21.6.3  Credits

Manual Transmittal

September 02, 2014

Purpose

(1) This transmits a revised IRM 21.6.3, Individual Tax Returns, Credits.

Material Changes

(1) Various editorial changes throughout the IRM.

(2) IPU 14U0089 issued 01-10-2014 IRM 21.6.3.2 - Clarified the definition of refundable and non-refundable credits.

(3) IPU 14U0089 issued 01-10-2014 IRM 21.6.3.4.1.5.2 - Changed the Lifetime Learning Credit to say it's available for all years instead of beyond the first two years.

(4) IRM 21.6.3.4.1.6 - updated (5) to say route claims when math verification is required and added note about assigning an International 1040X to the right category, function and program code.

(5) IRM 21.6.3.4.1.7- added the credit is not available for fuel sold after 2013 and linked to IRM 21.7.4.

(6) IRM 21.6.3.4.1.25 - updated (4) to say for tax year 2012 and prior.

(7) IPU 14U0351 issued 02-20-2014 IRM 21.6.3.4.1.27 - added caution to (8) about the taxpayer's claim referencing the child tax credit.

(8) IRM 21.6.3.4.1.27- clarified instructions throughout and added note to (9) saying a carryforward can be claimed on a MFS return.

(9) IRM 21.6.3.4.1.29 - added Form 8859 can be used to claim a carryforward of any unused credit.

(10) IRM 21.6.3.4.1.31 - added credit amount and 2014 AGI limits.

(11) IRM 21.6.3.4.1.35 - deleted Qualified Zone Academy Bond Credit subsection since credit expired in 2007, renumbered subsequent subsections.

(12) IRM 21.6.3.4.1.42 - deleted subsection and renumber remaining subsections.

(13) IPU 13U1539 issued 10-21-2013 IRM 21.6.3.4.1.44 - Added Schedule E and H as filers eligible for this credit and to verify Schedule C, E, F or H were filed before allowing the claim.

(14) IRM 21.6.3.4.1.43 (previously numbered 21.6.3.4.1.44) - updated section to add procedures for tax year 2014 and subsequent.

(15) IPU 13U1582 issued 10-28-2013 IRM 21.6.3.4.2.2 - Updated AMS category used to verify wages / withholding to RICS IVO ITIN Only Wage/WH Verification.

(16) IRM 21.6.3.4.2.2 - clarified the ITIN procedures and added IVO referrals are for current year returns only.

(17) IRM 21.6.3.4.2.4 - added 2014 limitations and new routing for Form 843 claims.

(18) IRM 21.6.3.4.2.6 - added to no consider claims for Part 1 with no business activity.

(19) IRM 21.6.3.4.2.7.13.1 - deleted subsection on tracking EITC correspondence as it is no longer needed, renumbered subsequent subsections.

(20) IPU 14U0089 issued 01-10-2014 IRM 21.6.3.4.2.7.17 - Added Note to (1) saying see IRM 21.6.1.6.2, Command Code DDBCK, for all other exceptions.

(21) IRM 21.6.3.4.2.7.19 - deleted subsection since it addressed a statute expired year.

(22) IRM 21.6.3.4.2.7.19.1 - deleted subsection since it addressed a statute expired year.

(23) IRM 21.6.3.4.2.8 - deleted 2nd note in (1) referring to tax year 2008.

(24) IPU 14U0089 issued 01-10-2014 IRM 21.6.3.4.2.8.2 - Added math error verbiage found in the non-refundable section.

(25) IPU 14U0202 issued 01-29-2014 IRM 21.6.3.4.2.8.2 - Updated CAT-A criteria in (5).

(26) IPU 14U0581 issued 03-28-2014 IRM 21.6.3.4.2.9 - added the credit was effective thru Dec. 31, 2013 and added updated contact information.

(27) IRM 21.6.3.4.2.10 - added credit was refundable through tax year 2012, for tax year 2013 and subsequent, it is no longer refundable.

(28) IPU 14U0089 issued 01-10-2014 IRM 21.6.3.4.2.11.6.2 - Added new (5) addressing amended returns filed to reverse the FTHBC received after ASED expired.

(29) IRM 21.6.3.4.2.16 - added new subsection on the Premium Tax Credit, Shared Responsibility Payment, and Health Coverage Exemptions.

(30) IRM 21.6.3.5 - deleted TETR subsection, renumbered subsequent subsection, deleted certain subsections that no longer apply.

Effect on Other Documents

IRM 21.6.3 dated Oct. 1, 2013, is superseded. This IRM also incorporates the following IRM Procedure Updates (IPUs): 13U1539 (dated 10-21-2013), 13U1582 (dated 10-28-2013), 14U0089 (dated 01-10-2014), 14U0202 (dated 01-29-2014), 14U0351 (dated 02-20-2014) and 14U0581 (dated 03-28-2014).

Audience

Employees responding to taxpayer inquiries and performing account adjustments pertaining to credits

Effective Date

(10-01-2014)

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

21.6.3.1  (10-01-2002)
Credits Overview

  1. This section provides information on both non-refundable and refundable credits.

21.6.3.2  (01-10-2014)
What Are Credits?

  1. Non-refundable credits reduce, and are limited to, the amount of the tax liability for the tax year, excluding taxes from the "Other Taxes" section.

    Reminder:

    The unused amounts of credits can be carried forward from year to year until the credits are absorbed, or the carry forward period expires, whichever is first.

  2. A Refundable Credit is a credit that is not limited by the amount of tax liability. It is treated as a payment and applied to the tax liability. If total credit(s) and/or payment(s) exceed the tax liability, the excess is refundable. Examples of refundable credits are the Earned Income Tax Credit and the Additional Child Tax Credit. See IRM 21.6.3.4.2, Refundable Credits.

21.6.3.3  (02-20-2013)
Credits Research

  1. Credits are researched on Integrated Data Retrieval System (IDRS), using Command Codes (CC) RTVUE, CC IMFOLT, CC TRDBV and/or CC TXMODA.

  2. The tax code permits a wide variety of credits. Follow the procedures in the following subsections for non-refundable and refundable credits.

  3. In order to assist with improving quality and timeliness of the work process, Accounts Management employees who have access are required to use the IAT (Integrated Assistance Tools) such as xClaim and REQ54 when appropriate for any case involving credits.

  4. If a fraudulent claim is identified that does not have an existing treatment stream, see IRM 21.5.3–7, Fraud Referral Claims.

21.6.3.4  (10-01-2013)
Credits Procedures

  1. This section contains the procedures for non-refundable and refundable tax credits.

  2. All credits require the primary taxpayer, secondary taxpayer, and, if applicable, the qualifying child(ren) have a valid Taxpayer Identification Number (TIN). See Exhibit 21.6.3-1, TIN REQUIREMENTS FOR EXEMPTIONS AND CREDITS.

    Note:

    An Internal Revenue Service Number (IRSN) is not a valid TIN for credit allowance.

  3. Certain credits, e.g., Child Tax Credit and Earned Income Tax Credit, contain age criteria that must be met for credit allowance.

    1. On January 1, 2001, IRS established a date of birth/death database. The database consists of the taxpayer's date of birth (DOB) and date of death information (DOD) as shown on Social Security Administration (SSA) records.

    2. Use CC DTVUE or CC INOLE to research IRS and SSA date of birth and date of death information. Use the Real Time System (RTS) to verify the DOB when an Individual Taxpayer Identification Number (ITIN) is involved. See IRM 3.21.263, IRS Individual Taxpayer Identification Number (ITIN) Real Time System (RTS).

