21.6.3  Credits (Cont. 2)

21.6.3.4 
Credits Procedures

21.6.3.4.2 
Refundable Credits

21.6.3.4.2.11  (10-01-2010)
First-Time Homebuyer Credit

  1. The Housing and Economic Recovery Act of 2008 (HERA) (PL 110-289), enacted on July 30, 2008, allows a taxpayer who is a first time homebuyer a refundable tax credit of the lesser of $7,500 ($3,750 for Married Filing Separate) or 10% of the purchase price. The law is effective for qualifying homes purchased on or after April 9, 2008, and on or before December 31, 2008.

  2. The American Recovery and Reinvestment Tax Act of 2009 (ARRA) (PL 111-5), enacted on February 17, 2009, allows a refundable tax credit of the lesser of 10% of the purchase price of the residence or $8,000. The credit is available for first time homebuyers who purchased a home after December 31, 2008 and before December 1, 2009.

  3. The Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA) (PL 111-92), enacted on November 6, 2009, extends the eligibility period for the first time homebuyer credit to purchases made before May 1, 2010. Taxpayers who have entered into a written binding contract before May 1, 2010, must close on the home before July 1, 2010 to qualify. This bill also establishes special rules for long-time residents and members of the Armed Services, Foreign Service officers and the intelligence community.

  4. The Homebuyer Assistance and Improvement Act of 2010 (HAIA) (PL 111-198), enacted on July 2, 2010, extends the deadline to purchase a home to October 1, 2010, for taxpayers who have entered into a written binding contract before May 1, 2010, to close before July 1, 2010.

  5. For homes purchased in 2008, the credit is treated as a 15 year interest-free loan. The credit is recaptured over fifteen years beginning the second year after the home is purchased.

  6. For homes purchased in 2009 and 2010, the taxpayer must repay the credit only if the home ceases to be the taxpayer's main home within the 36 month period beginning on the purchase date.

  7. A "home" must be the taxpayer's primary and principal residence and be located in the United States.

  8. A "home" must meet the definition of a house, condo, co-op, mobile home, house trailer, or houseboat that has sleeping, cooking and toilet facilities.

  9. If a taxpayer is constructing a new home, the home will be treated as "purchased" by the taxpayer on the date the taxpayer first occupies the home as the principal residence. This also applies to manufactured homes installed on a new site.

  10. The credit cannot be claimed if the taxpayer is a nonresident alien or for the purchase of a residence in 2008, if the taxpayer qualifies for the DC First Time Homebuyer Credit.

21.6.3.4.2.11.1  (04-09-2010)
The Housing and Economic Recovery Act of 2008 (HERA) and the American Recovery and Reinvestment Act of 2009 (ARRA)

  1. For eligible purchases made in 2008, the credit must be claimed on the 2008 tax return or amended return.

  2. For eligible purchases made in 2009, an election can be made to claim the credit on either the 2008 tax return, amended 2008 tax return, or the 2009 tax return.

  3. For eligible purchases made in 2010, an election can be made to claim the credit on either the 2009 tax return, amended 2009 tax return or their 2010 tax return.

  4. For purchases made on or before November 6, 2009, the modified adjusted gross income (MAGI) is computed by the AGI increased by any foreign income under IRC 911, 931 or 933.

    1. The phase out of this credit begins when the MAGI exceeds $75,000 ($150,000 if Married Filing Joint).

    2. The credit is eliminated when the MAGI reaches $95,000 ($170,000 if Married Filing Joint).

  5. Homes purchased in 2009 that do not fall under the fifteen year repayment criteria and are claimed on the original 2008 return will be coded with a SPC "H" by Document Perfection. This can be identified on Master File on RTVUE.

21.6.3.4.2.11.2  (01-12-2010)
Worker, Homeownership and Business Assistance Act of 2009 (WHBAA)

  1. Under WHBAA, the First-Time Homebuyer Credit of up to $8,000 was extended from December 1, 2009, to April 30, 2010.

  2. Long time residents of the same principal home may qualify for a credit of up to $6,500, based on the purchase of a new home.

  3. In addition, taxpayers who enter into a binding contract before May 1, 2010, to close on the purchase of a principal residence before October 1, 2010, also qualify for the credit.

    Example:

    A taxpayer enters into a binding contract on April 1, 2010 to purchase a home. The taxpayer then closes on the home on June 17, 2010 (receives a properly executed settlement statement). The taxpayer submits Form 5405 with required documentation claiming the credit.

  4. Form 5405 cannot be electronically filed with Form 1040 series returns for the 2010 filing season due to the required documentation.

  5. For the 2010 filing season, the Form 5405 "Date Purchased" entry will be a transcribed field, so SPC "H" will not be necessary to identify these returns as not falling under the fifteen year repayment criteria.

21.6.3.4.2.11.3  (10-04-2010)
WHBAA Date of Enactment- November 6, 2009

  1. The Date of Enactment (DOE) for WHBAA of 2009 is November 6, 2009. Certain changes are applicable to the credit on purchases made after this date. These are:

    1. Allowing qualifying long time residents to claim a credit up to $6,500.

    2. Dollar limit in MAGI increased to $125,000 ($225,000 for Married Filing Joint).

    3. No credit allowed for home purchase over $800,000.

    4. The taxpayer must be at least 18 years old on the date of purchase and if married, only one spouse must meet this requirement.

    5. Credit cannot be claimed from property purchased from individuals related to family of a spouse.

    6. No credit is allowed for taxpayers who are eligible to be claimed as a dependent on another taxpayer's return.

      Note:

      These changes are not retroactive.

21.6.3.4.2.11.4  (10-01-2011)
WHBAA Military Exceptions Credit Extension

  1. WHBAA allows members of the military and certain other federal employees serving outside the U.S. to have an extra year to buy a principal residence in the U.S. and qualify for the credit.

  2. An eligible taxpayer must buy before May 1, 2011, or alternatively, enter into a binding contract before May 1, 2011, to buy a principal residence before July 1, 2011.

  3. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule.

  4. This applies to any individual (and, if married, the individual's spouse) who serves on qualified official extended duty service outside of the U.S. for at least 90 days during the period beginning December 31, 2008, and ending before May 1, 2010.

  5. Additional documentation is not required for the military. Taxpayers must check Part I, Line D on Form 5405 to indicate they are part of the military.

21.6.3.4.2.11.5  (02-01-2010)
WHBAA Long-Time Residents Credit

  1. WHBAA allows for a long-time resident of the same principal home to qualify for a credit of up to $6,500, based on the purchase of a new home.

  2. The taxpayer(s) must have lived in the same principal home for any five consecutive year period during the previous eight years ending on the purchase date of the new home.

    Note:

    If the taxpayers are Married Filing Joint, BOTH taxpayers must have owned and used the home as the principal residence for the five consecutive years. However, please note that only one taxpayer could be shown as "owner" on mortgage or interest statements.

    Example:

    #1- Single - The taxpayer owned and used a home as a principal residence for five years in a row (2002-2007) and then moved to a rental apartment for two years. At the time of the move, the taxpayer either sold the home or converted it to rental property. The taxpayer now decides to buy a principal residence to live in again and once it is purchased (after November 6, 2009) is entitled to a credit up to $6,500. If the taxpayer had lived in the apartment for three years, he would qualify for up to $8,000 as a First-Time Homebuyer.

    Example:

    #2- MFJ - The taxpayers both own and used the same home as a principal residence since November 6, 2004. They purchase a new home and close after November 6, 2009. They are entitled to a credit up to $6,500.

21.6.3.4.2.11.6  (05-07-2012)
First-Time Homebuyer Credit Claims

  1. Eligibility requirements for First-Time Homebuyer Credit claims will be determined by the purchase date on Form 5405 and whether claim requirements are under HERA, ARRA, or WHBAA.

  2. Disallow the FTHBC for home purchases prior to the WHBAA DOE if the credit limits or MAGI limits are exceeded.

    • MAGI limits BEFORE WHBAA are phased out from $75,000 and are eliminated at $95,000 for single taxpayers. For Married Filing Joint taxpayers the MAGI limits are phased out from $150,000 and are eliminated at $170,000.

  3. WHBAA requires the taxpayer to submit documentation to support any FTHBC claim and provides additional authorities to the IRS to enhance the administration of the credit.

  4. Valid documentation includes a settlement statement (i.e.,, HUD-1 Settlement Statement) with the property address, the seller(s) and buyer(s) names, purchase price and purchase date. The settlement statement may or may not contain the buyer(s) and seller(s) signatures. Mobile home purchasers may submit an executed retail sales contract including the names, address, purchase date and purchase price and signatures of both taxpayers if applicable. If the home was newly constructed, a copy of the occupancy permit is sufficient.

    Invalid documentation includes:

    • Refinance settlement statements,

    • Construction receipts.

    • Incomplete documentation (without regard to the signatures).

      Note:

      If the taxpayer submits alternative, official documentation that includes the property address, the seller(s) and buyer(s) names and purchase date, or something other than the certificate of occupancy as shown in IRM 3.11.6.8.13.6.2, Form 5405 Requirements, forward the case as CAT-A criteria (even if none of the CAT-A filters are met).


      If the official documentation does not include all of the required elements, the claim should be "No Considered" as outlined in (8) below.

  5. A copy of a properly executed settlement statement must be attached to Form 5405 for tax period 2009 and subsequent tax returns or 2009 amended returns. A 2008 amended return does not require a settlement statement.

  6. If the taxpayer enters into a binding contract before May 1, 2010, to close on the purchase of a principal residence before October 1, 2010, a copy of the "purchase contract " should be attached to the return or 2009 amended return (but not 2008) in order to receive the credit. Documentation is a contract containing all parties' signatures, the date, the property address, the seller(s) and buyers(s) names and the purchase price.

    Note:

    If a claim is received with the settlement statement and WITHOUT this binding contract documentation proving ownership, process through the xClaim tool. If appropriate, send to CAT-A, otherwise adjust the account accordingly. Do not "reject" the claim due to missing documentation. When allowing the credit, use RC 128 instead of RC 110.

  7. In addition, if the taxpayer is claiming the long time residents credit, documentation proving ownership for five out of eight consecutive years, should be attached to the original or amended return. Documentation includes any of the following:

    1. Prior year mortgage interest statements,

    2. Property tax records,

    3. Form 1098 issued by Mortgage Company, or

    4. Homeowner insurance records.

      Note:

      Audit Codes "A" and/or" I" could be present on CC RTVUE if this documentation is not submitted on the original return

      Note:

      If a claim is received with the settlement statement and WITHOUT the "5 out of 8 year" documentation proving ownership, process through the xClaim tool. If appropriate, send to CAT-A, otherwise adjust the account accordingly. Do not "reject" the claim due to the missing documentation. When allowing the claim, use RC 129 instead of RC 110.

  8. "No Consider" the claim following IRM 21.5.3.4.6.3, No Consideration Procedures, if the settlement statement is not attached.

    Note:

    Process the FTHBC claim through the xClaim tool to check for any disallowance criteria. If disallowance criteria is identified, send 105C/106C to the taxpayer with appropriate information. If CAT-A criteria is identified do not forward to CAT-A.

    • Note:

      Depending on the circumstance, multiple types of documentation may be required from the taxpayer, such as a copy of the settlement statement and documentation to support five consecutive years. When "no considering" or disallowing a claim, ensure all the missing elements are requested after reviewing with xClaim.

  9. Process WHBAA claims as follows: Disallow the claim following IRM 21.5.3.4.6.1, Disallowance and Partial Disallowance Procedures, if any of the following conditions apply:

    1. Taxpayer is under age 18. If married, only one spouse must meet the age requirement.

    2. Home purchase price exceeds $800,000.

    3. Taxpayer's AGI limitations exceed $145,000 ("phase out" begins at $125,000) for individuals or $245,000 ("phase out" begins at $225,000) for Married Filing Joint.

    4. Taxpayer can be claimed as a dependent on another taxpayer's return for the tax year the FTHBC is being claimed.

    5. Taxpayer is claiming the FTHBC and has already received the credit in a prior year.

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    7. Future home purchase dates on Form 5405.

    8. Home purchase dates after July 1, 2010 (and does not meet exception criteria).

    9. No response to request for missing documentation or unacceptable documentation received.

  10. If the taxpayer has submitted all required documentation and no disallowance or CAT-A criteria is met, adjust the taxpayer's account to allow the credit.

21.6.3.4.2.11.6.1  (10-01-2011)
First Time Homebuyer Math Error Responses

  1. The majority of First-Time Homebuyer Credit math errors can be adjusted based on oral statement and do not require additional documentation. Unless indicated in this section of the IRM, these math error responses are not required to be run through xClaim.

  2. Responses to First-Time Homebuyer Credit math errors for missing settlement statements (TPNC 691) and missing Forms 5405 (TPNC 683) bypass original return processing filters. When responses come into Accounts Management, this requires the use of the FTHBC tool in xClaim tool to assure the taxpayer is in compliance with other Exam criteria before allowing the credit.

  3. If a taxpayer submits a missing Form 5405 or a settlement statement in response to a math error notice, or a late reply is forwarded from Submission Processing, run the response through the FTHBC tool in xClaim. Disallow or send to CATA if indicated on the FTHBC tool. If no filters are identified by the FTHBC tool, allow the FTHBC as claimed on the original return.

