This IRM provides guidance for a program to reduce refund interest paid on current year and prior year tax returns during original settlement processing and on refunds issued with credit interest as a result of Data Processing Tentative Carryback (TCB) adjustments.

The employees working the program must have a very strong knowledge of pre-posted and posted account transactions, including the ability to perform the analysis required to ensure manual refunds are issued correctly.

The program involves doing extensive IDRS and CFOL research. The employees should also have extensive IDRS input experience related to refund processing and account maintenance and will be required to do occasional online letter preparation and perform restricted interest computations.

The following IDRS CCs are required to work the program: ACTON, ADC24, ADC48, ADD24, ADD48, ADJ54, BMFOL, BRTVU, COMPA, DRT24, DRT48, ENMOD, FRM77, INOLE, LETER, LPAGD, LPAGE, MFREQ, NOREF, RECON, REQ54, REQ77, RFUND, RTVUE, SUMRY, TERUP$, TRDBV, TXMOD, UPTIN.

The employee(s) will require access to IDRS, Control D (Ctrl-D), MICROSOFT Word, Microsoft Excel, Internet Explorer, a printer and a fax machine. Optional access can be allowed to Accounts Management System (AMS) and Correspondence Imaging System (CIS).

All IDRS CCs used for the program can be researched on the Servicewide Electronic Research Program (SERP) IDRS CC Job Aid.

It is mandatory that employees utilize the IAT (Integrated Automation Technologies) Tool. This tool will automatically complete the Form 5792, IDRS Generated Refund (IGR) and Form 3753, Manual Refund Posting Voucher. IAT improves quality and timeliness of processing by eliminating repetitive typing.

Information Technology (IT) has made the BMF-IR Refund Intercept Listings available on the Control-D Database under job name OBMFIRxx (xx = campus FLC). The data in these files is extracted from Enterprise Computing Center (ECC-MTB) Non-Tape Distribution to Submission Processing Centers under Report Name BMF REFUND INTERCEPT Reports. These files are transmitted to Submission Processing Centers each week on Friday after Master file processing. For example, BMF processes cycle 201305 on January 31, 2013; The BMF RIR will be in Control-D on February 1, 2013. If the current BMF IR Refund Intercept Listings are not available on Control-D on Friday each week, the employee(s) should contact the IT help desk for assistance. the Refund Intercept Report must be worked within 11 business day to initiate the NOREF request. For example, the report that generates for cycle 201305 is available on February 1, 2013 and NOREF must be input no later than 4 p.m. EST February 15, 2013.

The Refund BMF-IR Refund Intercept Files are a weekly extract of all refunds with ≡ ≡ ≡ ≡ ≡ ≡ ≡ credit interest posted to a campus controlling document locator number (DLN). These refunds are grouped by Net Tax Refund Report Line numbers starting with line number 01. The account information is listed for each line number starting with the largest interest amount and ending with the smallest. Each line of the listing contains one account record:

The column header descriptions for the BMF Refund Intercept/45-Day Interest-Free Period Listings are as follows:

The pre-screened BMF listing File is available on Control-D under job name PRTA60X on the immediate Friday after BMF processes. For example, BMF processes cycle 201205 on January 26, 2012; the BMF listing file will be on Control-D on January 27, 2012. The files can be located under Report Name 160-44-XX (BMF) Reports. The listing contains records for BMF refunds with open 45-day periods and no limiting freeze or refund type conditions.

The column header descriptions for the BMF Edited Refund Report listings are as follows:

Due to CADE 2 implementation in January 2012, BMF moved their processing day from Saturday to Thursday. The associated IDRS updates occur on the immediate following Saturday. Posted transactions on the BMF modules are viewable on BMFOL command codes the Friday following weekly postings and are posted on IDRS command codes the immediately following Monday.

The listings should be reviewed immediately at the beginning of the week. A backup employee should be provided if the employee with primary responsibility for the program is not available. This is critical in order to meet the 45-day interest-free period. Last day for input may expire on the first day of review.

Access the refund data on Control-D and print the listing pages containing the line numbers subject to the 45-day period for BMF: 0,11, 12, 15, 16, 17, 21, 22, 25, 26, 27, 31, 32, 36, 37, 41, 42, 46, 47, 56, 57, 60, 61, 62, 65, 66, 87, 89, 90, 91 and 99. See IRM 2.4.20, Command Codes RFUND and REFAP, Exhibit 2.4.20-12, Description of Line Item Numbers.

