A series of printed forms are available for use in Life Insurance Company cases. Worksheets for computing life insurance company taxable income are available on the Appeals TCS web site.

Most of the forms are also available at the Electronic Publishing Catalog web site.

Refundable credits are different from non-refundable credits:

Examples of current refundable credits include:

Different procedures apply for refundable credit adjustments, depending on whether or not the adjustment is included in the definition of a statutory deficiency per IRC 6211.

Refundable credit adjustments not included in the definition of a statutory deficiency per IRC 6211 are all refundable credits except earned income credit, additional child tax credit, and credit for federal tax paid on fuels.

Adjustments to earned income credit, additional child tax credit, and credit for federal tax paid on fuels are included in the definition of a statutory deficiency per IRC 6211.

IRC 32 provides for a refundable earned income credit (EIC) to eligible taxpayers. The computation of the credit is affected by changes made to adjusted gross income and earned income so a recomputation of this credit is generally necessary.

Per IRC 6211(b)(4), include any adjustment to the earned income credit under IRC 32 in the statutory deficiency. Adjustments to the earned income credit became part of the deficiency as defined in IRC 6211 for deficiencies determined after November 10, 1988.

On Master File accounts enter the earned income credit separately.

In the settlement computation, identify the increase or decrease in tax before an adjustment is made to the earned income credit. The current Forms 5278, 4549, etc. no longer separately state the increase or decrease in tax before an earned income credit adjustment. Provide the information on Form 3610 if the increase or decrease in tax before an earned income credit adjustment is not identified on the Forms 5278, 4549, etc.

The following exhibits contain suggested formats to use to explain the earned income credit adjustment in settlement computations.

IRC 24(d) provides for a refundable additional child tax credit in addition to the non-refundable general child tax credit provided in section 24. IRC 24(d) applies for tax years beginning after December 31, 1997.

When the law was originally passed allowing refundable additional child tax credit under IRC 24(d), the definition of a deficiency per IRC 6211 was not changed to include the refundable additional child tax credit as part of the deficiency.

On December 21, 2000, IRC 6211(b)(4) was amended to retroactively add IRC 24(d). Since the change in the law was made retroactive, the additional child tax credit must be shown as part of the statutory deficiency for all years where IRC 24(d) applies.

On Master File accounts refundable additional child tax credits are shown separately on the transcript:

In settlement computations, identify the increase or decrease in tax before any adjustment is made to the refundable additional child tax credit. The current Forms 5278, 4549, etc. no longer separately state the increase or decrease in tax before any refundable additional child tax credit adjustment.

Per IRC 6211(b)(4), include any adjustment to the credit for federal tax paid on fuels under IRC 34 in the statutory deficiency.

In settlement computations, identify the increase or decrease in tax before any adjustment is made to the federal tax paid on fuels. The current Forms 5278, 4549, etc. no longer separately state the increase or decrease in tax before any federal tax paid on fuels adjustment.

Pre-refund cases (also called frozen refund cases) are those selected for examination prior to scheduling refunds claimed on returns. The IRS identifies issues that may indicate a taxpayer is not truly entitled to the refund amount claimed. The entire refund is generally held pending assurance of entitlement. The refund is released when the taxpayer provides information indicating he/she is entitled to the refund. To determine the status of refunds, however, secure a transcript of account before a case is closed. (See IRM 8.17.3, Preparing a Statement of Account.)

Examples of pre-refund examinations include earned income credit cases, CID initiated freeze codes, and unallowable tax holds.

The general procedure for settlement computations for cases where a refund is still being held is the same as other individual income tax cases with the following exceptions:

As part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the tax rates were reduced. In order to provide taxpayers with the benefits of the new 10% bracket more quickly, advance payments were issued in 2001 based on the tax year 2000 return information. If a taxpayer did not receive the maximum credit for their filing status, the taxpayer was entitled to an additional credit on their 2001 income tax return.

The credit was based on the filing status and tax of tax year 2000. The cumulative credit amounts between 2000 and 2001 cannot exceed the following:

The following are terms for the different types of credits discussed in this subsection:

The Jobs and Growth Tax Reconciliation Act of 2003 raised the child tax credit from $600 to $1,000 per child starting with tax year 2003 income tax returns. The Act further directed the Treasury to provide the difference, up to $400 per child based on the children claimed on the 2002 tax year return, as an advance payment to each eligible taxpayer during the summer of 2003.

The calculation of the advance on child tax credit was based on original return data from posted 2002 tax year returns.