    Note:

    If the taxpayer calls in about the missing Form 5405 or settlement statement, have them send in a copy of the Form or document to the center to process the adjustment.

  4. If the taxpayer receives a math error due to a missing settlement (TPNC 691), the settlement statement must be received in order to allow the credit. This document could be faxed or mailed in.

    Note:

    If the taxpayer calls in about the missing Form 5405 or settlement statement have them send in a copy of the Form or document to the center to process the adjustment.

  5. TPNC 641 is a math error based on specific filter checks made during processing of the original return which review data over the last two years. This math error states "We have disallowed the amount claimed for First Time Homebuyer Credit on page 2 of your tax return. Our records indicate you have a prior homeownership that would make you ineligible to claim the credit." If there is any mortgage interest found during the past two years, the First Time Homebuyers Credit will not be allowed and a TPNC 641 will be assigned.

  6. For TPNC 641, acceptable explanations of no previous home ownership must be submitted in writing. Taxpayers can submit the documentation via fax. The taxpayer must provide a reasonable explanation that any prior year mortgage interest/real estate tax was for something other than a principal residence. Some examples are:

    1. Timeshare or vacation property.

    2. Rental property and the mortgage interest/real estate tax was claimed on Schedule A instead of Schedule E.

    3. Taxpayer erroneously claimed interest in a previous year (i.e.,, did not pay the mortgage interest and the mortgage interest is not on IRPTR L. Note: Tell the taxpayer to amend the prior year but do not hold up adjusting the account waiting for the Form 1040X.

      Note:

      If it is evident the taxpayer is claiming the Long Time Residents Credit and an error was made, documentation is not needed. If the taxpayer originally claimed FTHBC and now states he wants LTRC, an amended return must be filed.

      Note:

      Keep in mind, the taxpayer must submit their acceptable explanation in writing with TPNC 641. This information can be faxed and the account adjusted. The examples listed above are not all-inclusive and the taxpayer may provide other explanations.

      Note:

      For informational purposes, CSR can run the tool for specifics of the TPNC 641 assignment. If any secondary CATA criteria exists, disregard.

  7. If a taxpayer's explanation is not considered acceptable for TPNC 641, follow procedures in IRM 21.5.4.4.5, Math Error Unsubstantiated Protest Processing.

  8. When a taxpayer submits a previously disallowed claim based on prior year homeownership over the past two years and the new information is not acceptable as described in 6 above, forward to Appeals.

  9. If a taxpayer is responding to a math error notice from the original return or a disallowance letter and states they are "appealing" the disallowance of FTHBC, do not refer to the Office of Appeals. These are responses to math error notices and should be resolved by the assistor. Specific examples of erroneous referrals to Appeals would include:

    • Taxpayer calls and wishes to "appeal" a math error notice related to the FTHBC and the taxpayer is referred to the Appeals Customer Service Line. The math error should be explained to the taxpayer.

    • Taxpayer calls indicating they wish to appeal the disallowance of the FTHBC and research indicates a 105C letter was issued and shows a disallowance letter was issued and there is a disallowance adjustment. As outlined in the 105C letter information provided to the taxpayer, the request for appeal must be submitted in writing.

    Note:

    Just because the taxpayer uses the word "appeals" in his statement, does not necessarily indicate the taxpayer should be given the Appeals telephone number. Taxpayers may only be trying to obtain a status on their account. Only refer to Appeals if there is a clear cut indication on AMS the account is in Appeals.

  10. Math error responses for disallowance for the FTHBC include the following disallowance literals:

    • 638- Disallowance of FTHBC due to sale of property to a person related to you or spouse.

    • 639- Disallowance of FTHBC due to purchase price of residence exceeding $800,000.

    • 640- Disallowance of FTHBC due to settlement statement not attached to return.

    • 641- Disallowance of FTHBC due to prior homeownership.

    • 683- Disallowance of FTHBC due to missing or incomplete Form 5405.

    • 685- Disallowance of FTHBC due to home being purchased before April 8, 2008 or after July 1, 2010.

    • 686- Disallowance of FTHBC due to taxpayer or spouse (if married filing joint) must be 18 or older.

    • 690- Disallowance of FTHBC due to home being purchased prior to year tax year being filed.

    • 691- Disallowance of FTHBC due to properly executed settlement statement not attached.

    • 692- Disallowance of FTHBC due to modified AGI being exceeded.

21.6.3.4.2.11.6.2  (10-01-2011)
First-Time Homebuyer Taxpayers Not Entitled to Credit

  1. If the First Time Homebuyer taxpayer calls or writes in response to a letter (i.e.,, 3064C, open control issue) reverse the FTHBC when the taxpayer states the following:

    1. They did not intend to purchase a home, or

    2. They are not going to buy a home, or

    3. They have not closed on their home, or

    4. They are now going to close on a different home

  2. If the taxpayer calls or writes concerning the FTHBC and states any of the following which is NOT in response to any letter:

    1. They did not intend to purchase a home, or

    2. They are now not going to buy a home, or

    3. They have not closed on their home, or

    4. They are now going to close on a different home, then


    If the account indicates a TC 766 with a CRN 258 and a TC 846 has posted, inform the taxpayer the credit should not have been allowed and they must file an amended return to correct the account. Send the taxpayer Form 1040X to file an amended return, or

    If the account indicates a TC 766 with a CRN 258 and a TC 846 has not yet posted, inform the taxpayer their refund will be stopped because they are not entitled to the credit. Stop the refund. Refer to IRM 21.4.1.4.10, Refund Intercept CC NOREF with Definer "P" , and IRM 21.4.1.4.11, IRS Holds Automated Listing (HAL), for additional instructions. Send the taxpayer From 1040X to file an amended return.

  3. When reversing a credit, interest and penalties are due on these accounts and computed as normal adjustments and computed from Return Due Date. The taxpayer had use of this money to the date or repayment of this credit.

  4. Instruct the taxpayer to send repayment with the bottom half of the notice to assure proper posting.

21.6.3.4.2.11.7  (11-02-2011)
First-Time Homebuyer Adjusting Accounts

  1. Always review Forms 1040X for a new address and update master file accordingly. Refer to IRM 21.6.7.4.4.4, Entity Verification.

  2. When adjusting an account, review IMFOLF or ENMOD prior to allowing the FTHBC to assure the credit was not previously taken on another tax period. If there is an entry in the primary and/or secondary credit amount fields, the credit was previously taken.

  3. When adjusting an account for the FTHBC use Credit Reference Number (CRN) 258 to allow/increase the credit and CRN 258 with a minus sign (-) to decrease the credit.

    Note:

    The CRN converts to TC 766/767 Reference Number 258 at Master File. Enter only one of the following reason codes:

    1. Use RC 109 (First Time Homebuyer Credit) when the home was purchased in 2008.

    2. Use RC 110 (First Time Homebuyer Credit) when the home was purchased in 2009 or 2010.

    3. Use RC 125 (First Time Homebuyer Credit) when the home was purchased by a long time resident (up to $6,500).

    4. Use RC 126 (First Time Homebuyer Credit) only for homes purchased by first time homebuyers that are military using their one year extension.

    5. Use RC 127 (Requirement to repay the First Time Homebuyer Credit Waived) only for military forgiveness.

    6. Use RC 128 (First Time Homebuyer Credit) - for homes purchased by first time homebuyer WITHOUT binding contract documentation attached.

    7. Use RC 129 (First Time Homebuyer Credit) - for long time residents WITHOUT binding contract or 5 out of 8 year documentation attached.

      Caution:

      It is imperative to use the correct reason code when adjusting the 2008 accounts. This code will be used to identify homes purchased in 2008 that require repayment.

    Note:

    For any home purchased in 2010 and the Form 5405 is for a 2009 tax period, input a reference code 880 .10, RC 121 (primary), or RC 000 (joint) along with the appropriate RC 110, 125, 126, 128, or 129. This is necessary to show the correct year of purchase on IMFOLF.

    Note:

    For any home purchased in 2011 (military), input a reference code 880 .11 and use the appropriate RCs. Input RC 121 (primary) or RC 000 (joint) as well.

  4. Use the appropriate SC and blocking series.

  5. When adjusting the "year" the credit was taken, use item reference number 880 with a two year digit indicator (including the decimal.)

    Example:

    The primary taxpayer mistakenly entered a purchase date of 07/08/09 on Form 5405 and submits a Form 1040X with a corrected date of 07/08/08. We would show the adjustment as follows: TC 290 .00, IRN 880 .08, RC109, RC 121, BS 05.

    Note:

    Use Reason Code 121- (internal use only) adjust primary FTHBC year or Reason Code 122 - (internal use only) adjust secondary FTHBC year with TC 880 credit reference code.

  6. If two valid Forms 5405 need to be adjusted onto one account, Priority Code 9 will be needed in order to override any unpostable condition.

    Example:

    Two single taxpayers purchase separate homes. They were both single first time homebuyers. They then marry. Both purchases then qualify for the credit provided each residence is the principal residence of the purchasing taxpayer. In this case, we could get two Forms 5405 if they decide to file an amended return. We would need to use PC 9 on our adjustment.

  7. When backing out or reducing the FTHBC on an account, always check the entity on CC IMFOLF to assure the FTHBC credit amount field has data posted. If the field is blank, you must first bring the data back from the cross reference account before backing out the tax module account. Failure to do this will cause an unpostable.

    1. Reverse the credit amount shown on CC IMFOLF using a reference number 875 for the primary amount (negative), or a 975 for the secondary amount (negative), RC 109, 110, 125 or 126.

    2. To create the FTHBC entity on the account where the FTHBC is being back-out or reduced, input the same transaction in (a) above with a positive.

    3. Wait until the following week to work the remainder of the case to assure posting of these transactions or use a posting delay code of 1.

    Note:

    If CC IMFOLF indicates a repayment of 1/15 of the credit, the tax and repayment amount on IMFOLF can be adjusted if the repayment was assessed via math error authority. If the taxpayer reported the repayment on their original or amended return, the taxpayer will have to file an amended return to correct the tax / IMFOLF.

  8. Due to a systemic problem, there may be instances where the FTHBC has been backed out of an account, but still shows on IMFOLF. The IMFOLF information must be removed with item reference code 875 / 975 as listed in the example above, one cycle prior to posting the FTHBC or the adjustment will unpost.

21.6.3.4.2.11.8  (10-01-2011)
Recapture of First-Time Homebuyer Credit

  1. Refer to IRM 21.6.4.4.19.1, Recapture of First-Time Homebuyer Credit, for more information.

21.6.3.4.2.11.8.1  (10-01-2010)
First-Time Homebuyer Military Exceptions Waiver of Recapture of Credit

  1. The recapture requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community.

  2. This relief applies where a home is sold or stops being the taxpayer's principal residence after December 31, 2008, in connection with Government orders received by the individual (or individual's spouse) for qualified official extended duty service.

  3. The credit is still allowable even if this happens during the year of purchase.

  4. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer's principal residence (whether inside or outside the U.S.) or under orders compelling residence in government furnished quarters.

  5. Extended duty is defined as any period pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.

21.6.3.4.2.12  (01-05-2009)
Recovery Rebate Credit

  1. As part of the Economic Stimulus Act of 2008, eligible individuals were sent an Economic Stimulus Payment (ESP) giving them an advance payment of the 2008 Recovery Rebate Credit (RRC). The RRC is figured in the same manner as the ESP except that the amounts are based on Tax Year 2008 instead of 2007.

  2. Individuals may be able to claim the RRC on his/her 2008 tax return only if:

    • He/she did not receive an ESP in 2008 OR

    • His/her ESP was less than $600 ($1200 MFJ in 2007) plus $300 for each qualifying child they have for 2008.

  3. A Recovery Rebate Credit Job Aid is provided to assist in determining if a taxpayer is eligible for the credit. The job aid will be accessible from the Employee Tools link on the Recovery Rebate Credit Resource page and on the "IRM Supplements" tab on SERP. Use of the job aid is not mandatory but is recommended.

  4. Taxpayers whose ESP is larger than the RRC amount figured on the 2008 tax return will not have to pay back the difference.

  5. Individuals who did not qualify for the ESP can claim the RRC on his/her 2008 tax return, provided they are otherwise eligible. See IRM 21.6.3.4.2.12.3, RRC Qualifications.

21.6.3.4.2.12.1  (01-05-2009)
RRC General Research

  1. Except as specified in the following instructions, normal procedures should be followed to resolve most account problems or discrepancies. You may also need to reference other IRM sections. See IRM 21.6.3.6.1, General Research, for links to specific IRM sections.

21.6.3.4.2.12.2  (10-01-2011)
Explanation of RRC

  1. If eligible, the 2008 RRC is claimed on Form 1040, Line 70; Form 1040A, Line 42; or Form 1040EZ, Line 9.

  2. The 2008 income tax instructions include a worksheet (for each F1040 series return) to help taxpayers figure the Recovery Rebate Credit (RRC). The worksheet will help taxpayers who did not receive an economic stimulus payment or received a reduced amount, determine if they are eligible for the RRC.

