3.14.1  IMF Notice Review (Cont. 2)

3.14.1.6 
Primary Notice Review Procedures

3.14.1.6.9 
Special Notice Review Issues

3.14.1.6.9.6  (01-01-2015)
Slipped Blocks and Mixed Data Blocks

  1. Slipped blocks and mixed data blocks occur when data from a document or payment posts to a module related to a different document or payment in the same block of DLNs. The erroneous data on the notice module usually belongs to the taxpayer whose document or payment is immediately before or after the notice document or payment in the DLN block sequence.

    1. Research the five accounts posted immediately prior to and the five accounts immediately subsequent to the notice document.

  2. Slipped Blocks have the following characteristics:

    1. A block (or part of a block) of documents or payments posted to the Master File incorrectly.

    2. The incorrect transactions have DLNs from other documents or payments in the same block.

    3. The DLN is usually from the document or payment immediately before or after the notice document or payment in the block sequence.

    4. A slipped block may result in erroneous refunds, incorrect notices, and/or lost or missing documents, returns, or payments.

      Note:

      Per Chief Counsel: If money is found in the wrong account(s) due to a Slipped Block and the money has refunded, Erroneous Refund Procedures (CAT- D) must be used to recover the money even if the money is not in your original assigned case.

  3. Mixed Data Blocks have the following characteristics:

    1. A block (or part of a block) of documents or payments posted to the Master File incorrectly.

    2. The data is incorrect due to a transcription error.

    3. A mixed-data block may result in erroneous refunds and/or incorrect notices.

  4. Suspect a slipped block or a mixed data block if any of the following conditions are present:

    1. The data on the notice module does not match the data on the document.

    2. A posted payment amount does not match the amount listed on the payment voucher.

    3. A payment is missing or is misapplied.

  5. Research the five accounts posted immediately prior to and the five accounts immediately subsequent to the notice document.

    1. If the situation involves... Then...
      Two or less taxpayers Resolve the case in Notice Review. See IRM 3.14.1.7, Case Resolution
      Three or more taxpayers
      1. Resolve your account on IDRS if possible. See (6) below

      2. Recharge any live documents to Payment Tracer

      3. Complete Form 3465, Adjustment Request, and indicate in the remarks section what action was taken to resolve your account

      4. Print all incorrect vouchers and include them in the package

      5. Route entire package to Payment Tracer and complete the following:

      1. Input CC STAUPS for eight cycles on any balance due account

      2. Enter all appropriate history items

  6. To resolve your account:

    1. Prevent the refund from generating (when present and if possible per IRM 3.14.1.7.1.1) if it is needed to resolve the credit discrepancy.

      Note:

      If the refund cannot be prevented from generating and is needed to resolve the credit discrepancy, work any math error adjustment and the credit discrepancy as a Category D erroneous refund. See IRM 3.14.1.6.7.3, Category D ERRF Resolution.

    2. Transfer all payments not belonging to your taxpayer to the appropriate account(s). Input a TC 570 on the credit side if needed.

    3. If any payments belonging to your taxpayer are found, transfer them into your taxpayer's account.

    4. Reverse any current cycle offsets if needed.

      Note:

      Use a TC 570 on the credit side of the offset reversal.

    5. Work any math error.

    6. Determine the notice disposition.

      Note:

      Make every effort to resolve these situations in cycle.

3.14.1.6.9.7  (01-01-2015)
Community Property Split

  1. A Community Property Split is when divorced or separated taxpayers divide their joint property. If information on the tax return, such as income, withholding, ES credits, etc., differs from the Form W-2 and tax module information, suspect a community property split.

    1. Determine if an attachment to the return indicates allocation of income and credits between the two taxpayers. If necessary, adjust to taxpayer intent.

    2. Request all relevant documents.

      Caution:

      Review for a possible erroneous refund issued from the spouse’s tax module.

3.14.1.6.9.8  (01-01-2015)
Injured Spouse Claim

  1. If the front of a tax return has "Injured Spouse" written on it (with or without Form 8379, Injured Spouse Allocation, attached), the document Blocking Series should be 920–929.

  2. Review the notice.

  3. If the return is an Injured Spouse Claim and the blocking series is 920–929 take the following actions:

    If... And... Then...
    No adjustment is required There is no TC 840 on the tax module
    1. Mark the notice disposition

    2. Route the return to Accounts Management. See (5) below

    TC 840 is present on the module Mark the notice disposition
    An adjustment must be made to the account  
    1. Mark the notice disposition

    2. Use CC REQ54 to input the adjustment using Blocking Series 05 with a Hold Code "4"

    3. Route return to Accounts Management. See (5) below

  4. If the return is an Injured Spouse Claim and the blocking series is not 920–929, take the following actions:

    If... And... Then...
    No adjustment is required There is no TC 840 on the tax module
    1. Mark the notice disposition

    2. Route return to Accounts Management. See (5) below

    TC 840 is present on the module Mark the notice disposition
    An adjustment must be made to the account Adjustment is a net increase
    1. Prevent any refund from generating if possible per 3.14.1.7.1.1. See first note below

    2. Input adjustment using CC REQ54 using Blocking Series 05 with Hold Code "4" . See second note below

    3. Use CC REQ77 to input a TC 470 with no Closing Code

    4. Mark the notice disposition

    5. Route return to Accounts Management. See (5) below

    Note:

    Use the Accounts Management control number on line 3 of the CC NOREFP format instead of "*"

    Note:

    If the prevented refund will not satisfy the debit created by the adjustment, check for offsets. If offsets of any type are present, See IRM 3.14.1.6.4.2 , Lump Sum Credit Offsets — TC 826/706, TC 820/700 and IRM 3.14.1.6.4.3 , Treasury Offset Program (TOP) Offsets — TC 898/899, for reversal instructions. See IRM 21.4.6.4 , Customer Accounts Services - Refund Offset Research if there are multiple TC 898 or TC 826

    Adjustment is a net decrease
    1. Input adjustment using Blocking Series 05 with Hold Code "4"

    2. Use CC REQ77 to input a TC 570

    3. Mark the notice disposition

    4. Route return to Accounts Management. See (5) below

  5. When routing an injured spouse claim to Accounts Management take the following steps:

    1. Use CC ESTABDT to recharge the return to Accounts Management.

    2. Prepare Form 3465 and/or Form 12305.

    3. Indicate "–K freeze" , "29X mandatory" and "Injured Spouse Claim" on the Form 3465 or Form 12305.

    4. Route the case to Accounts Management in the current cycle.

3.14.1.6.9.9  (01-01-2015)
Natural Disaster Procedures

  1. Accounts impacted by a designated disaster should have a "–O" freeze present. A TC 971 AC086 appearing on the taxpayer's CC ENMOD screen indicates disaster processing is in place. A list of regions (such as counties, parishes or other political subdivisions) impacted by a designated disaster is compiled and provided by the Federal Emergency Management Agency (FEMA). The IRS then identifies the corresponding ZIP codes for disaster processing purposes.

  2. For processing years after 12/31/2006, a "–S" freeze may be present on the account. A TC 971 AC688 would appear on CC ENMOD to indicate disaster processing.

  3. The Local Control File (input on designated ZIP codes) can be used to select notices for the area(s) designated on the Disaster Relief Memorandum, if penalty adjustments are required.

  4. If the "–O" (or "–S" if processed after 12/31/2006) freeze is not present on an account with an address that is either in the FEMA Zip Code list, or is outside the FEMA Zip Code list and the taxpayer has "self-identified" as being impacted by the disaster, take the following action:

    1. Access CC ENMOD for the taxpayer.

    2. While in the CC ENMOD screen, execute CC REQ77.

    3. Input TC 971 as the transaction code, using the disaster end date in the "TRANS-DT>" field. Input Action Code 086 (or 688 if processed after 12/31/2006) in the "TC 971-CD>" field.

      Example:

      For Hurricane Katrina, use a "TRANS-DT>" of 08292005, and an "EXTENSION-DT>" of 02282006 for all states except Florida. For Florida, use a "TRANS-DT>" of 08242005.

    4. In the "FEMA-NUM>" field, enter the 4-digit code of the disaster identified on the return, as shown in the FEMA lists. The lists can be found on the Technical Reference Information System (TRIS) web site at http://www.icce.irs.gov/fema/ .

