898 transaction that was deleted in error and a systemic reversal (TC 766) cannot be done. Take the following actions:

    1. Research IDRS, if a deleted unpostable (DU) 898 or a TC 971 AC 598 is on the account, contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ for the paperwork to begin the manual reversal process.

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. The Fresno TOP/DMF Liaison will confirm the manual reversal process is warranted and provide the Manual Reversal Request to be completed.

    3. Prepare Manual Reversal Request supplied by the Fresno TOP/DMF Liaison.

    4. Fax the request to the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ unless an email address is provided by the Liaison.

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. Update the activity in the control base on IDRS to PENDMRR and monitor the account for the TC 700 which may take up to 60 days to post to the account.

    6. The Fresno TOP/DMF Liaison will open an IDRS control base, put MRRTONHQ in the activity section when the action has been initiated to the AM Process & Program Management Analyst. If 14 days have passed and you do not see an open control base with MRRTONHQ, follow-up with the Fresno TOP/DMF Liaison.

    7. The Fresno TOP/DMF Liaison will manually input the TC 971 AC 598 with OTN if the information is available for audit trail purposes.

    8. When the TC 700 posts to the account, follow normal Injured Spouse processing procedures.

    9. If a manual refund is requested (e.g., TAS hardship cases) before the TC 700 posts, contact the AM Process & Program Management Analyst to secure permission to expedite the manual refund.

    10. When permission is granted for the manual refund before the TC 700 posts to the account, input TC 470 CC 90 to prevent notices from being issued.

  4. The Fresno TOP/DMF Liaison will prepare the Form 3809, Miscellaneous Adjustment Voucher, and include it with the substantiating documents to AM Process & Program Management Analyst for inclusion in the manual reversal request package. The Fresno TOP/DMF Liaison will refer to IRM 3.17.63.26.15.4, TOP/DMF Exceptions Processing for Manual Offset Reversal Transactions.

  5. On occasion, you will have a UPC condition or Agency Refund Record TC 899 Type Code 2 which was submitted in error and cannot be reversed or corrected.

    1. Research the account to determine if a manual reversal is needed and the offset cannot be reversed via a TC 766. This is done on a case-by-case basis and each case may vary.

    2. After you have determined a manual reversal is needed, see IRM 21.4.6.5.13.2(3), Manual Reversal of TOP Offset.

21.4.6.5.13.3  (10-01-2013)
TC 766 Reject Listing

  1. A TC 766 reject occurs when IRS requests a specific TOP offset reversal and the Federal agency has already refunded the offset or Bureau of the Fiscal Service has initiated a reversal of the offset because it was undeliverable or a debt was canceled.

  2. A TC 766 Reject Listing is created weekly. Upon the receipt of the listing, IRS Headquarters must review and reconcile the listing with other TOP reports for accuracy prior to sending the listing for resolution.

  3. The TC 766 Reject Listing must be worked upon receipt to avoid erroneous refund conditions and correct the taxpayer's account.

  4. The account must be reviewed to identify the condition that caused the TC 766 to be rejected. In general, a TC 899, type 1, 2, 3 or 4 will be pending or posted to the account. If the TC 899 is unpostable, research the condition that caused the unpostable and make the necessary corrections to correct the taxpayer's account. If a TC 899 is not reflected on the account, contact Bureau of Fiscal Service to verify the transactions that transpired before any adjustment is made.

    Note:

    A TC 899 type 1,2, 3 or 4 may have been deleted in error. You may see a TC 971 AC 599 on the account representing a manual input of the TC 899 erroneously deleted. You must take all transactions; posted or unposted, into consideration.

  5. For each TC 766 rejection, Bureau of Fiscal Service provides a reason for the reject and is displayed on the report as a "result code" .

  6. The most common result codes, with an explanation, are listed below:

    If Then
    (01) Invalid Offset Trace Number (OTN) — The OTN is not for this TIN. The TC requested 766 carried an OTN that does not match at Bureau of Fiscal Service for the same taxpayer. Your TC 898 OTN may or may not match the posted 766 OTN 1. If OTN does not match, input a TC 767 with the invalid OTN, and a TC 766 with the correct OTN.
    2. If the OTN does match, input a TC 767 with the OTN and a new TC 766 with the same OTN. Input a Posting Delay Code for 1 cycle.

    Reminder:

    Only the TOP/DMF Liaison is authorized to input a TC 767 with an OTN.

    (03) Invalid Reversal Amount — Amount is not equal to the TOP offset amount. The posted TC 766 amount is greater than TC 898 amount or the amount is not available to input the TOP offset reversal due to a returned or cancelled refund (TC 740/TC 841).

    Note:

    Bureau of Fiscal Service will normally reverse all TOP offsets associated with the returned or canceled refund by posting a TC 899, type 1. See IRM 21.4.6.5.24, Returned Refund Check.

    Caution:

    TC 899, type 1 will not always appear on the account. Contact Bureau of Fiscal Service to verify if the refund has offset. See IRM 21.4.6.5.24(4), Returned Refund Check , and IRM 21.4.6.4.2.9(3)TC 899, Reversal or Agency Refund of Top Offset.

    Input a TC 767 for the disallowed amount with the OTN.

    Reminder:

    Only the TOP/DMF Liaison is authorized to input a TC 767 with the OTN.

    (06) Missing Field — There is a Field missing from the adjustment Input a TC 767 with the OTN for the full amount of the TC 766 and re-input the TC 766 with the correct information. Input a Posting Delay Code for 1 cycle.

    Reminder:

    Only the TOP/DMF Liaison is authorized to input a TC 767 with the OTN.

    (09) Valid Request — Bureau of Fiscal Service considers the TC 766 request as valid but for a lesser amount Input a TC 767 with the OTN for the disallowed amount. No TC 766 is needed.

    Reminder:

    Only the TOP/DMF Liaison is authorized to input a TC 767 with the OTN.

    Note:

    If there are any result codes not listed in the table above, please contact the IRS Headquarters Analyst.

  7. Once the condition creating the TC 766 reject is identified,

    1. Input a TC 767 with the OTN for the exact portion of the TC 766 (with the same OTN) disallowed on the reject report.

      Reminder:

      If the requested "reversal amount" is more than the disallowed amount, input only the portion that was disallowed.

    2. Be sure to Indicate "TC 766REJ" on the adjustment.

    3. Take any action necessary to resolve an erroneous refund condition. Refer to IRM 21.4.5, Erroneous Refunds.

    Caution:

    NEVER input TC 767 with the OTN for any reason other than to correct a reject on the TC 766 reject listing.

    Reminder:

    Only the TOP/DMF Liaison is authorized to input a TC 767 with the OTN.

  8. Upon each cycle's completion, the TOP/DMF Liaison will send an email to IRS Headquarters Analyst acknowledging that the listing has been processed.

21.4.6.5.13.4  (08-31-2012)
Input of DMF Offset Reversals TC 897

  1. Compare the injured spouse's refund allocation with the TC 896 on the module and:

    If Then
    TC 896 amount is greater than allocation amount Reverse only that portion of TC 896 equal to allocation amount.
    TC 896 amount is less than allocation amount Reverse entire TC 896 amount.

  2. Reverse a DMF offset, TC 896, by inputting on CC ADJ54, TC 897 with HC 1, source code 7, AG/SA, and a reason code. See IRM 21.4.6.5.15, TOP/DMF Source and Reason Codes, Do not input the Amended Claims Date (Amd-Clms-Dt) field on CC ADJ54 when working injured spouse allocation forms. The 45-day interest free period does not apply to injured spouse allocation refunds. See IRM 21.4.6.5.11.7, Issuing the Injured Spouse Refund.

    Reminder:

    All DMF injured spouse allocation refunds must be issued manually to allow for input of the appropriate BPI.

  3. A TC 897 cannot be input for more than the net DMF offset amount: TC 896s/TC 897s with the same AG/SA codes less any agency refunds, TC 131s, for the same AG/SA and processing year (PY). A TC 897 input for more than the net DMF offset amount results in an UPC 189.

  4. See IRM 21.4.6.5.13.5, Tax Modules with Multiple DMF Offsets, when reversing:

    • More than one TC 896 on the same module

    • Multiple offsets on different modules

    • Multiple offsets on different modules with an agency refund

21.4.6.5.13.5  (01-01-2007)
Tax Modules with Multiple DMF Offsets

  1. Consider the offset priorities set by Congress when reversing multiple DMF offsets. Reverse the offset with the lowest priority first.