    3. If a taxpayer contacts IRS concerning a math error issued as a result of a social security number (SSN) discrepancy, and it cannot be resolved through verification or research, advise the taxpayer to contact his/her local SSA office to resolve the discrepancy.

    4. To substantiate date of birth for tax purposes, taxpayer must provide documentation, e.g. birth certificate, school records, baptism records, etc., for verification.

    5. When the taxpayer provides the appropriate documentation, use CC DM1DT to add, change, or delete data to correct the date of birth. See IRM 2.3.25, Command Codes DM1DT and DTVUE, for CC input.

      Exception:

      Do not use CC DM1DT to update ITIN information. Complete a Form 4442, Inquiry Referral, and fax it along with the taxpayer documentation to the Austin Service Center (AUSC) ITIN unit at 512–433–5909.

  4. On 8/18/03, the IRS published Rev. Rul. 2003-72, which applies a uniform method of determining when a child attains a specific age for certain tax purposes. For ALL tax years, taxpayer inquiries or claims regarding this issue are to be addressed utilizing the following information:

    • A child attains a given age on the anniversary of the date that the child was born. For example, a child born on January 1, 2003, attains the age of 1 on January 1, 2004.

    • The revenue ruling applies to age determination for children regarding dependent care benefits, adoption credits, child tax credits, earned income tax credits, dependent care assistance programs, foster care payments, adoption assistance programs, and dependency exemptions.

  5. If one of the following credits is being claimed for a TIN for which our records indicate a date of death prior to the tax year, correspond before using math error procedures. The credits to which this apply are: Child and Dependent Care Credit, Child Tax Credit, Earned Income Tax Credit, Adoption Credit and Education Credits. In this instance, the Service should take steps to ensure that taxpayers are given notice of the problem and an opportunity to explain. The correspondence should indicate that the TIN at issue is incorrect since SSA records indicate the TIN being used is for a person who was deceased prior to the tax year.

    1. If documentation is received indicating the math error is incorrect, use CC DM1DT to change or delete the DOD. See IRM 2.3.25, Command Codes DM1DT and DTVUE, for additional information.

    2. If appropriate documentation is not received, disallow the credit(s) and send Letter 105C using the following (indicate the specific credits, including exemptions if applicable, in an open paragraph):
      "We are disallowing your claim for the credits below because you omitted a correct social security number. The information provided by the Social Security Administration (SSA) indicates the number provided belongs to an individual who was deceased prior to the beginning of the tax year for which it is being used."

    Note:

    See IRM 21.6.1.5.1, Determining the Exemption Deduction, for information on allowing exemptions.


  6. Take the following action on any CP 36, duplicate return or Form 1040X that claim refundable credits as noted below:

    If Then
    A review of any duplicate or amended return shows a claim of social security benefits with refundable credits and the refund is equal to the amount of credits

    Or

    A review of any duplicate or amended return shows Household Employee income and a claim for a refundable credit.
    1. Research CC IRPTR to substantiate the income and / or withholding.

    2. No consider the request if CC IRPTR does not substantiate the request. Follow procedures in IRM 21.5.3.4.6.3, No Consideration Procedures.

    Note:

    These procedures should be followed even though the refundable credit is below the specified tolerance amount.

  7. Refer taxpayers to the Taxpayer Advocate Service (TAS) when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria) and you cannot resolve the taxpayer's issue the same day. The definition of the "Same Day" is within 24 hours. "Same Day" cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue. Do not refer "Same Day" cases to TAS unless the taxpayer asks to be transferred to TAS and the case meets TAS criteria. Refer to IRM 13.1.7.4, Same- Day Resolution by Operations. When you refer cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), and forward to TAS. For additional information regarding TAS, see IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines.

21.6.3.4.1  (10-01-2011)
Non-Refundable Credits Procedures

  1. For tax year 2009 and subsequent, the non-refundable credits are applied in the order that they appear in this section:

    • Form 1116, Foreign Tax Credit (Individual, Estate or Trust)

    • Form 2441, Child and Dependent Care Expenses

    • Schedule R, Credit for the Elderly or the Disabled

    • Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)

    • Form 8880, Credit for Qualified Retirement Savings Contributions

    • Child Tax Credit

    • Form 8396, Mortgage Interest Credit

    • Form 8839, Qualified Adoption Expenses

    • Form 8859, District of Columbia First-Time Homebuyer Credit

    • Form 5695, Residential Energy Credits

    • Form 8834, Qualified Plug-In Electric and Electric Vehicle Credit

    • Form 3468, Investment Credit

    • Form 5884, Work Opportunity Credit

    • Form 8861, Welfare-to-Work Credit

    • Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit

    • Form 6765, Credit for Increasing Research Activities

    • Form 8586, Low-Income Housing Credit

    • Form 8830, Enhanced Oil Recovery Credit

    • Form 8826, Disabled Access Credit

    • Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit

    • Form 8845, Indian Employment Credit

    • Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips

    • Form 8820, Orphan Drug Credit

    • Form 8874, New Markets Credit

    • Form 8881, Credit for Small Employer Pension Plan Startup Costs

    • Form 8882, Credit for Employer-Provided Childcare Facilities and Services

    • Form 8900, Qualified Railroad Track Maintenance Credit

    • Form 8864, Biodiesel and Renewable Diesel Fuels Credit

    • Form 8896, Low Sulfur Diesel Fuel Production Credit

    • Form 8906, Distilled Spirits Credit

    • Form 8907, Nonconventional Source Fuel Credit

    • Form 8908, Energy Efficient Home Credit

    • Form 8910, Alternative Motor Vehicle Credit

    • Form 8911, Alternative Fuel Vehicle Refueling Property Credit

    • Form 8847, Credit for Contributions to Selected Community Development Corporations

    • Trans-Alaska Pipeline Liability Fund Credit, claimed on Form 3800, General Business Credit

    • Form 5884-A, Credits for Employers Affected by Hurricane Katrina, Rita, or Wilma

    • Form 8860, Qualified Zone Academy Bond Credit

    • Form 8912, Credit to Holders of Tax Credit Bonds

    • Form 8844, Empowerment Zone and Renewal Community Employment Credit

    • Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts


  2. These non-refundable credits are:

    1. Subtracted from the tax amount.

    2. Limited to the amount of the tax liability.

    3. Used before refundable credits.

    Reminder:

    Non-refundable credits MUST BE APPLIED in the order they appear in this section.

    Exception:

    If the Child Tax Credit is claimed in addition to the:

    • Mortgage Interest Credit and/or

    • Adoption Credit and/or

    • D.C. First-Time Homebuyer Credit

      then, the Worksheet(s) in Publication 972, Child Tax Credit, must be used to compute the amount of Child Tax Credit and to determine if it will be used before the other credits to reduce tax.

    Exception:

    If the Residential Energy Credit is claimed in addition to the:

    • Child Tax Credit and/or

    • Mortgage Interest Credit, Adoption Credit, or the D.C. First - Time Homebuyer Credit

      then, these credits must be computed before completing the carryforward section of Form 5695.


  3. Credits may be subject to limitation for taxpayers subject to the Alternative Minimum Tax; see Form 6251, Alternative Minimum Tax - Individuals.

  4. For taxable years 2000 and subsequent, all non-refundable personal credits are allowed to the extent of the full amount of the individual's regular tax and alternative minimum tax (AMT).

  5. Some credits may be eligible for carryback or carryover; refer to the individual form or schedule (see IRM 21.5.9, Carrybacks).