    5. If there are multiple FEMA codes for the same disaster (as in the case of Hurricane Katrina), and the taxpayer identifies a particular state or region, use the FEMA code for that state or region. If it cannot be determined which FEMA code should be used, enter whichever FEMA code for that disaster will provide the longest period of extension relief/penalty suspension for the taxpayer.

    6. On the Remarks line of the FRM77 response screen, enter "Disaster relief per self-identification" or "Disaster relief per FEMA Zip Code" as appropriate.

    7. Label the notice using Custom Label 98, since a label has not yet been added to OLNR programming, with the following language:
      "We are giving your return penalty relief consideration, because your return indicates that you were affected by certain disasters. If any penalties or interest on your account will be reduced by this consideration, you will receive another notice in 2–3 weeks."

      Exception:

      Do NOT apply this Label, if after inputting TC 971 AC086 or AC688, no penalties or interest will abate. The TC 971 itself, however, should still be input as described above.

      Note:

      Master File has special processing in place that will allow an adjustment notice to generate for recomputations of interest (TC 196) and Failure to Pay Penalty (TC 276) when a TC 971 AC086 or AC688 is input. This is an exception to normal adjustment notice generation.

  5. If the taxpayer notates on the front of the return the designated disaster phrase, and the return has not been edited with the appropriate Computer Condition Codes (CCC), input the TC 971 and label the notice as described in Item (4) above.

    Note:

    After 12/31/2006, Code and Edit will disregard all disaster notations on the return. All disaster relief will be done systemically. If the affected taxpayer is located outside the disaster area, they will be instructed to call the disaster hotline to "self-identify" for disaster relief.

  6. If correspondence, either attached to the return or subsequently received from the taxpayer, requests relief from any penalty due to disaster damage or disruption, take the following actions:

    1. Determine whether the taxpayer qualifies for relief based on disaster criteria as noted in item (1) above. If the taxpayer qualifies, input the TC 971 as described in Item (4) above.

    2. If the taxpayer does not qualify for relief based on disaster criteria, but may qualify based on "Reasonable Cause" , route the case to Accounts Management Function.

      Exception:

      If Code and Edit denies Reasonable Cause, take no action.

  7. If the estimated tax penalty has been imposed, determine if the taxpayer was required to make an estimated tax payment during the disaster period and if so, whether the payment was received by the date required by the Disaster Relief Memorandum. If the payment was received within this period, input the TC 971 as described in Item (4) above, which will systemically abate the portion of the estimated tax penalty assessed for the underpayment.

  8. If the payment was not received within the allowable period, but it concerns the estimated tax payment obligation of an individual, estate or trust (not a corporation's obligation), then evaluate the taxpayer's statement to determine if it meets IRC 6654(e)(3)(A) relating to waivers due to casualty, disaster, or other unusual circumstances. See IRM 20.1, Penalty Handbook.

  9. All affected notices, which receive this TC 971 AC086 or AC688 resolution should be labeled as described in Item (4) above, to inform the taxpayer that their return is being given disaster relief consideration.

  10. For additional information on disasters, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma.

3.14.1.6.9.9.1  (01-01-2015)
Katrina Emergency Tax Relief Act of 2005 (KETRA)

  1. The Katrina Emergency Tax Relief Act of 2005 contained legislation providing victims of Hurricane Katrina with certain tax benefits and penalty relief. This is not uncommon with IRS disaster processing.

  2. One unique aspect of this legislation, is that taxpayers who provided housing free of charge to individuals displaced by Hurricane Katrina for periods of at least 60 consecutive days, can claim an additional exemption amount of $500 per displaced individual. The total additional exemption amount for tax years 2005 and 2006 cannot exceed $2,000 ($1,000 if Married Filing Separately).

  3. This is an unprecedented concept, since this legislation provides tax relief not only to those who were displaced by the hurricane, but to the taxpayers that sheltered and supported them.

  4. The 2005 and 2006 version of Form 8914, Exemption Amount for Taxpayers Housing Individuals Displaced by Hurricane Katrina, was designed to facilitate this extra exemption amount, by becoming, in essence, an exemption worksheet to be attached to the return. As with any tax form, errors can be expected in its preparation and submission, for which Taxpayer Notice Codes (TPNCs) 536 and 538 were created.

  5. TPNC 539, which is unrelated to the Form 8914, was also created due to the legislation.

  6. Review and resolve cases involving these TPNCs as instructed in the IRM subsection, Keys 536 – 539, Math Errors related to IRM 3.14.1.6.17.14, Hurricane Katrina Legislation.

3.14.1.6.9.10  (01-01-2015)
Combat Zone or -C Freeze Returns

  1. Special handling may be required for those accounts where the taxpayer has served in a combat zone or contingency operation. The location or operation name should be noted at the top of the tax return (e.g., Operation Iraqi Freedom, Enduring Freedom, etc.).

  2. Combat Zone (CZ) accounts, identified by a –C freeze, indicate a taxpayer who is or was serving in a designated combat zone area. When working an account that contains a –C freeze, additional research is required to determine the taxpayer's CZ status. Research CC IMFOLE for the Combat indicator on Line 11. If Combat indicator is "1", then the taxpayer is still serving in a combat zone. Any compliance activity such as assessing or collecting tax is prohibited. However, if the taxpayer has other issues or requests information, you may work these other issues and contact the taxpayer if needed. If Combat indicator is "2", then the taxpayer is no longer a combat zone participant. Follow normal IRM procedures to work the case.

    Note:

    NOTE: The –C freeze stays on the account even after the taxpayer is no longer in the CZ.

  3. During processing, Computer Condition Codes (CCC) and Return Processing Codes (RPC) are assigned. These identify the type of tax relief to which the taxpayer is entitled. For CCC and RPC descriptions, refer to Document 6209, IRS Processing Codes and Information.

  4. If the appropriate relief is not provided during processing, correct the taxpayer's account to provide the relief to which the taxpayer is entitled. For example, you may be required to input:

    • TC 460

    • TC 500

      Note:

      Per Document 6209, IRS Processing Codes and Information, TC 340 will generate with the input of a TC 500.

    • TC 270

  5. For additional information on Combat Zone and other Military Returns, see IRM 3.11.3.7.1.11 Combat Zone Returns , IRM 3.12.3.3.11 and IRM 5.19.10.6.3, Combat Zone Freeze Code in evaluating –C Freeze accounts.

3.14.1.6.9.11  (01-01-2015)
Large Dollar Review

  1. Upon identification, all Balance Due Notices of $100,000 or more must be reviewed for accuracy.

    1. An in-depth review of the entire account should be performed. Problems with other modules or TINs not directly related to the notice often surface at this time and should be expeditiously resolved to prevent future taxpayer and/or Accounts Receivable impact.

    2. If a questionable situation is identified, but you cannot positively determine how the account should be adjusted, telephone the taxpayer for additional information. If the taxpayer verifies the information, print the notice. If the taxpayer indicates that an error was made, request the corrected information. If unable to contact the taxpayer before the mailing deadline, print the notice.

      Note:

      To prevent unauthorized disclosures of tax information when initiating telephone contacts, ensure that you are speaking with the taxpayer or someone authorized by the taxpayer.

    3. Payments intended for Form 1040 may have been misapplied to tax modules for BMF Form 706 or Form 709. Refer to the IRM 3.14.1.6.17.4 Key 008 – Balance Due Notices of $100,000 or More.

3.14.1.6.10  (01-01-2015)
Reviewing Undeliverable Notices

  1. Notices that cannot be delivered to taxpayers are generally returned to the Submission Processing Campus. They are routed to Files, where a preliminary search for a more current address is conducted. If a better address is found, Files attaches a 3x5 note with that address. These, and notices for which no better address is found, are then routed to Notice Review for resolution. Undeliverables must be reviewed for a more current address, as well as for any payment, penalty and interest changes. Use CC ACTON to input a history item if CC TXMOD is present on IDRS. Do not create a dummy module to input a history item.