    Note:

    These instructions do not apply to TOP offset reversals.

  2. Reverse offsets to two or more AG/SA on the same module in the opposite order from their posting: reverse last offset first.

  3. Make a separate adjustment for each TC 896 reversal if they have different AG/SA codes.

  4. You can input multiple TC 897(s) at the same time, only when the reversals will satisfy a debit balance in the module. For example, if you are issuing a manual refund due to an injured spouse allocation, input the TC 840 first, creating a debit balance that will be satisfied by the posting of the TC 897(s).

    • Use Posting Delay Codes (PDCs) on each TC 897 after the first

    • Hold all balance-due notices that will be satisfied by the TC 897(s)

    Caution:

    A TC 897 that creates a credit balance in a module and is frozen from refunding will cause subsequent TC 897(s) in all modules on the account to re-sequence until the balance in the credit module becomes zero or debit.

  5. Research for agency refund, TC 131:

    1. If the AG/SA code of the TC 896 is the same as the AG/SA code of the TC 131 and the agency refund amount is less than the TC 896 amount, reverse only the amount not refunded by the agency.

    2. If the TC 131 with money amount is for the entire amount of the TC 896, do not reverse any part of the offset.

  6. The first adjustment should be blocked 05 and input No Source Document (NSD). Change the case control base to "M" Status code and update the received date to the current date.

  7. Inform the taxpayer that the refund will be issued in more than one check. Use the Letter 1290C, Refund/Overpayment Offset to Debtor Master File Organization, or other appropriate letter.

  8. After the prior adjustment has posted, input the final adjustment as Source Document (SD), Blocking Series (BS) 05 or 00, and close the case.

  9. Use Hold Code (HC) 1 when a manual refund is issued for each reversal.

21.4.6.5.13.6  (01-01-2001)
Multiple Tax Periods with Same-Year DMF Offset

  1. Form 8379, Injured Spouse Allocation, filed on two or more tax periods with DMF offsets to one or more AG/SA in the same processing year are worked together.

    Note:

    These instructions do not apply to TOP offsets.

  2. When related cases are controlled to more than one tax examiner, the tax examiner with the oldest received date retains control of the accounts.

    1. Contact the employee who has control of the case to coordinate its closure.

    2. Put a history item on IDRS if you cannot reach that person by phone.

  3. When processing Form 8379, Injured Spouse Allocation, for same year offsets, annotate each form with the injured spouse refund amounts for all modules involved.

  4. Reverse the module with the most recent offset first. Settle this module (module balance: zero) before inputting a subsequent TC 897 to another module.

21.4.6.5.13.7  (01-01-2007)
Multiple Tax Periods, Same-Year DMF Offset and Agency Refund

  1. Forms filed on two or more tax periods with DMF offsets to the same AG/SA, in the same processing year as an agency refund, TC 131, indicated on CC ENMOD require special consideration.

  2. Determine if any forms for that particular processing year and AG/SA were processed on other tax modules after the cycle of the TC 131. If so, request the documents to determine if the TC 131, agency refund was already considered.

  3. If the TC 131 was considered, note the amount taken into consideration when the other form was processed on the form you are working.

    Example:

    The previous form was denied. The injured spouse would have received $500, but there was an agency refund, TC 131, for $750. On the form you are working, you should note that $500 of the agency refund was already considered, and only reduce the injured spouse's portion by $250.

  4. If the TC 131 was not considered, note the reason on the form you are working, re-file the prior form.

    1. Compute the form(s) without regard for the TC 131 or the amount noted.

    2. Deduct the amount in excess of the TC 131 ($250 in the example above) or any TC 131 amount not previously considered from the form computation for the earliest tax module.

    3. Send a disallowance letter if the amount of the agency refund not previously considered still exceeds the amount due the injured spouse.

    4. Input a manual refund for the full amount of the allowable allocation computation, using the appropriate BPI for the injured spouse.

    5. Input a TC 897 with HC 4 for an amount not to exceed the net offset amount (TC 896 minus TC 131 with the same PY minus any prior TC 897). See IRM 21.4.6.5.13.4, Input of DMF Offset Reversals TC 897.

    6. Prepare Form 3809, Miscellaneous Posting Voucher, to manually reverse the difference between your allocation computation and the TC 897 input.

    7. Debit the 6330 account (no other information is needed on the debit portion).

    8. Credit the taxpayer's account using the transaction date of the TC 896 as the date of the TC 700.

    9. In the remarks, indicate "debit reversal of offset to (AG/SA) for (obligor's SSN)."

    10. Forward the form to the IRS Campus Accounting function with a current transcript of the account.

  5. If any forms remain, deduct any TC 131 amount not previously considered from the form on the next earliest tax module and continue processing.

21.4.6.5.14  (11-19-2012)
Input of Tax Offset Reversals, TC 821/TC 822

  1. Reverse tax offsets in the opposite order in which they occurred. The last offset out should be reversed first.

  2. Reverse any credit interest that was transferred with the offset. If you do not reverse the full amount of the offset, you must compute the amount of credit interest allowed on the portion you are reversing.

  3. Follow the procedures below to reverse a tax offset when a clear determination is made that a portion of the injured spouse's refund has been applied to a tax liability for which he/she is not responsible.

    1. Input the appropriate credit transfer using CC ADD24/CC ADC24 to reverse the portion of the offset applicable to the injured spouse's share of the refund.

    2. Use a TC 570 on the credit portion of the transfer.

    3. Transfer the credit to a liability of the injured spouse and/or issue a manual refund to prevent the credit from offsetting back to the same debt.

    4. When issuing a manual refund, use the applicable BPI to assign ownership of the refund to the injured spouse. See IRM 21.4.6.4.2.1, Top Offset Bypass Indicators.

    Note:

    The manual refund is issued in the joint name line unless the injured spouse requested in writing or on Form 8379, Injured Spouse Allocation, that it be issued in one name only.

21.4.6.5.15  (10-01-2004)
TOP/DMF Source and Reason Codes

  1. Source Code (SC) 7 must be input with Reason Code (RC) 086, RC 087, RC 089, RC 090 or RC 091. SC 7 results in the following statement on the notice:

    "We reversed all or part of the tax refund amount we credited to an outstanding child support, federal, or state debt because"

  2. RC 086, RC 087, RC 089, RC 090, and RC 091 complete the statement by indicating specific DMF/TOP adjustments. See RC statements below:

    • RC 086 - "an injured spouse form was filed. The spouse who is not responsible for the debt claimed his/her share of the joint tax refund. Tax law requires that we honor the injured spouse form"

    • RC 087 - "we have corrected an error found when processing your return"

    • RC 089 - "the offset violated the automatic stay of bankruptcy"

    • RC 090 - "the offset resulted from a payment specifically intended for an outstanding IRS debt"

    • RC 091 - "of revisions on your amended tax return, filed by April 15 of the tax year it was due"

    Caution:

    DMF/TOP source and reason codes may not be used in combination with any other IMF source and reason codes.

21.4.6.5.16  (10-01-2013)
Form 8379 Disallowance

  1. Fully disallow the Form 8379, Injured Spouse Allocation, by inputting a TC 290 for .00, BS 98 or BS 99, SC 7, HC 3, and RC 086, for TOP offsets. Use SC 0, HC 3 and RC 99 for tax offsets, if:

    1. The injured spouse has no payments or refundable credits.

    2. An agency refund (TC 899 or TC 971 AC 599) was issued for the entire amount of the offset.

    3. The injured spouse's portion of tax exceeds their refundable credits.

    4. The injured spouse is not entitled to a refund, based on community property laws (tax offsets only).

    Note:

    Use BS 99 if the original return was filed electronically, do not use BS 98 and attach an IMFOLR print.

  2. Partially disallow the Form 8379, Injured Spouse Allocation, by inputting a TC 290 for .00, BS 00 or BS 18, Source Code 7, Reason Code 086 and HC 3. Input HC 4  if you are issuing a manual refund. If an agency refund was issued for part of the offset, allow the portion of the refund that was not refunded by the agency.

    Note:

    Electronic filed return disallowance cases: Input the Adjustment TC 290, NSD, block 00 and attach an IMFOLR print.

  3. Send Letter 105C, Claim Disallowed, for full disallowance or for TOP/DMF offsets. Send Letter 106C, Claim Partially Disallowed, for partial disallowance.

