21.6.1  Filing Status and Exemption Adjustments

Manual Transmittal

September 03, 2014

Purpose

(1) This transmits revised IRM Section 21.6.1, Individual Tax Returns, Filing Status and Exemption Adjustments.

Material Changes

(1) Editorial changes were made throughout IRM 21.6.1. The web addresses, IRM and legal resources were checked and corrected, where necessary.

(2) IRM 21.6.1.4 Added procedures for Filing Status change and possible impact to the Premium Tax Credit (PTC).

(3) IPU 13U1440 issued 09-10-2013 IRM 21.6.1.4.3 Processing Separate-to-Joint Adjustments procedures updated to include the Supreme Court decision for the Defense of Marriage Act (DOMA).

(4) IPU 13U1692 issued 11-29-2013 IRM 21.6.1.4.3 Added IRM reference to determine when a joint election is valid.

(5) IPU 14U0147 issued 01-21-2014 IRM 21.6.1.4.3 Reminder added do not request any additional documentation from the taxpayer to validate the marriage.

(6) IPU 13U1456 issued 09-13-2013 IRM 21.6.1.4.3.1 Separate to Joint and Both Taxpayers Previously Filed procedures clarified when a refund was previously issued or an offset occurred, and a refundable credit was involved.

(7) IPU 13U1514 issued 09-27-2013 IRM 21.6.1.4.3.1 Added Statute reference for the Refund Statute Expiration Date (RSED).

(8) IPU 13U1652 issued 11-18-2013 IRM 21.6.1.4.3.1 Updated procedures for adjusting both accounts and transferring refunds for Separate to Joint Claims.

(9) IPU 13U1708 issued 12-06-2013 IRM 21.6.1.4.3.1 Clarified the return received date for the TC 971 AC 001.

(10) IPU 14U0519 issued 03-19-2014 IRM 21.6.1.4.3.1 Added IRM link for First Time Homebuyer Credit recapture.

(11) IPU 14U1214 issued 08-06-2014 IRM 21.6.1.4.3.1 Updated procedures for Separate to Joint claims when both taxpayers previously filed, a Hold Code "4" must be input when adjusting the primary account.

(12) IPU 14U0746 issued 04-23-2014 IRM 21.6.1.4.3.1 Updated procedures for moving refunds.

(13) IPU 14U1213 issued 08-06-2014 IRM 21.6.1.4.3.1 Updated procedures for Separate to Joint claims when both taxpayers previously filed, a Hold Code "4" must be input when adjusting the primary account.

(14) IPU 13U1514 issued 09-27-2013 IRM 21.6.1.4.4 Statute of Limitations Procedures for Separate to Joint added IRM reference when processing statute year claims.

(15) IPU 13U1440 issued 09-10-2013 IRM 21.6.1.4.5.1 Updated to include information on moving refund.

(16) IRM 21.6.1.5 Added procedures for adding and deleting exemptions and potential impact to the Premium Tax Credit (PTC).

(17) IPU 13U1635 issued 11-08-2013 IRM 21.6.1.5.2 Added the Personal Exemption Deduction for tax year 2014.

(18) IPU 13U1635 issued 11-08-2013 IRM 21.6.1.5.3 Added the Personal Exemption Phase-Out for tax year 2014.

(19) IPU 14U0147 issued 01-21-2014 IRM 21.6.1.5.4 Updated to include IRM link for math error responses.

(20) IPU 14U0400 issued 02-28-2014 IRM 21.6.1.5.4 Added Individual Taxpayer Identification Number (ITIN) IRM links.

(21) IPU 14U0349 issued 02-20-2014 IRM 21.6.1.6.2 Procedures updated for Command Code DDBCK.

(22) IPU 14U0678 issued 04-11-2014 IRM 21.6.1.6.2 Clarification for Command Code DDBCK "Follow IRM" response.

(23) Deleted IRM section Form 8914 Exemption Amount for Taxpayers Housing Displaced Individuals pertains to tax years 2009 and prior.

Effect on Other Documents

IRM 21.6.1, Filing Status and Exemption Adjustments, dated September 06, 2013 (effective 10-01-2013) is superseded. The following IRM Procedural Updates (IPUs) issued from September 10, 2013 through August 06, 2014, have been incorporated into this IRM: "13U1440, 13U1456, 13U1514, 13U1635, 13U1652, 13U1692, 13U1708, 14U0100, 14U0147, 14U0349, 14U0400, 14U0519, 14U0678, 14U0746, 14U1213."

Audience

All employees performing account work.

Effective Date

(10-01-2014)

James P. Clifford
Director, Accounts Management
Wage and Investment Division

21.6.1.1  (10-01-2011)
Filing Status and Exemptions Adjustments Overview

  1. This section provides information on changes made to filing status and exemptions, usually after a tax return has been filed. It is designed to assist in making the appropriate changes to a taxpayer’s return and evaluate each situation and make a determination to adjust a taxpayer’s filing status and/or exemptions. Because of inflation, the amount allotted for each filing status and exemption usually increases yearly. An overview of procedures in a "step list" format, are available at the end of this section, refer to Exhibit 21.6.1-1.

    Note:

    Prior to release of any tax information to a taxpayer or their representative, appropriate disclosure authentication must be made. For additional information, refer to IRM 21.1.3.2, General Disclosure Guidelines. If applicable, refer to IRM 11.3.2.6.1, Leaving Information on Answering Machines/Voice Mail.

  2. There are two types of exemptions:

    • Personal

    • Dependency

  3. Personal exemptions are limited to the taxpayer and his/her spouse.

  4. Dependency exemptions are for anyone else the taxpayer can properly claim as a dependent on a return.

  5. The amount of one personal exemption and one dependency exemption is the same.

  6. Generally, filing status is determined by marital status on the last day of the year.

  7. Filing status will affect the standard deduction (unless the taxpayer itemizes), as well as the tax rate.

  8. For tax years ending after 12-21-2000, a parent of a kidnapped child may qualify to file Head of Household (if the parent would otherwise have been entitled to claim the exemption if there had been no kidnapping) or Qualifying Widow(er) with Dependent Child. Refer to Publication 501, Exemptions, Standard Deductions and Filing Information, for additional information.

  9. Refer taxpayers to the Taxpayer Advocate Service (TAS) when the contact meets TAS criteria and you can’t resolve the taxpayer’s issue the same day. Refer to IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria. The definition of same day is within 24 hours. Same day cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer’s issue. Do not refer same day cases to TAS unless the taxpayer asks to be transferred to TAS and the case meets TAS criteria. Refer to IRM 13.1.7.4, Same-Day Resolution by Operations. When you refer cases to TAS, prepare Form e-911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), via AMS or Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), if AMS is not available.

21.6.1.2  (10-01-2002)
What Are Filing Status Changes?

  1. A taxpayer may file an amended return to change the filing status claimed on the original return. Changes may involve the following:

    • From Married Filing Separately (MFS), Single, or Head of Household (HOH) to Joint refer to IRM 21.6.1.3, Filing Status Research and IRM 21.6.1.3.1, Married Filing Separate, Single, or Head of Household to Joint Research

    • From Joint to MFS, Single or HOH refer to IRM 21.6.1.4.5, Joint to Separate, Single, or Head of Household Procedures

    • Other changes

21.6.1.3  (10-01-2005)
Filing Status Research

  1. Verify using Command Code (CC) RTVUE if the change is a line item change and can be corrected by oral statement.

  2. If the filing status was changed during initial processing due to a Taxpayer Identification Number (TIN) related math error, consider a filing status correction if the taxpayer responds to the TIN issue.

    Example:

    The filing status was changed from Head of Household to Single, during original processing, because the taxpayer did not provide the correct TIN for the dependent.

    Refer to IRM 21.6.1.6, Command Code DUPED and DDBCK, and IRM 3.13.5, Individual Master File (IMF) Account Numbers, for additional information.

21.6.1.3.1  (10-01-2010)
Married Filing Separate, Single, or Head of Household to Joint Research

  1. Married taxpayers who previously filed as Married Filing Separately (MFS), Single, or Head of Household (HOH) may file a joint return within three years from the due date of the original return without regard to extensions, provided the Service did not mail either spouse a notice of deficiency for which a petition was filed in the U.S. Tax Court, and neither spouse has commenced a law suit, or entered into a closing agreement, or offer-in-compromise.

    Note:

    Refer to IRM 25.6.1.9.4.4, Joint Return after Separate Return, for specific information regarding separate to joint returns and the Assessment Statute Expiration Date (ASED).

21.6.1.4  (09-03-2014)
Filing Status Change Procedures

  1. Follow these procedures for filing status changes. Disallow filing status change if the spouses are not eligible to switch the filing status from separate to joint status and send the appropriate certified "C" letter (i.e., Letter 105C). Refer to IRM 25.6.1.10.2.10.2, Joint Returns, for statute information. Include appeal rights in the "C" letter.

  2. Update ENMOD on all filing status changes.

  3. In all cases, when an exemption and/or credit requiring Taxpayer Identification Number (TIN) validation is being allowed/removed due to a filing status change, use either Command Code (CC) DUPED or CC DDBCK to update the Duplicate TIN database. Refer to IRM 21.6.1.6, Command Code DUPED and DDBCK.