Eligible taxpayers received the advance on child tax credit checks in 2003. The advance on child tax credit posted to eligible taxpayers' 2002 tax year account with a TC 766 and a Credit Reference Number of 338. Any advance on child tax credit remaining on the account (for example, due to undeliverable funds) was reversed in cycle 200352 with a TC 767.

Do not confuse the advance on child tax credit posted to the 2002 tax year account (TC 766, Credit Reference Number of 338) with the 2002 tax year additional child tax credit (TC 766 with a Credit Reference Number of 336).

Also, do not confuse the advance on child tax credit posted to the 2002 tax year account with the ITR posted to the 2000 tax year account which also posted with a TC 766 and a Credit Reference Number of 338. The advance on child tax credit is completely different than the ITR posted to the 2000 tax modules.

See IRM Exhibit 8.17.5-11 for information pertaining to TC 766 and CRN for advance on child tax credits.

Joint return filers:

Computations involving 2002 income tax returns:

Computations involving 2003 income tax returns:

IRC 6013 provides for filing joint returns. This subsection discusses the procedures for converting separate returns to joint returns in non-docketed cases.

When collection of income tax is in jeopardy, the Area or Field Operations Director terminates a taxpayer’s taxable period, and has an assessment made for tax and penalty determined to be due, under the conditions found in Policy Statement P-4-89 and the procedures in IRM 4.15, the Jeopardy/Termination Assessments.

At the end of the usual annual accounting period, the taxpayer is responsible for filing a return for his or her annual accounting period.

Upon filing the full year return, the Area or Field Operations Director’s office determines the correct liability and, where appropriate, issues a preliminary notice or notice of deficiency. The statutory deficiency is the difference between the liability determined and the liability entered on the full-year return. If the taxpayer does not file a full-year return, follow the "substitute for return" procedures. The statutory deficiency is not reduced by the assessment under IRC 6851. The taxpayer may protest the notice to Appeals. In some cases, it is possible for Appeals to receive the case prior to issuance of the notice of deficiency. In these cases, Appeals issues the notice of deficiency.

In preparing settlement computations, use the format similar to jeopardy assessment cases, except change "jeopardy assessment" to "termination assessment under IRC 6851."

See IRC 7429(a) and Termination Assessments in IRM 8.7.1 for additional information.

See IRM 8.17.4.23, Notice of Deficiency Involving Termination Assessment under IRC 6851 (Termination of Taxable Period), for notice of deficiency procedures.

Jeopardy assessments of income, estate and gift taxes are covered in IRC 6861, and jeopardy assessments on all other taxes are covered in IRC 6862.

Generally settlement computations for cases involving jeopardy assessments follow the pattern of a regular settlement computation, except for the changes noted below.

Prepare a statement of account as set out in IRM 8.17.3, Preparing Statement of Accounts.

If an abatement is being made, prepare Form 1331, Notice of Adjustment, for those years assessed on NMF. Responsibility for preparation of this form may vary among offices. See IRM Exhibit 4.4.22-2 and IRM Exhibit 4.4.22-3 for details on preparing Form 1331.

Appeals procedures are covered in IRM 8.7.6, Appeals Bankruptcy Cases.

If a settlement computation is needed in a case where an assessment was made under bankruptcy/receivership proceedings, follow the format of jeopardy assessment cases.

If it is determined an overpayment or deficiency in a case is barred by statute, special annotations are made to Form 3610.

The same procedures apply to barred overpayments and barred deficiencies whether the case is non-docketed or docketed.

) If the total overpayment or deficiency is barred, asterisk (*) the amount and add a footnote to the Form 3610. The following is an example of the footnote for a barred overpayment case:

"Overpayment barred by statute of limitations."

If only part of the overpayment or deficiency is barred, asterisk (*) the total amount and add a short summary of the barred amount to the bottom of the Form 3610. The following is an example of the summary for a barred overpayment case:

It is the responsibility of local Appeals office to provide tax recomputation assistance for settlements and judgments in refund litigation cases when it is requested by Counsel.

Since refunds involve payment of interest by the Government, these recomputations must be furnished without undue delay.

Show breakdowns of the tax, penalties, deficiency interest and accrued interest by periods to enable the Campus to properly handle the overpayments and process the refunds.

Compute accrued (statutory) interest and show it in an accrued interest column of Form 3610 if requested by the attorney.

Forms needed to prepare recomputations are the same as those presently being used. Form 3610 may be revised to resemble the Form 6287 previously used as the face sheet.

See See Exhibit 8.17.5-12.