    Note:

    Taxpayers can choose to have the Service figure the credit for them by simply writing the letters" RRC" to the left of the appropriate Recovery Rebate Credit line (Line 70 on Form 1040, Line 42 of Form 1040A, or Line 9 of Form 1040EZ). For taxpayers who are filing electronically, the software will figure the credit for them.

    Note:

    To complete the RRC worksheet, the taxpayer must know the amount of the ESP allowed on the 2007. If the taxpayer does not have the ESP amount and you have IDRS access then provide the amount. If you do not have IDRS access, follow normal procedures and transfer the call to the appropriate application.

  3. The Recovery Rebate Credit Calculator is available internally on RRC Calculator.

  4. On taxpayer inquires, provide general eligibility information below or use the RRC job aid. Unless the taxpayer insists or is without a filing requirement (i.e.,, Social Security, Veteran, Railroad Retirement benefit recipient), do not calculate the credit amount, and then, only if the taxpayer has completed his/her tax return to the appropriate line (Line 61, Form 1040; Line 37 Form 1040A or Line 6, but including Line 11Form 1040EZ) for the credit. For ease of calculation use the Recovery Rebate Credit Calculator not the worksheets found in the Form 1040 series instructions.

    Note:

    If applicable, access the taxpayer's 2007 tax account and notate the amount of ESP allowed. Then access the online calculator and use the 2007 ESP amount along with the 2008 tax return information provided by the taxpayer to figure the RRC.

  5. The maximum credit is $600 ($1200 MFJ) with an additional $300 for each qualifying child.

    Note:

    A change in the 2008 Filing Status Code (FSC) from the 2007 FSC and/or a change in the number of qualifying children may result in a change in the allowable amount of 2008 RRC.

    IF your filing status in 2007 was... AND your filing status in 2008 changed to... THEN use the following Economic Stimulus Payment (ESP) amount(s) to figure your Recovery Rebate Credit (RRC)
    Not Married Filing Jointly Married Filing Jointly The total Economic Stimulus Payment amount received by you, as shown on Notice 1378, including any amount for qualified children PLUS the Economic Stimulus Payment amount received by your spouse, as shown on Notice 1378. Note: If you new spouse filed jointly with a different spouse in 2007, then your new spouse's stimulus payment was half of their joint stimulus payment amount
    Married Filing Jointly Not Married Filing Jointly Half of the total Economic Stimulus Payment amount received by you and your spouse, as shown on Notice 1378. including any amount for qualified children.  
    Married Filing Jointly Married Filing Jointly with a different spouse Half of the total Economic Stimulus Payment amount received by you and your former spouse, as shown on Notice 1378, including any amount for qualified children PLUS the Economic Stimulus Payment amount received by your now spouse, as shown on Notice 1378. Note: If your new spouse filed jointly with a different spouse in 2007, then your new spouse's stimulus payment was half of their joint stimulus payment amount.

    • Example 1 - Taxpayer A filed MFJ for 2007 and files MFS for 2008. Taxpayer A and spouse received $1200 ESP based on 2007 return ($600 for each spouse). Taxpayer A is not entitled to the RRC since he/she received the maximum credit ($600) based on 2008 filing status of MFS.

    • Example 2 - Taxpayer B filed MFJ for 2007 subsequently gets a divorce and remarries. Taxpayer B files MFJ for 2008 with new spouse. Taxpayer B and ex-spouse received $1200 ESP based on 2007 return ($600 for each spouse). Taxpayer B's new spouse did not file a 2007 return and therefore did not receive an ESP. Depending on their 2008 net income tax liability, Taxpayer B and his/her new spouse may qualify for the RRC. When figuring the RRC, Taxpayer B and new spouse will reduce the credit by Taxpayer B's portion ($600) of the ESP received based on the 2007 tax return.

    • Example 3 - Grandmother claims qualifying child in 2007 and receives ESP in the amount of $300 for the qualifying child portion of the ESP. In 2008, mother claims the same qualifying child that grandmother did in 2007. Because the mother did not claim the qualifying child in 2007 she is entitled to $300 of RRC for the qualifying child if all of the other qualifications are met.

  6. The RRC DI application tool will supply the 2007 ESP data but is based on posted account information through cycle 200852. Any subsequent adjustments to the module, which may affect the ESP data, are not considered (e.g., the ESP is reversed in cycle 200904).

  7. If the taxpayer states he/she did not receive the ESP check as shown on the 2007 tax account, initiate a refund trace as outlined in IRM 21.6.3.6.6.4, Refund Traces.

21.6.3.4.2.12.3  (10-01-2010)
RRC Qualifications

  1. Taxpayers must meet the following qualifications to claim the Recovery Rebate Credit (RRC).

    • A Tax Year 2008 Federal income tax return must be filed.

    • Maximum credit, based on 2008 filing was not realized on the 2007 tax account.

    • A valid social security number (including spouse, if married filing joint). No ITIN, ATIN, IRSN, or invalid SSN.

      Exception:

      The Heroes Earnings Assistance and Relief Tax Act of 2008 provides that Social Security Number requirement for both spouses and children does not apply in the case of a joint return where at least one spouse is a member of the Armed Forces of the United States at any time during the taxable year.

    • All qualifying children must have a valid social security number.

      Exception:

      If the child was born and died in Tax Year 2008, a Social Security Number was not issued and the child can be claimed as an exemption on the tax return, that child is a qualifying child for RRC purposes.

    • A net income tax liability greater than zero OR qualifying income of $3000 or more.

      Note:

      Net income tax liability equals tax before credits plus alternative minimum tax minus nonrefundable credits except child tax credit.

      Note:

      Qualifying income equals earned income, including nontaxable combat pay, Social Security Benefits, certain Tier 1 Railroad Retirement Benefits, and certain Veteran's Benefits.

  2. Form 1040NR, Form 1040PR, and Form 1040SS are not eligible for the RRC.

    Note:

    Residents of Puerto Rico were eligible for a recovery rebate from the Puerto Rico Department of the Treasury.

  3. Individuals that can be claimed as a dependent of another taxpayer are not eligible for the RRC.

  4. Changes made during the processing of a return are considered. For example: If Error Resolution System (ERS) changes a return which increases/decreases the tax, the RRC is similarly increased/decreased.

  5. Amended or subsequent returns will affect the amount of any allowable RRC.

    Note:

    This includes any changes to the number of qualifying children.

21.6.3.4.2.12.3.1  (01-05-2009)
RRC Social Security Recipients, Veterans, and Other Beneficiaries

  1. Individuals who do not have to file a 2008 tax return for tax purposes, may file a return in order to receive the Recovery Rebate Credit (RRC). In order to qualify, these individuals must have received qualifying income of $3000 or more in Tax Year 2008.

    Note:

    Qualifying income equals earned income, including nontaxable combat pay, Social Security Benefits, certain Tier 1 Railroad Retirement Benefits, and certain Veteran's Benefits.

  2. During processing, these returns are coded with a Special Processing Code "P" to identify them as a claim for the Recovery Rebate Credit.

  3. When a duplicate filing condition exists and one or both returns involved have been "P" coded, a CP 36P is generated. CP36P cases are worked by Andover Accounts Management. See IRM 21.6.3.4.2.12.3.2, CP 36P.

21.6.3.4.2.12.3.2  (04-18-2011)
CP 36P

  1. Individuals with no tax liability, such as recipients of Social Security, certain Railroad Retirement and certain veterans' benefits, are eligible to receive a Recovery Rebate Credit (RRC) of $300 ($600 if MFJ), if they had at least $3000 of qualifying income. These individuals are required to file a TY 2008 return, to report his/her qualifying income, in order to receive the RRC. When these returns are received they are "P" coded in processing.

  2. When a duplicate filing condition occurs and one or both returns involved are "P" coded a CP 36P generates. CP 36P cases are worked in Andover Service Center (ANSC).

  3. If an international return (Form 1040PR/Form 1040NR ONLY) is identified while working the CP 36P then reassign the case in CIS to employee ≡ ≡ ≡ ≡ ≡ ≡ ≡ . If the case is not on CIS then mail to:
    IRS/PAMC/International IMF
    BLN 1-D08,113
    Philadelphia, PA 19106

21.6.3.4.2.12.3.3  (10-01-2011)
U.S. Territory Recovery Rebate Credit (RRC)

  1. Federal employees residing in U.S. territories (Puerto Rico, Guam, US Virgin Islands, American Samoa, Commonwealth of the Northern Mariana Islands) that are required to file income tax returns with both the Internal Revenue Service (IRS) and his/her territory treasury ARE NOT ENTITLED to the Recovery Rebate Credit (RRC) from the IRS.

  2. These federal employees should enter "TR" on Line 70 of Form 1040, Line 42 of Form 1040A, or Line 9 of Form 1040EZ, Recovery Rebate Credit. They should NOT enter "RRC" next to the credit line.

  3. If the RRC is received from the United States Treasury by a territory resident based on his/her 2008 U.S. Federal tax return, the payment must be returned IMMEDIATELY to the IRS.

  4. If an individual, residing in the U.S. territories, calls or writes asking for guidance in regard to the receipt of or returning a U.S. Treasury refund check which includes the RRC, advise the individual of the following:
    PAPER CHECK

    • Mark the back of the check "VOID" and return to the issuing campus which is identified by the Filing Location Code (FLC) of the TC 150.

    • Include a letter stating they are returning the RRC and why.

      Reminder:

      Please remind the individual to include his/her name and social security number in the letter.


    Direct Deposit or Cashed Paper Check

    • Return payment in the amount of the RRC in the form of check or money order with name, social security number, and 2008 notated on the payment. Send payment to the IRS campus where the 2008 tax return was filed.

    • Include a letter stating they are returning the RRC and why.

      Reminder:

      Please remind the individual to include his/her name and social security number in the letter.


    And take the following action:

    • Reverse the RRC.

      Note:

      See IRM 21.6.3.4.2.12.7, Adjusting 2008 RRC. See IRM 21.4.5, Erroneous Refunds, if applicable.

  5. Take the following action, if an individual, residing in the U.S. territories, calls or writes asking for guidance in regard to the RRC and the RRC was offset to pay outstanding Federal tax debt, child support, Federal agency non-tax debt or State Income Tax obligation:

    • Reverse the offset

      Note:

      See IRM 21.5.8, Credit Transfers, IRM 21.4.6, Refund Offset, IRM 21.4.6.5.13, TOP/DMF Offset Reversals.

    • Reverse the RRC

      Note:

      See IRM 21.6.3.4.2.12.7, Adjusting 2008 RRC.

21.6.3.4.2.12.4  (10-01-2011)
RRC IDRS Account Information

  1. Use CC RTVUE to determine the amount of Recovery Rebate Credit (RRC) claimed by the taxpayer and allowed by the computer during processing. The RRC will be shown on Form 1040, Line 70; Form 1040A, Line 42; or Form 1040EZ, Line 9.

  2. The RRC posts to the 2008 tax module as a TC 766 with credit reference number (CRN) 338/256/257.

  3. Use TC 29X with CRN 338/256/257 when adjusting the 2008 RRC. Use Reason Code (RC) 096 with the appropriate Source Code (SC) and any other reason codes. RC 096 reads: "Recovery Rebate Credit" See IRM 21.6.3.4.2.12.7, Adjusting 2008 RRC, for more information on how to adjust the RRC.

21.6.3.4.2.12.5  (10-01-2011)
Original Processing and RRC

  1. Original processing will automatically compute the Recovery Rebate Credit (RRC) on all returns even if not claimed by the taxpayer.

    Exception:

    If the taxpayer does not claim the RRC and a TIN is invalid or missing on the return then the RRC will not be computed in processing.

  2. After the systemic Economic Stimulus Payment (ESP) reversal was completed in cycle 200852 (See IRM 21.6.3.6.4.2, End of Year Reversals) the Tax Year 2007 ESP amount was passed to the National Account Profile (NAP) and the Integrated Customer Communications Environment (ICCE). The ESP amount passed to the NAP will be used by Submission Processing when processing an individual's 2008 return to verify/compute the RRC. In the case of a joint 2007 return, then 1/2 of the ESP will be passed for each spouse.

  3. Adjustments posting after cycle 200851 to the 2007 account involving the ESP will not be considered when passing the ESP amount to the NAP and ICCE. Therefore, in some cases the RRC amount claimed by an individual will be incorrectly disallowed or decreased during processing.

    Example:

    Taxpayer's 2007 account indicates an ESP of $200 (TC 766 with CRN 338/256/257) and a check was issued. Taxpayer never received the ESP of $200 and calls the Service to initiate a refund trace. The refund trace is completed, the ESP is manually reversed but after cycle 200851, the taxpayer is advised to claim the RRC when filing the 2008 return. When the taxpayer's 2008 original return is processed, original processing will still consider the ESP of $200 even though the ESP has subsequently been reversed. Therefore, the taxpayer may not receive the correct amount of RRC.

  4. ELF returns will be rejected if the return is claiming the RRC and the NAP indicates that the taxpayer received the maximum ESP.

21.6.3.4.2.12.6  (10-01-2010)
RRC Taxpayer Notice Codes (TPNC)

  1. ERS will assign the following TPNCs for RRC errors identified during processing:

    • TPNC 615 - We didn't allow the recovery rebate credit you claimed on your tax return. Your social security number (SSN) was either missing or incomplete.