3.14.1.6.10.1  (01-01-2015)
Researching Undeliverables

  1. Research Undeliverables using CC ENMOD, CC NAMES, CC NAMEI, CC IMFOLE, CC IRPTR, CC TPIIP, and RTR (submitted checks often contain a more current address). Check ENMOD or IMFOLE for recently-posted or pending address changes (some are made by the National Change of Address (NCOA) Program and are indicated by the presence of TC014 and the unique DLN of xx26399599999Y, with “xx” representing the IRSC of each campus. Update the notice using the more current address or the pending change-of-address.

    Note:

    Any change created by National Change of Address (NCOA) will update the taxpayer's entity information.

    Note:

    CC TPIIP researches for taxpayer account information using components/fields other than the full SSN.

  2. If a yellow USPS forwarding label is attached, verify the address on the label using CC ENMOD and CC NAMES. Use the address on the yellow label to update the notice if it differs from the notice address, and nothing more current was found.

  3. If neither of the above are good choices, consider using the address on the attached 3x5 card from Files.

    Caution:

    This information is often outdated, especially on prior year returns. Do not use an address from a previous year unless it is clear that any difference (for example, “1224 Main Street” vs. “124 Main Street”) may resolve the problem.

  4. If a better address is found and the notice is updated, do not change the taxpayer's entity information on CC ENMOD based on information provided by the Files Function 3X5 card or any of your research.

  5. Perfect any new address by entering into USPS.COM - Zip Code Finder. http://zip4.usps.com/zip4/welcome.jsp

3.14.1.6.10.2  (01-01-2015)
Resolving Undeliverables

  1. If no better address is found:

    1. E-filed notices: void (“X” through) the notice.

    2. Paper returns: attach Form 9856, Attachment Alert, to send the notice (along with envelope and any stuffers) back to Files to be associated with the return.

    3. Balance Due notices: Input STAUPS 51, with no cycle entry, to suspend Collection procedures and notices (series 500 on CC TXMOD).

    Note:

    CC STAUPS cannot be input if the account status (see SC STATUS on TXMOD) is 22, 24, 26, 60, 64, 71, or 72. CC STAUPS cannot be input 12-24 hours after using CC RECON.

  2. If a better address is found:

    1. Update the address on the notice. Do not change the address on CC ENMOD.

    2. Include Form 8822, Change of Address, with the notice. Completion of this form by the taxpayer authorizes an address change.

    3. Mark or insert the appropriate label, following IRM 3.14.1.7.8.5, Labeling Notices .

    4. For balance due notices:

      • Assume any Collection notice (series 500) issued after an undeliverable notice was also undeliverable. However, if CC TXMOD indicates a payment was received because of a Collection notice, add Label 13 and any others that apply. See IRM 3.14.1.7.8.5, Labeling Notices.

      • Input CC STAUPS for eight cycles to the appropriate status.

      Note:

      CC STAUPS cannot be input if the account status (see SC STATUS on TXMOD) is 22, 24, 26, 60, 64, 71, or 72. Input CC STAUPS before using CC RECON

    5. Use CC ACTON to enter a history item if CC TXMOD is present on IDRS. Do not create a dummy module to input a history item

  3. Resolve undeliverable refund and overpaid notices by correcting the address (if possible) and inserting the appropriate label.

    If... Then...
    A TC 846 posted in the notice cycle and the refund was direct deposit Add Label 19 to the notice
    A TC 846 posted in the notice cycle and the refund was issued on paper Add Labels 19 and 12 to the notice
    A TC 740 posted to the module with 99999 in the DLN, setting an S– freeze (Refund Check Returned Undeliverable) Add Labels 19 and 12 to the notice
    A TC 740 posted to the module between two TC 846s for the same amount

    Example:

    The original refund check was returned as undeliverable, then subsequently reissued

    Add Labels 19 and 12 to the notice, and mail to the address shown on CC ENMOD
    No TC 846 is present on the module Add Label 19 to the notice
  4. To resolve undeliverable Balance Due Notices:

    If a payment... Then...
    Posted since the notice cycle or is pending on the module Add Labels 3, 19, and 10. Use CC INTSTD to determine the new account balance
    Has not posted since the notice cycle Add Label 9 into the notice. Use CC INTSTD to determine the new account balance, which will be computed using the current 23C date, plus:
    • 21 calendar days, on balances less than $100,000 (21 calendar days from the current 23C date)

    • 10 work days (10 work days from the current 23C date) for a balance of $100,000 or more

    Note:

    If using CC INTSTA, it may be necessary to change the date on the initial response screen to the current 23C date and re-transmit to get the exact pay by dates on page 2 of CC INTSTA.

  5. Resolve fully-paid CP 14:

    • Void the notice if CP 14 is fully-paid by a subsequent payment. Input a history item

    • Update address and insert Label 3 if the module balance was satisfied by an offset. It is likely that any offset notice also went undeliverable, and the taxpayer must be apprised of changes to the account

  6. Resolve Even Balance and Information notices by inserting Label 19 into the notice.

    Note:

    Use CC IMFOL if the account is not available on IDRS.

  7. Resolve Adjustment notices by inserting Label 9 or any other applicable label into the notice. See IRM 3.14.1.7.8.5, Labeling Notices

  8. Assume that any subsequent notice that was mailed is also undeliverable. Update the original notice using the above instructions.

    Exception:

    If module conditions indicate that the entity was corrected before the subsequent notice generated, assume the notice was deliverable. Take no action other than to correct the address on the original undelivered notice.

    1. If the subsequent notice is going out in the current cycle, void the notice.

    2. If the subsequent notice is a Collection (50X series) notice,label the notice appropriatelyand input CC STAUPS with the appropriate status.

    3. Use CC ACTON to input a history item on CC TXMOD, if present on IDRS.

  9. Retain all documentation and attach to notice. Return completed Undeliverables to the Clerical Support Staff for mailing in the current cycle.

3.14.1.6.11  (01-01-2015)
Reviewing Notices With Freeze Codes

  1. Consider all existing freeze codes before taking any action on a tax module. Before routing, referring, or closing the case, notate any action that may be required to correct the account.

  2. Document 6209, IRS Processing Codes and Information, contains a complete listing of Master File Freeze Codes with explanations of the codes, conditions on the account, and freeze release instructions.

3.14.1.6.11.1  (01-01-2015)
Duplicate Return Freeze (–A)

  1. This freeze causes a Submission Processing Campus Notice CP 36 to generate to Accounts Management.

  2. It is set by the posting of:

    • A duplicate return (TC 976).

    • An amended return (TC 977).

  3. Accounts Management must resolve this freeze:

    If the –A Freeze case Then
    Is not controlled (Category Code DUPF) to an individual tax examiner Recharge the return using CC ESTABDT and route to Accounts Management. Print the notice
    Is controlled to a tax examiner Contact the tax examiner for instructions for notice disposition, return routing, and case resolution
  4. Do not insert a label unless there is an adjustment without a Hold Code "2" , "3" , or "4" pending on the account. The case will normally be closed in this situation.

3.14.1.6.11.2  (01-01-2015)
STEX Freeze (–B)

  1. This freeze prevents credits from refunding or offsetting (including credit elect) from the module.

  2. It is set when the refund statute expiration date (RSED date on TXMOD) expires.

    Caution:

    .

  3. Contact the Statute Function before making any adjustments to the account when the ASED is within 90 days AND:

    • The adjustment is a tax increase, or

    • There is Recapture of Advanced Earned Income Credit, Earned Income Credit, First-time Homebuyer Credit, Make Work Pay Credit, American Opportunity Tax Credit, Additional Child Tax Credit, or any other prepaid credits, or

    • There is Recapture of Withholding

      Caution:

      Do not abate tax on statute period accounts with the intent of reprocessing a return without first contacting the Statute Function. You may create a barred assessment by abating the tax.

  4. ) Follow any special instructions given by the Statute Function when making an adjustment to the tax module. Assessments of the above items must be made by the Statute Team.

  5. You DO NOT NEED to contact the Statute Function if the adjustment:

    • Is a timely claim for a tax decrease or a TC 290 for .00, or

    • If the return has been statute cleared within 90 days

      Note:

      If adjusting the tax, input a Hold Code “4” to hold any remaining credit.