21.6.3.4.1.1  (10-01-2012)
Non-Refundable Credit Inquiries and Procedures

  1. Use the following procedures for non-refundable credit inquiries.

    Note:

    When non-refundable credits requiring TIN validation are claimed, see IRM 21.6.1.6, Command Code DUPED and DDBCK, for appropriate use of CC DUPED and DDBCK for updating the Duplicate TIN database.

  2. When a taxpayer inquires by telephone:

    1. Request identifying information from taxpayer to ensure you have the correct person before disclosing any account information. See IRM 21.1.3.2.3, Required Taxpayer Authentication.

    2. Accept oral statement for account action after disclosure information is verified. See IRM 21.1.3, Operational Guidelines Overview.

    3. Consider all related information and/or examine all documents before making adjustments or answering taxpayer inquiries.

    4. Enter appropriate remarks in the REMARKS section of an on-line adjustment. See IRM 21.5.2.4.6, Remarks Field.

    5. If the adjustment is input on-line and a Form 4442, Inquiry Referral, is not required, no source document is sent to files.

    6. If the adjustment will not be input on-line or by close of business, complete a Form 4442, Inquiry Referral.

  3. Follow this table for all taxpayer inquiries regarding non-refundable credits. Refer to subsections in this section for specific credit information and procedures.

    If the taxpayer And Then
    Claimed the credit on the original return Provides a copy of the appropriate form or substantiating information Follow the specific subsection in this section and adjust the account.
    Claimed the credit on the original return DOES NOT provide missing information Follow IRM 21.5.4, General Math Error Procedures.
    Credit WAS NOT claimed on the original return   Advise taxpayer to file an amended return.
  4. If written documentation is required, advise taxpayer to send it to the site receiving the contact.

    Reminder:

    A fax is acceptable unless taxpayer's original signature is required. See IRM 21.5.3.4.4, Signature Requirements for Claims.

21.6.3.4.1.2  (10-01-2011)
Adjusting Non-Refundable Credit Accounts

  1. Math verify the form or schedule, if one is required.

  2. If the form, schedule, or documentation is incomplete and cannot be perfected with available information, follow claim processing in IRM 21.5.3.4, General Claims Procedures.

  3. If the credit requires a qualifying child, use CC INOLES to verify the name control, TIN, and date of birth of the qualifying child.

    Note:

    If the qualifying child is assigned an ITIN, use the Real Time System (RTS) to verify the name control, TIN, and date of birth. See IRM 3.21.263, IRS Individual Taxpayer Identification Number (ITIN) Real Time System (RTS).

  4. Estimated tax penalty is not changed when applying a non-refundable credit.

    Exception:

    If the credit is claimed on a superseding return, estimated tax penalty is recomputed (see IRM 20.1, Penalty Handbook).

  5. Adjust the tax account with Transaction Code (TC) 29X, Reason Code 036, (RC 035 for Education credits), and the appropriate Source Code and blocking series.

21.6.3.4.1.3  (10-01-2011)
Child and Dependent Care Credit

  1. If a taxpayer paid someone to care for his/her child, spouse, or dependent, the taxpayer may be able to reduce his/her tax by claiming the Child and Dependent Care Credit on his/her federal income tax return.

  2. A completed Form 2441, Child and Dependent Care Expenses, must be submitted when claiming the credit.

  3. Taxpayer must file a joint return, if married, unless an exception applies.

  4. Taxpayer must furnish a valid TIN for every qualifying person. This number may be:

    • An SSN issued by the Social Security Administration

    • An ITIN issued by the IRS if taxpayer is not eligible for an SSN.

    • An Adoption Taxpayer Identification Number (ATIN) issued by the IRS for a child while an adoption is pending

      Note:

      For taxpayers indicating a religious (e.g. Amish/Mennonite) or conscience-based objection to obtaining a TIN, refer to IRM 21.6.1.5.1, Determining the Exemption Deduction.

      Note:

      See IRM 21.6.3.4, Credits Procedures, for more information regarding correct TINs.

  5. A qualifying person is a taxpayer's:

    1. Dependent qualifying child under the age of 13.

      Note:

      If the child turned 13 during the tax year, he/she is a qualifying person for the part of the year he/she was under age 13.

      Example:

      For a child turning 13 on Sept. 16, count only those expenses through Sept. 15.

    2. Spouse (of any age), if physically or mentally unable to care for him/herself, who lived with the taxpayer for more than half the year.

    3. Disabled person (of any age), if physically or mentally unable to care for him/herself, who lived with the taxpayer for more than half the year and is the taxpayer's dependent.

    4. Disabled person (of any age) who lived with the taxpayer for more than half the year and who would have been the taxpayer's dependent except that he/she received gross income of $3900 or more for 2013, filed a joint return or could be claimed as a dependent on another taxpayer's return.

  6. See Publication 17, Your Federal Income Tax For Individuals, and/or Publication 503, Child and Dependent Care Expenses, for detailed information.

21.6.3.4.1.3.1  (10-01-2012)
Form 2441 Taxpayer Inquiry

  1. Use the following table for taxpayer inquiries:

    If the taxpayer And Then
    Claimed the credit on the original return The missing information is provided 1. Validate TIN if submitted for the qualifying person or care provider.
    2. Adjust the account following IRM 21.5.4.4.3, Processing Responses to Math Error Notices.
    Claimed the credit on the original return DOES NOT provide missing information Follow IRM 21.5.4, General Math Error Procedures.
    Claims "due diligence" was used to secure the provider's TIN The provider's TIN still cannot be secured Follow the guidelines in Publication 17, Your Federal Income Tax (For Individuals), under Form 2441, for Provider Identification Test. If due diligence is established, allow the credit.
    Credit WAS NOT claimed on the original return   Advise taxpayer to file an amended return and include Form 2441.

21.6.3.4.1.3.2  (10-01-2011)
Form 2441 - Adjusting the Account

  1. If the form is incomplete and cannot be perfected with available information, follow claim processing in IRM 21.5.3, General Claims Procedures.

  2. Math verify the Form 2441, Child and Dependent Care Credit.

  3. Use CC INOLES to verify the name control and Taxpayer Identification Number (TIN) of the qualifying person(s).

    Note:

    If the qualifying person is assigned an Individual Taxpayer Identification Number (ITIN), use the Real Time System (RTS) to verify the name control, TIN, and date of birth. See IRM 3.21.263, IRS Individual Taxpayer Identification Number (ITIN) Real Time System (RTS).

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate Source Code (SC) and blocking series.

21.6.3.4.1.4  (02-05-2010)
Schedule R, Credit for the Elderly or Permanently and Totally Disabled

  1. If a taxpayer and/or spouse is age 65 or older at the end of the tax year, or any age if retired on permanent and total disability, and have taxable disability income, the taxpayer may be able to reduce his/her tax by claiming the Credit for the Elderly or Permanently and Totally Disabled on his/her federal income tax return.

    Note:

    A taxpayer is considered age 65 on the day before the 65th birthday.

  2. Schedule R (Form 1040 ) as a write-in on Line 53 or Schedule 3 (Form 1040A ) must be submitted.

    • Filing status/age must be checked.

    • A physician's statement must certify the disability condition or the box must be checked to indicate the statement was filed or obtained in a previous year.

    • On a joint return, if both spouses are disabled, both must submit a statement.

    • The taxpayer may request the IRS to compute the credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Publication 17, Your Federal Income Tax (For Individuals), Publication 524, Credit for the Elderly or the Disabled, or Publication 554, Tax Guide for Seniors, for detailed information.

