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

Generally, a BPI is generated systemically, but when issuing a manual refund, you must input the BPI on CC RFUND.

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

There are ten BPIs, 0 through 9.

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

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

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

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

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

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

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

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

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

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

CC RFUND has a field entitled "BYPASS INDICATOR" . This indicator is normally set to "0" . When CC RFUND is input on a Master File Tax (MFT) Code not eligible for offset, the indicator is set to "3" . When CC RFUND is input on a module with a (—C) combat zone freeze, the indicator is set to "4" . Refer to IRM 21.4.6.4.2.2, IMF TOP Offset and IRM 21.4.6.4.2.3, BMF and Civil Penalty TOP Offsets, below for additional information. The following validity checks are made for BPI's on CC RFUND.

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

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

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

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

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

TOP offsets are made against any refund issued from MFT 02, 07, 10, 13, 29, 34, 44, 46, 52, 55, 60, 63, 64, 77, and 78, unless a BPI is systemically generated on the refund or input on a manual refund. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

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

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

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

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

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

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

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

The following Transaction Codes (TC) are used solely for TOP offsets:

IRS does not have a separate account for TOP offsets as it had for the Debtor Master File (DMF).

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

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

A TOP offset appears on Command Code (CC) TXMOD as a Transaction Code (TC) 898 with an Offset Trace Number (OTN), the offset amount is shown as OFFST-AMT. If the secondary spouse owes the debt, the debtor TIN will also be shown DEBTOR-TIN. If there is no DEBTOR-TIN shown, the taxpayer with the primary TIN is the debtor.

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

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

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

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

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

The TC 898 TOP offset is dated the same as the prior posted TC 840 from which it originated. A TC 898, originating from a computer generated refund, will match the date of the TC 846.

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

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

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

See IRM 21.4.6.5.25.2, UPC 137 or UPC 437.

In some instances, a TC 898 will unpost as UPC 151 RC 0 due to a name control mismatch when FMS returns the record to IRS. See IRM 21.4.6.5.25.4, UPC 151.

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

A TOP offset reversal posts as a TC 766 with an Offset Trace Number (OTN) that is the same as the OTN of the TC 898 TOP offset being reversed. See IRM 21.4.6.5.13.1, Input of TOP Offset Reversals TC 766 with OTN.

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

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

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

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

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

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

There are four types of TC 899:

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

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

TC 899, type 3, with negative money amount, is used by FMS for FMS refund and IRS manual reversal requests.

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

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

See IRM 21.4.6.5.25.2, UPC 137 or UPC 437, for TC 899 UPC 137 or UPC 437 resolution.

In some instances, a TC 899 will unpost due to an erroneously deleted TC 898. See IRM 21.4.6.5.25, , Unpostable Offset Transactions for instructions.

The net TOP offset amount is needed to:

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

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

Command Code (CC) DMFOL and CC MFTRA G are no longer available to research DMF offsets.

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

To get the address and phone number of DMF (TC 896) accounts, contact the Fresno TOP/DMF Liaison. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ You will need the AG/SA code.

The following transaction codes were used for the DMF program:

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

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

When working a 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. See IRM 21.4.6.5.8.1, Allowable DMF/TOP Offset Reversals.

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

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

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

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

Effective 01/01/1999, Form8379 received without the original return are not numbered. They are forwarded to the Accounts Management (AM) Function and require the input of a TC 971, AC 071, when the case is controlled. For instructions concerning Form 8379 filed by itself, see IRM 21.4.6.5.9.4, Form 8379 Filed by Itself.

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

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

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

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

Taxpayers may file an Injured Spouse Allocation by attaching a Form 8379 to the back of their original Form 1040 , U.S. Individual Income Tax Return, Form 1040A, U.S. Individual Tax Return, Form 1040EZ,, Income Tax Return for Single and Joint Filers With No Dependents, indicating "Injured Spouse" in the upper left corner of the Form 1040 series.

When Form 8379 is filed, the TC 150 Document Locator Number (DLN) is assigned blocking series 920-929. This generates a Computer Paragraph CP 36D , Injured Spouse Claims Notice. The blocking series 920-929 sets a TC 570 freeze to hold the credit until the Form 8379 is worked.

Research Command Code INOLES or IAT Results IS (Injured Spouse) tool under both the primary and secondary Social Security Number (SSN), for the no debt indicator (N), TOP non-tax indicator (F), IRS indicator (I), or indicator (B) for both IRS and Treasury Offset Program (TOP) obligations. See IRM 21.4.6.4, Refund Offset Research.

The (I) indicator is not always set for all IRS Tax debts. Research any cross reference SSNs along with CC IMFOL, CC BMFOL, CC TXMOD, MFT 29 and MFT 31, etc. for any outstanding tax debts. Always attach INOLES or IAT Results IS (Injured Spouse) screens for both spouses showing the debt indicator (I), (F), (B) or (N) at the time the Injured Spouse Allocation is being worked.

When working an injured spouse allocation 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 cases 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.

The status of a debt at Financial Management Services (FMS) may change daily, but the debt indicator found on CC INOLE is updated weekly. The debt may be activated, inactivated or deleted within TOP before a refund is issued. Therefore, discrepancies may arise from one cycle to the next and IRS may not be aware of a TOP debt. Consequently, the refund will offset, resulting in having to reverse the offset and process the Form 8379. When working a Form 8379, and the debt indicator on CC INOLE is "N" for both taxpayers do not release the overpayment with a TC 571. You will work the injured spouse case and issue a refund to the injured spouse for his/her share of the overpayment. In addition, retain the IDRS category code as DMFC (97140 paper)/DMFE ( 97144 electronic).

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

On all other Forms 8379 received with the original return:

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

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

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

For each scenario above, issue the manual refund in both names unless the one name only box is checked on Form 8379 ,Injured Spouse Allocation.

Upon posting of a TC 840 with BS 9, any remaining overpayment is released to the appropriate debt except when the secondary taxpayer owes a tax debt and meets one or more of the following conditions for the secondary taxpayer:

Under certain circumstances, a manual refund is not required for tax debts. See exception in IRM 21.4.6.5.9.3(11). After the computation is complete, follow the scenarios below to determine if a RN 808/RN 810 or RN 809/RN 811 can be used to generate a systemic refund.

Update the address information on the secondary module if necessary. Send an explanation of the action taken to the taxpayers. 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, for tax offsets, if applicable. A letter is only required when an adjustment notice will not be sent.

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

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

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

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

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

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

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

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

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

Rev. Rul. 80–7 intends that income, deductions, personal exemptions, credits, and payments shown on the joint return be allocated to the spouse to whom they belong.

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

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

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

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

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

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

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

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

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

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

Review question 5 on Form 8379 , Injured Spouse Allocation, to determine if the taxpayer resides in a community property state.

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

For electronic filed returns, try to contact the taxpayer for the missing information via phone or Letter 3179C , Refund Offset to Treasury Offset Program (TOP) Nontax Obligation. If no reply is received, send a letter of rejection to the taxpayer advising him/her we cannot process the injured spouse form until we receive the missing information. Input a TC 290.00 with appropriate blocking series. Use the CP 36D, Injured Spouse Claims Notice, as your source document.

If a Form 8379, Injured Spouse Allocation, is unsigned and was not filed with the original signed return or attached to a signed Form 1040X , Amended U.S. Individual Income Tax Return.

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

Overview.

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

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