  6. If transferring a credit, input a TC 570 on the notice module to hold any remaining credit.

3.14.1.6.11.3  (01-01-2015)
Offset Overflow Freeze (C–)

  1. Master File generates the C– freeze:

    • When an offset overflow (computer capacity exceeded) exists

  2. This freeze delays a TC 846 for one or two cycles.

  3. Follow normal review procedures for the Offset Overflow Freeze.

3.14.1.6.11.4  (01-01-2015)
Refund Statute Expiration Date (RSED) Freeze (–D)

  1. This freeze prevents credits from refunding or offsetting (including credit elect) from the module.

  2. It is set when a TC 29X or TC 30X (Doc Code 54 or 47) creates a credit balance comprised of timely credits on the account after the RSED expires.

  3. The following conditions will release the freeze:

    • A TC 29X with a Priority Code posts to the module.

    • The module balance becomes zero or a debit.

      Caution:

      Contact the Statutes Function before making any adjustment.

3.14.1.6.11.5  (01-01-2015)
ES Spousal Validation Freeze (D–)

  1. Either of the following conditions will set this freeze:

    • A TC 150 claiming more ES credits than are available on the tax module results in a TC 667 resequencing to a spouse’s account.

      Note:

      A computer-generated TC 666 will release the freeze in this circumstance.

    • An overpayment offsets to a joint balance due account.

      Note:

      A TC 826 posting to the spouse’s account (usually in three cycles) releases this type of D– freeze.

3.14.1.6.11.6  (01-01-2015)
Amended Return Freeze (E–)

  1. This freeze prevents overpayments from refunding or offsetting into or out of the frozen module.

  2. The following conditions will set this freeze:

    • A TC 977 posts to a module without a posted TC 150

      Note:

      This condition generates a CP 29.

    • A TC 976 posts as the result of a TC 971 with an Action Code 10, 12, 13, 14, or 15

  3. Any of the following actions will release the freeze:

    • TC 150

    • TC 971 with Action Code "AC 002"

  4. Route the case to Accounts Management.

    Note:

    If the case is controlled to a tax examiner, route it directly to that tax examiner.

3.14.1.6.11.7  (01-01-2015)
Math Error Freeze (–G)

  1. One of the most common freeze codes seen in Notice Review, this freeze grants Appeal Rights to the taxpayer, and prevents the tax module from updating to Tax Delinquent Account (TDA) status. One of the following conditions usually sets this freeze:

    • An original return with a Taxpayer Notice Code (TPNC) Math Error Notice Code posts to the module.

    • An adjustment in Blocking Series 770–789 posts to the module.

  2. The freeze automatically releases in 12 weeks. Any of the following actions will release it earlier:

    • TC 472 with closing code 94

    • TC 290 with priority code 6

3.14.1.6.11.8  (01-01-2015)
Restricted Failure to Pay Penalty Freeze (G–)

  1. This freeze is most commonly encountered when reviewing TDA (CP 500 series) notices.

  2. A TC 150 with CCC "Z" sets this freeze and generates a TC 270, TC 271, TC 320 (RDD is prior to 01/08/87), TC 534 and TC 780.

  3. A TC 272, TC 321, TC 535 (if TC 534 amount is completely released, TC 781 and TC 782) will release the freeze.

  4. Manually compute the penalty and retype the notice, if necessary.

3.14.1.6.11.9  (01-01-2015)
BMF Offset Freeze (H–)

  1. A resequencing module TC 796 sets this freeze. This indicates that Master File is searching Business Master File (BMF) for a possible offset from the IMF account.

  2. The freeze automatically releases in two cycles.

  3. If the credit offsets to a BMF account:

    1. A corresponding TC 896 debit posts to the Individual Master File (IMF) module for each credit offset.

    2. A CP 138 generates from the BMF module one cycle after the CP 12 or CP 24 generates from the IMF module.

    3. If it is necessary to input a TC 570 or CC NOREFP as outlined in IRM 3.14.1.7.1.1, Refund Intercepts, hold the CP 12 or CP 24 for one cycle and disposition in the next cycle when the CP 138 generates.

3.14.1.6.11.10  (01-01-2015)
Restricted Credit Interest Freeze (I–)

  1. This freeze restricts credit interest.

  2. One of the following conditions will set the freeze:

    • A TC 150 posts with CCC "U" .

    • A TC 150 posts to an invalid SSN or temporary SSN (first digit is a 9).

      Note:

      A TC 29X with a Return Processable Date will release the freeze in either of the above situations.

    • A TC 150 posts with CCC "Z" . A TC 770 for .00 will also generate. This freeze is released when the net module balance becomes zero or a debit.

  3. Follow normal review procedures.

3.14.1.6.11.11  (01-01-2015)
Restricted Debit Interest Freeze (–I)

  1. This freeze is most commonly encountered when reviewing TDA (CP 500 series) notices.

  2. This freeze prevents the computer from generating debit interest. It also prevents credits from refunding or offsetting into or out of the module for eight weeks.

  3. A TC 340/341 with a TC 780 posting to a module containing a TC 150 with CCC "Z" sets this freeze.

  4. TC 342 will release this freeze.

  5. Manually compute the interest and retype the notice, if necessary.

3.14.1.6.11.12  (01-01-2015)
Excess Estimated Tax Credit Freeze (J–)

  1. The presence of both of the following conditions will set this freeze:

    • Available ES credits exceed those claimed on the return.

    • The Filing Status Code is other than Married Filing Jointly (FS2).

  2. Any of the following actions will release the freeze:

    • TC 29X with Priority Code 8

    • TC 662 (even for a zero amount)

    • TC 667

    • TC 712

  3. Follow normal review procedures.

3.14.1.6.11.13  (01-01-2015)
Credit Balance Freeze (–K)

  1. This freeze prevents the credit balance from refunding or offsetting from the module.

  2. Any of the following transactions will set the freeze:

    • TC 30X with Hold Code "1" , "2" , "4" or posting of Form 1120 (MFT 02) with CCC "N" .

    • TC 29X with Hold Code "1" , "2" , or "4" .

      Note:

      A TC 290 for .00 with Hold Code "4" sets this freeze and prevents the refund from generating. A transcript generates to the Accounting Function sixteen (16) cycles later. If a TC 29X or TC 30X posts with a Hold Code "2" or "4" , an adjustment notice will generate.

    Caution:

    Do not set a –K freeze unless it is necessary for case resolution. Be aware of the conditions for the release of the freeze. Do not release a refund erroneously.

  3. Any of the following actions will release the freeze:

    • TC 150 posts to the module

    • TC 29X (without Priority Code "6" or "7" ) posts to the module

    • TC 30X posts to the module

    • TC 820 posts to the module

    • TC 830 posts to the module.

    • A Doc Code 24 or 34 credit transfer.

    • The module balance becomes zero or debit.

3.14.1.6.11.14  (01-01-2015)
Innocent Spouse Claim Freeze (L–)

  1. A TC 971 AC065 sets this freeze.

  2. This freeze prohibits offsets and prevents notices from being issued.

    Note:

    CP 521 (Monthly Installment Agreement Reminder) and CP 71C, issued semi-annually for all TDAs in the queue in Status 24 for at least one year, are not held by the L– freeze.

  3. TC 972/AC065 releases the freeze. Before releasing this freeze, contact the originator.

3.14.1.6.11.15  (01-01-2015)
AIMS Indicator Freeze (–L)

  1. A TC 420 or TC 424 sets this freeze.

    Caution:

    This freeze will not prevent a refund from generating. Follow normal review procedures.

    Note:

    If a CC REQ54 adjustment is needed, use Priority Code "1" .

3.14.1.6.11.16  (01-01-2015)
Disaster Processing Freeze (–O)

  1. This freeze represents an account, in which disaster processing has taken place.

  2. For returns processed 12/31/2006 and prior, this freeze is identified by a TC 971 AC 086 or AC 087 appearing on CC ENMOD.

  3. For information on how to handle these cases, refer to Natural Disaster Procedures. IRM 3.14.1.6.9.8.

3.14.1.6.11.17  (01-01-2015)
Refund Deletion Freeze (P–)

  1. This freeze prevents overpaid balances from refunding or offsetting from the module.

  2. A TC 841 or TC 720 sets the freeze.

  3. Any of the following actions will release the freeze:

    • TC 29X posts to the module

    • TC 30X posts to the module

    • TC 820 posts to the module

    • TC 830 posts to the module

    • A Doc Code 24 or 34 credit transfer

    • The module balance becomes zero or a debit

    Caution:

    If an open control base is on the module, do not release the freeze without contacting the controlling employee.