    • TPNC 616 - We didn’t allow the recovery rebate credit you claimed on your tax return. Your spouse’s social security number (SSN) was either missing or incomplete.

    • TPNC 617 - We changed the amount of the recovery rebate credit you claimed on your tax return. The social security number (SSN) of a dependent(s) who qualifies you for additional credit was either missing or incomplete.

    • TPNC 618 - We didn’t allow the recovery rebate credit you claimed on your tax return. Information on your return indicates that you are being claimed as a dependent on another person’s tax return.

    • TPNC 619 - We changed the amount of the recovery rebate credit you claimed on your tax return. Your qualifying dependent(s) must be under the age of 17 as of December 31, 2008, for you to receive the additional credit amount.

    • TPNC 620 - We didn't allow the recovery rebate credit you claimed on your tax return. Because the qualifying income shown on your return is less than $3000, you do not qualify for the credit.

    • TPNC 621 - We changed the amount of the recovery rebate credit you claimed on your tax return because the amount you entered was computed incorrectly.

    • TPNC 622 - We changed the amount of the recovery rebate credit you claimed on your tax return. There was an error in the application of the adjusted gross income limitation of $75,000 ($150,000 if married filling jointly) for your filing status.

    • TPNC 623 - We didn’t allow the recovery rebate credit you claimed on your tax return. Because there was no qualifying income shown on your return, you do not qualify for the credit.

    • TPNC 624 - We computed your recovery rebate credit for you.

  2. TPNCs assigned during processing do not consider adjustments to the Economic Stimulus Payment (ESP) posted to the 2007 tax account after cycle 200851. Based on this information, you will need to research the 2007 tax account for subsequent actions and determine if the TPNC is correct. If the TPNC is determined to be incorrect the 2008 RRC may require adjusting.

    Example:

    Taxpayer called to state he did not receive the ESP check for $600. Review of the 2007 module reflects a TC 766/CRN 338 and corresponding TC 846 for $600. A refund trace was initiated which resulted in a TC 841 returning the $600 credit to the 2007 module. However, the TC 841 posted after cycle 200852. The taxpayer subsequently files his 2008 return claiming a RRC of $600 which is changed to zero (.00) in processing and receives TPNC 621. His refund is $600 less than expected. Both the 2007 and 2008 tax accounts need to be corrected. For the 2007 tax account, the ESP must be reversed. The 2008 account needs adjusting to allow the correct RRC amount. Once verified, input TC 290 for zero and CRN 256 for $600 using RC 096 and the appropriate SC.

21.6.3.4.2.12.7  (02-05-2010)
Adjusting 2008 RRC

  1. Use the following rules when increasing the Recovery Rebate Credit (RRC) on the 2008 account AND:
    A CRN 338 is present on the module

    • Apply the maximum amount to the CRN 338 - Base amount - not to exceed $600 ($1200 MFJ)

      Example:

      If MFJ and a CRN 338 for $1000 is present, the CRN 338 could only be increased by an additional $200.

    • Apply the remainder, if any, to the CRN 257


    A CRN 338 is NOT present on the module

    • Apply the maximum amount to the CRN 256 - Base amount not to exceed $300 ($600 MFJ) when no CRN 338 is on the module.

    • Apply the remainder, if any, to the CRN 257 - (either the remainder when there is qualifying children involved and CRN 338 is present on the module) or (remainder of base amount with/without children for 2008 and no CRN 338 is on the module).

  2. Use the following rules when decreasing :

    • Decrease the CRN 338 first

    • Decrease the CRN 256, if present, second

    • Decrease the CRN 257, if present, last

  3. Use RC 096 when adjusting the RRC.

21.6.3.4.2.12.8  (06-04-2009)
Recovery Rebate Credit (RRC) Inquiries

  1. Use the following subsections to assist taxpayers who contact the service concerning issues related to the amount of RRC allowed/not allowed on the return. For balance due inquiries involving Social Security Recipients, Veterans, and other Beneficiaries, see IRM 21.6.3.4.2.12.8.3, RRC Social Security Recipients, Veterans and Other Beneficiaries.

21.6.3.4.2.12.8.1  (06-04-2009)
Deceased Qualifying Child

  1. Children who are born and die within the same tax year are not always issued a Social Security Number by the Social Security Administration. If the taxpayer claims a child on the 2008 tax return for exemption purposes who does not have a Social Security Number because that child died within the same year, that child is a qualifying child for RRC purposes and you would allow RRC for the child. See IRM 21.6.3.4.2.12.7, Adjusting 2008 RRC.

21.6.3.4.2.12.8.2  (10-01-2010)
RRC Name Control Mismatch

  1. Taxpayers may have been denied the Recovery Rebate Credit (RRC) for primary, secondary or a qualifying dependent child because the name associated with the Social Security Number (SSN) did not match the National Account Profile (NAP) but the SSN(s) provided were the correct number(s). These cases can often be identified for a dependent child by NAP Access Indicator "9" associated with an SSN on CC RTVUE. The primary or secondary SSN can be identified by an asterisk "*" behind the SSN.

  2. When contacted by a taxpayer who was denied a portion of the RRC because a SSN (primary, secondary or dependent) was invalid due to a name mismatch, take the following actions:

    • Validate the SSN using CC INOLE

    • If the invalid SSN condition was due to a name mismatch only (i.e.,, the taxpayer provided the correct SSN(s) on the return but the name did not match SSA records), follow IRM 21.6.3.4.2.12.7 Adjusting 2008 RRC and allow the RRC that was denied for the name control mismatch condition.

    • If the invalid SSN condition was due to taxpayer error in providing the incorrect SSN on the return and the taxpayer does not provide the correct SSN, follow appropriate procedures and do not allow the RRC. The taxpayer must report the correct SSN before the RRC can be corrected on the account.

21.6.3.4.2.12.8.3  (10-01-2011)
RRC Social Security Recipients, Veterans and Other Beneficiaries

  1. Taxpayers who receive Social Security(SS), Veterans Affairs (VA) or Railroad Retirement (RR) benefits may file a return ONLY to claim the Recovery Rebate Credit (RRC).

  2. Correspondence or Oral Statement will be allowed for recipients of Social Security, Tier 1 Railroad Retirement or certain Veterans' benefits, who filed ONLY to receive the RRC. An amended return is not required to correct these accounts. If a recipient of Social Security, Tier 1 Railroad Retirement or certain Veterans' benefits fitting the criteria below contacts the Service follow procedures below.

  3. If the taxpayer reported his/her Social Security (SS), Veterans Affairs (VA) or Railroad Retirement (RR) benefits on the wage line of the return, resulting in a balance due

    • Adjust the account to remove the SS/VA/RR benefits that were reported on the wrong line by inputting:

    • TC 291 to remove the Tax

    • IRN 886 to remove the Taxable Income

    • IRN 888 to remove the Adjusted Gross Income

    • RC 099, SC 2, HC 3

    • Input a STAUP for 4 cycles

    • Input MFR 01 on CC ENREQ to remove mail filing requirement

      If the RRC was allowed based on the original return then:

      • Verify the RRC shown on the module is accurate

      • If not accurate, adjust (increase/decrease) per IRM 21.6.3.4.2.12.7 Adjusting 2008 RRC

        Reminder:

        Validate any Economic Stimulus Payment (ESP) that was allowed last year when verifying the RRC

      • Advise the taxpayer verbally or in writing of the action taken

  4. If the taxpayer reported his/her SS/VA/RR benefits on the correct line but did not claim the RRC and the RRC was not allowed during initial processing:

    • Verify the individual(s) qualify for RRC

    • Adjust the RRC per IRM 21.6.3.4.2.12.7, Adjusting 2008 RRC

      Reminder:

      Validate any Economic Stimulus Payment (ESP) that was allowed last year when verifying the RRC

    • Advise the taxpayer verbally or in writing of the action taken

  5. If the taxpayer reported his/her SS/VA/RR benefits but forgot to claim his/her personal exemption:

    • Verify the individual qualifies for the RRC

    • Adjust the RRC per IRM 21.6.3.4.2.12.7, Adjusting 2008 RRC .

      Reminder:

      Validate any Economic Stimulus Payment (ESP) that was allowed last year when verifying the RRC

    • If adjusting to allow RRC also adjust the account to allow the personal exemption

    • Advise the taxpayer verbally or in writing of the action taken

21.6.3.4.2.12.8.4  (06-04-2009)
Peace Corp Volunteers and the Recovery Rebate Credit

  1. Peace Corp Volunteers are allowed to claim his/her wages and/or living expenses as wages on line 7 of Form 1040 to qualify for the RRC.

  2. If you are contacted by a Peace Corp Volunteer that reported his/her income on Form 1040 and as a result did not receive the RRC, validate the return to see what line the income was reported on.

  3. If the income was reported on any line other than line 7 then advise the taxpayer as follows:

    • Wages and/or Living Allowances received from the Peace Corp should have been reported on Line 7 of the Form 1040

    • An amended return, Form 1040X, Amended U.S. Individual Income Tax Return, must be filed to change any information reported on your original tax return

    • Form 1040X can be downloaded at www.irs.gov

21.6.3.4.2.12.8.5  (02-05-2010)
Recovery Rebate Credit (RRC) Figured for Taxpayers Who Did Not Qualify

  1. In error, the Service computed and allowed the RRC when the taxpayer did not qualify for the Recovery Rebate Credit (RRC). Examples of when the credit was computed and allowed, in error, by the Service are:

    • Taxpayers who received the maximum Economic Stimulus Payment (ESP) in 2008

    • Taxpayers who did not have a tax liability and did not have at least $3,000 in qualifying income

    • Taxpayers who filed using an ITIN who were not covered by the Heroes Earnings Assistance and Relief Tax Act of 2008

  2. These taxpayers are contacting the Service concerning receipt of the RRC. If you receive a telephone call or correspondence let the taxpayer know that the RRC was allowed in error and that he/she should return the RRC amount to the Service.

    Note:

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

    This does not pertain to cases where adjustments/corrections are input on an account due to an amended return, subsequent return, or correspondence.

  3. Advise the taxpayer to:

    • Return payment in the form of a check or money order with the name, SSN, and "Tax Year 2008" noted on the check or money order

    • Include a note with the payment stating that he/she is returning the RRC that he/she received in error

    • Send the check to the issuing campus which is identified by the Filing Location Code (FLC) of the TC 150

  4. Do not adjust the account to remove the RRC based on the call or correspondence. The RRC will be adjusted once the payment is received.

21.6.3.4.2.13  (04-01-2013)
Making Work Pay Credit - Schedule M

  1. Earlier in 2009, the withholding tables were adjusted to allow additional "take home" pay for most taxpayers. Schedule M, Making Work Pay and Government Retiree Credit, was developed to offset potential reduction in refunds and provide taxpayers with an additional refundable credit. Effective for 2010, the Schedule was changed to only the Making Work Pay Credit. The Government Retiree Credit section was eliminated.

  2. For tax years 2009 and 2010, this credit is reported on Schedule M of the Form 1040 and Form 1040A as well as on the worksheet on the back of Form 1040EZ. For 2010, the Schedule is only composed of the Making Work Pay Credit. For 2009, the Schedule is actually composed of the following two credits:

    • Making Work Pay Credit

    • Government Retiree Credit

  3. Each credit is subject to different rules. The total of both credits is included on Line 14 total on Schedule M.

  4. The Making Work Pay Credit will be calculated at a rate of 6.2% of earned income with a credit amount up to $400 ($800 - married filing joint). The credit cannot be claimed if:

    • The taxpayer is a non-resident alien (usually Files a Form 1040NR), or

    • The taxpayer can be claimed on another taxpayer's return, or

    • The MAGI is in excess of $95,000 ($190,000 for married filing joint).

    • The taxpayer does not have a valid social security number.

      Exception:

      For married filing joint, only one valid SSN is required, either the primary or secondary taxpayer’s, and the full credit amount is allowable. A rejected or revoked ITIN would not qualify for the credit.

  5. Earned income includes:

    • wages listed on line 7.

    • non taxable combat pay received.

    • Schedule C, F gain or loss.

    • Statutory employee income reported on Schedule C.

      Note:

      Do not include income from any statutory employee who is exempt from SE tax.

      Note:

      Although taxpayers who have filed a Form 4029 and are exempt from self-employment taxes (e.g., the Amish) are entitled to this credit because it can be based on earned income from wages that are not from self employment, they may not wish to receive the credit. If the refund is returned, reverse the credit.

  6. For 2010, the Making Work Pay Credit will be reduced if the taxpayer (or spouse, if married filing jointly) received a $250 Economic Recovery Payment (ERP) from SSA/VA/or RRB during 2010.

  7. For 2009, the Making Work Pay Credit will be reduced if either of the following situations occur:

    • The taxpayer (or spouse, if married filing jointly) received a $250 Economic Recovery Payment (ERP) from SSA/VA or RRB during 2009.

    • The taxpayer claims the Government Retiree Credit on Schedule M, Line 11.

  8. Taxpayers must have earned income in order to claim the Making Work Pay Credit. This includes wages, nontaxable combat pay, or profits or losses from Schedule C of F. Pensions are not considered earned income unless indicated as disability income received under the retirement age.