Prepare a cycle folder for the listings by annotating the refund posting cycle on the tab. The folders will be maintained in cycle order for the fiscal year and stored in the work area for a minimum of one year following the close of the fiscal year. The folders can then be archived following the published guidelines for original refund documents.

Prepare cover sheets for the BMF listings and annotate the following:

Underline the first record within each Line Number (61, 62, etc.). Underline the last record for each Line Number starting at the left of the TIN column. This will provide a visual break between the Line Numbers to facilitate the use of the listings.

After identifying the volume of accounts that are subject to review for the cycle, evaluate if additional staffing or a selection tolerance adjustment will be required. If the volume is high, notify the manager that assistance is needed to work the program.

There are a number of conditions that may prevent refunds from being worked even when the interest-free period is open or the last day for input has not passed. These conditions can be checked for at the same time as the received date review. Other limitations may not be found until further research is performed.

Employees are required to contact Criminal Investigation (CI) Scheme Developments Centers (SDC) prior to issuing a manual refund if there is a Z- or -Z present on the module or TC 910, TC 912, TC 914, TC 916 or TC 918 is present. CI SDC personnel maintaining the TC 91X control will advise whether to issue a refund or not. If unable to contact CI, do not work. CI may request a stop on the generated refund but advise not to issue a manual refund. If the refund is stopped, count the interest as savings.

The Questionable Refund Programs (QRP) are now under the program responsibility of the Return Integrity and Correspondence Services (RICS) Taxpayer Assurance Program (TAP). TAP identifies individuals filing false returns claiming refundable credits, income and withholding as part of schemes. These programs are implemented at the beginning of every filing season. Research transactions codes to determine if credits should be released. Contact with TAP may be required. The following examples of QRP account identifiers:

Taxpayer modules that contain a TC 971 AC 052 should not be worked. This is a definer for modules selected under the TAP QRP. Displayed on CC TXMOD may be a control showing ACTIVITY (IN_VERIFY) and CATEGORY (NVFY).

Cases identified as Telephone Excise Tax Refund (TETR) include predetermined credit interest. This interest should not be adjusted. The taxpayer is due this as mandated by federal law. The above cases are generally only valid for the 2006 tax year filing season.

Employees are required to contact other work areas if they have an open Control Base on a module. If you do not make contact with the other area, you will have to use your judgment as to the reason they have a Control Base and proceed accordingly. Annotate that contact was not made to the other work area in the remarks section of the Form 5792. Do not issue a refund if it appears there may be a pending assessment or transfer of available credit from the module. The other work area may request that you stop the generated refund and not issue a manual refund. If this occurs, count the interest as savings.

If there is a TC 130 present on ENMOD (with service center indicator), there may be a Non Master File balance due. Contact Cincinnati NMF Function ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to find out if the refund should be issued or stopped. If you are unable to take action on the account, annotate the listing as NMF. The Cincinnati NMF Function may request that you stop the generated refund (TC 846) but not reissue a manual refund (TC 840). If they do, count the interest as savings.

There may be more than one tax adjustment transaction posting at the same time as TCB refund account. If a TC 291 is posting in the same cycle as the TCB adjustment, annotate the listing as Mixed Cr. Credits against taxable income or credits against tax are allowable in the same cycle as the refund. These credits must be included in the overpayment amount.

Some TCB adjustment refunds have manually computed credit interest (TC 770) posting the same cycle as the refund. The employee that input the adjustment is required to enter an abbreviated reason, such as RSCH/CR (Research Credit) in the ACTON activity field. If there is no history item and the TC 770 appears questionable, call the employee to verify the correct action. If there is a TC 770 with money present, annotate the listing as TC 770.

Check for any pending assessment transactions, credit transfers or credit reversals that may affect the availability of the credit that is being refunded. Stop the generated refund and claim the interest saved if all of the available credit is being reversed. If only part of the credit is being reversed, claim the savings on the portion that is being reversed and issue a refund for the remainder credit. These reversals will require restricted interest computations.

Check the return display data against the posted data using IDRS CC BRTVU to identify possible fraudulent filers and misapplied payment errors.