21.6.3.4.1.5  (02-20-2013)
Form 8863, Education Credits

  1. Taxpayers may claim an education credit, Hope Scholarship Credit and Lifetime Learning Credit, for qualified tuition and related expenses paid to an eligible educational institution, including accredited colleges, universities, and vocational schools. For tax years 2009 through 2017, the American Opportunity Tax Credit (AOTC) replaced the Hope Scholarship Credit.

  2. A taxpayer can elect, for any year, only one of the credits for each student.

  3. If a taxpayer claims an exemption for a dependent who is an eligible student, then only that taxpayer can claim a credit for the student's qualified education expenses.

  4. Taxpayers cannot claim the credit if:

    • Claimed as a dependent on another person's tax return

    • Filing status is married filing separately

    • Nonresident alien

    • Modified adjusted gross income for 2013 is $180,000 or more if married filing jointly, $90,000 for all other filing statuses (if claiming the American Opportunity Credit), or, $127,000 or more if married filing jointly, $63,000 for all other filing statuses (if claiming the Lifetime Learning Credit)

  5. Students under age 24 do not qualify for the refundable portion of the AOTC if all the following apply:

    • Under age 18 at the end of the year, or age 18 at the end of the year and their earned income was less than one-half of their support, or a full-time student over age 18 and under age 24 at the end of the year and their earned income was less than one-half of their support.

    • At least one of the student's parents was alive at the end of the year.

    • The student is not filing a joint return.

  6. The credit may be for expenses of the taxpayer, the taxpayer's spouse, or the taxpayer's eligible dependent claimed on the taxpayer's return.

  7. All students claimed on Form 8863 must have a valid TIN. A valid TIN includes an SSN, ITIN or ATIN.

    Note:

    For taxpayers indicating a religious (e.g., Amish/Mennonite) or conscience-based objection to obtaining a TIN, refer to IRM 21.6.1.5.1, Determining the Exemption Deduction.

  8. Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), must be submitted.

  9. For Tax Year 2008 or 2009, the Heartland Disaster Tax Relief Act of 2008, temporarily expanded the Hope and Lifetime learning credits for students attending an eligible education institution located in the Midwestern disaster area.

    • For taxpayers or their dependents who attended an educational institution located in the Midwestern disaster area, the Hope credit is increased to 100 percent of the first $2400 in qualified tuition and related expenses and 50 percent of the next $2400 of qualified tuition and related expenses for a maximum credit of $3600 per student.

    • For taxpayers or their dependents who attended an educational institution located in the Midwestern disaster area, the Lifetime Learning credit rate is increased from 20 percent to 40 percent.

  10. See Publication 970, Tax Benefits for Education, for more information.

21.6.3.4.1.5.1  (10-01-2011)
HOPE Scholarship Credit

  1. The HOPE scholarship credit was replaced for tax years beginning after 2008 by the American Opportunity Credit. For prior years, the Hope Scholarship credit:

    1. Applied to expenses paid on or after January 1, 1998, for academic periods beginning on or after that date.

    2. For tax year 2009, it can only be claimed if at least one eligible student attended an eligible educational institution in a Midwestern disaster area. It is 100% of the first $2,400 of qualified education expenses and 50% of the next $2,400 of qualified education expenses, for a maximum credit of $3,600 per student.

    3. For tax year 2008, it is 100% of the first $1,200 of qualified education expenses and 50% of the amount that exceeds $1,200. It may not be in excess of $2,400 in expenses, for a maximum credit of $1,800 per student.

    4. Students must have been enrolled at least half-time in one of the first two years of post-secondary education.

    5. The credit can be claimed for only two tax years per student.

21.6.3.4.1.5.2  (01-10-2014)
Lifetime Learning Credit

  1. The Lifetime Learning Credit:

    1. Applies to expenses paid on or after July 1, 1998, for academic periods beginning on or after that date.

    2. Is 20% of the first $10,000 of out-of-pocket expenses for all eligible students in the family.

      Note:

      See IRM 21.6.3.4.1.5, Form 8863 Education Credits, for situations in which the rate is 40% rather than 20%.

    3. There is no course-load requirement, the credit is available for all years of post-secondary education (including graduate studies), and may be claimed for an unlimited number of years.

  2. A taxpayer can elect, for any year, only one of the education credits for each student.

21.6.3.4.1.5.3  (10-01-2011)
Form 8863 - Adjusting the Account

  1. If the form is incomplete and cannot be perfected with available information, follow claim processing in IRM 21.5.3, General Claims Procedures.

  2. Use CC INOLES to verify the name control and Taxpayer Identification Number (TIN) of the student(s).

    Note:

    For taxpayers indicating a religious (e.g., Amish/Mennonite) or conscience-based objection to obtaining a TIN for the student, refer to IRM 21.6.1.5.1, Determining the Exemption Deduction.

    Note:

    If the student is assigned an Individual Taxpayer Identification Number (ITIN), use the Real Time System (RTS) to verify the name control, TIN, and date of birth. See IRM 3.21.263, IRS Individual Taxpayer Identification Number (ITIN) Real Time System (RTS).

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 035 and the appropriate SC and blocking series.

21.6.3.4.1.6  (10-01-2013)
Form 1116, Foreign Tax Credit

  1. To qualify for the credit, taxpayer must have paid or accrued income tax in a foreign country or U.S. possession.

  2. The taxpayer may claim the credit against U.S. income tax or deduct the foreign tax as an itemized deduction.

  3. If the change in the credit is the result of a refund of foreign taxes paid, manually compute and assess interest per IRM 20.2, Interest. Contact taxpayer to determine the refund date, if necessary.

    Reminder:

    If the refund of foreign taxes included no interest, restriction of the account can be avoided by using TC 298; enter the refund date in the interest computation field of the adjustment.

  4. Form 1116, Foreign Tax Credit, must be submitted unless all of the taxpayer's foreign source income is passive and total creditable foreign taxes are not more than $300 ($600 if married filing a joint return).

    Caution:

    See IRM 25.6.1.10.2.8.4, Foreign Tax Credit, for important information regarding the statute period for these type of claims.

  5. If math verification is required (see IRM 21.5.3.4.5, Math and Master File Verification of Claims and Amended Returns ), regardless of the amount claimed, reassign the claim to IMF International. Send through the Correspondence Imaging System (CIS) via IMF International, or mail to:
    2970 Market Street
    1 D08.113
    Philadelphia, PA 19104

    Note:

    If sending a Form 1040X to International, change the category code to IXRT, function 710, program 33080 and update the "Work Type" to "IMF INTL" .

  6. See Form 1116, Foreign Tax Credit, Publication 17, Your Federal Income Tax (For Individuals), and Publication 514, Foreign Tax Credit for Individuals, for detailed information.

21.6.3.4.1.7  (10-01-2014)
Form 8907, Nonconventional Source Fuel Credit

  1. To qualify for the credit, taxpayers must be engaged in the domestic production and sale of liquid, gaseous or solid synthetic fuels produced from coal, or of gas produced from biomass, per IRC § 45K.

  2. The nonconventional source fuel credit is not available for fuel sold after 2013.

  3. For Tax Year 2006 and subsequent, the credit is claimed as a general business credit on Form 3800, General Business Credit.

  4. For additional information, see IRM 21.7.4.4.8.3.9, Form 8907, Nonconventional Source Fuel Credit

  5. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

    4. Input Item Reference Number (IRN) 883 to record the credit. Use a positive amount to increase the credit or a negative amount to decrease the credit.