  4. Terms used for the Premium Tax Credit (PTC):

    • Excess Advance Premium Tax Credit Repayment - Amount of additional tax liability the taxpayer must pay with their tax return.

    • Premium Tax Credit - Amount of premium tax credit the taxpayer is entitled to receive as a refundable credit on their tax return after reconciling the total premium tax credit with advance premium tax credit.

    • Advance Premium Tax Credit - Amount of advance premium tax credit paid to the insurer on behalf of covered individuals in the tax household.

    • Total Premium Tax Credit - Full amount of premium tax credit the taxpayer is entitled to receive without considering APTC paid.

    • Excess Advance Payment Above Limitation - When the additional tax limitation is applied, amount of excess advance payment the taxpayer is not required to repay.

  5. When changing the filing status (Single, Head of Household (HOH), Qualifying Widower (QW), Married Filing Separately (MFS), Married Filing Jointly (MFJ)) use the table below to determine potential impact to PTC. This table is used ONLY for filing status change, if adding or deleting exemptions refer to IRM 21.6.1.5, Exemptions Procedures.

    Current Filing Status? New Filing Status? Is one of the 5 PTC data elements present on Master File? (Refer to IRM 21.6.3.4.2.16.7, Adjusting Accounts) Data element present is PTC or Excess Advance PTC Repayment or Either? Potential Impact to PTC based on FS change ONLY?
    Single HOH / QW / MFJ Yes PTC (credit) No
    Single HOH / QW / MFJ Yes Excess Advance PTC Repayment (tax) Yes, if amount is present in Excess Advance Payment Above Limitation data element
    Single/ HOH/ MFJ/ QW MFS Yes Either Yes
    Any Any No N/A No
    HOH Single/ MFJ/ QW Yes PTC No
    HOH Single Yes Excess Advance PTC Repayment Yes
    HOH MFJ / QW Yes Excess Advance PTC Repayment No
    MFJ Single/ HOH/ QW Yes PTC No
    MFJ Single Yes Excess Advance PTC Repayment Yes
    MFJ HOH/QW Yes Excess Advance PTC Repayment No
    MFS Single / HOH/ MFJ/ QW Yes PTC No
    MFS Single Yes Excess Advance PTC Repayment Yes
    MFS HOH/ MFJ/ QW Yes Excess Advance PTC Repayment No
    QW Single / HOH/ MFJ   PTC No
    QW Single   Excess Advance PTC Repayment Yes
    QW HOH/ MFJ   Excess Advance PTC Repayment No

21.6.1.4.1  (10-01-2010)
"No Consideration" Filing Status Change

  1. "No Consider" the change to joint status:

    If either taxpayer And Then
    Received an examination 30-day letter Requested an Appeals review for the period (denoted by an open Audit Information Management Systems (AIMS) Transaction Code (TC) 420 with a Status Code 80 or 81 indicates taxpayer's case is in Appeals) Send the appropriate "C" letter (i.e. Letter 916C). Forward to Appeals.

21.6.1.4.2  (10-01-2010)
Returns With Missing Information

  1. Return the claim to the taxpayer with the appropriate "C" letter, requesting the necessary information if:

    • Both taxpayers did not sign the amended return

    • Someone other than an executor, administrator, or surviving spouse files an amended joint return for a deceased taxpayer

    • Supporting forms, schedules, or documents are missing

    Caution:

    Numbered returns and Statute Imminent cases are never returned to the taxpayer, refer to IRM 25.6, Statute of Limitations.

    Reminder:

    Release the "-A" freeze.

    Note:

    For Correspondence Imaging System (CIS) cases, refer to IRM 21.5.1.5.6, Incomplete CIS Claims.

  2. If there is a tax increase/credit decrease adjust the account and send a letter to the taxpayer requesting the missing information. Refer to IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing for additional guidance.

21.6.1.4.3  (01-21-2014)
Processing Separate-to-Joint Adjustments

  1. Research for the filing of both returns. It is not necessary to request the returns if the joint return information can be verified from research. To determine if request for a joint election is valid, refer to IRM 25.6.1.9.4.4, Joint Return After Separate Return.

  2. If there is an open Transaction Code (TC) 420 on either spouse's account, follow IRM 21.5.3.4.7, Processing Claims and Amended Returns with Examination Involvement.

  3. Verify math on the joint return and recompute the tax, if necessary. Determine if an estimated tax penalty needs to be assessed or recomputed using the joint liability. Refer to IRM 20.1.3.2.1.1.2, Joint Return After Filing Separate Return(s).

  4. Update the DUPOL database. Refer to IRM 21.6.1.6, Command Code DUPED and DDBCK, for additional information.

  5. Update the secondary taxpayer's address if there is a change on the joint return.

    Exception:

    Do not update if one of the following apply:

    • The primary taxpayer filed a later return with a different spouse

    • The primary taxpayer filed a later return with a filing status of single, head of household, qualifying widower or married filing separate indicating a different spouse

    • The secondary taxpayer has had an address update within the previous 52 cycles

  6. Revenue Ruling 2013-17 was released by the Internal Revenue Service on August 29, 2013. This ruling impacts IRC Section 6013, Joint Returns of Income Tax by Husband and Wife, based upon the Supreme Court decision holding section 3 of the Defense of Marriage Act (DOMA) to be unconstitutional. For Federal tax purposes, this ruling clarifies Revenue Ruling 58-66 and holds the following:

    • The terms “spouse,” “husband,” and “wife” includes individuals of the same sex who were lawfully married under the laws of a state whose laws authorize the marriage of two individuals of the same sex and who remain married.

    • The Service will recognize a marriage of individuals of the same sex that was validly created under the laws of the state of celebration even if the married couple resides in a state that does not recognize the validity of same-sex marriages.

    • The terms “spouse,” “husband,” and “wife” do not include individuals (whether of the opposite sex or the same sex) who have entered into a formal relationship that is recognized under state law that does not constitute a marriage under the laws of that state, such as Registered Domestic Partners (RDP).

  7. Same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. This ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

  8. Under this ruling, same-sex couples will be treated as married for all federal tax purposes, including income, gift and estate taxes. This ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

    Reminder:

    Do NOT request ANY additional documentation from the taxpayer to validate the marriage, such as proof or date of marriage. Taxpayer is not required to provide ANY validity for the marriage, process the claim following normal procedures.

  9. Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by this ruling. However, this ruling does not apply to registered domestic partnerships (RDPs), civil unions or similar formal relationships recognized under state law.

    Caution:

    Do not confuse Registered Domestic Partner (RDP) and Community Property Claims as DOMA Claims. RDP and Community Property Claims are NOT processed the same as DOMA Claims, refer to IRM 21.6.1.4.10, Registered Domestic Partners and Community Property Procedures.

  10. Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.

  11. Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years provided the applicable statute of limitations period for filing such claim has NOT expired. Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later.

  12. If an affected taxpayer files an original return, amended return, adjusted return, or claim for credit or refund, all items required to be reported on the return or claim that are affected by the marital status must be adjusted consistent with the status reported on the return or claim. If the claim is incomplete or additional information is needed, refer to IRM 21.5.1.5.6, Incomplete CIS Claims.

  13. For any statute related issues, refer to IRM 21.6.1.4.4, "Statute of Limitations" Procedures for Separate to Joint.

    Reminder:

    DOMA related employee Excess FICA claims filed on Form 843, follow procedures in IRM 21.6.3.4.2.4, Excess Social Security and RRTA Tier I Tax Credits and continue to refer these claims to a BMF campus (Cincinnati or Ogden).

  14. Additional information is located on the IRS website:

    • News Release IR-2013-72

    • Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law

    • Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions

21.6.1.4.3.1  (08-06-2014)
Separate to Joint and Both Taxpayers Previously Filed

  1. If both taxpayers previously filed a separate return and are now filing jointly, adjust the secondary account first. Take the following action on the secondary account:

    1. Back out the tax, income, item reference field, estimated tax penalty, and any manual restrictions. Input a Priority Code (PC) "1" on the adjustment if an -L freeze is present on the secondary account.

    2. Input a Transaction Code (TC) 170 for zero (.00) when decreasing withholding and/or transferring timely payments from the module and tax is also being adjusted when there is not a Computer Condition Code (CCC) "P" present.

    3. Input item reference code 999 for zero (.00) to prevent an Examination Multiple Filer case.

    4. You MUST use a Hold Code (HC) "4" to prevent erroneous refunds or notices. If multiple adjustments are needed because of the number of credit reference numbers, or etc. use a HC "4" on each adjustment.

    5. Input a TC 470 with Closing Code 93 to hold any notices.

    6. Input TC 971 with Action Code (AC) 001 to cross reference primary taxpayer's account. Use the RET-REVD-DT field on TXMOD of the TC 150 return (secondary taxpayer) as the Action Date for the TC 971.

    7. Transfer any extension or available credit/payments to the primary account. If applicable, net out (subtract) any offsets from the withholding. If a refundable credit was involved, refer to IRM 21.6.3.4.2, Refundable Credits. If the account has a First Time Homebuyer Credit (FTHBC), refer to IRM 21.6.3.4.2.11.7, First-Time Homebuyer Adjusting Accounts, and IRM 21.6.4.4.18.4, Manually Adjusting the Recapture Amount.