    Note:

    If you are fully disallowing the Form 8379, Injured Spouse Allocation, as stated in par. (1) above, and the debt indicators indicate there are no debts owed by either spouse, disallow the allocation and send a 105C. Explain why the spouse is not entitled to any portion of the overpayment and then include the following: "The 20XX overpayment will be applied to any legal obligation for the other spouse which we are required to collect. If there is not a debt owed or it is less than the overpayment, a refund will be issued in 3 to 4 weeks."

    1. Include taxpayer appeal rights and the following statement when disallowing:
      "For reconsideration, you may send us a letter with any new information not included on the original form, or you may file suit with the United States Claims Court or District Court having jurisdiction."

      Note:

      See IRM 21.4.6.5.9.9, Statute of Limitations for Filing Form 8379 and Reversing DMF, TOP, or TAX Offsets, when disallowing an injured spouse allocation.

    2. Do not include the 105C/106C paragraph that states "the taxpayer may file suit within two years from the mailing date of the letter" .

    3. If the address is different on the "loose" Form 8379 than the address on ENMOD, issue the 105C or 106C letter to the address on the Loose Form 8379.

  4. When working on CIS, you must attach the letter within CIS. Refer to IRM 21.5.1.5.1(7), CIS General Guidelines. Print and attach a copy of the letter to the Form 8379, Injured Spouse Allocation, when working a paper case.

21.4.6.5.16.1  (12-19-2012)
Response to Disallowance

  1. When a taxpayer responds to Letter 105C , Claim Disallowed, or Letter 106C, Claim Partially Disallowed, stating he/she wants to appeal the disallowance, his/her written statement should include the following:

    • The reasons for disputing the disallowance; (e.g., citations of law or other authority)

    • Name, address, and a daytime telephone number

    • Taxpayer's or authorized representative's signature (under penalty of perjury)

  2. Request the original return and the disallowed form along with a print of CC IMFOL or CC TXMOD.

    If Then
    Taxpayer sends additional information and Form 8379, Injured Spouse Allocation, can be allowed Follow normal injured spouse allocation processing procedures.
    Taxpayer is confused or asking questions Attempt to resolve problem before forwarding to Appeals.
    Taxpayer sends additional information and Form , Injured Spouse Allocation , cannot be allowed 1. Do not send another disallowance letter.
    2. Close case and transfer it to appropriate Appeals office.
    3. Use local procedures for transferring cases.
    4. Manager must review case before forwarding to Appeals office.

  3. Responses to letters 105C/106C that relate to prior disallowances for injured spouse's who are or were residents of a Community Property state are processed as follows:

    1. Request the original return and/or disallowed Form 8379, Injured Spouse Allocation, if applicable.

    2. Process the form without regard for the prior disallowance, if current procedures provide for allowance of the form. See IRM 21.4.6.5.10, Community Property Allocation.

21.4.6.5.17  (10-01-2013)
Bankruptcy Cases Involving Tax Offset

  1. For taxpayer inquiries regarding bankruptcy and a tax offset, immediately call the Centralized Insolvency Operation (CIO) ≡ ≡ ≡ ≡ ≡ ≡ ≡ or fax Form 4442, Inquiry Referral, clearly labeled "Expedite" to the CIO ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ before making any account adjustments so the potential stay violation may be resolved within 48 hours.

  2. Insolvency will determine if the tax offset is in violation of the automatic stay.

  3. If the tax offset was in violation of the automatic stay, follow Insolvency's instruction to reverse the tax offset and issue a manual refund with BPI 7.

    Note:

    Only use BPI 3 if instructed to do so by Insolvency.

    See IRM 21.4.6.5.9.3(18)(e) reminder for what is required on theForm 5792,, Request for IDRS Generated Refund (IGR).

    Note:

    When working Form 8379, Injured Spouse Allocation, 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. Contact Insolvency at the Centralized Insolvency Operation (CIO) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to determine if the Injured Spouse's refund can be issued. If approval to issue the refund is received, input a Manual Refund using BPI 8 or 9.

    IMPORTANT: DO NOT give out the TOP/DMF Liaison or Insolvency phone number above.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If Insolvency states not to issue the refund, send Letter 3179C, "Refund Offset to Treasury Offset Program (TOP) Nontax Obligation" , informing the injured spouse the result of the allocation and advise the injured spouse to contact Insolvency.

    1. If Insolvency provides a specific name and number for the injured spouse to contact, include that information in Letter 3179C.

    2. If Insolvency does not provide a specific name and number for the injured spouse to contact, include the Philadelphia CIO telephone number 1-800-973-0424 in the Letter 3179C.

    3. Notate on CIS that Insolvency did not give approval for a refund and that the injured spouse has been instructed to contact Insolvency.

    4. Do not release any freezes.Close the case.

21.4.6.5.17.1  (10-01-2013)
Bankruptcy Cases Involving DMF Offset

  1. For cases involving bankruptcy and a DMF offset, immediately call the Centralized Insolvency Operation (CIO) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or fax Form 4442, Inquiry Referral, clearly labeled “Expedite” to the CIO #1-855-235-6787# before making any account adjustments so the potential stay violation may be resolved within 48 hours.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    Before you contact Insolvency, verify through the use of CC ENMOD or CC IMFOLE that the agency has not refunded the offset (TC 131).

  2. If Insolvency determines the offset is in violation of the automatic stay, Insolvency will contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ for a copy of the Insolvency Special Procedures Referral Form. Insolvency will complete and fax the form to the TOP/DMF Liaison Office ≡ ≡ ≡ ≡ ≡ ≡ ≡ . The TOP/DMF Liaison will either approve or disapprove the request for a DMF offset reversal.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Cases approved for DMF offset reversal may be referred to Accounts Management (AM) by Insolvency. Insolvency will detail the action necessary on Form 4442/e4442 and send to the appropriate AM function.

    Note:

    When working Form 8379, Injured Spouse Allocation, 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. Contact Insolvency at the Centralized Insolvency Operation (CIO) ≡ ≡ ≡ ≡ ≡ ≡ ≡ to determine if the Injured Spouse's refund can be issued. If approval to issue the refund is received, input a Manual Refund using BPI 8 or 9. See IRM 21.4.6.5.9.3(18)(e) reminder for what is required on the Form 5792,,Request for IDRS Generated Refund (IGR).

    IMPORTANT: DO NOT give out the TOP/DMF Liaison or Insolvency phone number above.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If Insolvency states not to issue the refund, send Letter 3179C, "Refund Offset to Treasury Offset Program (TOP) Nontax Obligation" , informing the injured spouse the result of the allocation and advise the injured spouse to contact Insolvency.

    1. If Insolvency provides a specific name and number for the injured spouse to contact, include that information in Letter 3179C.

    2. If Insolvency does not provide a specific name and number for the injured spouse to contact, include the Philadelphia CIO telephone number 1-800-973-0424 in the Letter 3179C.

    3. Notate on CIS that Insolvency did not give approval for a refund and that the injured spouse has been instructed to contact Insolvency.

    4. Do not release any freezes..Close the case.

21.4.6.5.17.2  (10-01-2013)
Bankruptcy Cases Involving TOP Offset

  1. Cases involving bankruptcy and TOP offsets require that the agency receiving the offset make the refund unless:

    1. It can be determined that IRS was aware of the bankruptcy prior to issuing the refund that was offset.

    2. We, at the IRS, failed to put a BPI 3 on the refund to bypass offset.

      Note:

      A TC 520, with closing code 60-67, 81, or 83- 89 on the account with a transaction date prior to 10/17/2005, generates a BPI 3 on refunds that are issued systemically. Manual refunds issued from accounts with a -V or -W Freeze require input of BPI 3.

  2. Research the account for agency refunds (TC 899 or TC 971 AC 599 Type 2) or prior reversals (TC 766 with an Offset Trace Number (OTN).

  3. If research shows that the TOP offset is available for reversal, immediately call the Centralized Insolvency Operation (CIO) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or fax Form 4442, Inquiry Referral, clearly labeled "Expedite" to the CIO ≡ ≡ ≡ ≡ ≡ ≡ ≡ before making any account adjustments so the potential stay violation may be resolved within 48 hours. Once Insolvency determines the offset is in violation of the automatic stay, Insolvency will contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for a copy of the Insolvency Special Procedures Referral Form. Insolvency will then complete and fax the form to the TOP/DMF Liaison Office ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . The TOP/DMF Liaison will either approve or disapprove the request for a TOP offset reversal depending on information acquired during research.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡


    Cases approved for TOP offset reversal may be referred to Accounts Management (AM) by Insolvency. Insolvency will detail the action necessary on Form 4442/e4442 and submit it to the appropriate AM function.