21.6.3.4.1.8  (02-20-2013)
Form 8834, Qualified Plug-In Electric and Electric Vehicle Credit

  1. The plug-in electric vehicle credit is available for vehicles acquired after Feb. 17, 2009 and on or before Dec. 31, 2011.

  2. Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit, must be submitted. (The credit must be carried to Form 3800, General Business Credit, for purposes of figuring the allowable general business credit.) For personal uses, the amount of line 23 of the form is carried to line 53 of the Form 1040 (line 50 of Form 1040NR) to claim the credit.

  3. Notice 2009–58 allows manufacturers to certify to the IRS that a particular vehicle meets the requirements of IRC § 30. Taxpayers purchasing such vehicles can rely on the domestic manufacturer's certification that indicates a particular make, model, and model year of a vehicle qualifies as a plug-in electric motor vehicle under IRC § 30, and that specifies the amount of the credit allowable with respect to the vehicle.

  4. To qualify for the credit, the taxpayer must have placed a qualified plug-in electric or electric vehicle in service during the tax year. The credit is for both business use and personal use of a qualified vehicle.

  5. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  6. See Form 8834, Qualified Plug-In Electric or Electric Vehicle Credit, or Publication 17, Your Federal Income Tax (For Individuals), for detailed information.

21.6.3.4.1.9  (10-01-2012)
Form 3468, Investment Credit

  1. The investment credit consists of the sum of the rehabilitation credit, energy credit, qualifying advanced coal project credit, qualifying therapeutic discovery project credit, qualifying advanced energy project credit and qualifying gasification project credit.

  2. Form 3800, General Business Credit, must also be filed if two or more credits are claimed.

  3. IRC § 9023, Qualifying Therapeutic Discovery Project, of the Patient Protection and Affordable Care Act, PL 111-148, added new IRC § 48D. The provision added the Qualifying Therapeutic Discovery Project Credits to the investment credit for qualified investment in qualified therapeutic discovery projects made in 2009 and 2010. See Notice 2010-45, IRB 2010-23, for more specific information on the Qualifying Therapeutic Discovery Project Credits.

  4. Section 9023 also provides that if the amount of the credit exceeds the amount allowable, the excess must be recaptured. Form 4255, Recapture of Investment Credit, should be filed along with Form 1040X to report the recapture.

  5. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  6. See Form 3468, Investment Credit, for detailed information.

21.6.3.4.1.10  (10-01-2013)
Form 5884, Work Opportunity Credit

  1. To qualify for the credit, the taxpayer must have paid or incurred wages for employees who are certified as members of a targeted group. Wages shall not include any amount paid or incurred to an individual who begins work for the employer after Dec. 31, 2013.

  2. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  3. See Form 5884, Work Opportunity Credit, and instructions for detailed information.

21.6.3.4.1.10.1  (10-01-2009)
Form 5884-A - Credits for Affected Midwestern Disaster Area Employers

  1. The Emergency Economic Stabilization Act of 2008 provides for an Employee Retention Credit and the Employer Housing Credit to qualified employers.

    • The Employee Retention Credit provides a credit of 40 percent of the qualified wages (up to a maximum of $6000 in qualified wages per employee) paid by an employer to an eligible employee.

    • The Employer Housing Credit provides temporary income exclusion for the value of in-kind lodging provided for a month to a qualified employee (and the employees spouse or dependents) by or on behalf of a qualified employer. The amount of exclusion for any month for which lodging is furnished cannot exceed $600. The credit is equal to 30 percent of the value of lodging excluded from the income of a qualified employee.

  2. Both credits are reported on Form 3800. See Form 5884-A, Credits for Affected Midwestern Disaster Area Employers, and its instructions for more detailed information.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

21.6.3.4.1.11  (10-01-2013)
Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit

  1. Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit, is used to claim the credit for alcohol and cellulosic biofuel fuels used, or sold for use, as fuel in a trade or business. See IRM 21.7.4.4.8.3.3, Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit, for more information.

  2. The credits are effective for fuels sold or used after December 31, 2008, and before January 1, 2014. For prior year credits, see previous versions of the Form 6478 and instructions.

    Note:

    The credit related to alcohol expired on Dec. 31, 2011.


    Effective Jan. 3, 2013, the American Taxpayer Relief Act changed the designation of the credit to “second generation biofuel credit.” Also effective on Jan. 3, 2013, biofuels produced from algae, cyanobacteria, and lemna feedstocks are eligible for the credit. The second generation biofuel credit expires for fuel produced after Dec. 31, 2013.

  3. Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit, must be submitted.

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

    4. Input Item Reference Number (IRN) 884 to record the credit.

  5. See Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit, and its instructions for detailed information.

21.6.3.4.1.12  (02-20-2013)
Form 6765, Credit for Increasing Research Activities

  1. To qualify for the credit, taxpayer must have qualified research expenses paid or incurred in carrying on an active trade or business.

  2. For Tax Year 2006 through 2013, the credit must be claimed as a general business credit on Form 3800, General Business Credit.

  3. Unless a taxpayer's only source of credit is from a pass-through entity, Form 6765, Credit for Increasing Research Activities, must be submitted.

  4. For taxable years including a research credit suspension period, a portion of the research credit may be suspended. See IRM 21.7.4.4.8.3.4.1, Research Credit Suspension Periods, for information and procedures involving the suspension periods.

  5. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  6. See Form 6765, Credit for Increasing Research Activities, for detailed information.

21.6.3.4.1.13  (10-01-2011)
Form 8586, Low-Income Housing Credit

  1. To qualify for the credit, taxpayers must own residential rental buildings providing low-income housing.

  2. For Tax Year 2006 and subsequent, the credit must be claimed as a general business credit on Form 3800, General Business Credit. Generally, the Form 8586 must also be filed unless the taxpayer is exempt from filing this form. See Form 8586 for details.

  3. Form 8609, Low-Income Housing Credit Allocation and Certification, is issued by the state or local housing credit agency authorized to make credit allocations to the building owner. A building owner is required to make a one-time submission of this form to the Low-income Housing Credit Unit at the Philadelphia Campus to the address specified in the instructions of the form.

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  5. See Form 8586, Low Income Housing Credit, and Form 8609, Low-Income Housing Credit Allocation and Certification, for detailed information.

21.6.3.4.1.14  (10-01-2011)
Form 8830, Enhanced Oil Recovery Credit

  1. To qualify for the credit, the taxpayer must own an operating mineral interest and have qualified enhanced oil recovery costs.

  2. For Tax Year 2006 and subsequent, the credit is completely phased out. Any credit carried over from years prior to 2006 must be claimed as a general business credit on Form 3800, General Business Credit.

  3. For additional information, see IRM 21.7.4.4.8.3.6, Enhanced Oil Recovery Credit.

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  5. See Form 8830, Enhanced Oil Recovery Credit, for detailed information.

21.6.3.4.1.15  (10-01-2009)
Form 8826, Disabled Access Credit

  1. To qualify for the credit, the taxpayer must have an eligible small business which has eligible access expenditures.

  2. If Form 8826, Disabled Access Credit, is filed with an amended return, one of the following must be present on the original return in order to allow the credit:

    • Schedule C

    • Schedule E

    • Schedule F

    • "Other Income" claimed on line 21, Form 1040, U.S. Individual Income Tax Return, or the equivalent on Form 1040X, Amended U.S. Individual Income Tax Return.

      Note:

      The absence of these items indicates the taxpayer has no business ownership or participation.