3.14.1.6.11.18  (01-01-2015)
Additional Liability Freeze (–R)

  1. A manual or systemic TC 570 sets this freeze.

  2. Any of the following conditions will generate a TC 570:

    • A TC 150 with CCC "3" posting to the module (unless the return has an Audit Code "L" or there is an unreversed TC 424 or TC 940 on the module).

    • A TC 150 posting in Blocking Series 920–929.

    • A TC 680 posting and creating a credit balance of $5 or more after interest accruals are assessed.

    • A 29X posting in Blocking Series 740–769.

    • A Taxpayer Delinquency Investigation (TDI) refund hold with Julian date 999.

  3. This freeze is usually released by a TC 571, 572, or 29X.

    Exception:

    If the freeze was set by the TDI refund hold, the refund may only be released by a TC 290 with Priority Code "8" .

3.14.1.6.11.19  (01-01-2015)
RPS Multiple 610 Freeze (R–)

  1. This freeze prevents any overpayment from refunding.

  2. RPS multiple 610 freeze sets when multiple TC 610s were present on the module when the TC 150 posted, or if RPS TC 610 does not match DLN of posted TC 150.

  3. The mismatched-DLN condition described above is becoming increasingly common, because electronically filed balance due returns, if paid by paper check with a Form 1040–V Voucher, will never carry the same DLN as the return.

  4. Common reasons why the TC 610 creates a credit balance is that the taxpayer anticipates penalty and/or interest, and attempts to satisfy it along with the unpaid tax, or a balance due is paid, and a math error causes the account to become overpaid.

  5. Research the payment and take all necessary corrective actions.

  6. Input a TC 290 for .00 to release the freeze and allow module to refund, as appropriate. A credit transfer will also release the freeze.

3.14.1.6.11.20  (01-01-2015)
Undelivered Refund Check Freeze (S–)

  1. This freeze prevents any overpayment from refunding. It also causes a CP 31 to be issued to the taxpayer.

  2. Either of the following actions sets this freeze:

    • A TC 740.

    • A refund attempting to generate from an account having a Submission Processing Campus Zip Code.

  3. A TC018 releases this freeze.

  4. Refer to IRM 3.14.1.6.10.1, Researching Undeliverables.

3.14.1.6.11.21  (01-01-2015)
Disaster Processing Freeze (–S)

  1. This freeze represents an account upon which disaster processing has taken place.

  2. For returns processed 01/01/2007 and later, this freeze is identified by a TC 971 AC688 appearing on CC ENMOD.

  3. For information on how to handle these cases, refer to IRM 3.14.1.6.9.8 Natural Disaster Procedures.

3.14.1.6.11.22  (01-01-2015)
Outstanding Liability Freeze (V–)

  1. This freeze indicates an outstanding liability on another tax account.

  2. A TC 130 sets this freeze.

  3. A TC 131, TC 132, or TC 824 releases the freeze.

  4. If the account has a credit balance and the TC 130 DLN indicates a DMF liability, research the account to determine if there is a DMF liability. If there is no indication of a DMF liability, contact Collections before taking any action.

  5. Follow normal review procedures.

3.14.1.6.11.23  (01-01-2015)
Bankruptcy Freeze (–V)

  1. This freeze causes the Submission Processing Campus status to become SC 72.

  2. A TC 520 with Closing Code 83, 85–89 sets the freeze.

  3. A TC 521/522 with Closing Code 83, 85-89 releases the freeze.

  4. Follow normal review procedures.

    Caution:

    Contact the appropriate Insolvency Function before taking any action on the account that is not specified here. Refer to Servicewide Electronic Research Project (SERP) for Insolvency contacts.

3.14.1.6.11.24  (01-01-2015)
Claim Pending Freeze (W–)

  1. This freeze indicates that a claim is pending.

  2. A TC 470 or TC 976 posting to a balance due module sets the freeze.

    Note:

    A TC 470 without a Closing Code or with a Closing Code "90" will prevent offsets into the account.

  3. Follow normal review procedures.

3.14.1.6.11.25  (01-01-2015)
Litigation Pending Freeze (–W)

  1. A TC 520 with various closing codes sets this freeze.

  2. Follow normal review procedures.

    Caution:

    Contact the Insolvency Function or the Appeals Function indicated before taking any action on the account that is not specified here. Refer to SERP for Insolvency contacts.

3.14.1.6.11.26  (01-01-2015)
Accounting Manual Refund Freeze ( X–)

  1. A refund amount of $10,000,000 (Ten Million) or greater sets this freeze. These cases require a manual refund and are worked by the Accounting Function.

  2. If working a case with a refund of less than $10,000,000 without an X– freeze, and the case requires an action that will create a refund over $10,000,000 (Ten Million), the case must be routed to the Accounting Function. Refer to IRM 3.14.1.6.9.3, $10,000,000 Refunds for more information.

3.14.1.6.11.27  (01-01-2015)
Offer In Compromise Freeze (–Y)

  1. A TC 480 or TC 780 sets this freeze.

  2. TCs 481– 483, 781, 782 and 788 release this freeze, but Notice Review is not responsible for releasing it.

  3. Contact the Compliance Offer in Compromise Function (OIC), for case resolution instructions. Review the list in the Who/Where tab of SERP for contacts in Compliance OIC.

  4. Initial submission of Offers In Compromise are routed to either Brookhaven or Memphis campuses, based on taxpayer type and their location. Refer to the Who/Where tab of SERP, on the Centralized OIC web page to determine where they should send their submissions.

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3.14.1.6.12  (01-01-2015)
Reviewing Math Error Notices – CP 10, CP 11, CP 12, CP 13, and CP 16

  1. Tax returns with math errors must receive the appropriate notice and math error explanations (TPNCs), even if the refund or balance due is what the taxpayer expected.

  2. Notices that contain Math Error information are:

    • CP 10 —Math error on an overpaid module, which causes a reduction of credit elect. Exhibit 3.14.1-8.

    • CP 11 — Math error on a module with a balance due of $5 or more. Exhibit 3.14.1-9.

    • CP 12 — Math error on a module with an overpayment of $1 or more. Exhibit 3.14.1-10.

    • CP 13 — Math error on a module with an even balance, a balance due of less than $5 or an overpayment of less than $1. Exhibit 3.14.1-11.

    • CP 16 — Math error on an overpaid module, and part or all of the overpayment is offsetting to satisfy another tax module liability. Exhibit 3.14.1-14.

  3. Estimated Tax (ES) Discrepancy notices are not considered true Math Error notices, but they may also contain math errors.

    • CP 23 — ES discrepancy with a possible math error on a balance due module of $5 or more. Exhibit 3.14.1-16.

    • CP 24 — ES discrepancy with a possible math error on an overpaid module of $1 or more. Exhibit 3.14.1-17.

    • CP 25 — ES discrepancy with a possible math error on a module with an even balance, a balance due of less than $5, or an overpayment of less than $1. Exhibit 3.14.1-18.

  4. Review each TPNC assigned by ERS from the point of error. Review all lines, forms and schedules affected by the error. The required review is limited to those items directly related to the point of error. Although a complete review of the return is not required, if another error is found that does not directly relate to the point of error, it should be corrected.

  5. Ensure that each TPNC matches the math error involved. The TPNC must clearly state the taxpayer’s error.

  6. When assigning TPNCs, only one TPNC should be assigned to cover the point of error. Assigning two TPNCs that cover the same situation is not appropriate.

  7. CP 12s will have a systemic refund hold applied (TC 570 with blocking series "55555" ) and there will not be a TC 846 on the account. These notices must be worked by Thursday 10 pm Eastern time to prevent the refund from going out to the taxpayer. When a refund needs to be prevented from generating, follow guidelines in IRM 3.14.1.7.1.1, Refund Intercepts.