    8. Transfer any refund previously issued use TC 848 and TC 849, refer to IRM 21.5.2.4.23.10, Moving Refunds and IRM 21.4.6.5 , Refund Offset Procedures. Input a TC 570 with the credit transfer on the TC 848 secondary account to hold the credit until the secondary account adjustment posts. Failure to input the TC 570 on the secondary account could cause an erroneous refund.

  2. After adjusting the secondary account following the procedures above, take the following action on the primary account:

    1. Adjust the primary account as necessary using a Hold Code (HC) "4" .

      Reminder:

      You MUST use a HC "4" to prevent an erroneous refund while waiting for the TC 849 to post. Monitor the account until the TC 849 posts then release the -K Freeze with a TC 290 .00.

    2. Use the appropriate re-file blocking series 05 for electronically filed tax returns, 00 when making an adjustment using the original return as the source document, or 18 when adjustment should be associated with the original return.

    3. Refer to IRM 21.6.3.4.2.7, Earned Income Tax Credit (EITC), for any necessary EIC changes.

    4. Any adjustment involving a joint return after separate returns will require a manual estimated tax penalty computation and adjustment, even if there is no change to the penalty (TC 170 for zero amount). Refer to IRM 20.1.3.2.1.1.2, Joint Return After Filing Separate Return(s).

    5. Correct the withholding to reflect any previous offset from the secondary account and input TC 971 AC 173 (using the claim received date) to cross reference the secondary taxpayer's account.

    6. When transferring a refund from the secondary account, input a TC 470 with Closing Code 93 on the primary account to hold the balance due notice generated from the TC 849.

    7. Correct the entity on the primary account to reflect the joint filing information.

      Reminder:

      When adding the secondary taxpayer's name, update the entity as shown on the Form 1040X, Amended Return. Joint filers do not always use/have the same last name.

    8. Update DDBCK on both secondary and primary account including the correct Filing Status for the secondary.

      Caution:

      Failure to update the entity to reflect the joint filing information could result in an erroneous refund. Refer to IRM 21.4.5.5, Account Actions for Category D Erroneous Refunds.

      Note:

      The filing of a joint return subsequent to separate return(s) may affect the Refund Statute Expiration Date (RSED) and/or the Assessment Statute Expiration Date (ASED). Refer to procedures in IRM 21.6.1.4.4, "Statute of Limitations" Procedures for Separate to Joint.

21.6.1.4.3.2  (10-01-2010)
Separate to Joint and One Taxpayer Did Not Previously File

  1. If one spouse did not previously file a return, adjust the established account of the taxpayer that has filed to reflect the amended joint return.

  2. Take the following actions on the established (now referred to as the primary) account:

    1. Transfer any available credit or payments to the primary account.

    2. Use the appropriate re-file blocking series (05 for electronically filed tax returns).

    3. Correct the entity on the primary account to reflect the joint filing information.

    Caution:

    Failure to update the entity to reflect the joint filing information could result in an erroneous refund. Refer to IRM 21.4.5.5, Account Actions for Category D Erroneous Refunds.

  3. Take the following actions, if applicable, on the account of the taxpayer who did not previously file:

    • If a Transaction Code (TC) 140 is present on the account, input TC 594 Closing Code 084 using command code FRM49

    • If a TC 971, Action Code 010 (generates a TC 976) is present, input a TC 971 Action Code 002 using command code REQ77 to cross reference the joint account and release the E- freeze

  4. If the deadline for filing a separate to joint return has expired and the non-filing spouse has income, refer to IRM 25.6.1.9.4.4, Joint Return after Separate Return.

21.6.1.4.4  (09-27-2013)
"Statute of Limitations" Procedures for Separate to Joint

  1. Care must be taken when processing statute year claims to prevent erroneous abatements and to prevent the generation of RSED-STAT transcripts. Refer to procedures in IRM 21.5.3.4.3, Tax Decrease and Statute Consideration.

    Reminder:

    Verify the claim received date or the post mark date to determine if the claim for refund was timely filed. When adjusting the account input either the timely filed claim received date or timely post mark date in the "RFSCDT" field and use override code "S" .

  2. The filing of a joint return subsequent to separate return(s) may affect the Assessment Statute Expiration Date (ASED). The Service will have at least one year from the actual filing of a joint return to make an assessment, IRC Section 6013(c)4.

    Reminder:

    When updating the ASED it does not update the RSED.

  3. Determine if the extended ASED is imminent (within 90 days). Refer to IRM 25.6.1.9.4.4, Joint Return After Separate Return, for specific instructions on conditions which extend the ASED.

    If the ASED And Then
    Is not imminent (due to a Separate to Joint filing status case)   Update the ASED (TC 560) using command code (CC) REQ77.
    Is imminent (within 90 days) No TC 560 posted on the account Update the ASED. The transaction date used on CC REQ77 must be one day prior to the original ASED.
    Is imminent (within 90 days) of the extended ASED and claim is for a tax increase TC 560 posted on account Refer claim to the Statute Unit for manual assessment, follow procedures in IRM 25.6.1.9.9, Procedures for Processing Amended Returns - in General.

    Reminder:

    Use Document Locator Number (DLN) blocking series "70" on CC REQ77 to avoid an unpostable condition.

21.6.1.4.5  (10-01-2013)
Joint to Separate, Single, or Head of Household Procedures

  1. Married taxpayers may file separate returns on or before the due date of their originally filed joint return.

    Exception:

    A personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. This is done by the filing a separate return for the decedent within one year from the due date of the return of the surviving spouse (including any extension). Refer to Publication 559, Survivors, Executors, and Administrators.

  2. Disallow all claims postmarked after the due date except:

    • Items listed in IRM 21.6.1.4.7, Claims of Joint to Single or Head of Household Where Joint Election is Invalid

    • Taxpayers whose marriage was annulled or the subject of a court order holding that no valid marriage ever existed

  3. If the taxpayer has not allocated a previously received refund:

    1. Return the claim to the taxpayer.

    2. Request the allocation from the taxpayer. The IRS can not make the allocation determination of a previously received refund.

21.6.1.4.5.1  (09-10-2013)
Allowable Claims Procedures

  1. Adjust the joint account income, deductions, tax, and credit amounts to reflect the separate return entries. Be aware of the rules governing Married Filing Separately (MFS) restrictions. Refer to Publication 17, Your Federal Income Tax (For Individuals), for information on:

    • Itemized deductions

    • Child care credit

    • Earned Income Tax Credit

    • Credit for the Elderly

    • Taxable Social Security benefits

    • Net operating loss

  2. Do the following:

    1. Request records of both taxpayers’ accounts. Use Command Code (CC) RTVUE or TRDBV, if possible, in lieu of requesting the return.

    2. Math verify and recompute the tax and credits, as necessary, on each return.

  3. Adjust the joint account via the Integrated Data Retrieval System (IDRS), and:

    1. Use item reference number 887 to change the exemption amount.

    2. Reverse any previous Earned Income Credit (EIC) to the amount allowable for the new filing status:

      If Then
      Only one taxpayer is requesting the change Recover the EIC from the taxpayer filing the claim. It becomes a civil matter between spouses in the event they do not agree.
      Both taxpayers are filing the claim Recover the EIC using the procedures in IRM 21.5.2.4.23.10, Moving Refunds.
    3. Input Transaction code (TC) 170 on the primary account when decreasing withholding and/or transferring timely payments from the module and tax is also being adjusted when there is not a Computer Condition Code (CCC) "P" present.

    4. Determine if a recomputation of Estimated Tax (ES) penalty is needed if a TC 176 is present on the primary account.

    5. Allocate payments evenly, unless the taxpayer indicates otherwise. Transfer the secondary taxpayer’s share of the joint credit to the separate account. Use TC 848/849 to transfer any refund previously issued. Refer to IRM 21.4.6.5, Refund Offset Procedures, and IRM 21.5.2.4.23.10, Moving Refunds.

    6. Input the back out adjustment with a Hold Code (HC) "4" .

  4. Update ENMOD:

    1. Delete the secondary spouse’s name and Social Security Number (SSN).

      Note:

      DO NOT delete the secondary SSN on Married Filing Separately (MFS) accounts.

    2. Correct the filing status.

    3. Use a posting delay code (PDC) "1" , if there is secondary Self Employment (SE) income on the joint account belonging to the spouse being backed out of the account.

  5. Issue a manual refund in the primary spouse’s name only if the back out adjustment creates a credit balance for the primary taxpayer. On Command Code (CC) RFUND input the applicable offset bypass indicator (BPI), refer to IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

  6. If applicable, forward the secondary taxpayer’s return to the Processing function, for processing as an original unnumbered return, using local routing procedures.

  7. Refer to IRM 21.5.1.5.5 Processing/Reprocessing CIS Tax Returns.

21.6.1.4.6  (10-01-2011)
Only One Spouse Requesting Filing Status Change

  1. If only one taxpayer is requesting the change, and the other taxpayer has income and/or credit:

    1. Prepare a return for the secondary taxpayer. Complete the entity, separate income, and tax information on Form 1040.

    2. Edit the itemized or standard deduction to correspond with the separate spouse’s deduction. If one spouse itemizes, so must the other spouse.