      Note:

      If Form 8826, Disabled Access Credit, or Form 3800, General Business Credit, claiming the credit is filed with an amended return and the criteria above are met, follow Category A procedures in IRM 21.5.3-2, Examination Criteria (CAT A) - General, if the amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. If these schedules or items are not present, disallow the credit and use the following language when explaining the disallowance:
    "We have not allowed your claim for the Disabled Access Credit. The Disabled Access Credit is a business credit. There is no indication of business ownership or activity based on your tax return information for this tax year."

  4. For Tax Year 2006 and subsequent, the credit must be claimed as a general business credit on Form 3800, General Business Credit.

  5. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  6. See Form 8826, Disabled Access Credit, for detailed information.

21.6.3.4.1.16  (02-20-2013)
Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit

  1. To qualify for the credit, taxpayer must sell electricity produced in the U.S. or U.S. possessions from qualified energy resources at a qualified facility to an unrelated person.

  2. For Tax Year 2006 through 2013, the credit, which is figured in Part II of Form 8835, can be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See IRM 21.7.4.4.8.3.8, Form 8835, Renewable Electricity and Refined Coal Production Credit, and Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit, for detailed information.

21.6.3.4.1.17  (02-20-2013)
Form 8845, Indian Employment Credit

  1. To qualify for the credit, taxpayer must be an employer who pays wages and health insurance costs for American Indians who are qualified employees.

  2. For Tax Year 2006 through 2013, the credit can be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8845, Indian Employment Credit, for detailed information.

21.6.3.4.1.18  (10-01-2011)
Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips

  1. To qualify for the credit, the taxpayer must be an employer and have:

    1. Paid or incurred employer social security and Medicare taxes during the taxable year on tips.

    2. Employees who received tips from customers for providing, delivering, or serving food or beverages for consumption where tipping is customary.

  2. For Tax Year 2006 and subsequent, the credit can be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, for detailed information.

21.6.3.4.1.19  (10-01-2009)
Form 8820, Orphan Drug Credit

  1. The credit is 50 percent of the qualified clinical testing expenses paid or incurred by the taxpayer during the taxable year.

  2. For Tax Year 2006 and subsequent, the credit must be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8820, Orphan Drug Credit, for detailed information.

21.6.3.4.1.20  (10-01-2009)
Form 8847, Credit for Contributions to Selected Community Development Corporations

  1. To qualify for the credit, the taxpayer must have made qualified contributions to selected community development corporations.

  2. For Tax Year 2006 and subsequent, the credit must be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8847, Credit for Contributions to Selected Community Development Corporations, for detailed information.

21.6.3.4.1.21  (10-01-2009)
Trans-Alaska Pipeline Liability Fund Credit

  1. To qualify for the credit, the taxpayer must have made payments into the Trans-Alaska Pipeline Liability Fund.

  2. There is no supporting schedule or form for this credit. Taxpayer must claim credit on Form 3800, General Business Credit.

  3. See IRM 21.7.4.4.8.3.16, Trans-Alaska Pipeline Liability Fund Credit, for more details.

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

21.6.3.4.1.22  (02-20-2013)
Form 8844, Empowerment Zone Employment Credit

  1. To qualify for the credit, the taxpayer must have paid or incurred qualified wages, which can include certain training or educational expenses, to a qualified empowerment zone employee who lives and works in an empowerment zone.

  2. The Empowerment Zone credit was extended through tax year 2013, however, the Renewal Community Employment credit expired after tax year 2009.

  3. Form 8844, Empowerment Zone Employment Credit, must be submitted. The data on Form 8844 (for IMF) is carried to Form 3800.

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  5. See Form 8844, Empowerment Zone Employment Credit, for detailed information.

21.6.3.4.1.23  (10-01-2013)
Form 8861, Welfare-to-Work Credit

  1. To qualify for the credit, the taxpayer must have paid or incurred wages to an employee who:

    • Is certified as a long-term family assistance recipient, and

    • Began work after December 31, 1997, and before January 1, 2008.

  2. For Tax Year 2006 and prior, the credit can be claimed as a general business credit on Form 3800, General Business Credit, only from partnerships, S-Corporations or Estates and Trusts.

    Note:

    For tax year 2007 and subsequent, taxpayers should use Form 5884, Work Opportunity Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8861, Welfare-to-Work Credit, and its instructions for detailed information.

21.6.3.4.1.24  (03-15-2013)
Form 3800, General Business Credit

  1. If more than one of the credits listed on Form 3800, General Business Credit, are claimed, the total credit must be summarized on Form 3800 and if applicable, the appropriate credit form must be attached.

    Note:

    See the specific credit form for filing requirements.

  2. If attached, Form 8582–CR, Passive Activity Credit Limitations, must be math verified.

    Note:

    See Form 8582–CR and its Instructions for detailed information.

  3. Credits may only be carried back one year and then carried forward twenty years as a result of the Restructuring and Reform Act of 1998 (IRS RRA 98).

  4. Form 3800, General Business Credit, must be math verified.

  5. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

    Note:

    Some credits captured on Form 3800 require specific item reference numbers. See the appropriate IRM section before adjusting the account.

  6. See Form 3800, General Business Credit, and its instructions for detailed information.

21.6.3.4.1.25  (10-01-2014)
Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts

  1. To qualify for the credit, the taxpayer must have:

    1. An alternative minimum tax liability and adjustments or preferences (other than exclusion items) in the prior tax year, or

    2. A minimum tax credit carryforward from the prior year to the current tax year, or

    3. A qualified electric vehicle credit (or a non-conventional source fuel credit for Tax Year 2005 and prior only) disallowed for the prior tax year because use of the credit was limited by taxpayer's tentative minimum tax.

  2. Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts, may be attached but is not required in most cases.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. For tax years 2012 and prior, if a taxpayer has any unused minimum tax credit carryforward from 2004 or earlier years, he/she may qualify for a refund of that credit amount. See IRM 21.6.3.4.2.10, Refundable Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts, Form 8801, for information on the refundable portion of this credit.

  5. See Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts, for detailed information.

21.6.3.4.1.26  (10-01-2013)
Child Tax Credit

  1. Beginning with the 1998 tax year, a credit is allowed for each qualifying child under age 17. The credit amounts are as follows:

    If the tax year is ... Then the credit is ...
    2003 or later $1,000 per child
    2001-2002 $600 per child
    2000 $500 per child
  2. A portion of the child tax credit may be refundable. See IRM 21.6.3.4.2.8, Additional Child Tax Credit, for additional information.

  3. The Child Tax Credit is phased out by $50 for each $1,000 that the AGI exceeds:

    • $110,000 for married filing jointly

    • $55,000 for married filing separately

    • $75,000 for single, head of household, and qualifying widow(er)

  4. For tax year 2012 and subsequent, taxpayers will use Schedule 8812, if required, to claim the refundable Child Tax Credit, and for dependents with an ITIN, the non-refundable credit. For tax year 2011 and prior, Form 8812 is used to claim the Additional Child Tax Credit. From this point forward, it will be referred to as Schedule 8812.

21.6.3.4.1.26.1  (06-06-2013)
Child Tax Credit Qualifications

  1. See Publication 972, Child Tax Credit, for qualification information.

    Note:

    For tax year 2009 and subsequent, a taxpayer must claim the qualifying child as a dependent to be a qualifying child for the Child Tax Credit.


    Reminder:

    Taxpayers may claim the dependency exemption, child tax credit, EITC, and Child and Dependent Care credit for the same qualifying child.

  2. Beginning with tax year 2012, tax returns claiming the child tax credit for dependents with an ITIN must attach Schedule 8812 stating the child met the substantial presence test. See Pub 519, U.S. Tax Guide for Aliens, for information regarding the substantial presence test. Use the date of entry in the Real-Time System (RTS) (for the ITIN dependent) to determine substantial presence. If the date of entry is blank, use the information provided on Schedule 8812. Correspond if the Schedule 8812 is incomplete.