    Reminder:

    When working Form 8379, Injured Spouse Allocation, 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. Contact Insolvency at the Centralized Insolvency Operation (CIO) ≡ ≡ ≡ ≡ ≡ ≡ ≡ to determine if the Injured Spouse's refund can be issued. If approval to issue the refund is received, input a Manual Refund using BPI 8 or 9. See IRM 21.4.6.5.9.3(18)(e) reminder for what is required on the Form 5792,,Request for IDRS Generated Refund (IGR) IMPORTANT: DO NOT give out the TOP/DMF Liaison or Insolvency phone number above.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If Insolvency states not to issue the refund, send Letter 3179C, "Refund Offset to Treasury Offset Program (TOP) Nontax Obligation" , informing the injured spouse the result of the allocation and advise the injured spouse to contact Insolvency.

    1. If Insolvency provides a specific name and number for the injured spouse to contact, include that information in Letter 3179C.

    2. If Insolvency does not provide a specific name and number for the injured spouse to contact, include the Philadelphia CIO telephone number 1-800-973-0424 in the Letter 3179C.

    3. Notate on CIS that Insolvency did not give approval for a refund and that the injured spouse has been instructed to contact Insolvency.

    4. Do not release any freezes. Close the case.

21.4.6.5.18  (12-19-2012)
Combat Zone Cases

  1. Declaration of any area, as a combat zone or Qualified Hazardous Duty Area (QHDA), affects certain military personnel who are listed as debtors and are participating in combat zone initiatives. Combat Zone (CZ) accounts, identified by a -C freeze, indicate a taxpayer who is or was serving in a designated combat zone area.

    Note:

    -C freeze stays on the account even after the taxpayer is no longer in the CZ. When working an account that contains a –C freeze, additional research is required to determine the taxpayer's CZ status. Research CC IMFOLE for the Combat indicator on Line 11.


    If Combat indicator is "1", then the taxpayer is still serving in a combat zone. Any compliance activity such as assessing or collecting tax is prohibited. However, if the taxpayer has other issues or requests information, you may work these other issues and contact the taxpayer if needed. If Combat indicator is "2", then the taxpayer is no longer a combat zone participant. Follow normal IRM procedures to work the case. See IRM 5.19.10.6.3, Combat Zone Freeze Code, for additional information.

  2. For such military personnel, Federal income tax refunds will not be offset to any Tax or Federal agency debt. Offsets will only occur on child support obligations.

  3. Combat Zone (—C Freeze) accounts have a BPI 4 set when a computer generated refund is issued. BPI 4 allows for TOP offset to any child support debts. BPI 5 and 6 must be input on injured spouse manual refunds when —C freeze is present.

  4. DMF offsets that were inadvertently applied to Federal agency debts other than child support should be reversed and manually refunded to the affected taxpayers. This action is initiated when the taxpayer contacts IRS.

  5. Reverse and refund any DMF offsets to Federal agency debt, identified by agency codes 03-62, according to the entry and exit date of the participant/taxpayer.

    1. Offsets to Child Support Agencies 01 and 02 MAY NOT be reversed.

    2. Offsets must be reversed according to instructions. See IRM 21.4.6.5.13.4, Input of DMF Offset Reversals TC 897.

    3. Input TC 897 with HC 4, source code 7 and reason code 86.

    4. Send a letter of explanation to the taxpayer.

    5. Issue manual refund with applicable BPI.

21.4.6.5.19  (04-01-2013)
Mixed Entity Cases With TOP/DMF Offsets

  1. To reverse TOP/DMF offsets for mixed entity cases:

    1. Research to determine which taxpayer's refund was offset. The DLN of the TC 846/TC 896/TC 898 will match the DLN of the original return.

    2. Contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if needed. The Liaison contacts the agency to determine which taxpayer owes the DMF obligation.

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. If research indicates the correct taxpayer was offset, do not reverse the offset.

    4. If the "wrong" taxpayer was offset, the offset must be reversed after determining that there has not been an agency refund (TC 131, TC 899 or TC 971 AC 599). See IRM 21.4.6.4.3.1, DMF Offset Research, for information on DMF agency refunds and IRM 21.4.6.4.2.6, TOP Offset Research.

    5. If the account is less than 6 years old and needs to be re-sequenced, you need to reverse the offset. If the offset is more than 6 years old, contact the Fresno TOP/DMF Liaison for manual reversal procedures.

  2. Reverse TOP offsets for the full amount available, prior to taking any further action on the account. See IRM 21.4.6.4.2.10, Netting TOP Offsets and Reversals.

  3. If there was an Agency Refund for the full amount do not reverse the TC 896/TC 898 If there was an Agency Refund for a partial amount reverse any remaining amount TC 896/TC 898/TC 971 AC 598 minus any TC 131/TC 899/TC 971 AC 599.

  4. Continue to adjust the account using normal Mixed Entity procedures as outlined in IRM 21.6.2.4.3, Mixed Entity Procedures.

21.4.6.5.20  (04-01-2013)
Scrambled SSN Cases With TOP/DMF Offsets

  1. TOP/DMF offsets must be reversed for condition 2 scrambled SSN cases.

  2. TOP/DMF offsets on condition 1 scrambled SSN cases are reversed only if the wrong taxpayers money offset to the debt.

  3. To reverse TOP/DMF offsets for scrambled SSN cases:

    1. Reverse an offset only when you can establish that the taxpayer who was offset absolutely was not the obligor. Contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or Fax the request ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Follow up with the Fresno TOP/DMF Liaison if you have not received a response after 5 business days.

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. If research indicates the correct taxpayer was offset, do not reverse the offset.

    3. If the "wrong" taxpayer was offset, reverse the offset after determining that there has not been an agency refund, TC 131/TC 899. See IRM 21.4.6.4.4, TC 131 Agency Refund/Reversal and IRM 21.4.6.4.2.8, TC 766 with OTN TOP Offset Reversal.

  4. If preliminary research does not indicate an agency refund, follow Scrambled SSN Procedures in IRM 21.6.2.4.4, Scrambled SSN Case Procedures.

  5. Scrambled SSN cases with TOP offset (TC 898) must be reversed in whole (TC 766 with OTN), unless any agency refund has been issued.

21.4.6.5.21  (04-01-2013)
Re-sequence Cases

  1. Prior to re-sequencing an account to a temporary number or different valid SSN, reverse any TC 896 or TC 898 on the "from" account if it is within 6 years from the date of original offset. If more than six years have passed, contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ for a manual reversal. Refer to IRM 21.4.6.5.25.1, UPC 134.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. The net DMF offset amount (TC 896s/TC 897s with the same Agency/Sub-Agency (AG/SA) codes less any agency refunds, TC 131, for the same AG/SA and Processing Year) must be zero on the "from" account.

    2. The net TOP offset amount must be zero on the "from" account for a successful merge. See IRM 21.4.6.4.2.10, Netting TOP Offsets and Reversals.

      Note:

      Allow three weeks for the posting of the reversal transactions when calculating the six-year period. Do not reverse any TC 896(s) or TC 898(s) on the " to" account unless other conditions allow for it.

  2. If there are two or more offsets with different dates, consider each one separately when determining the six-year period for reversal.

  3. All DMF/TOP reversals must be input to the SSN from which the offset occurred, so that the correct debtor’s account can be updated with the agency.

    Caution:

    A reversal of the offset cannot be input after six years have elapsed from the date of the TC 896/TC 898. This causes an UPC 134, RC 04 or RC 05. Contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , for a manual reversal. Please allow at least 60 days for the manual reversal to post.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.4.6.5.22  (04-01-2013)
Mixed Period Cases

  1. To reverse mixed-period offsets, with DMF/TOP offset from incorrect-year return posting first, take the following actions:

    1. Request CC IMFOL, CC RTVUE, and CC MFTRA and returns on all years involved.

    2. Transfer any misapplied payments to the correct period. Use a secondary TC 570 as needed.

    3. Input a TC 971, AC 001 to cross-reference the correct tax period.

    4. Increase or decrease tax and credits to reflect the correct figures. Use the appropriate HC. See IRM 21.4.6.5.13, TOP/DMF Offset Reversals.