    3. Edit the withholding to reflect any previously refunded or offset amounts.

      Caution:

      You must back out offsets if prior to the Return Due Date (RDD).

    4. Write the tax examiner’s name and/or employee number on the signature line of the return being input. State the reason for the return (e.g., "Establish separate entity" ).

    5. Forward the unnumbered Form 1040 to the Processing function for input as an original return. Refer to IRM 21.5.2.4.23.11, Reprocessing "Dummy" Returns.

21.6.1.4.7  (06-29-2012)
Claims of Joint to Single or Head of Household Where Joint Election is Invalid

  1. The joint election is potentially invalid if the individuals were not legally married or if the return contains a forged signature.

  2. Allow claims if the marriage was not legal for federal tax purposes (even if the claim is received after the due date) if the following is present:

    • Verification, such as court documents showing the marriage was not valid for the tax period involved, copy of divorce decree or separate maintenance, documents verifying that the taxpayers did not live together during the last six months, such as a lease agreement, utility bills, etc., and a letter from the state confirming there is no record of a marriage between the parties or an affidavit, signed and sworn under penalty of perjury stating the marriage does not exist.

    • Allocation of all return income, credits, and payments, refer to IRM 21.6.1.4.8, Allocating Jointly Filed Case.

    IF THEN
    All information is not present and the only change is to the filing status which includes allocation of income, credits and payments Do not allow the filing status change, follow procedures in IRM 21.5.3.4.6, No Consideration and Disallowance of Claims and Amended Returns.
    All information above is not present and additional changes are requested Do not allow the filing status change. For the joint account, determine if the other issues are allowable and follow IRM 21.5.3.4, General Claims Procedures, for applicable procedures.
    All information above is present Allow filing status change, follow procedures in IRM 21.6.1.4.5.1, Allowable Claims Procedures.
  3. Take the following action when one spouse on a joint return claims that his or her signature was forged:

    1. Request the original return, if not electronically filed.

    2. Do not issue a Claim Disallowance or Appeal rights.

    3. Refer to Examination Classification for determination.

21.6.1.4.8  (09-03-2014)
Allocating Jointly Filed Cases

  1. Allocation means the taxpayer must designate which wages, deductions, withholding, tax liability, etc., belong to each taxpayer:

    • The allocation is necessary to determine the amount of overpayment due each taxpayer

    • Rev. Rul. 74-611 indicates a husband and wife who file a joint return have a separate interest in the overpayment.

  2. Return the claim to the taxpayer if a determination can not be made because the taxpayer does not submit an allocation. Refer to IRM 21.5.1.4.3, Incomplete Inquiry.

    Exception:

    If the joint return did not result in a previously issued refund and the Service can conclusively determine ownership of all income and payments claimed/allowed on the joint return using internal information, the caseworker must prepare the allocation instead of rejecting the claim.

    If a joint return was filed And Then
    The overpayment offset to a spouse’s liability incurred before marriage to the current spouse. The present spouse files an "Injured Spouse" claim. An allocation is required.
    The overpayment offset to a Business Master File (BMF) or Individual Master File (IMF) account of one spouse. The other spouse files a claim. An allocation is required.
    The taxpayer is subsequently divorced. Only one spouse files a claim. An allocation is required.

    Note:

    Refer to IRM 21.4.6.5.8.9, Time Period for Submitting Form 8379 for the time period for a spouse to file an "injured spouse" claim.

    Reminder:

    For procedures for allocating liability in section 6015(c) cases, refer to IRM 25.15, Relief from Joint and Several Liability and IRM 25.15.3.7.2, Allocating a Deficiency Under IRC Section 6015(d).

  3. Accept the allocations as specified below:

    If Then
    The method used follows the separate tax liability formula. Accept the allocation.
    The taxpayer provides clear and convincing evidence for another allocation. Accept the allocation.
    The allocation is specified by a court order. Accept the allocation.
  4. The separate tax method allocates liabilities by dividing the joint liability into separate liabilities:

    • Determine each taxpayer’s separate tax liability.

    • Divide one taxpayer’s separate tax liability by the sum of both separate liabilities to determine the ratio (.xxx) attributable to each taxpayer.

    • Multiply one taxpayer’s ratio times the joint tax to determine that spouse’s share of joint liability.

  5. Subtract the taxpayer’s share of the new joint liability from the taxpayer’s separate payments to arrive at the overpayment amount:

    • The refund from the claim is limited to this amount

    • The overpayment is also limited to the amount of tax actually paid by the taxpayer

    • Compute the tax at the MFS rate

    • Payments and deductions may be allocated differently in community property states

    Note:

    In some community property states, wages and withholding credits are considered split 50-50 between spouses. Refer to Publication 555, Community Property.

  6. Manually refund the proportionate share of the overpayment to the spouse filing the claim.

    If Then
    An offset has occurred.
    1. Input a credit transfer to reverse the portion of the offset applicable to the spouse’s share of the refund.

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

    3. Issue a manual refund. Refer to IRM 21.4.4, Manual Refunds

    All items of income and credit belong to the spouse filing the claim. Refund the entire overpayment to that spouse.

21.6.1.4.9  (10-01-2010)
Bankruptcy Assessments on Joint Accounts Procedures

  1. Route the return to the Collection Operations when one spouse is discharged of a tax liability in a bankruptcy proceeding and a joint return was filed.

21.6.1.4.10  (10-01-2013)
Registered Domestic Partners and Community Property Procedures

  1. In 2005, California law expanded the rights and obligations of individuals entering into a California domestic partnership for state property law purposes. In 2006, the IRS ruled that an individual who is a Registered Domestic Partner (RDP) in California must report all income earned from performance of personal services.

  2. Effective January 1, 2007, California extended community property treatment to RDPs. Thus beginning in 2007, California treats the earned income of RDPs as community property as both property law purposes and state income tax purposes.

  3. The Office of Chief Counsel has advised that the federal tax treatment of community property should apply to California RDPs. For tax years beginning after December 31, 2006, a California RDP must report one half of the community income, whether received as compensation for personal services or income from property, on his or her federal income tax return.

  4. In December 2010, the Internal Revenue Service issued a revised edition of Publication 555, Community Property, to explicitly provide that the federal tax treatment of community property applies to RDPs in Washington, Nevada and California.

  5. For tax year 2010 and subsequent, RDPs must each report half of their community income. A partner who amends a previously filed return to claim a credit or refund of tax paid must file the amended return before the Statute of limitations has expired to receive the credit or refund. Refer to IRM 25.6.1.5, Basic Guide for Processing Cases with Statute of Limitations Issues.

  6. Amended returns for 2008 and subsequent could be received for these RDP taxpayers. The only documentation required is the community property worksheet listed in Publication 555 or a copy of the partner's return showing the allocation, and a reference on the claim that the taxpayer is a RDP.

  7. For tax year 2012, the community property worksheet was replaced with Form 8958, Allocation of Tax Amounts Between Married Filing Separate Spouses, Same-Sex Spouses, or Registered Domestic Partners With Community Property Rights. The Form 8958 can be filed electronically.

  8. A RDP claim for refund must include:

    • the community property worksheet/Form 8958, or

    • a copy of the partner's return showing the allocation, and

    • a reference on the claim that the taxpayer is an RDP

    If not follow the "No Consideration" procedures listed in IRM 21.5.3.4.6.3No Consideration Procedures.

  9. For a RDP claim for a tax increase/assessment without the documentation in (8) above, follow procedures in IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing.

  10. If an RDP files an amended return, there is no need to verify if the other domestic partner filed a claim to reduce or claim additional income.

  11. When adjusting the partner's account with a tax decrease, reducing withholding or previous credit claimed, input Transaction Code (TC) 170 for zero (.00) to restrict any erroneous Estimated Tax (ES) penalty assessment.

  12. Amended returns claiming a Net Operating Loss Carryback/Carryforward as Community Property Income, refer to IRM 21.5.9.5, Carryback Processing.

  13. In some cases the amended returns filed in response to this Chief Counsel advise are resulting in the assessment of the penalty for failure to pay the tax shown on the return because of adjustments in the withholding credit. If the tax shown due on an amended return filed under this Chief Counsel advise is paid in full at the time it is processed, or if it has been paid within 21 days of notice and demand for payment (10 business days, if the amount in the notice was $100,000 or more), reasonable cause for paying late should be presumed, and any penalty for paying late should be restricted with Transaction Code (TC) 270 for zero amount at the time the amended return is processed. Otherwise abate any penalty attributable to the amended return using TC 271 with Reason Code (RC) 062 and Penalty Reason Code (PRC) 030 if it was assessed after the amended return was processed.

  14. If one partner in the RDP did not previously file a return to report his or her share of community property income, abate any penalty for filing late assessed against that partner, provided that the one partner was not otherwise required to file, and the other partner previously filed a timely return that reported 100 percent of the community property income of both partners. Use TC 161 with Reason Code 062, and PRC 030. For additional penalty information refer to IRM 20.1.2.2.6.1, California's Registered Domestic Partners.