21.6.3.4.1.26.2  (02-20-2013)
Adjusting the Account

  1. When claiming the child tax credit, the name(s) and TIN(s) of the child(ren) must be shown on the amended return. If the name or TIN of the child is omitted, the IRS can recompute the tax liability and deny the credit under math error procedures.

    Note:

    For taxpayers indicating a religious (e.g., Amish/Mennonite) or conscience-based objection to obtaining a TIN, refer to IRM 21.6.1.5.1, Determining the Exemption Deduction.

  2. The taxpayer must furnish a valid TIN for each qualifying child. This number may be:

    1. An SSN issued by the Social Security Administration.

    2. An ITIN issued by the IRS if the individual is not eligible for an SSN.

    3. An ATIN issued by the IRS for a child while an adoption is pending.

    Note:

    See IRM 3.13.5.81, Individual Taxpayer Identification Numbers (ITINs), and IRM 3.13.5.82, Adoption Taxpayer Identification Numbers (ATINs), for information regarding ITIN/ATIN issues. Also see IRM 21.6.3.4, Credits Procedures, for information regarding valid/correct TIN information.

  3. The Child Tax Credit contains an age criterion that must be met for credit allowance. The qualifying child must have been under the age of 17 at end of the calendar year. Command Code (CC) INOLES, or in the case of an ITIN, the Real Time System (RTS) can be used to verify date of birth. See IRM 3.21.263, IRS Individual Taxpayer Identification Number (ITIN) Real Time System (RTS).

  4. Verify each qualifying child's TIN is valid and the age requirement is met, then compute the child tax credit using the worksheet located on Account Management Services (AMS) or in the Form 1040 instruction booklet.

    Note:

    Publication 972, Child Tax Credit, must be used to figure the credit if any of the following are present:

    • Form 8839, Qualified Adoption Expenses

    • Form 8396, Mortgage Interest Credit

    • Form 8859, District of Columbia First-Time Homebuyer Credit

    • Taxpayer is excluding income from Puerto Rico

    • Form 2555, Foreign Earned Income, or Form 2555-EZ , Foreign Earned Income Exclusion

    • Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa

    • AGI is greater than $110,000 for Married Filing Jointly

    • AGI is greater than $75,000 for single, Head of Household or Qualifying Widower

    • AGI is greater than $55,000 for Married Filing Separate

      Note:

      Do not use the RTS system to determine residency requirements for this credit.

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡

  6. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  7. If the taxpayer was allowed the credit during processing, but is not entitled to all or a portion of the credit:

    1. Follow the procedures in IRM 21.5.4.4.1, Setting the Initial Math Error Action.

    2. Explain to the taxpayer the adjustment was made and he will receive a notice explaining the adjustment and his appeal rights.

21.6.3.4.1.27  (10-01-2014)
Form 8839, Qualified Adoption Expenses, for Tax Years Prior to 2010 and after 2011

  1. A taxpayer who paid qualified expenses to adopt an eligible child and the adoption became final during the tax year may be able to reduce their tax liability by claiming the Adoption Credit on Form 8839, Qualified Adoption Expenses. This is a non- refundable credit for tax years prior to 2010 and after 2011.

    Note:

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

    Note:

    The Adoption Credit is entered on Form 1040, line 53, or Form 1040NR, line 50. Taxpayers are instructed to check box c on that line and enter “8839” in the space next to box c.

  2. Taxpayers are also entitled to claim a credit for qualified adoption expenses paid during the tax year immediately preceding the year the credit is being taken, 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.

  3. If the taxpayer is unable to provide complete information in Part I, Form 8839, Qualified Adoption Expenses, because they were unsuccessful or the adoption was not final by the end of the tax year, they are instructed to complete what information they can on line 1 and to enter "See Attached Statement" in the columns for which they do not have information. They are instructed to enter the name and address of any agency or agent (such as an attorney) that assisted in the attempted adoption on the attached statement. If the statement is not attached, or the information provided is incomplete, follow instructions in IRM 21.5.3.4, General Claims Procedures.

  4. The eligible child must be:

    1. Any child under age 18. If the child turned 18 during the year, the child is eligible 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.

  5. All non-refundable adoption credit claims will be worked at the Andover Campus. Control to category SPC1. Reassign through CIS to IDRS number 0830141335.

  6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

  8. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.


    Caution:

    If the taxpayer's claim references the Child Tax Credit, see paragraph 2 of IRM 21.6.3.4.1, Non-Refundable Credits Procedures.

  9. Taxpayers may file amended returns for earlier periods to release carryforward of the adoption credit.

    Note:

    If the Service has the necessary information to establish a taxpayer was entitled to the credit in a prior year, an amended return is not required for the earlier period.

    1. Prior year claims, including carryforwards, do not require adoption documentation.

    2. Do not reject prior year claims with carryforwards because the adoption documentation is missing.

    Note:

    Although married taxpayers generally have to file a joint return in order to qualify for the credit, a carryforward may be claimed with a Married Filing Separate filing status.

  10. When working an adoption credit carryforward case, determine if all tax periods are controlled to the earliest tax period first and worked by one employee. Work the case as follows:

    1. Review the earliest tax period claim first.

    2. Verify carryforward amount. If the claim is not a statute period, apply the adoption credit amount listed on Form 8839 to the taxpayer's tax liability. Statute year periods are addressed in paragraph 12.

    3. Adoption Credit may change the priority order of other Non-Refundable Credits, such as the Child Tax Credit. See IRM 21.6.3.4.1, Non-Refundable Credits Procedures .

    4. Take any remaining balance of the carryforward to the next period and repeat the steps above.

    Example:


    - A taxpayer files a claim for 2008 for a carryforward release of $10,650 in expenses.
    - The taxpayer had a tax before credits liability of $8,850 and received the child tax credit of $2,000.
    - The 2008 module shows a TC 150 of $6,850.
    - This leaves $1,800 available to be carryforwarded to the next year.
    - Process the 2008 Form 1040X with a TC 291 for $6,850.
    - Send a 288c letter informing the taxpayer you have recorded the carryforward amount of $1,800.

    - The same taxpayer also has a Form 1040X for 2009 claiming $10,000 in adoption expenses carryforward.
    - However, we have math verified the correct carryforward amount remaining is $1,800.
    - The taxpayer is expecting a refund of $10,000.
    - Since the refund amount will only be $1,800, you will need to follow IRM 21.5.4.4.1, Setting the Initial Math Error Action.
    - Block the adjustment in 77 / 78 and send a Letter 474C explaining the error to the taxpayer and that they will only be receiving $1,800.

  11. If a statute period claim comes in showing no change in tax liability or refundable credits and only a carryforward:

    1. Input a TC 290 .00 with a BS 05 and RC 36.

    2. Send a Letter 288C2 with the following fill-in language:
      "Thank you for your Form 8839. We have recorded your carryforward amount of $$$$."

  12. If a statute period claim comes in requesting a change in tax liability or refundable credits, follow procedures in IRM 25.6.1, Statute of Limitations Processes and Procedures.

  13. If the statute period claims are returned to Accounts Management, process as follows:

    1. Input a TC 290 .00 with a BS 98 / 99 to disallow the change in tax liability or refundable credits due to the expired refund statute.

    2. Send a Letter 106C to explain the disallowance of the tax refund, but explain you have recorded the carryforward amount of $$$$.