Some refunds may include interest on offset credits or abated penalties and interest (i.e., TC 826, TC 197, TC 277, etc.). This interest must be paid and may reduce the amount that can be saved below the ≡ ≡ ≡ ≡ ≡ ≡ ≡ for the program.

Research may indicate a manual refund was issued. Manual refunds are identified by TC 840 (Manual Refund, Form 5792/3753) or TC 971 AC 664 (Manual Refund processed by Accounting, Form 3753 only). If you identify either of these codes, do not issue a manual refund, unless certain it is NOT A DUPLICATE. Coordinate with the initiating function to determine if the potential refund is due to the taxpayer.

Cases identified with TC 846 as direct deposits (DD). Do not attempt to issue manual refunds on these cases.

Use CC BRTVU (BMF) to review the return line entry information prior to issuing manual refunds. Enter the TIN, MFT and tax period in the following format:

The response will be a summary screen, which can be used to retrieve each page of the return information. Enter a 1, 2, etc., immediately to the right of the R on the first line of the response page to see a display of the data for the selected page.

Look for inconsistencies in the submitted return information compared to the posted information. Evaluate the amounts claimed in relationship to other entries. Question entries, such as the reported income being low compared to the amount claimed as withholding or the amount entered on the refund line being less than the generated amount.

If the amount being refunded exceeds the amount claimed on the BRTVU display, compare the estimated payments or other credit amounts claimed, to the posted amounts. Periodically a payment intended for the next tax year will be applied to the current year account. If this is the case, transfer the excess credit to the next tax year using CC ADD24.

If the refund is based on a payment that is not claimed by the taxpayer and there is no indication it was intended for a future period, research the credit using the Remittance Transaction Research (RTR) database. If this application is not available to the employee(s) performing the review, contact the Payment Tracer Manual/Erroneous Refund Unit for assistance.

If the account is not already present or is incomplete, the current account information for Original Settlement Refunds must to be brought onto the Campus (local) IDRS system at the time the last day for input is determined to be open. This step is done using CC MFREQ and RECON. This step is required to identify math errors at the start of the review process for inclusion on the Notice Retype Fax List. Math errors can only be reviewed on the local file (TXMOD). Command Code RECON will be input for review of TCB refunds and is not required to be performed before the Fax List is prepared for Notice Review. The cut-off for faxing the Notice Retype List to Notice Review is 11:00 a.m. local time Wednesday, the first week of review. These times vary depending on local requirements.

Use CC MFREQ with definer C to bring the module onto the local file when a No Data is received when CC TXMOD is input. For example:

Use CC RECON if the latest transactions shown on BMFOL are not present on the module display when TXMOD is on the local system. For example:

Notices will be issued to taxpayers when there are TCB or math error adjustments on their accounts. These notices need to be corrected (Retyped) to show the correct refund and interest (if any) amounts before they are mailed.

Notice Review must be alerted to select notices for review. With the implementation in CADE 2 in January 2012, the notice review cycle will also be accelerated and the request to select the specific notices must be added to the local control file before the BMF Refund Intercept Program report is available. Selections can be made by MFT or Notice Type. Coordinate with Notice Review to request selection of the notices each week before 12:00 eastern on Thursday.

If a restricted interest computation is required, annotate the listing with an NR next to the ME math error entry. Annotating the listing will provide a quick visual confirmation of the notices that need to be corrected.

Contact Notice Review to coordinate the notice correction.

It will be necessary to manually compute credit interest on accounts that include abatements of interest and or penalty (TC 197 or TC 277), or have TC 826 credit offsets with TC 776 credit interest that are posted in the same cycle as the generated refunds. The IRS is required to pay credit interest on penalty and interest abatements only when the taxpayer has paid the assessed penalty or interest and it is subsequently abated.

There may be occasions when part of the overpayment being refunded on an account needs to be held for a pending adjustment or dishonored check or credit reversal. This can occur when a locally input action comes onto an account right after the Master File analysis has been completed. This happens very infrequently so no description of the interest computation is included in this procedure. See IRM 20.2, Interest for additional information.

When the abated amount is more than the most recent assessment, there will be more than one computation line on the COMPA. The total of the abated amount (or amounts, if combined) will be shown on the last line of the COMPA screen with each preceding line showing the balance after subtracting the last assessment. Continue this sequence by always subtracting the assessment prior to the last.