  15. If the taxpayer writes or calls in because they received an incorrect notice about penalty assessment(s) when the tax was decreased, abate the penalty/penalties and apologize to the taxpayer for the error.

21.6.1.5  (09-03-2014)
Exemptions Procedures

  1. Exemptions are claimed in the entity portion of the return. A taxpayer is allowed one exemption for each qualifying person listed on the return.

  2. Refer to IRM 21.6.1.6, Command Code DUPED and DDBCK, for information on updating the DUPOL database.

  3. If taxpayer is adding or deleting an exemption use the table below to determine if there is a potential impact to the Premium Tax Credit (PTC). For definition of terms, refer to IRM 21.6.1.4, Filing Status Change Procedures.

    Note:

    To determine if APTC was paid on behalf of an individual, use the individual’s SSN and the AMS CDR Research Tool. If the tool results shows the individual is listed as a "Covered member of the Exchange Tax Household" on a policy that APTC was paid for, then that individual had APTC paid on his/her behalf.

    Adding or Deleting Exemption? One of the 5 PTC data elements present on MF? (Refer to IRM 21.6.3.4.2.16.7, Adjusting Accounts) Was APTC paid on behalf of individual being added or deleted? Potential Impact to PTC?
    Deleting Yes Either Yes
    Deleting No N/A No
    Adding Yes Either Yes
    Adding No Yes Yes – If applicable, use normal suspense procedures and ask taxpayer to submit Form 8962, Premium Tax Credit, to address APTC paid on behalf of individual being added as an exemption.
    Adding No No No

21.6.1.5.1  (10-01-2013)
Determining the Exemption Deduction

  1. A taxpayer is allowed only one exemption regardless of the number of returns on which they are listed. A dependent child may not claim his/her exemption when filing a return if eligible to be claimed on the parent’s return.

  2. A taxpayer must furnish a correct/valid Taxpayer Identification Number (TIN) for every exemption claimed. This number may be a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN), or an Adoption Taxpayer Identification Number (ATIN). Refer to IRM 3.21.263, IRS Individual Taxpayer Identification Number (ITIN) Real Time System (RTS) and IRM 3.13.5.72, Assignment of Internal Revenue Service Numbers (IRSNs), for additional information.

    Note:

    For taxpayers indicating a religious (e.g., Amish/Mennonite) or conscience-based objection to obtaining a TIN, refer to paragraphs (6), (7) and (8) below.

  3. Taxpayers will be considered to have omitted a correct TIN if Social Security Administration (SSA) information indicates the social security number being used belongs to an individual who was deceased prior to the beginning of the tax year for which it is being used or if the social security number or ITIN being used does not match the name of the taxpayer based on SSA or IRS records.

    Note:

    To substantiate the Date of Death (DOD) is incorrect, taxpayers must provide documentation from the Social Security Administration for verification. When the documentation is provided allow the exemption and use Command Code (CC) DM1DT to add, change, or delete data to correct the DOD. Refer to IRM 2.3.25, Command Codes DM1DT and DTVUE. CC DM1DT overrides an SSA DOD. After using CC DM1DT, the DOD field on CC INOLE will be replaced with the IRS DOD.

    Reminder:

    To delete a DOD, update CC DM1DT to add a DOD of all zeroes (000-00-0000).

  4. Dependents, such as children and other relatives, must meet certain eligibility criteria. For TY 2005 and subsequent years, a dependent is either a qualifying child or a qualifying relative. Refer to Publication 17, Your Federal Income Tax (For Individuals), Part One, Chapter Three, Personal Exemptions and Dependents, for dependency qualifications.

  5. Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or similar statement must be attached to the taxpayer’s return when a noncustodial parent claims a child as a dependent as a result of the custodial parent’s release of claim to exemption for the child, or a custodial parent claims a child as a dependent as a result of a revocation of a release of claim to exemption for the child.

  6. The IRS will allow exemptions for primary, secondary or dependents identified as either "Amish" , "Mennonite" , or "Exempt - Form 4029" , even if the individual does not have a valid Taxpayer Identification number (TIN). If the exemption for such an individual was improperly NOT allowed during original processing, adjust the account.

  7. The IRS will initially disallow dependency exemptions or related credits for any return having a notation or attachment indicating a "religious or conscience-based" objection to providing TINs for dependents. Taxpayers will receive a math error notice stating their dependent exemption is disallowed because a TIN was not furnished.

  8. Taxpayers claiming a "religious or conscience-based" objection to obtaining a TIN will be allowed the dependent exemption or related credits (except for EIC) when they provide specific documentation listed in paragraph 1 of the Letter 3050C.

    1. If the taxpayer contacts IRS stating they have a religious or conscience based objection to providing a TIN, follow the procedures listed below:

      If contact is by And Then
      Phone Taxpayer inquires regarding TIN for dependent exemption.
      1. Inform the taxpayer they will receive a letter within 10 - 15 days instructing them to provide specific information. Taxpayer should provide the required documentation and respond using the enclosed envelope within 30 days of receipt of the letter.

      2. Initiate a Letter 3050C, include the information in the Note below this table.

      Walk In
      1. Taxpayer inquires regarding TIN for dependent exemption.

      2. The taxpayer is providing the information listed in the Letter 3050C.

      3. The information provided is incomplete.

      1. Using the Letter 3050C include the information in the Note below this table and also inform the taxpayer what is required for us to allow the dependency exemption.

      2. Review the information for completeness and make the appropriate account adjustment (follow local procedures for account adjustment).

      3. Reiterate to the taxpayer what is required as listed in the Letter 3050C, paragraph 1.

      Paper
      1. The taxpayer is responding to a math error.

      2. The taxpayer is providing the information listed in the Letter 3050C, paragraph 1.

      3. The information provided by the taxpayer is incomplete.

      1. Initiate a Letter 3050C and include the information in the Note below this table. Suspend the case following normal procedures.

      2. Review the information for completeness and make the appropriate account adjustment.

      3. Disallow the dependency exemption following normal claim disallowance procedures.

      Note:

      When initiating a Letter 3050C include the following: "If you have a religious or conscience-based objection to securing a Taxpayer identification Number for the dependents or exemptions, please forward a statement outlining your objection and documentation from the following lists to verify the dependents."

21.6.1.5.2  (11-08-2013)
Computing the Personal Exemption Deduction

  1. Taxpayer is allowed one exemption for each qualifying person listed on the return. Allow one exemption for:

    • The primary taxpayer

    • The secondary taxpayer

    • Each qualifying child

    • Each qualifying relative

    Note:

    A dependent is either a qualifying child or qualifying relative. Refer to Publication 17, Your Federal Income Tax (For Individuals), for additional information.

  2. The exemption allowance is different for each year. Refer to the year of the tax return for the correct amount:

    Personal Exemption Deduction Tax Year
    $3,950 2014
    $3,900 2013
    $3,800 2012
    $3,700 2011
    $3,650 2010

21.6.1.5.3  (11-08-2013)
Personal Exemption Phase-Out

  1. The personal exemption deduction begins to phase out when the Adjusted Gross Income (AGI) exceeds the following amounts:

    Filing Status 2013 Amount 2014 Amount
    Married Filing Joint and Qualifying Widow(er) $300,000 $305,050
    Head of Household $275,000 $279,650
    Single $250,000 $254,200
    Married Filing Separately (MFS) $150,000 $152,525
  2. The amount for each exemption is reduced by 2 percent for each $2,500 ($1,250 for MFS), or fraction thereof, in excess of the applicable threshold.

  3. Tax years 2010, 2011, and 2012 the phase out for personal exemptions was eliminated.

  4. The American Taxpayer Relief Act of 2012 re-instated the personal exemption phase out, starting in 2013.

21.6.1.5.4  (02-28-2014)
Missing or Invalid Exemption TINs Procedures

  1. If a valid Taxpayer Identification Number (TIN) or Individual Taxpayer Identification Number (ITIN) is not provided for the primary taxpayer, the secondary taxpayer, or the dependents, the exemption is disallowed for the person listed with the invalid TIN. The IRS considers a TIN to be missing if it isn't provided or if it is obviously incorrect. If the exemption was disallowed during initial processing, a math error taxpayer notice code (TPNC) appears on the module.

    Exception:

    If the taxpayer asked IRS to compute the tax liability, there will not be any TPNCs, a CP 51 will be issued. The "-G" freeze code will not be on the module.

    Caution:

    Disallowance of an exemption may also affect filing status, take in consideration when determining an adjustment to an account.

  2. Verify the exemption field on CC TXMOD, RTVUE, and IMFOL screens:

    1. Verify the number of exemptions the taxpayer was allowed during original processing.

    2. Divide the total exemption amount shown on RTVUE-PER COMPUTER by the exemption amount for the tax year in question.

      Note:

      Does not apply to phase-out situations.

    3. If an adjustment is made for exemptions, only input Transaction Code (TC) 887 if the new total number of exemptions differ from the number shown in the exemption field on CC TXMOD/IMFOL.

  3. If the taxpayer submits correspondence indicating someone used his/her TIN or the TIN of a dependent, refer to IRM 21.6.2.4.2.2, Taxpayer Inquiries Involving Questionable Ownership of a Primary, Secondary or Dependent TIN on a Filed Return.