3.14.1.6.12.1  (01-01-2015)
Items To Review on All Math Error Notices

  1. The following items need to be reviewed on every math error notice when impacted by point of error:

    • Adjusted Gross Income (AGI)

    • Taxable Income (TXI)

    • Tax

    • Self-Employment (SE) Tax, if present

    • TY-2009; if Form 1099 attached - $2,400 deduction of Unemployment Compensation (Line 19 Form 1040, Line 13 Form 1040A, Line 3 Form 1040EZ, and Line 20 Form 1040NR)

    • Accuracy of TPNCs assigned to the notice

    Note:

    TPNC verbiage shown on OLNR will always be that of the default (general) TPNC. The literal TPNC has line specifics which vary by tax form and tax year. These will appear on the actual notice.

  2. Also review the tax period, entity and signature(s) on math error notices. These items are covered in IRM 3.14.1.6.1.1 Verifying Return Information.

3.14.1.6.12.1.1  (01-01-2015)
Verifying AGI, TXI and Tax Changes

  1. Compare Adjusted Gross Income (AGI), Taxable Income (TXI), and tax (including Self-Employment (SE) Tax) to the notice as described below:

    1. Verify any change made by ERS to the AGI, TXI, and tax amounts on the tax return filed by the taxpayer.

    2. If filing status is the point of error, compare the filing status on the return to the tax account. If ERS changed the filing status, verify that the filing status was changed correctly.

    3. Perfect the AGI and TXI if adjusting the tax on the tax module. However, do not adjust AGI and TXI if no changes to the tax are needed.

      Reminder:

      AGI can be adjusted below zero, but TXI cannot. The adjustment will unpost.

    4. When line 9b is more than line 9a on Form 1040/A, the Tax Examiner needs to add both amounts and enter the total on line 9a.

      Note:

      See Miscellaneous Quick Reference Chart in Job Aid 2534-002.

    5. If Lump Sum Election (LSE) is notated on the return, follow taxpayer intent.

    6. Compare overpayment, balance due, and credit elect amounts to the notice.

    7. If the ERS (computer) figures are incorrect, adjust the module using CC REQ54.

      Note:

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    8. Prevent the refund from generating when increasing the tax (including SE Tax) or when decreasing refundable credits.

      Note:

      Do not prevent the refund from generating unless decreasing the overpayment.

  2. Take appropriate action to correct the taxpayer’s account, when needed. Also change incorrect or incomplete TPNCs to adequately explain math errors.

  3. See the following for additional instructions for specific Math Error Keys:

    • Key 060 — Tax Period More Than Two Years Prior To Current Tax Year. See IRM 3.14.1.6.17.7

    • Key 061 – Multiple Math Error Explanations. See IRM 3.14.1.6.17.8 .

    • Key 100 – Non-Standard TPNC Explanations Not Computer Generated, IRM 3.14.1.6.17.12

  4. Correct all associated notices in the NRPS package if their accuracy is affected by a change to the primary notice or to the notice module.

  5. TPNC 111 will be assigned by ERS whenever a return is converted, during processing, from a Form 1040EZ or Form 1040A to a Form 1040. TPNC 111 notifies the taxpayer that their return was converted, and also causes the default TPNC literals to generate during printing. If TPNC 111 is not present on a notice for a converted return, retype the notice and add TPNC 111 as the first TPNC.

3.14.1.6.12.1.2  (01-01-2015)
Verifying Self-Employment Tax Changes

  1. If the math error is related to self-employment income (Schedule C or F), and/or the line marked "Other Income" on Form 1040, then also verify Schedule SE and the "“Deductible part of self-employment tax”" and "Self-employment tax" entries on the Form 1040.

  2. Use the following table as a guide for determining how to handle various SE Tax scenarios:

    Reminder:

    Adjust the Social Security and Medicare incomes and taxes when adjusting total SE Tax.

    Caution:

    For tax year 2013 and subsequent, the SE Social Security tax rate has returned to 12.4%, up from 10.4% for 2011 and 2012.

    If... Then...
    The Schedule C, Schedule F, or Schedule E Self-Employed income amount was changed Verify that the tax on Schedule SE was also changed
    The taxpayer had Social Security wages greater than the current year limitation The entire self-employment amount may not be subject to Social Security tax since self-employment (SE) tax is now divided between the Social Security and Medicare taxes

    Reminder:

    There is no longer a maximum Medicare income limit for 199412 and subsequent returns

    The taxpayer used either of the optional SE Tax methods Verify that the SE Tax method was not changed by ERS to the normal method. Adjust the SE Tax if necessary
    The taxpayer computed SE Tax, but did not attach Schedule SE to the return Check for Schedules C, E, or F. Follow the taxpayer’s intent to assess SE Tax. If taxpayer is Married Filing Jointly (FS2) and there is no indication which taxpayer is liable for SE Tax:
    If primary taxpayer’s Social Security wages were... Then assign the SE Tax to...
    At least the current year limitation The secondary taxpayer
    Less than the current year limitation The primary taxpayer
    Self-Employment income is shown on the line marked "Other Income" on the front of the Form 1040 and no SE Tax is computed The return should have an RPC "N" (coded at the bottom front of Form 1040). If it was not transcribed, recharge the return and route the case to the Examination Function
    No SE Tax is self assessed and Schedules C, E, or F is attached Do not assess the SE Tax unless EIC is claimed

    Exception:

    If the taxpayer qualifies for EIC, additional instructions may apply. Refer to IRM 3.14.1.6.12.4.4SE Tax Computation — TPNC 580

    Note:

    For tax period 201012, taxpayers are instructed to reduce line 3 of Schedule SE by the amount claimed on Form 1040, line 29. If an amount is present on Form 1040, line 29 research Form(s) W-2 (boxes 1,3,5, and 14), Schedule E (S Corporation Income), and Schedule SE (line 3) to determine if SE Income should be reduced.

3.14.1.6.12.1.3  (01-01-2015)
Verifying Accuracy of Assigned Taxpayer Notice Codes

  1. When reviewing notices containing TPNCs, it is important to allow only TPNCs that reflect actual errors made by the taxpayer. A ripple math error results directly from another math error, usually one that precedes it on the tax return. Each TPNC must stand on its own to be considered a valid math error.

  2. If a subsequent error is found after the point of error, add the correct TPNC. Remove incorrect TPNCs.

3.14.1.6.12.1.4  (01-01-2015)
Verifying Information from Form W-2, Form W-2G, and Form 1099

  1. Verify Form W-2, Form W-2G, and/or Form 1099 when the point of error is one of the following:

    • Additional Child Tax Credit (Sch 8812)

    • Adjusted Gross Income (AGI)

    • Advance Earned Income Credit (AEIC) (prior to 2011)

    • Child and Dependent Care (Schedule 2 or Form 2441)

    • Credit for Elderly or Disabled (Schedule 3 or Schedule R)

    • Earned Income Credit (EIC)

    • Estimated Tax Payment Discrepancy (CP 23, CP 24, or CP 25)

    • Excess Federal Insurance Contribution Act (FICA)

    • Gambling Winnings

    • Individual Retirement Account (IRA)

    • Lump Sum Distribution

    • Non-Compute Returns (CP 51A, CP 51B, or 51C)

    • Pensions

    • Self-Employment Income (Schedule C, Schedule E, or Schedule F)

    • Self-Employment Tax (Schedule SE)

    • Social Security Benefits

    • Total Income

    • TPNC 297 or 299

    • Wages

    • Withholding

    Note:

    If the taxpayer places a line entry for Additional Child Tax Credit, Sch 8812 must be attached to the return to receive the credit for 3 or more children.

  2. Tax Period — The individual income tax period usually runs from January 1 through December 31 of a given year. Compare the year of Form W-2 with the tax form year. Wages may only be claimed for the tax period in which the wages were paid. If Form W-2 indicates the tax return was processed to the incorrect year, reprocess the return as appropriate. See IRM 3.14.1.6.22, Reprocessing Returns. If the module is overpaid, and the refund transaction has not generated, prevent the refund from generating using procedures in IRM 3.14.1.7.1.1 and void any notices associated with a return needing to be reprocessed to a different tax period. If the refund transaction has already generated, follow Erroneous Refund procedures.