These computations are based on the assessment dates and the manual refund input date without consideration of payments on the account following the assessment dates. See IRM 20.2, Interest, for guidance.

The following table is an example of this type of manual credit interest computation. The table below displays posted transactions. The original return was filed and full paid before the audit assessment posted.

Setting up the interest computation.

Description of Interest on abated amounts.

The interest on the credit offset interest is combined into the TC 776 amount that is paired with the TC 846 refund transaction. This interest will be reversed when the generated refund reversal posts, following input of the refund stop (NOREF). As a result, any interest due on the credit offset interest will have to be manually computed and entered in the TC 770 interest field on the Form 5792 refund document. Attach prints of the COMPA screens to the Form 5792.

The TC 776 interest transactions, paired with the TC 826 offsets, will not be reversed when the refund reversal posts. As a result, it should be included in the overpayment amount shown on the Form 5792. Note in the remarks section that the total TC 776 amount on the offsets is included in the overpayment amount.

In the abatement example, all of the transactions will be posted in the same cycle as the TC 846.

Occasionally, more than one offset amount may be paired with a single TC 776 amount. This occurs when the offsets are split to pay separate accruals on the gaining account and post with the same transaction date on the gaining account.

Any generated TC 776 interest amounts paired with offsets require no additional verification.

The posting dates on the TC 776 paired with the offsets will match the posting dates of the offsets on the gaining module. The TC 826 will post with the credit availability date of the TCB loss year module.

If generated interest is paid on a TC 826 transaction, the TC 826 will be immediately followed by an INT-TO-DT>MMDDYYYY. If no interest is paid on the offset amount, it will be followed by an INT-TO-DT>00000000. The INT-TO-DT dates are used as the start dates for the interest on the corresponding TC 776 amounts when the manual interest computation is done.

The interest savings claimed for the refund must be reduced by the TC 776 amounts paired with the offsets and any additional interest paid on this interest.

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Listed below is an example of the manual credit interest computation on accounts with TC 776 interest paired with TC 826 offsets.

Preparation of the Form 5792 should be completed within the Refund Suite of the Integrated Automation Technologies (IAT) tool.

In the event IAT is unavailable, It is recommended that an online version of Form 5792 with the remarks section comments and applicable portions of Section II, and IV of the checklist be used. The Form should be preprinted (overlaid) with the following entries.

Use prints of the ENMOD and TXMOD displays to prepare the Form 5792 as shown below.

The remaining sections will need to be entered on the online Form 5792 prior to printing except the signatures of the authorizing officials. Additional remarks can be entered online or handwritten on the Form after they it is printed:

The online Form 5792 can be temporarily stored pending verification of the refund input but should be deleted following verification of the refund to avoid potential Unauthorized Access (UNAX) violations.

Annotate R on the listing (in red) next to the 42nd day or last day for input as each refund document is prepared.

After the Form 5792 is signed, make a photocopy. This copy will be used for the Cycle File copy that will also be used for the refund monitoring documentation.

IDRS CC RFUND is used to input manual refunds on IDRS. The individual who does the RFUND input should never do the subsequent REFAP confirmation input. Information regarding command codes are contained in IRM 2.4.20, IDRS Terminal Input-Command Codes RFUND and REFAP.

CC RFUND requires a sixth position definer R for initiating the refund input screen. Call up the CC TXMOD display for the account, then overlay TXMOD with CC RFUND R and enter. The response will be the input screen display. The display for RFUND input will appear as follows:

The description of line entries' name and address information will be brought in automatically.

Using the B Control Base Status on the refund input will establish a Control Base to the employee's IDRS number. This Control Base will be referenced when the CC NOREF is input and should remain open in B status until all refund related actions are completed.

After inputting each refund, print the request completed screen twice. Associate one copy of the print to the original Form 5792 and hand walk the documents to the Manual Refund team for CC REFAP input. Retain one copy of the request completed screen prints to attach to the Cycle File copy of the Form 5792. Attach the RFUND screen prints to the Cycle Folder copies of the Form 5792, staple the prints to the bottom of the Form 5792 so that the remarks section remains uncovered. Place the current day's file copies of the Form 5792 in the front of the Cycle Folder.