  9. If the taxpayer does not compute the Making Work Pay Credit on the tax return, the credit will be calculated for the taxpayer and TPNC 661 will be assigned. A new notice will generate to the taxpayer (CP 11M, 12M, or 13M). This notice has a special toll free number (1–800–908–4184) to assist taxpayers in understanding why this credit was given to the taxpayer.

  10. For 2009, the Government Retiree Credit is a credit of up to $250 ($500 if married filing joint and both spouses qualify) for taxpayers who received a pension or annuity (i.e.,, surviving spouse) payment in 2009 from the U.S. Government or any state or local government (or agency of these) NOT covered by Social Security. The Government Retiree Credit is not reduced by the AGI phase out. However, the credit cannot be allowed if the taxpayer (and/or spouse) received a $250 Economic Recovery Payment during 2009.

    Note:

    The Government Retiree Credit is NOT based on earned income.

  11. For 2009, Document Perfection will code the return with SPC "M" if the box on Line 11 of Schedule M is checked or there is an amount present on Line 11.

  12. The Economic Recovery Payment (ERP) is a $250 payment sent to the taxpayer directly by the U.S. Treasury representing social security benefits, supplemental social security benefits, veterans disability benefits, and/or railroad retirement benefits. Each taxpayer may have received a $250 payment from a different agency. These payments were NOT issued from IRS accounts. The agencies sent electronic files to IRS and can be researched on the CC INOLE response screen. These payments could have been issued in 2009 or 2010.

  13. CC INOLE(S) and CC INOLE(X) responses will display the literal "ERP" (Economic Recovery Payment) with the following literals:

    • SSA

    • SSI

    • RRB

    • VA

    • NP (This indicates "No Payment Received" )

    These literals indicate whether or not a taxpayer received an ERP disbursement and from what agency.

    1. CC INOLE(S) is used when a return has been filed. The literal "ERP" is displayed on the far right of the second line.

    2. CC INOLE(X) is used when a return has not been filed. The literal "ERP" is displayed on the far right of the third line.

  14. Only one agency code is displayed and does not reflect the year the payment was made.

  15. If the taxpayer attempts to file electronically and does not indicate an ERP was received, the ELF return will be rejected. The taxpayer may then file electronically without the Schedule M or report the $250 until the problem is resolved with the agency. This could impact either the Making Work Pay Credit or the Government Retiree Credit. The taxpayer will need to resolve any discrepancies with the appropriate agencies directly. Documentation will need to be submitted with any subsequent Form 1040X with Schedule M attached. Contact information for agencies is as follows:

    • Social Security Administration - 1-800-772-1213

    • Veterans Administration - 1-800-827-1000

    • Railroad Retirement Board- 1–877–772–5772

  16. The IRS will match the information provided from each agency against what the taxpayer has claimed and process the return accordingly. Then if the taxpayer's amount claimed does not match the agency's data, a corrected refund or adjusted balance due notice will be issued to the taxpayer with a math error notice. Taxpayers stating they have not received the ERP must contact their respective agency for confirmation documentation.

  17. If the taxpayer contacts the Service about any erroneous credit from Schedule M, apologize for the inconvenience.

    1. If the refund check has not been cashed, advise the taxpayer to write VOID in the endorsement area on the back of the check and do not write on the front of the check. Advise the taxpayer to return the refund check, a copy of the CP notice and a note of explanation to the issuing campus Refund Inquiry Unit, so the credit can be reversed. Do not adjust the account based on "Oral Statement Authority" .

    2. If the check has been cashed, advise the taxpayer to return payment in the exact amount of the credit, a copy of the CP notice and a note of explanation to the address on the CP notice, so the credit can be reversed. Do not adjust the account based on "Oral Statement Authority" .

    3. Beginning April 1, 2010, when adjusting the account, if the module is settled (no balance due), reverse the Schedule M overpayment and restrict debit interest and Failure to Pay Penalty (FTP) on the account with a TC 340 .00 and TC 270 .00 on REQ 54. Use the 23c date of the adjustment in the DB-INT-TO-DT field.

    4. If the taxpayer only makes a partial payment, reverse the full amount of the erroneous credit.

  18. Adjust the account:

    • Use credit reference number 259 to allow/increase the credit.

    • Use credit reference number 259 with a minus sign (-) to decrease the credit.

    • The credit reference number will convert to a TC 766 / TC 767 reference 259 at Master File.

    Note:

    If you are also changing the filing status, use a posting delay code on your adjustment to avoid unpostable condition 189.

  19. Use the appropriate reason codes, SC and blocking series:

    • RC 105, 108, or 111 (Making Work Pay and Government Retiree Pay)

    • Use RC 105 when Schedule M, Line 11 is blank or zero.

    • Use RC 108 when $250 is shown on Line 11 of Schedule M.

    • Use RC 111 when $500 is shown on Line 11.

    Note:

    RC 105 will be the only RC applicable for 2010.

21.6.3.4.2.14  (02-20-2013)
American Opportunity Tax Credit

  1. The American Opportunity Tax Credit (AOTC) is a tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxpayer year. This credit is one of two credits reported on Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) and is the only refundable education credit. Under the new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable. For more information on Education Credits, refer to IRM 21.6.3.4.1.5, Form 8863 Education Credits.

  2. AOTC is available for tax years 2009 through 2017.

  3. AOTC is for taxpayers who paid qualified education expenses to an eligible postsecondary education institution (college) for themselves, their spouse or their child for whom they claimed a dependency exemption. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

  4. In addition to (3), if there are any other circumstances the make the claim questionable, if the Form 1098-T cannot be verified, no consider the claim.

  5. Adjust the tax account:

    1. Adjust the non refundable portion of the credit with a TC 29X. Do not use a credit reference number for the nonrefundable portion of the credit. Use RC 35.

    2. Use credit reference number 260 to allow/increase the refundable portion of the credit.

    3. Use credit reference number 260 with a minus sign (-) to decrease the refundable portion of the credit.

      Reminder:

      The credit reference number will convert to a TC 766/767 Reference 260 at Master File.

    4. Use RC 106 (Refundable American Opportunity Credit) and the appropriate SC and blocking series for the refundable credit portion of the adjustment.

21.6.3.4.2.15  (02-20-2013)
Form 8839 Qualified Adoption Expenses

  1. The adoption tax credit is used to defray qualified adoption expenses, helping to make adoption possible for families who could not otherwise afford it. The definition of qualified adoption expenses did not change under the new tax law.

  2. For tax years 2010 and 2011 only, the adoption credit is refundable, which means that even if the taxpayer owes zero taxes, they can receive the applicable tax credit amount in the form of a refund. A taxpayer who paid qualified expenses to adopt an eligible child may verify that they are eligible to claim the adoption credit by using the Form 8839, Qualified Adoption Expenses.

    Note:

    See Form 8839, Qualified Adoption Expenses, and its instructions for detailed qualification information.

  3. Taxpayers are entitled to claim a credit for qualified adoption expenses paid during the immediately preceding tax year, if the child was a citizen or resident of the U.S., when the adoption process began. In the case of a child with special needs, the credit can be claimed in the year the adoption is final even if no qualified expenses are paid.

  4. If the adoption was not finalized or was unsuccessful, taxpayers are instructed to attach one or more of the following documents:

    • An adoption taxpayer identification number (ATIN).

    • A home study completed by an authorized placement agency.

    • A placement agreement with an authorized placement agency.

    • A document signed by a hospital official authorizing the release of a newborn child from the hospital to the taxpayer for legal adoption.

    • A court document (a copy showing official seal) ordering or approving the placement of a child with the taxpayer for legal adoption.

    • An original affidavit or notarized statement signed under penalties of perjury from an adoption attorney, government official, or other authorized person, stating the signer either placed, or is placing, a child with the taxpayer for legal adoption, or is facilitating the adoption process for the taxpayer in an official capacity, with a description of the actions taken to facilitate the process.

    If this documentation is incomplete or not attached, follow instructions in IRM 21.5.3.4, General Claims Procedures.

  5. With the enactment of Affordable Care Act Tax Provision (ACA), the adoption credit is refundable and increased up to $13,170 in expenses for tax year 2010 and $13,360 for tax year 2011.

  6. The eligible child must be:

    1. Any child under age 18. If the child turned 18 during the year, the child is an eligible child for the part of the year he/she was under age 18.

    2. Any age, if physically or mentally incapable of caring for him/herself.

  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. All non-refundable Adoption Credit claims will be worked in the Andover Campus. If a claim is to be sent to Andover, reassign through CIS to IDRS number 0830141335.

  10. All 2010 and 2011 Adoption Credit claims will be run through the xClaim tool to determine which Examination site will work the claim (i.e.,, Memphis or Andover), if selected.

  11. Use category code NYCX for all 2010 and 2011 claims.

  12. Taxpayers may file amended returns for earlier periods to release the carryforward of the adoption credit. See IRM 21.6.3.4.1.27, Form 8839 Qualified Adoption Expenses for Tax Year 2009 and Prior, for procedures on processing prior year claims.

    1. Do not reject these claims with carryforwards because the adoption documentation is missing.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  13. Use CC ADOPT to assist in identifying any Examination filters that were used during original processing for not allowing the credit for 2010 and 2011 claims. This may assist in explaining to the taxpayer why their adoption credit was not allowed.

  14. When processing Forms 1040X," No Consider" the claim following IRM 21.5.3.4.6.3, No Consideration Procedures, if the Form 8839 is not attached. Do not "No Consider" the claim if any adoption documentation is missing.

  15. Adoptions will either be "final" or in process. Actual documentation for 2010 and 2011 returns will not need to be reviewed or verified by AM. However, AM will need to confirm the taxpayer's (mother and/or father) and the child(ren)'s name(s) on the Form 8839 against the documentation. If the confirmation cannot be accomplished, send to CATA.

  16. If there is no adoption documentation attached to the 2010 or 2011 amended return, run through IAT tool and send to Exam, regardless. You must indicate which filters have been broken in the Notes Field in CIS for Exam.

  17. If there is adoption documentation attached to the 2010 or 2011 amended return and the adoption is "In process" :

    1. And the documentation and the return are verified, and filters A, B or C are broken, send to Exam. Use criteria in xClaim for making the determination.

    2. If no filters are broken, allow the adjustment.

      Note:

      If the assistor cannot determine if documents are valid (questionable), send to CATA.

  18. If there is adoption documentation attached to the 2010 or 2011 amended return and the adoption is final:

    1. And Filter A breaks, send to Exam

    2. And Filters B or C break, or there is no break in any filter, send to CATA as HQ-2. Use criteria in xClaim for basing the determination.

  19. When adjusting the tax account for the refundable credit:

    1. Use TC 290 with a zero.

    2. Use Credit Reference 261 with the money amount to increase the credit.

    3. Use Credit Reference 261 with the money amount with a (-) to decrease the credit.

    4. Use RC 061 and the appropriate SC and blocking series.

      Note:

      Credit reference 261 is for the refundable credit only. Use TC 291/290 for previous tax periods and RC 36.

  20. See Form 8839, Qualified Adoption Expenses, and its instructions for detailed information.

  21. See IRM 21.5.3-6, Adoption Credit - Additional CAT-A Criteria, for additional information.

21.6.3.5  (10-02-2009)
Telephone Excise Tax Refund (TETR) - General

  1. The federal excise tax on long distance telephone services was first imposed in 1898. It was originally imposed as a "luxury" tax on wealthy Americans who owned a telephone.

  2. Per Notice 2006-50 the Internal Revenue Service will no longer collect the federal excise tax on long distance telephone service or service under a plan that does not separately state a charge for long distance and local service (aka bundled service). Several federal court decisions have held that the federal excise tax does not apply to long distance service and bundled service as it is billed today.

  3. A telephone excise tax refund request allows taxpayers to request a one-time refund of the telephone excise taxes they paid on long distance service over a 41 month period including interest. Taxpayers may request a refund of tax on nontaxable service that was billed after February 28, 2003, and before August 1, 2006. The preferred method for requesting a refund of the standard amount, discussed below, is by filing a 2006 Federal income tax return. For this purpose, the 2006 Federal income tax return is the income tax return with a tax period ending 200612 or the first taxable year including December 31, 2006 (200612-200711). Per Announcement 2012-16, taxpayers have until July 27, 2012, to file a telephone excise tax refund (TETR) claim.

  4. The information in this subsection will assist in answering taxpayers' questions regarding TETR and processing TETR requests.

  5. Use the information located under Servicewide Electronic Research Program (SERP) IRM Supplements, in conjunction with the IRM instructions when answering taxpayers' questions related to eligibility.

  6. The credit can be requested on Form 1040, Form 1040A, Form 1040EZ, Form 1040NR, Form 1040NR-EZ, Form 1040-PR or Form 1040-SS for individuals who are required to file a tax return. Individuals not otherwise required to file a federal income tax return may file Form 1040-EZ-T. Individuals may also request a refund using Form 843, Claim for Refund and Request for Abatement.

  7. Form 8913 is used to figure the credit or refund of the federal excise tax paid when using the Actual or Estimation Method.