  3. Name Mismatch — If the name shown on Form W-2 does not match the return and:

    If the taxpayer... Then...
    Did not use the money amount on Form W-2 for computing Wages or Withholding Remove and process as loose Form W-2s
    Did use the Form W-2 wages or withholding Accept all attached W-2 wages and withholding per taxpayer intent
    Claimed children's income with no Form 8814 Remove child/children's income and send TPNC 100: You cannot claim your child/children's income from interest and/or dividends on your return. We have removed the interest and/or dividends and adjusted your return accordingly
    Claimed child/children's income with Form 8814 Allow child/children's income from interest and/or dividends

    Note:

    A parent can only claim income from a child if the income is interest and/or dividends and there is no federal income tax withheld from the child's income until the age of 19. If the child is a student the age goes up to 24.

  4. Wages, Allocated Tips, and Other Compensation — The sum of all entries for wages and other compensation shown on Form W-2, box 1, should equal the amount claimed on Form 1040, or Form 1040A, line 7 or on Form 1040EZ, line 1.

    If the amount on the return... And the taxpayer... Then...
    Includes compensation from other than Form W-2 wages Included this compensation to compute EIC Accept the income as earned unless it can be identified as unearned income (unemployment compensation or pension income, for example)

    Caution:

    If unearned income is from Temporary Assistance for Needy Family (TANF), FS4 or FS5 may need to be changed to FS1

    Is greater than the total wages on Form W-2   Do not decrease the entry. Accept the larger wage amount unless you determine that the taxpayer made a double entry, a transposition error, or used Social Security wages from Form W-2, box 3
    Exception: Form W-2, box 12 or 14 includes deferred compensation such as Thrift Savings Plan (TSP) or 401(k) contributions
    Is less than the total wages on Form W-2   Change the amount entered as wages on the return to agree with the total Form W-2 wages. See below for exceptions
    Included a statement indicating that the Form W-2(s) are incorrect Do not process as a math error
    Has Schedule C income Review the Schedule C to determine if the taxpayer included Form W-2 income on Schedule C. If so, do not increase Form 1040, Line 7
    Reported a gross income amount on line 7, Form 1040, and also on Schedule C Deduct the amount reported from Form 1040, Line 7 if it is determined to be a duplicate of Schedule C income reported elsewhere on the return
  5. Federal Income Tax Withheld — Federal Income Tax withheld by the employer is reported on Form W-2, box 2. It is a refundable credit that is applied against the total tax due on the tax return. Federal income tax withheld may also be reported on Form W-2G and Form 1099. Combine all of the federal income tax withheld from all sources. Compare amount to the taxpayer’s entry on the line marked "Federal income tax withheld from Form(s) W-2 and 1099" on Form 1040, Form 1040A, and Form 1040EZ.

    1. If... Then...
      The withholding amount claimed is more than the total from Form W-2 and/or Form W-2G
      1. Determine if any attached Form 1099 includes withholding

      2. Allow any withholding shown on Form 1099

      3. If no withholding is shown, follow guidelines ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

      The taxpayer is required to attach Form 1099-R if any federal income tax was withheld from a distribution from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.

      Caution:

      If withholding is overstated and the tax module is refunding, follow Category B Erroneous Refund Procedures, even if the refund can be prevented from generating. Refer to IRM 3.14.1.6.7.2, Category B ERRF Resolution

      The taxpayer claims more withholding than is substantiated by Form W-2 and has no earned income on Form 1040, Line 7
      1. Suspect a double credit situation which occurs when the taxpayer includes ES payments on the withholding line, either alone or with the withholding. Refer to IRM 3.14.1.6.13 , Reviewing Estimated Tax (ES) Discrepancy Notices

      2. Adjust the withholding

      3. Assign TPNC 283 or 582 if appropriate. See Category B Caution Above

      The taxpayer used Social Security Tax withheld (Form W-2 , box 4) instead of Federal Income Tax withheld (Form W-2, box 2)
      1. Adjust withholding to match the Form W-2, box 2 amount

      2. Assign TPNC 283 See Category B Caution Above

      Withholding is claimed on a secured return (identified by a TC 599 in the left hand margin of page 1 of the tax return) and Form W-2(s) is not attached
      1. Determine if other information (CC TDINQ print or a TDI Supplement) is attached

      2. If no attachments, check CC TDINQ or CC IRPTR

      3. Attach the printout to the return

      4. Adjust withholding accordingly

      Form W-2 is missing and withholding is claimed
      1. If prior year return or current year processed after Mid-May use CC IRPTR for verification of the taxpayer’s withholding amount

      2. Allow the amount claimed if IRPTR agrees with the amount

      3. Remove withholding, allow wages, and assign appropriate TPNC

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      The withholding amount claimed is less than the total from Form W-2 and/or W-2G
      1. Check the W-2 for transposition and/or transcription errors

      2. See IRM 3.14.1.6.9.6Community Property Split

      3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Excess Social Security and Railroad Retirement Tax Amount (RRTA) Tax Withheld.

    1. If a taxpayer had more than one employer for the current tax year and the total social security wages were over the current year limitation, the employers may have withheld too much social security tax. If so, a credit can be taken for the excess on the "Excess Social Security tax and Tier 1 RRTA tax withheld" line of the Form 1040.

    2. Effective on returns processed after January 1, 2007, Excess FICA is separated from Federal Withholding at the Master File level, and posts to the tax module as a TC 766 with Credit Reference Number (CRN) 252.

    3. For all returns posted prior to January 1, 2007, Excess FICA, if present, will remain combined in the TC 806 amount.

    4. Any necessary adjustments to Excess FICA should be made based on how it originally posted (either by TC 806 or TC 766).

    5. Use Form W-2 documents or CC IRPTR to verify excess credit.

    If the taxpayer... Then...
    Filed a joint return Each spouse must figure excess Social Security withholding separately. Do not combine the social security withholding of the primary taxpayer with the secondary taxpayer
    1. Has ONLY ONE employer and that employer withheld more than the annual maximum, OR

    2. Has two or more employers, but ONLY ONE employer caused the excess by withholding more than the entire annual maximum

    Disallow the credit. The taxpayer must seek reimbursement from the employer
    Has multiple Form W-2 documents from only one employer, and Box C of those Form W-2 documents state "Agent For" Allow the credit. Input adjustment using override code N and Reason Code 055
    Did contribute excess Social Security tax through the deductions of two or more employers (two or more W-2s required.) Allow the credit. See Publication 17 or Notice Review Job Aid for the appropriate worksheet to figure the excess credit amount
  7. Pension Plan — Employers report participation in a pension plan on Form W-2, box 13. If the taxpayer has an IRA deduction, use Publication 590 to determine any limitations and for the IRA worksheet.

  8. Advanced Earned Income Credit Payment (For 2010 and prior) — When a taxpayer is eligible for Earned Income Credit, the employer may pay part of the credit in advance. Use Form W-2, box 9, to verify the payment. The taxpayer is required to claim the payment on Form 1040. If the tax return does not reflect the taxpayer's Advanced Earned Income Credit (AEIC) payment from Form W-2, box 9, adjust the account. Use TC 290 or TC 291 with reference code 885.

3.14.1.6.12.2  (01-01-2015)
Standard Deduction, Age-Blind Indicator (ABI), Exemption and Schedule A Errors

  1. Taxpayer errors and IRS processing errors often relate to Standard Deduction, Age-Blind Indicator (ABI), Schedule A deductions, and/or Exemptions. Consult the following for guidance in reviewing and resolving these errors.

3.14.1.6.12.2.1  (01-01-2015)
Standard Deduction Errors

  1. Taxpayers frequently claim an incorrect amount for Standard Deduction. Many errors are caused by claiming the Standard Deduction for a different filing status, or by claiming an amount from a different tax year.

  2. Verify the taxpayer's filing status, and verify that the taxpayer is not claiming any Age-Blind Indicators (ABI). If intent to claim an ABI is present on the return, refer to IRM 3.14.1.6.12.2.2 Age-Blind Indicator (ABI) Errors.