  4. Taxpayers may call or correspond regarding Individual Taxpayer Identification Numbers (ITINs), refer to procedures in IRM 3.21.263.7, Accounts Management (AM). For ITIN math error procedures, refer to IRM 3.21.263.7.6, Math Errors.

    If the taxpayer responds with Then
    An invalid TIN/Rejected ITIN
    1. Set a math error by inputting TC 290.00, Hold Code (HC) 3, Source Code (SC) 6, Reason Code (RC) 006, blocking series 77/78. (Creates a -G freeze.)

    2. Send the Letter 3050C to thoroughly explain the math error issue.

    Reminder:

    If a math error is already posted on the account (-G Freeze), refer to IRM 21.5.4.4.3, Processing Responses to Math Error Notices.

    A valid SSN/ITIN Allow the exemption using normal procedures.
    Note : Refer to IRM 21.6.3.4.2.7, Earned Income Tax Credit (EITC), if EIC is impacted.

    Note:

    If taxpayer responds and both situations in the above table applies, input the valid SSN/ITIN adjustment first then follow the invalid TIN procedures using a post delay code "1" on the TC 290 .00 adjustment to set the math error.

  5. When working math error returns processed by Austin Submission Processing ITIN unit indicating the valid/invalid ITIN(s), follow procedures above.

  6. If a Form W-7, Application for IRS Individual Taxpayer Identification Number is attached to the Form 1040X, or the taxpayer requests additional information in order to complete processing Form W-7, refer to the following address:
    Austin Submission Processing Campus
    ITIN Operation Stop: AUSC 6090 P.O. Box 149342
    Austin, TX 78714-9342

21.6.1.5.5  (05-02-2013)
Exemption Claim Procedures

  1. A taxpayer may respond to a math error concerning the number of exemptions allowed on the original return or the taxpayer may file a claim (amended/duplicate/informal) to request a change to exemptions.

    If Then
    An exemption is claimed Taxpayer must provide the exemption's TIN, name and, if applicable the date of birth. To determine if date of birth verification is required, refer to IRM 21.6.3.4, Credits Procedures. The TIN may be either an SSN, an ITIN or an ATIN (for dependent only).
    Child is in the process of a domestic adoption, an SSN from Social Security Administration (SSA) may not be issued immediately The parent must apply for an ATIN for the child. Refer to Form 8839, Qualified Adoption Expenses, for more information.
    Child was born and died in the same tax year
    1. The taxpayer must supply the child's TIN, if a TIN was issued for the child.

    2. If a TIN was not issued for the child, the taxpayer must provide a copy of the child's birth certificate, if a birth certificate was issued for the child.

    3. If the taxpayer has difficulty in obtaining a birth certificate for a child who lived only a brief time, the taxpayer must document the birth with the copy of hospital medical record or a signed statement by a doctor or midwife, who attended the birth (on letterhead with business address and telephone number).

    Child is in the process of a foreign adoption and is not yet eligible for an SSN from SSA The parent must obtain an ITIN for the child. Refer to Form W-7, Application for IRS Individual Taxpayer Identification Number, for more information.
  2. Verify the validity of the name(s) and TIN(s) submitted by taxpayer. For a math error reply, the dependent with the missing/invalid TIN is recorded on RTVUE:

    1. Use CC INOLE/NAMES to verify the SSN and name.

    2. Use CC INOLE/NAMES or access ITIN RTS refer to IRM 3.21.263.8, General Instructions for ITIN Navigation (ITIN RTS), to verify ITIN and name.

    3. Use CC ATINQ to verify the ATIN and name.

    4. Verify the name and TIN (and date of birth for EIC and Child Tax Credit). For date of birth, ensure the information provided by the taxpayer is accurate, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. On RTVUE, the dependent field is followed by an indicator showing which dependent(s) was included in the math error condition; "2" means "account is not present on the NAP" and "9" means "invalid TIN."

    6. Refer to IRM 3.13.5.18, Social Security Administration (SSA) Requirements and Form SSA-2458 , and IRM 3.13.5.16, Weekly NEW SSA Name Control (N/C) Indicator Files, for correction of entity issues involving missing/invalid TINs for the primary and/or secondary taxpayer.

    If And Then
    TIN, name, and if applicable date of birth match IRS records   Allow the exemption Reminder: Consider filing status if changed during original processing.
    TIN, name and date of birth do not match IRS records Taxpayer is responding to a math error notice
    1. Do not allow the exemption.

    2. Follow IRM 21.5.4, General Math Error Procedures.

    TIN, name, and date of birth do not match IRS records A math error is not involved (e.g., taxpayer claiming an additional exemption)
    1. Close the case per IRM 21.5.3.4, General Claims Procedures.

    2. Send a Letter 3050C and include only the name of the dependent for which the information provided did not validate.

  3. If taxpayer makes a statement, asks a question, or indicates a misunderstanding of an exemption math error notice:

    • Refer to IRM 21.5.4.4.3, Processing Responses to Math Error Notices

    • Follow "no consideration" procedures in IRM 21.5.3.4.6, No Consideration and Disallowance of Claims and Amended Returns, if a claim, amended or duplicate return is included with statement

    • Close the case with a Letter 3050C explaining the exemption requirements

  4. If taxpayer responds to a math error notice within 60 days, refuses to obtain/provide the correct information and requests the account adjustment be made (after a full explanation of the legislative provisions was given), follow unsubstantiated math error procedures in IRM 21.5.4.4.5, Math Error Unsubstantiated Protest Processing.

  5. When changing the number of exemptions (or adjusting credits requiring TIN validation for allowance), refer to IRM 21.6.1.6, Command Code DUPED and DDBCK, for more information.

21.6.1.5.6  (05-09-2012)
Resolving CP 54 Notice with Math Error Involvement

  1. When the primary taxpayer’s TIN is invalid, the taxpayer may receive a CP 54 and/or a math error notice. Written responses to CP 54 notices that do not involve Earned Income Credit (EIC) math errors are worked in Entity. If taxpayer attaches correspondence in response to a math error notice or attaches correspondence inquiring about a math error issue, Accounts Management will work the response. Process CP 54 responses with math error involvement as follows:

    If the primary exemption was disallowed Then
    Primary TIN and/or name control was transposed or transcribed incorrectly
    1. Correct the invalid primary TIN. Refer to IRM 3.13.5.89, Researching Using CC ENMOD to Initiate Entity Changes.

    2. Review the math error code(s) to identify all additional math error conditions.

    3. Refer to IRM 21.6.3.4.2.7, Earned Income Tax Credit (EITC), if EIC is involved.


    Caution: : DO NOT RELEASE EIC for refund if the primary TIN is an ITIN/ATIN.
    Invalid primary TIN condition was the result of an IRS error
    1. Update the return processable date (RPD) with the original due date or date received, whichever is later. Credit interest is allowed.

    2. Resequence the invalid account to the valid number. Credit transfers are not necessary.


    Caution: Refer to IRM 21.6.2.4, TIN-Related Problems Procedures, on resequencing accounts prior to the merge.
  2. Taxpayer may provide a different name or primary TIN:

    • Research CC INOLE/NAMES if the number is an SSN/ITIN

    • Research CC ATINQ if the number is an ATIN

    Caution:

    DO NOT RELEASE EIC if the primary number is an ITIN.

    Note:

    Refer to IRM 21.6.2.4, TIN-Related Problems Procedures, on resequencing accounts prior to the merge.

    If Then
    Primary number provided is valid Correct the invalid TIN. Refer to IRM 21.6.2.4.1, Resequencing Accounts, if account will not merge.
    Invalid primary TIN condition is not due to an IRS error
    1. Update the RPD with the date the taxpayer contacted the IRS (verbally or in writing).

    2. Review the math error code(s) to identify all additional math error conditions.

    3. Follow IRM 21.6.3.4.2.7, Earned Income Tax Credit (EITC), if the EITC is involved.

    4. Resequence the invalid account to the valid number. Credit transfers are not necessary.

    Primary TIN provided is not valid DO NOT RELEASE THE REFUND.
    Exception: Refer to "taxpayer changed surname" below.
    Taxpayer changed his/her surname but did not notify the SSA and the prior name is valid on IRS records
    1. Refer to IRM 3.13.5.89, Researching Using CC ENMOD to Initiate Entity Changes, and IRM 3.13.5.88, Using CC INCHG Instead of CC IRCHG for correction of entity issues involving missing/invalid TIN's. CC INCHG is used to make corrections to the invalid account on Master File.

      Reminder:

      Only correct a taxpayers account with CC IRCHG when the taxpayer provides legal documentation or when research conducted clearly shows the taxpayer is using the correct TIN.