21.6.3.5.1  (12-21-2006)
Qualifications - TETR

  1. In general, anyone who paid federal long distance taxes on landline, cell phone, or voice over internet protocol services billed after February 28, 2003, and before August 1, 2006, is eligible to request the refund.

  2. Individuals with the following qualifications are eligible to request a refund of telephone excise tax:

    • Paid federal telephone excise tax on long distance telephone service for any period billed after February 28, 2003, and before August 1, 2006, and

    • Has not received or requested a credit or refund of the federal excise tax from his/her phone service provider.

      Note:

      If the individual requested a credit or a refund, he/she must have withdrawn the request.

21.6.3.5.2  (01-12-2007)
Repayment - TETR

  1. The service provider (e.g. AT&T, BellSouth, Verizon) may refund the tax collected prior to August 1, 2006; however they are not required to. If the service provider refunds the tax paid, the individual may not request a credit for the same amount.

  2. The IRS directed all service providers to stop collecting this tax by August 1, 2006.

  3. If the service provider continues to collect the federal excise tax on long distance service after July 31, 2006, the individual must contact the service provider for a refund of the tax.

21.6.3.5.3  (01-12-2007)
TETR Options

  1. For Tax Year 2006 only, an individual can choose from three options to figure the telephone excise tax refund (TETR) depending on the individual's filing requirement. The table below lists the three options and the applicable filing requirements for each option.

    Options available to figure TETR: Filing requirement:
    Standard Amount
    or
    Actual Amount
    • Individual with no filing requirement or

    • Taxpayer with a filing requirement

    Estimation Methodology
    • Taxpayer filing Schedule C/C-EZ, Schedule E (owners of rental property), Schedule F, Form 4835, who reports gross rental and business income totaling more than $25,000 on his/her 2006 federal income tax return.

  2. Members of flow through entities, such as S corporations and partnerships, cannot request the TETR related to his/her S corporation or partnership on his/her individual (Form 1040 series) returns. The refund must be requested by the S corporation or partnership on the business income tax return (e.g. Form 1120S, and Form 1065), respectively.

21.6.3.5.4  (01-12-2007)
Standard Amount

  1. If an individual does not know the actual amount of federal excise tax he/she paid or does not want to gather 41 months of old telephone bills, he/she can request the standard amount.

  2. The standard amount is based on the number of exemptions the individual claims in Tax Year 2006 or would be allowed to claim if he/she was required to file an individual income tax return for 2006. Publication 501 explains exemptions in detail.

    Caution:

    Individuals with no filing requirement and Form 1040EZ filers may not be familiar with the "exemption" terminology .

    Exception:

    If an individual's dependent has filed (or plans to file) a separate request for credit or refund of federal communications excise tax, that dependent cannot be included in the individual's calculation of the number of exemptions when determining that individual's standard amount.

  3. The standard amount includes the refundable taxes and the interest in one figure. The interest included is calculated to May 30, 2007. When requesting the standard amount, additional credit interest is never due, no matter when the original return is filed or if requested on an amended return.

  4. The following is a chart of the applicable standard amount based on the number of exemptions. It also shows the amount of the tax credit and imputed interest for each amount:

    Number of Exemptions Standard Amount TC 766 CRN 253 (Tax Credit) TC 776 or
    TC 770 CRN 254 (Interest)
    Zero $0 N/A N/A
    One $30 $25.61 $4.39
    Two $40 $34.15 $5.85
    Three $50 $42.69 $7.31
    Four or more $60 $51.23 $8.77

  5. If an individual is claimed on another person's tax return as a dependent, the individual cannot request the standard amount. However, the individual can request the actual amount of federal excise tax he/she paid. See IRM 21.6.3.5.5, Actual Amount.

21.6.3.5.5  (10-05-2011)
Actual Amount

  1. An individual choosing to request the actual amount of federal excise tax paid must complete and attach Form 8913 to the federal income tax return he/she was required to file or Form 1040EZ–T. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. Individuals requesting TETR ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ will need copies of his/her phone bills showing the excise taxes billed for each of the 41 months for which they are requesting the refund.

    Note:

    The individual should not attach any phone bills or other records to Form 8913. However, they are required to have in his/her possession the appropriate documentation to support the credit or refund request.

  3. Individuals using the actual expenses will add the charges for the months in each of the 14 quarters listed on Form 8913 and compute interest based on the interest factors provided for each of the 14 quarters.

21.6.3.5.6  (01-12-2007)
Estimation Methodology

  1. Individual owners of rental property and self-employed people, including independent contractors, sole proprietors and farmers, can use the estimation method, but only if they report gross rental and business income totaling more than $25,000 on his/her 2006 federal income tax returns. This is the amount shown as:

    • Gross income on Schedule C, Line 7

    • Gross receipts on Schedule C-EZ, Line 1

    • Rents received on Schedule E, Line 3

    • Gross income on Schedule F, Line 11

  2. Individuals with more than one activity who fill out multiple business or rental schedules should add together all gross rental and business income amounts shown on these schedules. Similarly, married couples filing joint returns should also combine his/her gross rental and business income amount from these schedules.

  3. There are limits on the amount that can be requested based on the number of employees in an organization.

  4. To use the estimation method, the taxpayer must know the amount the business paid for federal excise tax on long distance service for April 2006 and September 2006. Taxpayers will also need to know the telephone expenses paid (not the actual invoices/bills) by the business from March 1, 2003 through July 31, 2006, as well as the number of employees they had as of the second quarter of 2006. Form 8913 has an estimation worksheet for the taxpayer to complete.

21.6.3.5.7  (12-21-2006)
Deceased Taxpayers

  1. If requesting a refund on behalf of an individual who died before 2006, the representative must file a Form 1041 to request the refund.

  2. If the individual died after 2005, the individual's spouse or personal representative can file an income tax return requesting the credit or a Form 1040-EZ-T if the deceased individual did not have a filing requirement.

21.6.3.5.8  (12-21-2006)
Form 1040-EZ-T, Request for Refund of Federal Telephone Excise Tax

  1. The Form 1040-EZ–T is used by individuals who are not required to file an individual federal income tax return and are entitled to request the one-time refund of the federal telephone excise tax.

  2. In addition to the qualifications listed in IRM 21.6.3.5.1, Qualifications - TETR, an individual can only file the Form 1040-EZ–T to obtain a refund if they are not required to file an individual federal income tax return.

  3. A qualifying resident alien or qualifying non-resident alien without a valid taxpayer identification number (TIN), who does not have a filing requirement may file a Form 1040EZ–T . See IRM 21.6.3.5.9, TETR - Internal Revenue Service Number (IRSN).

  4. The Form 1040EZ–T will be uniquely identified with Doc Code 08 and Blocking Series 100–989.

  5. A standard amount or the actual amount can be requested on Form 1040EZ–T.

21.6.3.5.9  (02-26-2007)
TETR - Internal Revenue Service Number (IRSN)

  1. Individuals who do not have or do not qualify for either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) can file a TETR request. In order to process these requests the individual will be assigned an Internal Revenue Service Number (IRSN) during processing. To obtain a refund these individuals will need to file Form 1040EZ–T with copies of the necessary documentation attached. See Form 1040-EZ–T instructions for a list of the acceptable documentation.

  2. The TETR IRSN will start with a "9" and can be identified by the campus code of "01" or "03" .

    Example:

    9NN-01–NNNN or 9NN-03–NNNN

  3. The CP 54 notice that is normally mailed to the individual will be suppressed. Therefore, the individual will not know the IRSN they were assigned.

  4. The IRSN issued should not be provided to the individual.

    Exception:

    See IRM 21.6.3.5.10, TETR IRNS and Disclosure, for the two situations in which the individual may be provided the IRSN.

  5. Processing of the Form 1040-EZ-T with an IRSN will take 8–10 weeks.

21.6.3.5.10  (10-01-2011)
TETR IRSN and Disclosure

  1. If an individual calls regarding a TETR refund, see IRM 21.6.3.5.11, TETR Refund Inquiry Response Procedures, Form 1040-EZ-T, first.

  2. For purposes of identification and to prevent unauthorized disclosures when an individual assigned an IRSN for TETR processing contacts the IRS, you must know with whom you are speaking and the purpose of the call/contact. It may be necessary to ask the caller if he or she is the individual listed on the Form 1040EZ–T or an authorized third party. You will also need to know the following:

    • Name(s) listed on Form 1040EZ–T

    • Address exactly as shown on Form 1040EZ–T

    • Refund amount

  3. Research for the IRSN using Command Code NAMES.

  4. If able to locate the IRSN, Form 1040-EZ-T processing time frame has been met, and the issue is:
    Non-receipt of TETR refund

    • Provide the individual with the IRSN.

    • See IRM 21.4.2, Refund Trace and Limited Payability.


    Individual needs to amend original TETR request

    • Provide the individual with the IRSN.

    • If needed, mail the individual a Form 1040X.


    For all other issues, continue the call and help the individual accordingly. DO NOT under any circumstances, other than those listed above, provide the individual with the IRSN.

  5. If unable to locate the IRSN, Form 1040EZ–T processing time frame has been met, and issue is:
    Non-receipt of TETR refund

    • Apologize to individual.

    • Advise individual they will need to refile request with copies of necessary documentation.

    • If needed, mail individual another Form 1040-EZ-T .


    Individual needs to amend original TETR request

    • Advise individual to file another Form 1040EZ–T requesting only theadditional TETR amount.

    • Advise individual that copies of necessary documentation will have to be resubmitted.

  6. See IRM 11.3.1.7, Reporting Unauthorized Accesses or Disclosures, if applicable.

21.6.3.5.11  (12-21-2006)
TETR Refund Inquiry Response Procedures - Form 1040-EZ-T

  1. When responding to a refund inquiry involving TETR for all forms other than Form 1040EZ–T, follow IRM 21.4.1.3, Refund Inquiry Response Procedures.

  2. If the individual indicates receipt of a CP 73 or CP 73A notice see IRM 21.6.3.5.16 , CP 73 and CP 73A.

  3. When responding to a refund inquiry involving Form 1040EZ–T, you need to know the following information:

    • Return filed electronically or paper?

    • When was return filed?

    • Was return filed with a valid Taxpayer Identification Number (i.e.,, SSN or ITIN)?

  4. To respond, you must first determine if processing time frames for Form 1040EZ–T have been met. Use the following table to determine normal processing time frames:

    Form 1040-EZ-T return type Weeks to process
    Paper Return with valid TIN 6–8
    Paper Return - without a valid TIN and Internal Revenue Service Number (IRSN) will be assigned 8–10
    e-file return 3

  5. If processing time is not met, advise the individual of normal processing time frames. For individuals with a valid TIN, advise them if his/her refund is not received within the above time frames to call 1–800–829–1954 or if calling from outside the United States, they must call a non-toll free number, 267-941-1000. For individuals when an IRSN will be assigned, advise them if his/her refund is not received within the above time frame to call 1–800–829–1040.

  6. If the processing time has been met and the Form 1040EZ–T was filed with a valid TIN, research CC IMFOLT to determine the current refund status. If no record, continue researching IDRS. Follow procedures located in IRM 21.4.1.3.1, Locating the Taxpayer's Return.

  7. If the processing time frame has been met and the Form 1040EZ–T was filed without a valid TIN, see IRM 21.6.3.5.10, TETR IRSN and Disclosure , to prevent possible disclosure before continuing with call.

21.6.3.5.12  (10-01-2011)
TETR - Initial Processing Procedures

  1. The Data Input unit of Submission Processing (SP) will only transcribe Line 15 of Form 8913. Each individual period shown on Form 8913 will not be transcribed. Command Code RTVUE/TRDBV will show Line 15(d), total amount of credit, and Line 15(e), total amount of interest.

  2. If any returns come into Submission Processing, the returns will be copied. The TETR amount will then be edited out and the return then processed. The photocopy will then be notated as "amended" and sent to the 1040X Unit for processing.

  3. If the individual shown on the TETR request died before March 2003, SP will disallow the request and send a Letter 105C, Claim Disallowed.

  4. SP will accept TETR interest computations that do not exceed ≡ ≡ of the total TETR amount requested.

  5. If the individual does not figure the interest column on the Form 8913, then the TETR tax will be reduced by 14% and the corresponding amount will be entered as the TETR interest. These returns can be identified by a difference in the amounts shown on CC RTVUE and the amount shown on CC TXMOD. CC RTVUE will show the TETR tax on Form 8913, Line 15(d) and nothing for the TETR interest on Form 8913, Line 15(e). CC TXMOD will show both the reduced TETR tax and the TETR interest.

  6. If the Form 8913 is missing, SP will accept the individual's figures if the credit request is ≡ ≡ ≡ ≡ ≡ . In all other situations, SP will correspond for the missing Form 8913 and in the case of claims for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ SP will also correspond and request the taxpayer provide substantiation from the telephone service provider.

    Note:

    If no reply received, SP will send Letter 105C, Claim Disallowed.

  7. SP will allow the individual's figures when the amount shown on Form 8913 differs from the amount shown on the original return (1040 series) by ≡ ≡ ≡ ≡ ≡ ≡ ≡ . In all other situations, SP will correspond if the amounts differ.

    Note:

    If reply received, SP will use the individual's figures based on the response. If no reply received, SP will use the amount shown on the original return (1040 series).