Annotate the date of input on the listings to the right of the R. This provides a quick way of screening the targeted records to determine if all actions have been completed. Due to the last day of input dates, all records on each page will not be worked in order.

Treasure Inspector General for Tax Administration (TIGTA) and Government Accountability Office reviews of TC 840 manual refund processing determined IRS managers and employees have not been adequately monitoring refund transactions following the input of refunds. This was identified as contributing to the rate of erroneous refunds occurring at all campuses.

As a result of the audits, specific instructions were added to IRM 3.17.79, Accounting Refund Transactions and IRM 21.4.4.5 Other Manual Refund Requirements, requiring documentation of monitoring actions by managers and employees. All requests for manual refunds must be controlled and monitored on IDRS by the initiator to prevent duplicate, erroneous refunds.

Monitoring activity is intended to prevent erroneous refunds from being issued as a result of Master File processing, or other local actions, pending posting of the manual refunds.

After the TC 840 posts, the accounts should be monitored to verify the posting of the refund reversals (TC 777 and TC 841). Use the IDRS Inventory Report to identify when the TC 841 transactions post. The BOD Category (third column from the left) on the report will update from RFDL to 841P when the TC 777(s) and TC 841(s) are processed.

If a refund is missed by San Francisco Financial Center (SFC), the Activity information on the Control Base will change from RR200X2480 to RIM200X24. RIM means the refund interception was missed. If this occurs, there has been a duplicate refund issued and the account should be worked as an erroneous refund.

The inventory report should be used to check for credit or outstanding balances (other than the refund amount) during the monitoring period.

Monitoring documentation must be maintained for a period of three months. A complete documentation file will include weekly monitoring actions completed by the employee, as well as the manager's completed review.

IDRS Control Bases are established when manual refund transactions are input. The input format assigns a Control Base to the employee number of the employee doing the input. The open Control Base information should be used to track the status of accounts until all transactions are posted.

The IDRS Control Base display information is formatted as follows:

The IDRS CC input screen requires the input of a Status Code and Category Code. It automatically generates an Activity description.

The IDRS CC NOREF input screen requires the input of a Status and Category Code and a revision to the Activity description.

When the reversal of the TC 776 and TC 846 is processed, the Category Code will be changed to 841P. This will provide an easy visual reference to check for on the weekly IDRS Inventory listing.

When all actions are completed, the IDRS Control Base should be closed using CC ACTON.

The Refund Interception Savings Log is used for tracking the review statistics for the Refund Intercept Program. This spreadsheet is maintained by fiscal year ending with weekly results broken down by posting cycle for BMF Accounts and the Combined Total. Campuses email monthly completed Logs the Friday or Monday after month end to Refund Interest Analyst Garry Sewell and Submission Processing Headquarters Analyst Crystal Noble. A copy of the current Refund Intercept Savings Log can be found on the Submission Processing website .

The transaction dates (23C) of the TC 846 is used to designate the month the results are reported to.

The Refund Interception Savings log is designed to automatically provide weekly and monthly totals of the number of accounts reviewed, the number of refund stops input and the total interest saved. Also, the Log generates quarterly, half-year and full year totals. The log is designed to automatically modify all of the totals when corrections to previously entered data are made.

The data collected from the sites are used to compile Headquarters reports.

During receive date review of the Refund Intercept listings it may become apparent returns have posted with incorrect received dates. Research for inconsistencies such as the received date is earlier than a previously posted TC 460 or a TC 140 posted later than the IRS received date. Other examples may be a number of returns posted with an odd received date such as 05-11-09 present on the cycle listing with a current Julian Date and current year 2010 is shown in the DLN.

Order the questionable returns from Files within two weeks following the receipt of the cycle listing. If the posted received date is identified as correct/incorrect, issuance of an additional refund of the interest may be necessary. Subtract the savings and volume from the Refund Intercept Report.

If you determine the posted received dates are in error, issue manual refunds without interest and stop the generated refunds.

If the received dates are incorrect, the Assessment Statute Expiration Date (ASED) and correspondence received dates (CRD) will need to be updated and/or added to the modules. The Collection Statute Expiration Dates (CSED) does not need to be corrected. They are established by the 23C posting dates of the TC 150 and are correct as shown.