    5. Input the TC 897 or TC 766 as a separate adjustment in the required input order.

    6. If the correct return has been filed and an overpayment is indicated, reverse only the portion of the overpayment that should not be applied to the DMF/TOP account.

    7. If an agency refund has occurred, do not reverse the TC 896/TC 898 or TC 971 AC 598 (manual input of TOP offset record) for any amount refunded by the agency. Advise the taxpayer that a processing error has been made and explain that any additional offset or balance-due notice will be issued during reprocessing.

    8. If a refund was issued and Earned Income Tax Credit (EITC) is involved, refer to IRM 21.6.3.4.2.7, Earned Income Tax Credit (EITC).

    9. If a refund was issued and Earned Income Tax Credit (EITC) or other refundable credits (e.g. Additional Child Tax Credit, Making Work Pay Credit, American Opportunity Credit, etc.) is involved, refer to IRM 21.6.4.4.16.3(1)(n), Incorrect Year Posted First.

  2. If there is no TC 150 in the correct tax period:

    1. Reprocess the return to the correct tax module. Refer to IRM 21.5.2.4.23, Reprocessing Returns/Documents.

    2. If a Form 8379, Injured Spouse Allocation is attached to the return, renumber and process the return in BS 920-929.

    3. Input TC 599 with closing code (cc) 18 using CC FRM49 on the re-processable year, when there is a TC 140 on the module.

  3. If there is a TC 150 on the correct year, adjust and work the return/form for the correct tax period. If a Form 8379, Injured Spouse Allocation, is attached, input a TC 971, AC 071. Advise the taxpayer of corrective action.

21.4.6.5.23  (10-01-2007)
CP 29 E– Freeze Injured Spouse Allocations

  1. Form 8379, Injured Spouse Allocation, may post to the Master File as an amended return without an original, creating an E– Freeze, when the injured spouse files Form 8379 using his/her own SSN, instead of the primary SSN shown on the original joint return.

  2. Resolve the E– Freeze on the incorrect SSN according to CP 29 instructions in IRM 21.6.7.4.2, Amended Return — No Original — CP 29 (Amended Return Posts to an Account With No Original Return Present).

  3. When the Form 8379 posts to the wrong spouse's SSN, work the form under the correct SSN.

    1. Input TC 971, AC 071, to show that a Form 8379 was received. The transaction date is the received date of the Form 8379.

    2. Process the form under the correct SSN. See IRM 21.4.6.5.9, Form 8379, Injured Spouse Allocation.

  4. When the original Form 1040, U.S. Individual Income Tax Return, is found behind Form 8379:

    If Then
    Form 8379 posted to the correct SSN and the original return is found behind the Form 8379 1. Process the return with a new DLN, BS 920–929, before working the allocation.
    2. Staple Form 8379 behind Form 1040 and send for processing.
    Form 8379 posted to the incorrect SSN, and the original Form 1040 is behind the Form 8379 1. Reprocess the return with a new DLN, BS 920–929, before working the allocation.
    2. Resolve the (E-) freeze condition according to the CP 29 instruction in IRM 21.6.7.4, Adjusting Individual Tax Returns.
    3. Input TC 971, AC 002.

21.4.6.5.24  (10-01-2013)
Returned Refund Check

  1. IRS overpayments that were partially TOP-offset and partially refunded, and are later returned and credited to the taxpayer's account (TC 740/TC 841), may be for an amount less than the original refund, TC 840/TC 846. Some examples of returned payments include:

    • Undelivered refunds

    • Checks returned uncashed by the taxpayer

    • Checks uncashed after 13 months

  2. Bureau of Fiscal Service will normally reverse all offsets associated with a canceled refund and return the full amount of the original TC 840/TC 846 to IRS. However, Bureau of Fiscal Service will deduct from the original refund any portion of the offset previously reversed by IRS (TC 76X with OTN), and/or previously refunded by the agency (TC 899 type 2 and 3, less TC 899 type 4), with the same OTN(s) as the TC 898(s) offset.

  3. If the undelivered or canceled refund, TC 740/TC 841, is less than the TC 840/TC 846, and credit interest, TC 770/TC 776, was included, then Master File (MF) prorates the amount of interest reversed. The calculation below provides the amount of interest related to the portion of the refund that was canceled.

    Prorated Interest on Partial Refund Cancellation
    TC 777 = TC 740/TC 841 TC 840/TC 846 × TC 770/TC 776

  4. The following example illustrates a returned refund, TC 841, that posted for an amount less than the original refund that was offset. The original refund for $1,586, TC 846 dated 03/06/2009, was offset for $1,000, TC 898. Master File reversed $550, TC 766, and the agency refunded $450, TC 899 type 2, leaving only $586 for Bureau of Fiscal Service to return.

    Note:

    This example illustrates the exception to the rule. The vast majority of refunds are canceled for the original amount issued.

    Example:

    TC POSTED AMT CYC DLN  
    846 03062009 1,586.00 20091209 28221-067-92005-9 BPI>0
    898 03062009 .00 20091210 28277-067-92005-9 OFFST-AMT> 1,000.00 OTN-CD>12345–67890 OTN>12345-67890
    290 04192009 .00 20091214 28254–109–00001–9  
      ADJ-RSN-CD>86…  
    766 04152009 550.00– 200914 28254–109–00001–9 OTN-CD>12345–67890 BPI>1
    846 04192009 550.00– 20091214 28254-109-00001-9 BPI>1
    899 03092009 .00 20091222 28221-067-92005-9 OFFST-AMT> 450.00–  
    OTN-CD>12345–67890 OFFST-REC-TYPE>2
    841 03062009 586.00 20091226 28277–178–99999–9  
              CK#>000
    9435871

  5. A UPC 138, RC 0, will still result if there is a TC 898 TOP offset and the TC 740/TC 841 is less than the related TC 840/TC 846: (TC 899 type 2 or 3) + (TC 899 type 4) − (TC 76X), all with the same OTNs as the TC 898. Refer to IRM 3.17.79.10.7, Incorrect Cancellation Amounts, for correcting UPC 138.

  6. In the above example, the TC 841 would unpost if it were less than $586.00, determined as follows:

    $1,586.00 (TC 846) − $450.00 (TC 899 type 2) − $550.00 (TC 76X) = $586.00

    Note:

    The TC 76X will always be a negative number or zero. The net of all TC 76X with the same OTN cannot be greater than zero. Disregard all signs when adding or subtracting the transaction amounts.

  7. If the address needs to be updated on the returned refund check and a BPI is required to avoid an inappropriate offset to a non-tax debt, do not request the duplicate refund issuance through CC CHK64. Prepare a manual refund with the appropriate BPI.

21.4.6.5.24.1  (10-01-2013)
Injured Spouse Returned Refunds

  1. When an injured spouse files a Form 8379, Injured Spouse Allocation, that results in a reversal and refund of the DMF or TOP offset, and the agency also refunds the offset for some reason, the injured spouse often returns the IRS refund.

  2. If the TC 841 creates a credit balance and it is determined that the DMF offset reversal posted or the TOP offset reversal was honored by Bureau of the Fiscal Service , inform the taxpayer that he/she must return the refund to the agency. Explain that IRS has already obtained the offset funds from the agency and that the agency is now owed the money. IRS can no longer manually repay the refund to the agency. Allow the credit to refund if there are no other open issues. Refer to IRM 21.5.6.4.31, P— Freeze.

  3. If the injured spouse explains that the agency issued a refund and the TC 841 satisfies a debit balance in the module, no further action is necessary. This occurs when a DMF offset reversal, TC 897, does not post or a TOP offset reversal, TC 766 with OTN, was denied by Bureau of Fiscal Service (subsequent TC 767 in the module with the same OTN).

    Caution:

    Do not input TC 767 with OTN to correct a TC 766. See IRM 21.4.6.5.13.3, TC 766 Reject Listing, for information on denied TOP reversal requests.

21.4.6.5.25  (12-19-2012)
TOP/DMF Unpostable Conditions

  1. The unpostable codes explained below deal with conditions specifically related to TOP and DMF offsets. Some of these codes may also occur when you attempt to post other transactions not explained in this section. Refer to Document 6209, IRS Processing Codes and Information, for additional transactions and reason codes not shown here.