  8. Normal math error procedures do not apply to the TETR requested on the federal income tax return or Form 1040-EZ-T. Math error procedures apply to the remainder of the return not associated with the TETR.

  9. The following Taxpayer Notice Codes (TPNC) will be used to inform the individual of the changes associated with TETR:

    • 611 — We adjusted your telephone excise tax refund based on the information you provided. This resulted in a change to the refund amount or the amount you owe on your tax return.

    • 612 — We didn't allow all or part of your telephone excise tax refund because you did not provide the requested information. This results in a change to the refund amount or the amount you owe on your tax return. A separate explanation of claims disallowance notice will be sent to the address of record explaining the reason for the adjustment to your return.

      Note:

      Individuals assigned a TPNC 612 will be sent a Letter 105C, Claim Disallowed.

    • 613 — We didn't allow the amount requested as credit for federal telephone excise tax on your return because the credit can only be claimed for tax year 2006.

21.6.3.5.13  (10-01-2011)
TETR Interest - General Information

  1. Individuals are due credit interest on TETR requests, which is included in the standard amount or figured on Form 8913. The computer will not calculate any additional credit interest associated with the TETR amount. However, the computer will continue to calculate credit interest as applicable on all non-TETR transactions.

  2. Additional credit interest will not be figured on the TETR portion of an original return overpayment if not processed timely. See IRM 20.2.4.7.5.2, 45-Day Rule and All Original Tax Returns . If the taxpayer believes they are entitled to additional interest they may file Form 843, Claim for Refund and Request for Abatement.

  3. The computer will however calculate debit interest, if applicable, on the TETR amount.

  4. An account may have two TC 77X credit interest transactions posting. One for the interest not related to TETR and one for the interest attributable to TETR.

  5. Credit interest related to TETR will carry a Julian date of "997" in the Document Locator Number (DLN). On original returns, the TETR interest will post as a TC 776 and on subsequent adjustments, the TETR interest will post as a TC 770.

    Caution:

    The Credit Interest To Date (CR-INT-TO-DT) associated with the TETR TC 776 will always show May 30, 2007, no matter when the original return is filed. Therefore, when talking to the individual or working an amended return you must keep in mind that the TETR "CR-INT-TO-DT" associated with the original return may be incorrect.

  6. The individual is instructed to figure TETR interest on Form 8913 to:

    • Original return - the later of 45 days after the original return due date (May 30, 2007, for calendar year filers) or 45 days after the date the return was filed. The Form 8913 instructions contain an interest table for calendar year filers.

    • Amended return - the same date used to figure the TETR interest on the original Form 8913.

      Exception:

      If TETR was not requested originally, then TETR interest is figured to the later of 45 days after the original return due date or 45 days after the date the original return was filed.

      Note:

      If the standard amount was requested originally then TETR interest was figured to May 30, 2007.

  7. Additional credit interest, if due, on a TETR amended return, will be calculated by Accounts Management (AM) when working the request. See IRM 21.6.3.5.15, TETR Interest - Amended Returns.

21.6.3.5.14  (10-01-2011)
TETR Adjustments - General Information

  1. The computer will not compute additional TETR interest; therefore, it is imperative that every effort be made to identify TETR requests/amended returns and issue refunds within the 45 day interest-free period.

  2. TETR requests of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ meet CAT A criteria. See IRM 21.5.3–2, Examination Criteria (CAT A).

    Note:

    When figuring the≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ criteria do include the TETR interest.

  3. The Form 8913 instructs the individual to attach both a copy of his/her original Form 8913 and the corrected Form 8913. It also instructs the individual to write "Amended TETR" at the top of the amended return and the corrected Form 8913.

  4. Accept TETR interest computations shown on Form 8913 that do not exceed ≡ ≡ ≡ of the total TETR amount requested.

  5. If the interest computation exceeds ≡ ≡ ≡ , reject the request. Send the individual a Letter 916C, Claim Incomplete for Processing; No Consideration. Explain in the letter that it appears an error was made when figuring the interest on Form 8913 and once corrected they can resubmit the request.

  6. If the individual does not figure the interest column on the Form 8913, then reduce the TETR tax by 14% and the corresponding amount becomes the TETR interest. Do not correspond with the individual to explain this change.

  7. TETR requests (Form 1040X or CP 36) for ≡ ≡ ≡ ≡ ≡ ≡ ≡ will be accepted. A Form 8913 is not required.

  8. TETR requests (Form 1040X or CP 36) for ≡ ≡ ≡ ≡ ≡ ≡ ≡ will be accepted if a completed Form 8913 is included. If the Form 8913 is missing try and contact the individual by phone to obtain the missing form. If unable to contact the individual by phone then send a Letter 916C, Claim Incomplete for Processing; No Consideration. The open paragraph must read "Please resubmit your request with a Form 8913 to substantiate the amount of federal telephone excise tax you paid on long-distance and bundled service. Please be advised that the vast majority of taxpayers will only qualify for the standard amount."

  9. TETR requests (Form 1040X, Form 843 or CP 36) for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must include a Form 8913AND copies of all telephone bills or statements from the telephone provider to substantiate the amount of the federal telephone excise tax claimed. If the request is missing the Form 8913 and/or substantiation then send a Letter 916C, Claim Incomplete for Processing; No Consideration. The open paragraph must read "Please resubmit your request with a Form 8913 and copies of all telephone bills to substantiate the amount of federal telephone excise tax you paid on long-distance and bundled service. We will accept statements from the telephone service provider to verify your refundable federal telephone excise tax paid. Your telephone service provider may charge you for copies of past bills or for an itemized statement. Please be advised that the vast majority of taxpayers will only qualify for the standard amount."

  10. Take the following action when the TETR request is for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the taxpayer replies to the Letter 916C, Claim Incomplete for Processing; No Consideration, WITHOUT the Form 8913 and/or without acceptable substantiation from the telephone service provider (acceptable substantiation = at least 12 telephone bills or an itemized statement from the telephone service provider):

    • If TETR was not previously allowed then adjust the account to allow the standard amount of $30/$40/$50/$60 based on the number of exemptions claimed (If Form 1040-EZ-T is involved allow $30 if one name is listed on the form or $40 if a spouse is listed on the form). Send the taxpayer a Letter 106C, Claim Partially Disallowed. The open paragraph must state "We allowed only $XX which is the standard amount of credit available because the phone bills provided were incomplete and did not verify the credit claimed." Include Appeal rights in the letter.

    • If TETR was previously allowed then disallow the request and send the taxpayer a Letter 105C, Claim Disallowed. The open paragraph must state "We have disallowed the credit amount claimed since you did not submit the requested documentation to substantiate the amount of federal excise tax you paid for long-distance and bundled service after February 28, 2003 and before August 1, 2006 or the substantiation submitted was incomplete and did not verify the credit claimed." Include Appeal rights in the letter.

  11. Take the following action when the TETR request is for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the taxpayer replies to the Letter 916C, Claim Incomplete for Processing; No Consideration, WITH the Form 8913 and acceptable substantiation from the telephone service provider ( acceptable substantiation = at least 12 telephone bills or an itemized statement from the telephone service provider):

    • If an -A freeze is present, input a TC 971 AC 013

    • Input a Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office, advising taxpayer that his/her return or information has been referred to the Kansas City Compliance Center for review and that office will contact them within 60 days

    • Route the response to:
      Internal Revenue Service
      333 W. Pershing Road
      Stop 4100 P3 Exam Operations
      Kansas City, MO 64108

    • In the remarks notate "TETR - 916C Reply"

  12. If the TETR amount shown on the amended return differs by ≡ ≡ ≡ ≡ ≡ ≡ ≡ from the TETR amount shown on the Form 8913, adjust account using the amount shown on amended return.

  13. If the TETR amount shown on the amended return differs by ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ from the TETR amount shown on Form 8913, contact the individual by phone for clarification. If unable to reach by phone, correspond and ask the individual to explain the difference. Suspend the case. If the individual replies, adjust account based on reply. If a reply is not received, allow amount requested on amended return.

  14. If the taxpayer files an amended return claiming the TETR standard amount, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Do not correspond and do not reject claim.

  15. Amended returns or subsequent adjustments where the taxpayer does not address previously claimed TETR do not affect the amount of TETR, even if superseding.

    Example:

    Taxpayer A files original return and claims the TETR standard amount based on the number of exemptions claimed. Taxpayer A later files an amended return increasing/decreasing the number of exemptions but does not address the TETR.

  16. When a Form 1040X is received and the taxpayer does not indicate TETR was previously claimed, take the following action:

    IF THEN
    TETR amount claimed on Form 1040X is the same as the TETR amount claimed originally. Input TC 290 .00.
    Send Letter 474C explaining TETR request was allowed on original return.
    TETR amount claimed on Form 1040X is more than the TETR amount claimed originally. If claim is complete and amount is for ≡ ≡ ≡ ≡ ≡ ≡ then:
    1. Adjust account to allow for additional TETR tax credit and TETR interest.
    2. Send Letter 474C explaining the difference in the amount of expected refund.
    If amount is for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ then see paragraphs (9) (10) and (11) above.
    TETR amount claimed on Form 1040X is less than the TETR claimed originally. Adjust account and decrease TETR tax credit and TETR interest.
    Send Letter 474C explaining the difference in the amount of expected refund.
    TETR was not claimed on original return. If claim is complete and amount is for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ then:
    1. Adjust account to allow the TETR tax credit.
    IRM 21.6.3.5.14.2., TETR - Adjusting the Account .
    If amount is for ≡ ≡ ≡ ≡ ≡ ≡ then see paragraphs (9) (10) and (11) above.

21.6.3.5.14.1  (02-12-2009)
TETR - CP 36 (Duplicate Filing Condition)

  1. A duplicate filing condition (CP 36) is created when a Form 1040 series return (Form 1040/A/EZ) is filed after a Form 1040-EZ-T is filed or vice versa.

    Note:

    CP 36 could be generated from TETR claims up to six years old. The refund statute does not expire for six years. Allow the claim if filed on or before July 27, 2012.

  2. For additional instructions, see IRM 21.6.3.5.14, TETR Adjustments - General Information, IRM 21.6.3.5.14.2, TETR - Adjusting the Account, and IRM 21.6.7.4.4, Duplicate or Amended Returns — CP 36 (Duplicate Filing Condition) .

  3. The Form 1040-EZ-T is not an income tax return because it does not provide any information from which the taxpayer's income tax liability can be determined or assessed. A subsequently filed Form 1040 series return would be regarded as the original income tax return for all purposes.

  4. Take the following action if a Form 1040 series return is filed after a Form 1040-EZ-T

    • Update the Assessment Statute Expiration Date (ASED), if applicable.

      Note:

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

    • Verify Entity information and update if applicable.

    • Math verify the return and recompute the tax, if necessary.

      Reminder:

      Determine if an ES Penalty or Failure to File penalty needs to be assessed.

    • Adjust the account accordingly. Input all tax increases. Adjust TETR, if applicable. Correct Adjusted Gross Income (AGI), Taxable Income (TXI) , Exemptions, Credits, etc.

      Exception:

      If routing the return to Examination for manual classification, do not adjust to allow refundable credits except for federal income withholding when adjusting the account. Also, use hold code 4 and input a TC 470 to hold balance due notices, if applicable.

      Use blocking series 00 and the appropriate hold code.

    • Route the return to Examination, using local procedures, for manual classification since it by-passed Discriminant Index Function (DIF) scoring when the return reflects total credits of ≡ ≡ ≡ ≡ ≡ or more, or Schedule C, E, or F reflects deductions of ≡ ≡ ≡ ≡ ≡ or more, or the Schedule A deductions are greater than the applicable standard deduction amount by ≡ ≡ ≡ or more.

      Reminder:

      Adjust the account to allow the refundable credits, if Examination does not "Select" the return.

    • If EIC is involved, do not use CC DDBCK. Use CC DUPED instead, if applicable.

  5. When a Form 1040-EZ-T is filed after a Form 1040 series (Form 1040/A/EZ) treat the Form 1040-EZ-T as amended return. Depending on if the TETR amount differs from what was originally claimed take the following action:

    IF Then
    TETR amount claimed on Form 1040-EZ-T is the same as the TETR amount claimed originally. Input TC 290 .00.
    Send taxpayer Letter 673C, explaining TETR request was allowed on original return.
    TETR amount claimed on Form 1040-EZ-T is more than the TETR amount claimed originally. If claim is complete and amount is for ≡ ≡ ≡ ≡ ≡ ≡ then:
    1, Adjust account to allow for additional TETR tax credit and TETR interest.
    2. Send taxpayer Letter 673C, explaining the difference in the amount of expected refund.
    If amount is for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , then see IRM 21.6.3.5.14, paragraphs (9) (10) and (11).
    TETR amount claimed on Form 1040-EZ-T is less than the TETR amount claimed originally. Adjust account and decrease TETR tax credit and TETR interest.
    Send the taxpayer Letter 673C , explaining the difference in the amount of expected refund.
    TETR was not claimed on original return If claim is complete and amount is for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ then:
    Adjust account to allow the TETR tax credit. See IRM 21.6.3.5.14.2, TETR - Adjusting the Account.
    If amount is for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , then see IRM 21.6.3.5.14, paragraphs (9) (10) and (11).