  3. Use the chart below to determine the correct tax year's standard deduction, based on filing status.

    Multi-Year Standard Deduction, ABI, and AGI Limitation Chart
    Year Standard Deduction Age/Blind Indicator (ea. box checked) AGI Limitation for Schedule A
    2014 FS1 – $6,200
    FS2/5 – $12,400
    FS3/6 – $6,200
    FS4/7 – $9,100
    Minimum – $1,000
    FS1 – $1,550
    FS2/5 – $1,200
    FS3/6 – $1,200
    FS4/7 – $1,550
    FS1 – $254,200
    FS2/5 – $305,050
    FS3/6 – $152,525
    FS4/7 – $279,650
    2013 FS1 – $6,100
    FS2/5 – $12,200
    FS3/6 – $6,100
    FS4/7 – $8,950
    Minimum – $1,000
    FS1 – $1,500
    FS2/5 – $1,200
    FS3/6 – $1,200
    FS4/7 – $1,500
    FS1 – $250,000
    FS2/5 – $300,000
    FS3/6 – $150,000
    FS4/7 – $275,000
    2012 FS1 – $5,950
    FS2/5 – $11,900
    FS3/6 – $5,950
    FS4/7 – $8,700
    Minimum – $950
    FS1 – $1,450
    FS2/5 – $1,150
    FS3/6 – $1,150
    FS4/7 – $1,450
    No Schedule A Limitation
    2011 FS1 – $5,800
    FS2/5 – $11,600
    FS3/6 – $5,800
    FS4/7 – $8,500
    Minimum – $950
    FS1 – $1,450
    FS2/5 – $1,150
    FS3/6 – $1,150
    FS4/7 – $1,450
    No Schedule A Limitation
    2010 FS1 – $5,700
    FS2/5 – $11,400
    FS3/6 – $5,700
    FS4/7 – $8,400
    Minimum – $950
    FS1 – $1,400
    FS2/5 – $1,100
    FS3/6 – $1,100
    FS4/7 – $1,400
    No Schedule A Limitation
    2009 FS1 – $5,700
    FS2/5 – $11,400
    FS3/6 – $5,700
    FS4/7 – $8,350
    Minimum – $950
    FS1 – $1,400
    FS2/5 – $1,100
    FS3/6 – $1,100
    FS4/7 – $1,400
    FS1, 2, 4, 5 & 7 = $166,800
    FS3/6 = $83,400

    Note:

    For 2009 only, qualifying taxpayers (non-business) are entitled to increase their standard deduction by including real estate taxes, motor vehicle purchase taxes, and/or disaster losses. Schedule L must be attached to gain these benefits. Credit for real estate taxes is limited to $500 for FS1, 3, or 4, and $1,000 for FS2 and 5. Credit for vehicle-purchase taxes will vary. Credit for disaster losses will derive from Form 4684.

    2008 FS1 – $5,450
    FS2/5 – $10.900
    FS3/6 – $5,450
    FS4/7 – $8,000
    Minimum – $900
    FS1 – $1,350
    FS2/5 – $1,050
    FS3/6 – $1,050
    FS4/7 – $1,350
    FS1, 2 ,4, 5 & 7 = $159,950
    FS3/6 = $79,975
    2007 FS1 – $5,350
    FS2/5 – $10,700
    FS3/6 – $5,350
    FS4/7 – $7,850
    Minimum – $850
    FS1 – $1,300
    FS2/5 – $1,050
    FS3/6 – $1,050
    FS4/7 – $1,300
    FS1, 2, 4, 5 & 7 = $156,400
    FS3/6 = $78,200
    2006 FS1 – $5,150
    FS2/5 – $10,300
    FS3/6 – $5,150
    FS4/7 – $7,550
    Minimum – $850

    FS1 – $1,250
    FS2/5 – $1,000
    FS3/6 – $1,000
    FS4/7 – $1,250
    FS1, 2, 4, 5 & 7 = $150,500

    FS3/6 = $75,250
    2005 FS1 – $5,000
    FS2/5 – $10,000
    FS3/6 – $5,000
    FS4/7 – $7,300
    Minimum – $800

    FS1 – $1,250
    FS2/5 – $1,000
    FS3/6 – $1,000
    FS4/7 – $1,250
    FS1, 2, 4, 5 & 7 = $145,950

    FS3/6 = $72,975

    IRM Multi-Year Standard Deduction, ABI, and AGI Limitation Chart

3.14.1.6.12.2.2  (01-01-2015)
Age-Blind Indicator (ABI) Errors

  1. The Age-Blind Indicator (ABI) increases the standard deduction amount if a taxpayer is 65 or older, and/or blind, at the end of the tax year. Separate check-boxes appear for age and for blindness on the Form 1040 and Form 1040A, with one set of check-boxes available for each spouse. A married couple filing a joint return can have as many as four ABIs on a given return.

  2. Common ABI errors may result from the taxpayer:

    • Claiming the incorrect number of indicators or multiplying incorrectly

    • Using the standard deduction amount

  3. Use the Multi-Year chart to apply the appropriate year's amounts.

3.14.1.6.12.2.3  (01-01-2015)
Exemption Errors

  1. Common exemption errors may result from the taxpayer:

    • Claiming the incorrect number of exemptions

    • Multiplying the total number of exemptions by the exemption amount incorrectly

    • Using the exemption amount from an incorrect tax year

    • Neglecting to apply, or incorrectly applying, the exemption limitation based on AGI (except for 2010,2011 and 2012 returns)

    • Failure to include Form 8332 for child not living with the Taxpayer

  2. Verify that the exemption error on page 2 (Form 1040 or Form 1040A) is not an error from incorrectly totaling dependents on page 1. Do not assign a TPNC for incorrectly figuring the total exemption amount on page 2, if the point of error was due to incorrect totaling of the dependents on page 1 of the return.

  3. Ensure that correct year amounts have been used to calculate exemption totals. With AGI thresholds, verify exemption limitations.

    Figure 3.14.1-6
    Multi-Year Chart Exemption amount and AGI Limitation
    Year Exemption Amount AGI Limitation Amounts for Exemptions
    2014 $3,950 each FS1 – $254,200
    FS2/5 – $305,050
    FS3/6 – $152,525
    FS4/7 – $279,650
    2013 $3.900 each FS1 – $250,000
    FS2/5 – $300,000
    FS3/6 – $150,000
    FS4/7 – $275,000
    2012 $3,800 each No Limitation on Exemptions
    2011 $3,700 each No Limitation on Exemptions
    2010 $3,650 each No Limitation on Exemptions
    2009 $3,650 each FS1 – $166,800
    FS2/5 – $250,200
    FS3/6 – $125,100
    FS4/7 – $208,500
    2008 $3,500 each FS1 – $159,950
    FS2/5 – $239,950
    FS3/6 – $119,975
    FS4/7 – $199,950
    2007 $3,400 each FS1 – $156,400
    FS2/5 – $234,600
    FS3/6 – $117,300
    FS4/7 – $195,500
    2006 $3,300 each FS1 – $150,500
    FS2/5 – $225,750
    FS3/6 – $112,875
    FS4/7– $188,150
    2005 $3,200 each FS1 – $145,950
    FS2/5 – $218,950
    FS3/6 – $109,475
    FS4/7 – $182,450

3.14.1.6.12.2.4  (01-01-2015)
Schedule A Errors

  1. Schedule A errors are most often attributed to a taxpayer doing one or more of the following:

    1. Totaling the Itemized Deductions incorrectly

    2. Incorrectly applying AGI figures from Form 1040 to the Medical and Dental and/or Miscellaneous Deductions sections

    3. Incorrectly multiplying the AGI by percentages shown in the Medical and Dental and/or Miscellaneous Deductions sections

    4. Omitting any other forms which are required to substantiate certain Itemized Deductions

    5. Applying the Schedule A limitation incorrectly (all return years except 2010,2011 and 2012)

    6. Using an incorrect year Schedule A, which would contain incorrect AGI limitation thresholds

    7. Forgetting to check the "Itemized Election" box, or checking it in error

  2. If changes made to AGI increase it to a level above the Schedule A limitation threshold, make sure Schedule A is also adjusted, if needed.

  3. If an FS3 taxpayer uses Schedule A figures that are below the Standard Deduction, but does not check the "Itemized Election" box, follow TP intent that their spouse also itemizes, and allow the Schedule A amount to stand, despite it being less than the Standard Deduction.

  4. More detailed information can be found as to how ERS handles these determinations in IRM 3.12.3Individual Income Tax Returns – Error Resolution System.


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