    2. Review the math error code(s) to identify all additional math error conditions.

    3. Follow IRM 21.6.3.4.2.7, Earned Income Tax Credit, if the math error condition is for EITC.

    4. Make the necessary adjustments to the account using a Post Delay Code "1" allowing the Entity to update.

      1. Update the RPD with the original return due date or the received date, whichever is later.

      2. Release any verified withholding credit for refund, without regard to other math error conditions.

21.6.1.5.7  (11-29-2013)
Adjusting the Exemption Deduction

  1. To change the exemptions, the taxpayer must:

    1. Meet the dependency test for the exemption change.

    2. Submit a valid SSN, ITIN, or ATIN for each dependent.

    3. Provide the exemption information.

  2. Review the claim for Examination criteria:

    1. Refer to Examination for Category-A (CAT-A) review, if necessary.

    2. Refer to IRM 21.5.3, General Claims Procedures, for CAT-A criteria.

  3. Changes to the exemptions change the taxable income. Change the exemptions on the Master File as follows:

    1. Adjust the number of exemptions with item reference number 887.

      Note:

      Do not reduce the exemptions below zero.

    2. Increase the exemptions with (+).

    3. Decrease the exemptions with (-).

    4. Adjust the taxable income with reference number 886.

      Note:

      Do not decrease the taxable income below zero (00).

    5. Use Reason Code (RC) 006 and the appropriate Source Code (SC) and blocking series.

  4. When changing the number of exemptions, refer to IRM 21.6.1.6, Command Code DUPED and DDBCK, for procedures on updating the Duplicate TIN database (DUPOL).

  5. Refer to IRM 21.5.3.4.6, No Consideration and Disallowance of Claims and Amended Returns, for claim rejection and disallowance information.

21.6.1.5.8  (09-03-2014)
Verifying Form 8332

  1. A custodial parent may release his/her claim to a child’s exemption. The custodial parent:

    1. Completes and signs Form 8332, Release/Revocation of Claim to Exemption for Child by Custodial Parent, or similar statement.

      Note:

      Per Treasury Regulation Section 1.152-4(e)(1)(ii), a written declaration not on Form 8332 must conform to the substance of that form. For tax years beginning after 7/2/2008, a court order or decree or separation agreement may not substitute for a Form 8332.

    2. Gives the form to the noncustodial parent to claim the exemption.

    3. Releases the exemption for a single year, a specified number of years, or all future years.

  2. The noncustodial parent must attach a copy of the Form 8332 to the return for each year the noncustodial parent claims the child as a dependent.

    Note:

    A Form 8332 executed after the return has been filed, refer to Chief Counsel Advice (CCA) 200646014 may be considered when determining which parent is entitled to the exemption.

  3. Upon receipt of a math error notice response concerning a missing or incomplete Form 8332 (or similar statement) take the following actions:

    1. Review Command Code (CC) RTVUE to determine if sufficient information is available to adjust the account.

    2. Secure the related return, if needed, to determine the reason for issuance of the notice.

    3. Correspond with the noncustodial parent, enclose a blank Form 8332.

    4. Request taxpayer to complete and return the Form 8332, signed by the custodial parent.

    5. Tell the taxpayer that the IRS will reconsider the request when the appropriate information is provided.

  4. Upon receipt of the completed Form 8332:

    1. Reopen the case.

    2. Secure the return, if needed, to verify taxpayer submitted the appropriate information.

    3. If the response does not clearly show the noncustodial parent is entitled to the exemption, send the correspondence and tax return to Examination.

  5. If taxpayer provides the appropriate documentation, allow the exemption as follows:

    1. Decrease the tax (Transaction Code 291).

    2. Decrease the taxable income (item reference number 886).

    3. Increase the exemptions (item reference number 887).

    4. Input Reason Code 006 and the appropriate blocking series and source code.

    5. Update the Return Processable Date (RPD) if the Form 8332 is a late reply to a "U" coded return (RPD 99999). Refer to IRM 21.5.1.4.2.10, Late Replies.

21.6.1.6  (01-12-2007)
Command Code DUPED and DDBCK

  1. CC DUPED and DDBCK allows a user to update the Duplicate TIN database (DUPOL).

  2. In all cases, when an exemption and/or credit requiring TIN validation is being allowed/removed, use either DUPED or DDBCK to update the database. The conditions which apply to the use of each of these command codes are provided below.

    Caution:

    There are conditions which do not allow the use of CC DUPED or CC DDBCK.

  3. Refer to IRM 21.6.1.6.1, Command Code DUPED, for specific information on CC DUPED.

  4. Refer to IRM 21.6.1.6.2Command Code DDBCK, for specific information on CC DDBCK.

21.6.1.6.1  (02-01-2013)
Command Code DUPED

  1. Command Code (CC) DUPED must be used to update the Duplicate TIN database (DUPOL) when processing current year returns (i.e., from January 1, current year to December 31, current year, only the current year returns are updated):

    • CP 09 responses

    • responses (via correspondence, amended return, or by phone) to TIN related math errors when CC DDBCK can not be used

    • claims (amended return/ Form 8862, Information to Claim Earned Income Credit After Disallowance) when CC DDBCK can not be used

    Exception:

    Do not use CC DUPED when processing math error 653 responses, instead use CC DDBCK unless the tax year involved does not allow for the use of CC DDBCK. Refer to IRM 21.6.1.6.2, Command Code DDBCK, for the list of exceptions of when DDBCK can not be used.

  2. CC DUPED should not be used to update DUPOL if the taxpayer is:

    • Claiming EIC for self/spouse only, or

    • Requesting a filing status change which does not affect exemption/credit allowance

      Note:

      If EIC was disallowed during original processing but other exemption/credit amounts were not addressed due to no effect upon taxable income or total tax, determine if the TIN was used for these allowances and update DUPOL accordingly.

  3. Command Code DUPED does not replace masterfile account action. Appropriate account transactions are still required.

  4. Do not disclose DUPED data. Taxpayers are not entitled to know who else has claimed the dependent exemption or EIC credit.

    Note:

    Do not use Command Code DUPED or DUPOL to determine if the taxpayer is entitled to claim the exemption or credit (including EIC). The database is not to be used to determine the taxpayer's eligibility.

  5. Refer to IRM 2.4.53, Command Code DUPED, for information on the input of the command code.

21.6.1.6.2  (04-11-2014)
Command Code DDBCK

  1. Command Code DDBCK must be used on all current processing year and two years prior:

    • Amended returns when exemptions and/or certain credits requiring TIN validation are being allowed/removed

    • Responses (via correspondence, amended return, or by phone) to TIN related math errors

    • Responses to math error 653 whether a Form 8862 is attached to a Form 1040X or is filed alone

      Note:

      Refer to IRM 21.6.3.4.2.7.17, EITC and Command Code DDBCK, for detailed information when EIC is involved.

      Caution:

      Do not use CC DDBCK when processing a Transaction Code (TC) 976 return that involves identity theft, mixed entity, or scrambled SSN's. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ IRM 21.5.2.4.23.6, DIF SCORE or CLASSIFICATION "Send Return(s) to Examination for Review" , must be followed when working these returns.

  2. Telephone assistor's only: If math error 653 is present do not access command code DDBCK, tell the caller we will correct their account when they submit the Form 8862 by mail. The Form 8862 cannot be faxed it must be received by mail.

  3. Always use Command Code (CC) INOLES to verify the TIN/NAME/DOB before using CC DDBCK. Even though CC DDBCK will validate age and TIN/Name information when the taxpayer is claiming additional dependents and/or credits requiring TIN validation, it will not provide an error message unless EIC is involved and then only if ME 653 is present or the taxpayer is claiming EIC for the first time.

  4. When processing an amended return/ Form 8862 and EIC is being increased, Command Code DDBCK will identify account conditions which require Exam involvement refer to IRM 21.6.3.4.2.7.17, EITC and Command Code DDBCK.

  5. DDBCK must be used when the following is being allowed or removed:

    • Exemptions

    • EIC refer to IRM 21.6.3.4.2.7.17, EITC and Command Code DDBCK

    • Child Tax Credit/Additional Child Tax Credit

    • Child and Dependent Care Credit

    • Education Credit

    • Adoption Credit

  6. Exceptions for when CC DDBCK cannot be used:

    Condition If current year claim should CC DUPED be used ?
    CP 27 response
    or
    Amended return where taxpayer is claiming EIC for self/spouse only
    No
    Children/Other Dependent with ITINs - Must be a dependent qualifying child/qualifying relative (for whom an exemption or credit is being claimed).

    Exception:

    Use DDBCK if the dependent qualifying child/qualifying relative previously had an ITIN and NOW has an SSN.

    No
    TIN has been merged or resequenced.

    Example:

    Primary taxpayer filed originally with an Individual Taxpayer Identification Number (ITIN) and NOW obtained a valid Social Security Number (SSN) and a Form 1040X needs to be processed.

    Yes
    Child Care Credit and dependent child turned 13 during the tax year, he/she is a qualifying person for part of the year he/she was under age 13. Refer to IRM 21.6.3.4.1.3, Form 2441, Child and Dependent Care Credit Yes
    Requesting filing status change which does not affect exemption/credit allowance No
    EIC increase due to additional Form W-2 No
    EIC NON-TIN related Math Errors (ME) pertaining to either correspondence or Forms 1040X.