21.6.3.5.14.2  (09-22-2008)
TETR - Adjusting the Account

  1. Credit Reference Number (CRN) 253 indicates the telephone excise tax (Line 15(d) of Form 8913) and CRN 254 indicates the interest portion of the credit (Line 15(e) of Form 8913).

  2. Input Credit Reference Number (CRN) 253 to adjust the tax portion of the credit. Use a minus sign (-) when decreasing the TETR tax. The CRN 253 will generate a TC 766 (increase) or TC 767 (decrease).

  3. Input Credit Reference Number (CRN) 254 to adjust the interest portion of the credit. Use a minus sign (-) when decreasing the TETR interest. The CRN 254 will generate a TC 770 (increase) or TC 772 (decrease) but will not restrict the module. Both the TC 770 and TC 772 will generate with a "997" Julian Date in the Document Locator Number (DLN).

  4. Normally, both the Credit Reference Number (CRN) 253 and CRN 254 will be input when adjusting the TETR. However, if adjusting only the TETR tax or TETR interest, IDRS will generate the warning message "MSG-269 ARE BOTH CRNS 253/254 NEEDED?/OVR-CD E IN POSITN 1 TO CONTINUE" . Enter "E" to bypass the error message.

  5. When adjusting TETR, input of the Amended Claims Date (AMD-CLMS-DT) will auto-populate the Credit Interest To Date (CR-INT-TO-DT), which is associated with the TC 770 generated by the Credit Reference Number (CRN) 254.

    Note:

    If the AMD-CLMS-DT is left blank, when adjusting TETR, the CR-INT-TO-DT will auto-populate with May 30, 2007.

  6. Depending on what issues are involved, when the request is received, and if the request is processed within the 45 day interest-free period, the Amended Claims Date (AMD-CLMS-DT) on TETR adjustments will either be May 30, 2007, the received date of the amended return, the current 23C date minus 13 days, or not input.

    Caution:

    Since the AMD-CLMS-DT auto-populates the CR-INT-TO-DT when TETR is involved, the date shown in the CR-INT-TO-DT field may be incorrect. Therefore, when increasing TETR a history item of the correct CR-INT-TO-DT must always be notated on Desktop Integration (DI)/AMS (Account Management Service). See IRM 21.6.3.5.15, TETR Interest - Amended Return.


    See the tables below to figure the Amended Claims Date (AMD-CLMS-DT) to use and if a history item is needed.

      Adjustments involving Form 8913  
    Claim issue(s): Refund issued within 45 day interest-free period? Input AMD-CLMS-DT of:
    TETR Increase:
    TETR only
    or
    TETR and Additional issue(s) which will not be included in refund
    Yes May 30, 2007
    or
    Amended return received date, whichever is later.

    CR-INT-TO-DT to notate on DI / AMS:
    • Same date as above

    TETR Increase:
    TETR only
    or
    TETR and Additional issue(s) which will not be included in refund
    No Do not input an AMD-CLMS-DT.

    CR-INT-TO-DT to notate on DI / AMS:
    • Current 23C date minus 13 days.

    TETR Increase:
    TETR and Additional issue(s) which will be included in refund
    Yes If applicable, enter the date the processible amended return was received as the AMD-CLMS-DT, See IRM 21.5.3.4 , General Claims Procedures.
    CR-INT-TO-DT to notate on DI / AMS:
    • May 30, 2007, if amended return was received on or before May 30, 2007.

    • Amended return received date if received after May 30, 2007.

    TETR Increase:
    TETR and Additional issue(s) which will be included in refund
    No Do not input an AMD-CLMS-DT.

    CR-INT-TO-DT to notate on DI / AMS:
    • Current 23C date minus 13 days.

    TETR Decrease:
    TETR only
    Yes
    or
    No
    Do not input an AMD-CLMS-DT.
    TETR Decrease:
    TETR and Additional issue(s)
    Yes
    or
    No
    If applicable, follow normal procedures for figuring the AMD-CLMS-DT. See IRM 21.5.3.4, General Claims Procedures.

      Adjustments involving the Standard Amount  
    Claim issue(s): Refund issued within 45 day interest-free period? Input AMD-CLMS-DT of:
    TETR Increase:
    TETR only
    or
    TETR and Additional issue(s) which will not be included in refund
    Yes
    or
    No
    Leave the AMD-CLMS-DT blank
    CR-INT-TO-DT to notate on DI / AMS:
    • May 30, 2007

    TETR Increase:
    TETR and Additional issue(s) which will be included in refund
    Yes If applicable, enter the date the processible amended return was received as the AMD-CLMS-DT, see IRM 21.5.3.4, General Claims Procedures.
    CR-INT-TO-DT to notate on DI / AMS:
    • May 30, 2007

    TETR Increase:
    TETR and Additional issue(s) which will be included in refund
    No Do not input an AMD-CLMS-DT.
    CR-INT-TO-DT to notate on DI:
    • May 30, 2007

    TETR Decrease:
    TETR only
    Yes
    or
    No
    Do not input an AMD-CLMS-DT.
    TETR Decrease:
    TETR and Additional issue(s)
    Yes
    or
    No
    If applicable, follow normal procedures for figuring the AMD-CLMS-DT. See IRM 21.5.3.4, General Claims Procedures.

  7. Reason Code 102 is required when adjusting the TETR tax and/or TETR interest.

21.6.3.5.14.3  (07-03-2007)
TETR and Filing Status Change Procedures

  1. Taxpayers may file an amended return to change the filing status claimed on the original return. Follow the procedures located in IRM 21.6.1, Filing Status and Exemption Adjustments , when working filing status changes.

  2. For separate to joint claims and both taxpayers have previously filed see also IRM 21.6.1.4.3.1, Separate to Joint and Both Taxpayers Have Filed Previously. However, when backing out the secondary account do not net out (subtract) any refunds or offsets previously issued which included TETR.

    Caution:

    If a refund was previously issued or an offset occurred, and TETR was involved, then the TETR must be reversed and the refund/offset must be moved/reversed when backing out the account. See IRM 21.5.2.4.23.10, Moving Refunds.

  3. For separate to joint claims and only one taxpayer has previously filed see also IRM 21.6.1.4.3.2, Separate to Joint and One Taxpayer Has Not Filed Previously.

  4. For joint to separate claims see also IRM 21.6.1.4.5, Joint to Separate, Single, or Head of Household Procedures.

21.6.3.5.15  (09-22-2008)
TETR Interest - Amended Return

  1. When amending Form 8913, individuals are instructed to calculate the interest to the same date they used when figuring his/her original Form 8913. If requesting TETR for the first time using Form 8913, individuals will figure the interest to the later of 45 days past the original return due date or 45 days after the date the original return was filed.

    Reminder:

    The standard amounts include interest figured to May 30, 2007. Additional credit interest is never due when requesting a standard amount.

  2. Because the computer restricts credit interest on TETR, a manual computation of any additional interest, if due, is necessary. The additional credit interest figured will be included in the Credit Reference Number (CRN) 254 amount.

  3. Below are the steps to calculate the additional credit interest and the Credit Reference Number (CRN) 254 amount:

    1. Combine the TETR tax credit, Line 15(d) of Form 8913, and the TETR interest, Line 15(e) of Form 8913 then subtract the TETR tax credit and TETR interest previously allowed, if applicable.

    2. Using CC COMPA, calculate the additional interest on the amount from Step 1. The "From date" will be the 45th day past the return due date (RDD) or on late filed returns, the 45th day past the original return received date. The "To date" will be the received date of the amended return, if the refund will be issued within the 45 day interest-free period or the current 23C date minus 13 days, if not issued within the 45 day interest-free period. See the IMF 45-Day Interest Free Chart..

      Note:

      If issuing a manual refund which includes TETR, the "To date" for figuring interest on the TETR portion of the refund will be the date determined by your local Accounting Function.

    3. Combine the TETR interest figured by the taxpayer on Form 8913, Line 15(e), and the interest amount figured in Step 2. The combined amount is the Credit Reference Number (CRN) 254.

      Example:

      Taxpayer requested $30 TETR standard amount (comprised of $25.61 TETR tax and $4.39 TETR interest) on his original return filed March 1, 2007. Taxpayer's amended return requesting actual TETR amount of $91.75, was received August 1, 2007, and is being worked on August 19, 2007. Form 8913 shows $82.25 on line 15(d) as the TETR tax credit and $9.50 on line 15(e) as TETR interest. Interest is figured on $61.75 ($91.75 - $30) using CC COMPA with a "From date" of May 30, 2007, and a "To date" of August 1, 2007. COMPA results show additional interest of $.86. Input CRN 253 for $56.64 ($82.25 - $25.61) and CRN 254 for $5.97 ($9.50 + $.86 - $4.39).

  4. Notate the credit interest "To date" on Desktop Integration (DI)/AMS (Account Management Service) as "TETR CR-INT-TO-DT is MMDDYYYY" . This is imperative since the CR-INT-TO-DT associated with the TETR TC 770 on Master File might contain an incorrect date.

  5. A manual computation of interest is not required for amended returns decreasing the TETR credit, since debit interest is not restricted by the computer.

21.6.3.5.16  (02-26-2007)
CP 73 and CP 73A

  1. If the TETR request is determined to be questionable, Examination will freeze the account by inputting a TC 424. The TC 424 will post the same cycle as the original return (TC 150) setting a -L freeze and a CP 73 or CP 73A will be sent.

  2. The entire refund will be held at the point of selection with a TC 810. In the same cycle there will be a TC 811 for the amount of refund not related to the TETR. A CP 73 or CP 73A will be sent to inform the individual the TETR portion of his/her refund will be delayed.

    Note:

    The TETR portion of the refund will be held systemically until the examination is completed and will be released appropriately.

  3. The CP 73 or CP 73A both provide the individual a telephone number to call with questions. See the table below for information on how to determine where a case was assigned and how to respond to each taxpayer. The Filing Location Code of the Document Locator Number (DLN) of the transaction code 424 will indicate how and where the taxpayer’s examination is being worked.

    If the FLC of the TC 424 DLN is: Then Response to the Taxpayer
    09 (or 18) The case is/will be assigned to Kansas City Compliance Center. The taxpayer was/will be issued a CP 73. Inform the Taxpayer that they should have, or will be, receiving a notice that will tell them what to submit.
    49 The case is/will be assigned to Memphis Compliance Center. The taxpayer was/will be issued a CP 73. Inform the Taxpayer that they should have, or will be, receiving a notice that will tell them what to submit.
    28 The Case will be assigned to an SB/SE Field Office. The taxpayer was/will be issued a CP 73A. They will receive another notice telling them where his/her case is assigned. They should wait 30 days to receive the second notice. If it is after 30 days, refer the taxpayer to the phone number on the notice.

21.6.3.5.17  (11-16-2007)
TETR - Referrals from Automated Underreporter (AUR)

  1. When a taxpayer responds to the Tax Year 2006 AUR Notice (CP 2000, CP 2501, or Statutory Notice of Deficiency) which includes a request for the Telephone Excise Tax Refund (TETR), the TETR portion of the response will be worked by Accounts Management (AM).

  2. AUR will take the following actions before routing to AM:

    • AUR will work and close their case for the non-TETR issues.

    • Issue appropriate closing letter to the taxpayer.

      Note:

      The letter will advise the taxpayer of the actions taken on the AUR issues, that the request for TETR has been forwarded to another area for consideration, provide the locally designated AM Action 61 / Policy Statement P-21-3 contact, and that it may take up to 60 days for a subsequent contact.

    • Photocopy the taxpayer's response (including Form 8913, Credit for Federal Telephone Excise Tax Paid , if present) and prepare Form 4442, Inquiry Referral, for referral to AM at the local site.

      Note:

      AUR will notate on the Form 4442 that the interim letter was issued, the date the letter was issued, and that AUR has worked all non-TETR issues.

  3. Adjust the account to allow the TETR tax credit. See IRM 21.6.3.5.14, TETR Adjustments - General Information and IRM 21.6.3.5.14.2, TETR - Adjusting the Account.

    Reminder:

    Use Category Code TETR, if this is the first time the taxpayer has claimed TETR.

21.6.3.6  (10-01-2009)
Economic Stimulus Payment (ESP)

  1. The information in this section will assist in answering taxpayers' questions regarding the Economic Stimulus Payment. Use the information located under Economic Stimulus/Rebate TOC on Servicewide Electronic Research Program (SERP) under IRM Supplements, in conjunction with the IRM instructions when answering taxpayers' questions related to the stimulus payment.

  2. The Economic Stimulus Act of 2008, approved by Congress and signed by President Bush, directed the Treasury to send checks to eligible taxpayers giving them an advance payment of the 2008 Recovery Rebate Credit.

  3. The IRS processed the Economic Stimulus Payments after taxpayers filed his/her returns for Tax Year 2007.

  4. Notice 1377, Economic Stimulus Payment Notice, was mailed in March 2008 to all taxpayers who filed a 2006 Federal income tax return. Notice 1377 was an information only notice that did not require a taxpayer response.

  5. A week before the payment was issued a Notice 1378 was mailed to eligible taxpayers, providing the expected payment amount, the date, and other information.


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