21.6.3.4.1.28  (10-01-2013)
Form 8396, Mortgage Interest Credit

  1. To qualify for the credit, a taxpayer must have a mortgage credit certificate (MCC) issued under a qualified MCC program in connection with the taxpayer's principal residence.

  2. Form 8396 must be submitted and math verified.

  3. If the amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ , route to CAT-A.

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  5. See Form 8396, Mortgage Interest Credit, Publication 17, Your Federal Income Tax (For Individuals), or Publication 530, Tax Information for Homeowners, for detailed information.

21.6.3.4.1.29  (11-07-2012)
Form 8859, District of Columbia First-Time Homebuyer Credit

  1. A taxpayer who bought a home in the District of Columbia may be able to reduce his/her tax by claiming the District of Columbia First-Time Homebuyer Credit on his/her federal income tax return.

    Note:

    See Form 8859, District of Columbia First-Time Homebuyer Credit, and its instructions for detailed qualification information.

    Caution:

    Eligible taxpayers are not allowed to claim both the District of Columbia First-Time Homebuyer Credit on Form 8859 and the First-Time Homebuyer Credit on Form 5405. If both credits are claimed and the purchase date of the home is in 2008, the taxpayer is allowed the District of Columbia First-Time Homebuyer Credit. If the purchase date of the home is in 2009 or 2010, the taxpayer is allowed the First-Time Homebuyer Credit. See IRM 21.6.3.4.2.11, First-Time Homebuyer Credit, for more information.

  2. The District of Columbia First-Time Homebuyer Credit is available for property purchased on or before Dec. 31, 2011.

  3. Any unused portion of the credit can be used to claim a carryforward on Form 8859, Carryforward of the District of Columbia First-Time Homebuyer Credit.

  4. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  5. See Form 8859, District of Columbia First-Time Homebuyer Credit, or Publication 17, Your Federal Income Tax (For Individuals), for detailed information.

21.6.3.4.1.30  (10-01-2013)
Form 5695, Residential Energy Credits

  1. The Energy Policy Act of 2005 provides for a Nonbusiness Energy Property Credit and a Residential Energy Efficient Property Credit to qualified taxpayers who made energy efficient purchases. Since the enactment, subsequent legislation has amended and extended these credits.

  2. Form 5695, Residential Energy Credits, is divided into two parts:

    1. Residential Energy Efficient Property Credit - provides taxpayers a credit for adding qualified solar electric property, solar water heating equipment, small wind energy property, geothermal heat pump property, or a fuel cell property to his/her existing and newly constructed homes in the United States. Generally, there is no limitation on this portion of the credit, however, fuel cell property is limited to $500 for each half kilowatt of capacity of the qualified fuel cell property. This credit does not apply to any property placed in service after Dec. 31, 2016.

    2. Nonbusiness Energy Property Credit - provides taxpayers a credit for improving the energy efficiency of an existing home. The credit is available for costs related to items such as high efficiency heating and cooling systems, water heaters, windows, doors and insulation. For tax year 2011 and subsequent, the credit is limited to $500 and reduced by any amounts received in prior years. This credit does not apply to any property placed in service after Dec. 31, 2013.

    Note:

    For tax year 2014 and subsequent, Form 5695 will only contain the Residential Energy Efficient Property Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 5695, Residential Energy Credits, for detailed information. Additional information can be found in Notice 2013-70.

21.6.3.4.1.31  (10-01-2014)
Form 8880, Credit for Qualified Retirement Savings Contributions

  1. A taxpayer may be able to take a credit of up to $1,000 ($2,000 if married filing jointly) for making eligible contributions to one of the items below. Taxpayers claim this credit on Form 8880, Credit for Qualified Retirement Savings Contributions.

    1. Contributions (other than rollover contributions) to a traditional or Roth IRA

    2. Elective deferrals to a 401(k), 403(b), governmental 457, SEP, or SIMPLE plan

    3. Voluntary employee contributions to a qualified retirement plan as defined in section 4974(c) (including the federal Thrift Savings Plan)

    4. Contributions to a 501(c)(18)(D) plan

  2. An eligible individual must:

    • Be 18 or older at the end of the tax year

    • Not be claimed as a dependent on someone else's tax return

    • Not be a full-time student

      Note:

      For this purpose, an individual is a student if during any part of 5 calendar months during the tax year he or she was enrolled as a full time student or took a full time on-farm training course given by a school or a state, county or local government agency.

    • Have adjusted gross income of less than:

      Filing Status 2014 2013 2012 2011
      Single or Married Filing Separately $30,000 $29,500 $28,750 $28,250
      Head of Household $45,000 $44,250 $43,125 $42,375
      Married Filing Jointly $60,000 $59,000 $57,500 $56,500
  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8880, Credit for Qualified Retirement Savings Contributions, or Publication 17, Your Federal Income Tax (For Individuals), for detailed information.

21.6.3.4.1.32  (10-01-2011)
Form 8881, Credit for Small Employer Pension Plan Startup Costs

  1. For information concerning the Credit for Small Employer Pension Plan Startup Costs, see IRM 21.7.4.4.8.3.19, Form 8881, Credit for Small Employer Pension Plan Startup Costs.

21.6.3.4.1.33  (10-01-2011)
Form 8882, Credit for Employer Provided Childcare Facilities and Services

  1. For information concerning the Credit for Employer-Provided Childcare Facilities and Services, see IRM 21.7.4.4.8.3.18, Form 8882, Credit for Employer-Provided Childcare Facilities and Services.

21.6.3.4.1.34  (10-01-2011)
Form 8874, New Markets Credit

  1. For information concerning the New Markets Credit, see IRM 21.7.4.4.8.3.20, Form 8874, New Markets Credit.

21.6.3.4.1.35  (10-01-2013)
Form 8864, Biodiesel and Renewable Diesel Fuels Credit

  1. Form 8864, Biodiesel and Renewable Diesel Fuels Credit, is used to claim a credit for the tax year in which the sale or use occurs. The credit consists of:

    • Biodiesel Credit

    • Renewable Diesel Credit

    • Biodiesel Mixture Credit

    • Renewable Diesel Mixture Credit, and

    • Small Agri-Biodiesel Producer Credit

  2. For Tax Year 2006 through 2013, the credit can be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8864, Biodiesel and Renewable Diesel Fuels Credit, for detailed information.

21.6.3.4.1.36  (10-01-2013)
Form 8896, Low Sulfur Diesel Fuel Production Credit

  1. Form 8896, Low Sulfur Diesel Fuel Production Credit, generally is 5 cents for every gallon of low sulfur diesel fuel produced at a particular facility by a qualified small business refiner during the taxable year.

    Note:

    Although the qualified costs cannot be incurred after Dec. 31, 2009, the credit can be claimed until the total credits equal the qualified costs.

  2. For Tax Year 2006 and subsequent, the credit can be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8896, Low Sulfur Diesel Fuel Production Credit, for detailed information.

21.6.3.4.1.37  (02-20-2013)
Form 8900, Qualified Railroad Track Maintenance Credit

  1. Form 8900, Qualified Railroad Track Maintenance Credit, generally is 50 percent of the qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer during the taxable year.

  2. For Tax Year 2006 through 2013, the credit must be claimed as a general business credit on Form 3800, General Business Credit.

  3. When adjusting the tax account:

    1. Use TC 291 with a money amount to allow/increase the credit.

    2. Use TC 290 with a money amount to decrease the credit.

    3. Use RC 036 and the appropriate SC and blocking series.

  4. See Form 8900, Qualified Railroad Track Maintenance Credit, for detailed information.


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