    Exception:

    ME 653

    No
    Taxpayer is a fiscal year filer Yes
    CP 09 response Yes
    DDBCK Input Screen is full (6 dependents were previously claimed) Yes
    Tentative Carrybacks (TENTs) Yes
    Mixed Entity Cases Yes
    Scrambled SSN Cases Yes
    After the resolution of an ID Theft case and the "good" return has been identified, update as applicable refer to IRM 25.25.4.5, Identity Theft Category 7 — Single Return/Deceased/X-REF (No Lost Refund) Process and IRM 25.25.4.10, Identity Theft Category 7 — Two (2) or more ID Theft returns filed using the same TIN (ID Theft/ID Theft) Yes
    Child Care Credit and the qualifying dependent is over the age of 12 but disabled Yes
    Recertification Indicator 2, 3, or 4 is present and tax year is < EITC-EL-TXPD No
    Employee does not have access to command code DDBCK

    Note:

    If the case involves an increase to the earned income tax credit refer to Exhibit 21.5.3-2, Examination Criteria (CAT-A) - General. If the case does not meet CAT-A criteria and all other requirements are met then allow the EIC.

    Yes
    ASFR returns worked in AM contain a TC 599/089.
    Note: If input, CC DDBCK response will be "POSTED RETURN NOT FOUND FOR XXXX12" .
    No

    Reminder:

    For additional DDBCK Examination criteria, refer to IRM 21.5.3-3Examination Criteria (CAT-A) – Credits.

  7. CC DDBCK does not update DUPOL on cases when the response includes "Follow IRM" , "Selected" , or "Send as CAT-A" .

    1. If working a current year claim and CC DDBCK's response includes "Follow IRM" and following the applicable IRM procedures results in the adjustment being made, CC DUPED must be used to update DUPOL. Example of a DDBCK response "ITIN - Follow IRM" , refer to IRM 21.6.1.5.4 , Missing or Invalid Exemption TINs Procedures.

    2. If working a current year claim and CC DDBCK's response is "Selected" , do not use CC DUPED to update DUPOL. The claim is being referred to Examination for further review.

    3. If working a current year claim and CC DDBCK's response is "Send as CAT-A" and the claim is later returned by Examination "accepted as filed" , CC DUPED must be used to update DUPOL.

    4. If working a current year claim that is timely filed prior to April 15 and CC DDBCK's response is "Date Cannot be a Future Date" use the current date for the input.

  8. Input Category Code "EICN" in the category code field when working a case and:

    • EIC is not involved (amended return/CP 36/DUPF).

    • EIC is decreased (amended return/CP 36/DUPF).

    • Correcting Non-EIC TIN related math error based on taxpayer correspondence, phone call, or amended return.


    When the Category Code is "EICN" input:

    • Claim Amount "0"

    • Schedule C (SCHED-C) indicator "N"

    • AGI (L1) INC/DEC "0"

    • EIC (L13) INC/DEC "0"

  9. For cases involving an increase to EIC, refer to IRM 21.6.3.4.2.7.18, EITC Increases and Claims for Abatement, for information on the appropriate "Category Code" , "Claim Amount" , and "SCHED-C" indicator to enter.

  10. Take the following account action per DDBCK:

    Note:

    If the account contains a Transaction Code (TC) 971 Action Code (AC) 010 and DDBCK's response indicates case has been "Selected" , manually input the TC 971 AC 013. Otherwise, DDBCK systemically inputs a TC 971 AC 013.

    Reminder:

    If DDBCK's response indicates case has been Selected or to route case to CAT-A, refer to IRM 21.5.3.4.7, Processing Claims and Amended Returns with Examination Involvement, for additional instructions.

    If the following literal displays... Then...
    OK to input ADJ54, Do Not Use Blocking Series 74 Input the adjustment following the appropriate procedures for the specific issue.

    Note:

    Do not use Blocking Series 74

    OK to input ADJ54, if eligibility met
    OK to input ADJ54, enter reason code 103 Input the adjustment for the qualifying child (QC) case following the appropriate procedures and use RC 103.

    Note:

    Do not use Blocking Series 74

    Selected, DDBCK reroute to EITC Do not adjust. Route to your local Examination, using appropriate routing procedures
    Selected, DDBCK route to EITC XXXX

    Note:

    "XXXX" = CAMPUS

    Do not adjust. Route to Examination at XXXX using appropriate routing procedures.

    Note:

    If "Selected, DDBCK reroute to EITC KCSC" then refer to IRM 21.6.3.4.2.7.15, EITC Recertification.

    Selected, DDBCK route to EITC BSC (9A or 10A)
    OR
    Selected, DDBCK route to EITC PSC (9A or 10A)
    Do not adjust. Route to Examination at BSC (Brookhaven) or Route to Examination at PSC (Philadelphia) using appropriate routing procedures.
    Selected, DDBCK reroute to EITC, possible citizenship issue Do not adjust. Route to local Examination, using appropriate routing procedures.
    Send as CAT-A - possible citizenship Do not adjust. Follow normal CAT-A routing procedures.
    FS Case Joint to Separate after the due date - Follow IRM Refer to IRM 21.6.1.4.5, Joint to Separate, Single or Head of Household Procedures.
    Possible Statute of Limitations - Follow IRM prior to sending as CAT-A Follow normal CAT-A routing procedures.
    ITIN - Follow IRM Refer to IRM 21.6.1.5.4, Missing or Invalid Exemption TINs Procedures.
    Open AIMS Present - Follow IRM Refer to IRM 21.5.3.4.7, Processing Claims and Amended Returns with Examination Involvement.
    Prior Year Possible Statute - Follow IRM Refer to IRM 25.6.1.5, Basic Guide for Processing Cases with Statute of Limitations Issues.
    Selected, Input ADJ54 using BS 74 then Route to EITC Adjust account using unsubstantiated math error procedures found in paragraph 4 of IRM 21.5.4.4.5, Math Error Unsubstantiated Protest Processing. Route to your local Examination, using appropriate routing procedures after the adjustment has been made.
    Selected, Input ADJ54 using BS 74, reroute to EITC BSC
    or
    Selected ME 653 - Reroute to EITC XXXX

    Note:

    "XXXX" = CAMPUS

    Adjust account using unsubstantiated math error procedures found in paragraph 4 of IRM 21.5.4.4.5, Math Error Unsubstantiated Protest Processing. Route the case after the adjustment has been made.

    Note:

    DDBCK has selected this case and the account will be opened on AIMS before the adjustment input posts to master file.

    RECERT IND Present - Follow IRM Refer to IRM 21.6.3.4.2.7.15.1, EITC Recertification Math Errors.
  11. Response screens addressing the action to be taken will be displayed after the appropriate data is input. For DDBCK input, refer to IRM 2.4.58, Command Code DDBCK / DDBCV / DDBCS, for additional information.

Exhibit 21.6.1-1 
FILING STATUS and EXEMPTION ADJUSTMENTS STEP LIST

The following step list represents the general flow for processing changes to filing status and exemptions. To determine if the requirements for a filing status and/or exemption changes are met, follow procedure for:

  1. Researching filing status, refer to IRM 21.6.1.3, Filing Status Research.

  2. Filing status change, refer to IRM 21.6.1.4, Filing Status Change Procedures.

  3. "No Consideration" change, refer to IRM 21.6.1.4.1, No Consideration Filing Status Change.

  4. Return with missing information, refer to IRM 21.6.1.4.2, Returns With Missing Information.

  5. Separate to joint accounts, refer to IRM 21.6.1.4.3, Processing Separate-To-Joint Adjustments.

  6. "Statute of Limitations" , refer to IRM 21.6.1.4.4, Statute of Limitations Procedures for Separate to Joint.

  7. Joint to separate, single or head of household, refer to IRM 21.6.1.4.5, Joint to Separate, Single, or Head of Household Procedures.

  8. One spouse only requesting filing status change, refer to IRM 21.6.1.4.6, Only One Spouse Requesting Filing Status Change.

  9. Claim where Joint Election is Invalid, refer to IRM 21.6.1.4.7, Claims of Joint to Single or Head of Household Where Joint Election is Invalid.

  10. Allocating Jointly Filed Case Procedures, refer to IRM 21.6.1.4.8, Allocating Jointly Filed Cases.

  11. Bankruptcy assessments on joint accounts, refer to IRM 21.6.1.4.9, Bankruptcy Assessments on Joint Accounts Procedures.

  12. Registered Domestic Partners and Community Property Claims, refer to IRM 21.6.1.4.10, Registered Domestic Partners and Community Property Procedures

  13. Exemptions, refer to IRM 21.6.1.5, Exemptions Procedures.

  14. Missing or invalid exemption TINs, refer to IRM 21.6.1.5.4, Missing or Invalid Exemption TINs Procedures.

  15. Exemption claim, refer to IRM 21.6.1.5.5, Exemption Claim Procedures.

  16. Resolving a CP 54 notice with math error, refer to IRM 21.6.1.5.6, Resolving CP 54 Notices with Math Error Involvement.

  17. Adjusting an exemption deduction, refer to IRM 21.6.1.5.7, Adjusting the Exemption Deduction.

  18. Verifying Form 8332, refer to IRM 21.6.1.5.8, Verifying Form 8332.

  19. Using Command Codes DUPED and DDBCK, refer to IRM 21.6.1.6, Command Code DUPED and DDBCK.


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