21.4.6.5.25.1  (04-01-2013)
UPC 134

  1. A UPC 134, RC 03, is an IMF unpostable that occurs when an account containing a full or partially unreversed TC 898 (net offset amount greater than zero) attempts to merge with another account, and the 23C date of the TC 898 is within six years of the current date. Refer to IRM 21.6.2, Adjusting TIN-Related Problems.

    1. On the "from" account, identify all modules containing TC 898(s) and determine whether the net offset amounts are greater than zero and less than six years have passed since the date of offset. See IRM 21.4.6.4.2.10, Netting TOP Offsets and Reversals.

    2. Input a TOP offset reversal to reverse the net offset amount still remaining on any/all tax modules.

    3. After all adjustments have posted, attempt to merge the accounts again.

    Caution:

    Be sure that all TC 898(s) net to zero before attempting to merge the accounts again.

  2. A UPC 134, RC 04, occurs when a TC 897 attempts to reverse a TC 896 with the same Agency/Sub-Agency code, and the 23C date of the offset is more than six years from the date of reversal.

    1. Do not attempt to re-input the adjustment. The account must be corrected without regard to the offset. If necessary, treat the offset as an erroneous refund.

  3. A UPC 134, RC 05, occurs when a TC 766 with an Offset Trace Number (OTN) attempts to reverse a TC 898 with the same OTN, and the 23C date of the offset is more than six years from the date of reversal.

    1. Do not attempt to re-input the adjustment. The account must be corrected without regard for the offset. If necessary, treat the offset as an erroneous refund.

    Reminder:

    If you need to reverse a TC 898/TC 896 that is over six years contact the Fresno TOP/DMF Liaison≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , for a manual reversal. See IRM 21.4.6.5.13.2, Manual Reversal of TOP Offset , for additional instructions. Please allow at least 60 days for the manual reversal to post.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.4.6.5.25.2  (10-01-2013)
UPC 137 or UPC 437

  1. UPC 137 and UPC 437 are IMF and BMF UPC(s) unique to the posting of a TC 898 or TC 899.

    1. RC 1 results from an attempt to post a TC 898 with document code 45 when it does not find a TC 840 with the same DLN after 10 cycles.

    2. RC 2 results from an attempt to post a TC 898 with document code 45 attempting to post and it does not find a TC 840 with the same date or TC 898 with document code 77 does not find a TC 846 with a date within 12 days of the date of the TC 898.

    3. RC 3 results from an attempt to post a TC 898 when the amount is greater than the TC 840/TC 846 with the same dates.

    4. RC 4 results from an attempt to post a TC 899 when it does not find a TC 898 with the same OTN.

    5. RC 5 results from an attempt to post a TC 899 for an amount greater than the net TOP offset amount. See IRM 21.4.6.4.2.10, Netting TOP Offsets and Reversals.

      Note:

      In some instances, the TC 898 was deleted erroneously. A TC 899 will NEVER post to the account without a previously posted TC 898. You may see a TC 971 AC 598 or a TC 971 AC 599 which represents the manual input of an erroneously deleted TC 898 or TC 899 transaction. You must consider these transactions when netting the TOP offset amount.

    6. RC 6 results from an attempt to post a TC 899 with an XREF SSN that does not find a prior posted TC 898/TC 899 with the same XREF SSN (Not applicable to BMF).

  2. The Unpostables unit attempts to correct each of the above conditions. The case is referred to the appropriate Accounts Management (AM) Function if Unpostables is unable to correct the transaction.

    Note:

    Bureau of Fiscal Service cannot regenerate another TC 898 or TC 899 transaction when it has been erroneously deleted. Therefore, this unpostable transaction must NEVER be deleted.

    1. AM attempts to resolve the unpostable condition through research before contacting Bureau of Fiscal Service.

    2. Determine if the refund that was offset posted to a different tax period. Compare dates and DLNs and correct the tax period on CC UPRES, if necessary.

    3. Check the entity to see if the account was re-sequenced to another TIN. Locate a refund on the other TIN that has the same dates and DLN and correct the TIN on CC UPRES, if necessary.

    4. Check any XREF SSN to see if the refund that was offset posted under a different primary TIN. Correct as needed.

    5. If there is a discrepancy with the TC 898/TC 971 AC 598 or TC 899/TC 971 AC 599, contact the Fresno TOP/DMF Liaison ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.4.6.5.25.3  (12-19-2012)
UPC 142

  1. A UPC 142 occurs the first time a TC 897 is input on an account showing a TC 131 YR OFFSET, that is the same as the processing year of the TC 896 being reversed.

    1. The originator must research to determine the amount of the agency refund. Check CC IMFOLE or CC ENMOD for the TC 131 amount and YR OFFSET that is the same processing year as the TC 896 being reversed. YR OFFSET always refers to the processing year in which the offset took place, not the tax year.

    2. Re-input a reversal for the same amount, or the corrected amount, if you failed to take into account the agency refund the first time you input the adjustment.

    3. Deny the Form 8379 if the agency refund was not originally taken into account and a partial disallowance was not already sent. Follow Form 8379, Injured Spouse Allocation, disallowance procedures. See IRM 21.4.6.5.16, Form 8379 Disallowance, citing the refund as the reason for the denial.

    4. Initiate erroneous refund procedures for part or all of the injured spouse form refund that was previously issued. Refer to IRM 21.4.5, Erroneous Refunds.

21.4.6.5.25.4  (10-01-2013)
UPC 151

  1. For TOP Offset (TC 898) and Agency Reversal (TC 899), UPC 151 RC 0 occurs when the TC 898/TC 899 transaction returned by Bureau of Fiscal Service has a different name control than the one used by IRS.

    Example:

    Primary and secondary taxpayers have different last names and the secondary taxpayer is the debtor. Bureau of Fiscal Service provides the debtors name only. Consequently, the name control does not match master file.

    1. If there is a UPC 151 RC 0 on the account, research CC UPTIN of the campus identified in the Refund Schedule Number (RSN) of the TC 846/TC 840 on the account. To determine the appropriate campus, use the 8th and 9th position of the Refund Schedule Number (RSN). See IRM 3.17.79–5, Refund Schedule Number Format.

    2. Use CC UPCAS with Definer Z to input a message with the correct name control.

    3. Monitor the account for the TC 898/TC 899 to post, do not close the IDRS control base.

    4. When TC 898/TC 899 posts, work your Injured Spouse case.

  2. Occasionally, the TC 898 was deleted in error (DU 898 on CC TXMOD). When this occurs, you cannot do a TC 766 to reverse the offset systemically. You will need to do a manual reversal request. See IRM 21.4.6.5.13.2, Manual Reversal of TOP Offset.

    Note:

    You may see a TC 971 AC 598 which indicates the manual input of a deleted TC 898 transaction. You will need to do a manual reversal request.

  3. If there is no DU 898 on CC TXMOD, research CC UPTIN of the campus identified in the Refund Schedule Number (RSN) of the TC 846/TC 840 on the account. To determine the appropriate campus, use the 8th and 9th position of the Refund Schedule Number (RSN). See IRM 3.17.79–5, Refund Schedule Number Format, for additional information. If research indicates the TC 898 was deleted, see IRM 21.4.6.5.13.2, Manual Reversal of TOP Offset, to initiate procedures for a manual reversal request.

21.4.6.5.25.5  (01-01-2001)
UPC 168

  1. UPC 168, RC 0, is an IMF unpostable code that occurs when TC 766 with OTN fails to find a previously posted TC 898 with the same OTN.

  2. Input the reversal with the correct OTN or on the correct tax period, MFT, etc.

21.4.6.5.25.6  (04-01-2013)
UPC 189

  1. For DMF offsets, UPC 189, RC 0, occurs when a TC 897 is input for an amount greater than the TC 896 available for reversal.

    1. Recompute the TC 897 amount before re-inputting the adjustment.

    2. Be sure to account for any agency refund, TC 131 amount for the same YR OFFSET.

  2. See IRM 21.4.6.5.13.6, Multiple Tax Period with Same-Year DMF Offsets, when a UPC 189, RC 0 occurs and all of the following conditions are met:

    • Multiple DMF offsets to the same AG/SA, from multiple tax modules, in the same PY

    • TC 131 with significant money amount with YR OFFSET the same as the processing year of the multiple offsets, and

    • An attempted reversal of one or more of the offsets, for credit correctly due the taxpayer, results in UPC 189

  3. For TOP offsets, UPC 189, RC 06, occurs when a TC 766 with OTN is greater than the net TOP offset amount. See IRM 21.4.6.4.2.10, Netting TOP Offsets and Reversals.

    1. Recompute the amount of the TC 766.

    2. Be sure to take into account all pending and posted TC 899(s) or TC 971 AC 599(s) and TC 766(s) with the same OTNs.

21.4.6.5.25.7  (02-22-2013)
UPC 342

  1. UPC 342, RC 05, is a BMF unpostable code which occurs when TC 766 with OTN fails to find a previously posted TC 898 with the same OTN.

  2. UPC 342, RC 06, occurs when a TC 766 with OTN is greater than the net TOP offset amount. See IRM 21.4.6.4.2.10, Netting TOP Offsets and Reversals.

  3. UPC 342, RC 07, occurs when a TC 767 with OTN is greater than the net TC 76X with same OTN. See IRM 21.4.6.5.13.3, TC 766 Reject Listing.

  4. UPC 342, RC 08, occurs when a TC 766 with OTN attempts to reverse a TC 898 with the same OTN, and the 23C date of the offset is more than six years from the date of reversal.

    1. Do not attempt to re-input the adjustment. The account must be corrected without regard for the offset. If necessary, treat the offset as an erroneous refund.

    Note:

    If you need to reverse a TC 898/TC 896 that is over six years, a manual reversal is required. See IRM 21.4.6.5.13.2, Manual Reversal of TOP Offset.

21.4.6.5.26  (12-19-2012)
DMF Utility 50 Run

  1. AM Process and Program Management produces a Utility 50 Run in October of each year to determine the volume and money amount of unresolved Form 8379, Injured Spouse Allocations.
    Most common reasons for an unresolved condition are listed below:

    1. A TC 897 or TC 766 was input with a HC that is holding credit on the module (—K Freeze).

    2. A returned refund check resulting from a Form 8379, Injured Spouse Allocation, has posted to the account (P— Freeze).

    3. A manual refund was issued for an amount greater than the credit available on the module (—X Freeze).

    4. Form 8379, Injured Spouse Allocation, posts to wrong spouse's SSN (E- Freeze).

  2. These freeze conditions are resolved with the adjustment indicated by account research.

    1. Release HCs.

    2. Use a manual refund to reissue a returned refund check.

    3. Process erroneous refunds.

    4. Use CP 29 E- Freeze procedures.

  3. Debit balances are worked and accounts showing refunds in excess of available credits are processed as appropriate.

  4. Accounts with undeliverable refund checks must be researched for the correct address for re-issuance of a manual refund.

21.4.6.5.27  (10-01-2007)
Non-Master File Child Support

  1. IRC § 6305 authorizes the IRS to assert its full collection powers to enforce and collect certain delinquent child support obligations. This is commonly referred to as the "Full Collection" program. Refer to IRM 5.1.12.11, Child Support Obligations, which provides additional information, including the NMF assessment and collection processes.

  2. Public Law 93-647 authorizes the collection of child support debts through this "Full Collection" procedure.

  3. The obligation is assessed as a tax on NMF, MFT 59.

  4. If copies of legal documents or forms regarding support obligations are received, forward them to the NMF IRS Campus.

    Reminder:

    The Full Collection program is not related to refund offsets for child support made under the DMF or TOP programs.

21.4.6.5.28  (02-22-2013)
Injured Spouse Allocation for Immediate Tax Relief Credit

  1. The Economic Growth and Tax Relief Reconciliation Act of 2001, approved by Congress and signed by President Bush, directed the Treasury to send checks to most income taxpayers, giving them an advance payment of a 2001 tax credit.

  2. The IRS automatically processed the Immediate Tax Relief checks after taxpayers filed their returns for Tax Year 2000.

  3. The Injured Spouse is only entitled to his/her portion of the credit, which is 50 percent of the $600.00 credit for a married filing a joint return. If part of the refund was offset and part was refunded to the taxpayers, deduct the offset amount from the credit amount to determine if the injured spouse is entitled to any additional refund.

    Example:

    #1


    $600 Immediate Tax Relief Credit
    $100 Offset to Federal Agency
    $500 Taxpayer received the difference between Immediate Tax Relief Credit and offset amount.
    The injured spouse is not entitled to more refund. He/she received the injured spouse portion in the $500 that was issued to the taxpayers ($300 for the injured spouse and $200 for the debtor.)

    Example:

    #2


    $600 Immediate Tax Relief Credit
    $400 Offset to Federal Agency
    $200 Taxpayer received the difference
    The injured spouse is entitled to $100 of the offset. Bring back the $100.

  4. If the injured spouse Form 8379 is filed compute an allocation for the original offset and for the 50 percent of the Immediate Tax Relief Credit offset. Two adjustments are required, one for the original return offset and second for the Immediate Tax Relief Credit offset. Two TC 766(s) (with OTN(s)) are required.

  5. A manual refund is needed for all Immediate Tax Relief Credit offset reversals. If the injured spouse requests the refund in one name only, issue it in one name; in all other cases, issue the manual refund in both names. If you issue a manual refund for both the original return offset and the Immediate Tax Relief Credit offset, issue one check with interest paid on the original offset and none on the Tax Relief offset. No interest is paid on the Immediate Tax Relief Credit.

  6. When working a Form 8379, Injured Spouse Allocation, that offsets to a tax debt, first check to make sure that the injured spouse does not owe a tax debt. If he/she does owe, transfer his/her share to that debt. If he/she does not owe any debt, bring the money back to the 2000 account and issue a manual refund with the appropriate BPI.

  7. Work all Injured Spouse forms for the Immediate Tax Relief Credit offset under the Program Code 97149. In all cases involving only the Tax Relief Credit the remarks section of your Manual Refund Form 5792, Request for IDRS Generated Refund (IGR), must indicate "HR 1836 2001" . Where the Tax Relief Credit, and an original refund are issued on one manual refund, reflect the Tax Relief amount as "HR 1836 2001 $XXX" .

21.4.6.5.29  (02-22-2013)
Injured Spouse Allocation for Advanced Child Tax Credit

  1. The Jobs and Growth Tax Relief Reconciliation Act of 2003 directed the Treasury to advance payment of an increase to the 2003 Child Tax Credit (CTC) to eligible taxpayers.

  2. The IRS processed Advance Child Tax Credit (ACTC) checks based on original return data from posted Tax Year (TY) 2002 returns.

  3. The ACTC is always split 50 percent regardless of the amount of income, credit, the number of children claimed or the year claimed ''as long as it falls within the Statute of Limitations for refunding''.

  4. Once the ACTC offsets to pay a tax or non-tax debt, it loses it's identity as ACTC. Normal credit interest rules apply when considering credit interest if all or part of the credit is subsequently refunded. Issue a manual refund. ACTC is considered an IRS initiated adjustment, see IRM 20.2.4.7.5.5(4), 45-Day Rule and IRS Initiated Adjustments.

21.4.6.5.30  (02-22-2013)
Injured Spouse Allocations/Telephone Excise Tax Refund (TETR)

  1. If the taxpayer claimed the TETR refund on their 200612 original return and allocated the TETR refund on Form 8379, Injured Spouse Allocation, follow the instructions on Line 11, of Form 8379. Interest should be figured based on each taxpayer’s share of the TETR refund claimed on the original return.

  2. If the taxpayer claimed the TETR refund on their original return, but did not allocate the credit on Form 8379 allocate the TETR refund 50/50, one-half for each spouse, split any interest 50/50. Send Letter 3179C, Refund Offset to Treasury Offset Program (TOP) Nontax Obligation, to the taxpayer informing them: "We received and processed your Form 8379. Our records show you did not allocate the Telephone Excise Tax Refund on your Form 8379. Therefore, we allocated the credit for you, giving each spouse one-half of the credit. If you do not agree with the allocation, you must submit a new Form 8379 allocating the credit as you determine, and attach any supporting documentation."

21.4.6.5.31  (02-22-2013)
Injured Spouse Allocation/Stimulus Payment

  1. When you have a Form 8379 for the original refund, which has been processed and the stimulus payment is posted, you will work the Form 8379 for both the original refund and the stimulus payment.

    Note:

    If interest is due on the original overpayment, you will figure the interest on the original overpayment. Interest is only paid on the stimulus portion if the stimulus payment offset and was subsequently reversed. See paragraph (4) below.

  2. Compute an allocation for the original offset and 50 percent for the stimulus payment. The stimulus payment is always split 50 percent regardless of the amount of income, credits/children claimed or community property jurisdiction as long as it falls within the period of limitations for refunding.

  3. If part of the stimulus payment was offset and part was refunded to the taxpayers, deduct the refunded amount from the credit amount to determine if the injured spouse is entitled to any additional refund.

  4. Once the stimulus payment offsets to pay a tax or non-tax debt, it loses it's identity as a stimulus payment. Normal Interest rules apply when considering credit interest if all or part of the credit is subsequently refunded. Refer to IRM 21.6.3.6.8, Tax Year 2007 Offset Reversal Issues: Injured Spouse/Innocent Spouse/EITC.

  5. All injured spouse can be worked as a normal case as long as the Economic Stimulus Payment (ESP) was not reversed in cycle 200852. If the ESP was reversed in cycle 200852, the taxpayer had to claim the ESP on their 2008 return. See IRM 21.4.6.5.31.1, Injured Spouse Allocation/Recovery Rebate Credit (RRC).

  6. When working an injured spouse case after offset of the original overpayment and the stimulus payment, you will input two adjustments. One adjustment will be for the original overpayment and the second adjustment will be for the ESP. Be sure to use the correct OTN for each adjustment.

  7. If there is a joint debt and one or both spouses owes an individual debt you must first pay off the joint debt then:

    1. split the remaining ESP equally between both spouses;

    2. apply any applicable ESP to the individual debt owed; or

    3. reverse any previous offset ESP which belongs to the injured spouse and

    4. issue a manual refund to the injured spouse

    If there is no allocation involved, you will split the remaining ESP after paying the joint debt. Do not follow the procedures in IRM 21.4.6.5.11, Allocation of Injured Spouse Form 8379 . This is used only for processing normal injured spouse cases.

21.4.6.5.31.1  (02-22-2013)
Injured Spouse Allocation/Recovery Rebate Credit (RRC)

  1. The Recovery Rebate Credit (RRC) is a one-time benefit for people who didn't receive the full economic stimulus payment in 2008 and whose circumstances may have changed, making them eligible now for some or all of the unpaid portion.

  2. Each spouse must take their own exemption and is entitled to his/her share of the joint RRC/ESP up to $600.00. Allocate any recovery rebate credit received for any children to the spouse who was allocated the qualifying child's exemption on Form 8379, Injured Spouse Allocation. Exemptions for the children must be entered in whole numbers only. For example, you cannot allocate an exemption by giving each spouse 1/2 of the exemption.

  3. If the taxpayer is claiming the RRC on their 2008 return, you will need to look at the 2007 account. Determine if the injured spouse's share of the 2007 ESP was reversed in Cycle 200852 or the 2007 ESP was not received ( return not filed or not eligible for some or all of the ESP). If either spouse's share of the RRC was reversed in cycle 200852, the amount reversed should be allocated to that spouse. The remaining RRC is split 50/50 up to $600.00 for each spouse, plus any qualifying child exemption amount.

21.4.6.5.32  (10-01-2013)
First-TimeHomebuyer Credit

  1. The American Recovery and Reinvestment Tax Act of 2009 and the Worker, Homeownership, and Business Assistance Act of 2009 extended the first-time homebuyer credit and provided a waiver of the requirement to repay the credit, except when taxpayers dispose of the new residence within 36 months of purchase.

  2. When working Form 8379, Injured Spouse Allocation, cases involving the First-time Homebuyers Credit (2008, 2009 and 2010), the taxpayer may allocate the credit as they determine, in accordance with the instructions for Form 8379. For community property states you should follow the community property laws for each state.

  3. Under IRC § 6402 (a), the Service has discretion whether to offset an overpayment against a liability, but only when it is with respect to an internal revenue tax. Bureau of Fiscal Service , which administers the Treasury Offset Program, controls the offset of debts under sections 6402(c)-(f). This includes offsets against past-due support (delinquent child support); past-due legally enforceable debts owed to Federal agencies; past-due legally enforceable State income tax obligations; and covered unemployment compensation debt (basically unemployment compensation received by fraud). Therefore, with respect to amounts paid to a taxpayer under the first-time homebuyer credit, the Service has no authority under sections 6402(c)-(f) to prevent Bureau of Fiscal Service from offsetting in those cases in which Bureau of Fiscal Service has determined the offset appropriate. The same rule applies to the original legislation under the Housing Assistance Act of 2008 as it does to the extension under the American Recovery and Reinvestment Act.

21.4.6.5.32.1  (08-31-2012)
First-Time Homebuyer Credit Recapture

  1. The First-Time Homebuyer Credit (FTHBC), IRC § 36(f)(5), provides that for the purpose of the recapture tax, 50 percent of the amount of the credit claimed on a joint return is treated as having been allowed to each spouse.

    Exception:

    An Injured Spouse allocated and received the entire First-Time Home buyer Credit in a previous year is liable for repayment of the recapture tax.

  2. When working Injured Spouse Allocation Cases involving recapture research 2008/2009 returns to determine how the credit was allocated. Refer to IRM 21.6.4.4.19.1, Recapture of First-Time Homebuyer Credit (FTHBC ), for guidelines on the recapture. Some examples are provided below:

    Example:

    If a joint return was originally filed claiming the credit, and the credit was split 50/50 between the two spouses; and a joint return is filed with the 6 2/3 percent recapture, it will also be split 50/50.

    Example:

    If separate returns were originally filed and each person claimed part of the credit, each person should recapture 6 2/3 percent on their separate returns.

    Example:

    If separate returns were originally filed and now a joint return is filed reporting the recapture, the system should move the First-Time Home Buyer Credit entity from the secondary to the primary account and split the recapture based on the percentage.

  3. When working Injured Spouse Allocation Cases involving math errors with First-Time Homebuyer Credit, follow procedures in IRM 21.4.6.5.9.3(13), Form 8379 Filed with Original Return and IRM 21.5.4.4.7, Math Error with Injured Spouse.

  4. If the Return Statute Expiration Date (RSED) has expired, seeIRM 21.4.6.5.9.9, Statute of Limitations for Processing Form 8379 and Reversing DMF, TOP, or TAX Offsets.

21.4.6.5.33  (10-01-2013)
Making Work Pay and Government Retiree Credits - Schedule M

  1. For tax years 2009 and 2010, the Making Work Pay Credit provides a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns. This credit is reported on Schedule M of the Form 1040/Form 1040A , U.S. Individual Income Tax Return. The credit will be calculated at a rate of 6.2 percent of earned income, and will phase out for taxpayers with a modified adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly) with total elimination at $95,000/$190,000. See IF/AND/THEN Chart in paragraph (5) below.

  2. For people who receive a paycheck and are subject to withholding, the credit was typically handled by their employers through automated withholding changes made in early spring.

  3. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on the 2009 tax return filed in 2010.

  4. In addition to the Making Work Pay Credit, certain government retirees also will be eligible for a credit beginning in 2009 in an amount equal to $250 ($500 in the case of a joint return where both spouses are eligible individuals). This is also reported on Schedule M and attached to the Form 1040.

  5. When working an injured spouse allocation for 2009 and 2010, each spouse is entitled to his/her share of the credit. See IRM 21.6.3.4.2.13, Making Work Pay Credit - Schedule M and follow the chart below to determine how much each spouse is entitled to.

    IF AND THEN
    If one or both spouses has income (see Note below) The total earned income is $12,903.00 or less Calculate each spouse's share at a rate of 6.2 percent up to $400.00 for each spouse.

    Example:

    One spouse earned $8,000 and the other spouse $1,500. Total credit would be $589.00 (9,500 x .062). One spouse is entitled to $496 (8,000 x .062), but can only be allocated $400. The other spouse is entitled to $93 (1,500 x .062). The spouse who did not earn enough for the full $400 is allocated the $93 + $96 (the rest of the first spouses credit).

    If both spouses have income (see Note below) The earned income is $12,903.00 or more Split the credit 50/50.
    If one spouse has income (see Note below) The earned income is $12,903.00 or more (phased out with a MAGI of $150,000) Split the credit 50/50. You do not need to complete the Injured Spouse Worksheet. Use the shortcut method and annotate the case 50/50 split for the credit.
    If the taxpayers live in a Community Property State see Note below   Calculate the credit based on Community Property Laws for that state.

    Note:

    For all of the above scenarios, you will deduct any Economic Recovery Payment (ERP) or Government Retiree Credit received from the spouse who received the prepayment.


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