An erroneous refund is defined as, "the receipt of any money from the IRS to which the recipient is not entitled. This definition includes all erroneous refunds regardless of taxpayer intent or whether the error that caused the erroneous refund was made by the IRS, the taxpayer, a systemic issue, or a third-party."

IRM 3.17.80, Accounting and Data Control, Working and Monitoring Category D, Erroneous Refund Cases in Accounting Operations, provides guidelines for reviewing the facts and evaluating the circumstances surrounding a Category-D erroneous refund. and trying to recover the erroneous refund. These procedures contain requirements for obtaining restitution, and/or resolution.

The authority for these policies are:

The Submission Processing Headquarters Erroneous Refund Analyst (and back-up) is the individual responsible for the oversight of the Category-D, Erroneous Refund Recovery program.

The Accounts Management Headquarters Erroneous Refund Analyst (and back-up) is the individual responsible for creating the IRM 21.4.5, Erroneous Refunds, for all Business Operating Divisions (BOD’s) to use when an erroneous refund is identified.

The Erroneous Refund HQ Points of Contact are individuals within the various BODs for communications to and about erroneous refunds that happened within the HQ Analyst’s BOD.

An Accountable Officer is any government employee or officer who, by reason of employment, is responsible for or has custody of government funds. Accountable Officers are held accountable for losses occurring within their accounting jurisdictions until restitution is made or relief is granted.

The Federal Accounting Standards Advisory Board (FASAB) establishes accounting concepts and standards. The Federal Financial Management Improvement Act (FFMIA) of 1996 prescribes that agencies implementation and maintenance of financial management systems substantially comply with Federal Financial Management Systems requirements, applicable Federal Accounting Standards and U. S. Government Standard General Ledger at transaction level and audits to report compliance.

The Field Director, Submission Processing, is normally the Accountable Officer for the campus accounting system. The Field Director, Submission Processing, usually delegates the authority for carrying out the accounting function. However, the ultimate responsibility remains with the Field Director, Submission Processing who can be held financially responsible if proper controls are not maintained. The Accountable Officer is responsible for ensuring that the following principles and standards are met in maintaining the accounting system.

This IRM is updated and published annually after review and concurrence by impacted stakeholders according to the clearance process established in IRM 1.11.9, Internal Management Documents, Clearing and Approving Internal Management Documents (IMDs).

Functional areas are responsible for reviewing the information in this IRM annually to ensure accuracy, consistency, and to promote effective program administration.

The program effectiveness includes conducting reviews and analysis to detect and identify material or significant deficiencies that could adversely impact IRS audits and/or financial statements.

These reviews are necessary to ensure Submission Processing is conducting business as prescribed in the governing IRM's and are designed to identify potential internal control deficiencies that may impair the integrity of the general ledger accounts and/or financial reporting.

A vulnerability assessment identifies, quantifies, and prioritizes the vulnerabilities of government programs and assets including systems/technology, property, funds, and employees.

Vulnerability assessments may be conducted on any business process to assess the risks of business failure and/or weakness caused by internal or external factors.

Program Reviews are mission critical to the health of accounting and deposit programs to ensure integrity of the general ledger accounts and accuracy of the financial statements.

It is essential that each function conducts its operations with an emphasis on mitigating risks, identifying best practices, and adhering to IRM requirements.

An objective assessment of program compliance, including all applicable procedures and guidelines, is necessary to ensure that adequate internal controls are in place.

A program review ensures actions are in accordance with IRM procedures. SP HQ Accounting and Deposit Section conducts program reviews to verify compliance with IRM requirements, address TIGTA/GAO findings, identify risks to internal controls, address error trends, and training needs, as needed.

In addition, the reviews ensure IRM procedures are applicable, adequate, and adhere to Department of the Treasury and/or IRS guidelines.

See Exhibit 3.17.80-18 for commonly used acronyms and their definitions.

See IRS Style Guide - Abbreviations and acronyms for commonly used acronyms and their definitions.

These procedures must be used in conjunction with IRM 3.17.63 Redesign Revenue Accounting Control System (RRACS), IRM 3.17.64 Accounting Control General Ledger Policies and Procedures, IRM 3.17.243 Miscellaneous Accounting, IRM 21.3.3 Incoming and Outgoing Correspondence/Letters, IRM 21.4.5 Erroneous Refunds, IRM 3.0.167 Losses and Shortages, IRM 2.3 IDRS Terminal Responses, IRM 1.11.5 Publishing the Internal Revenue Manual (IRM), IRM 1.11.8 Service-wide Electronic Research Program (SERP), IRM 25.13.1, Taxpayer Correspondence Services, IRM 10.5.1 Privacy Policy, IRM 10.5.1.6.9.4 Faxing, IRM 10.5.1.6.8 E-mail. IRM deviations must be submitted in writing following instructions from IRM 1.11.2.2 Internal Management Documents System - Internal Revenue Manual (IRM) Process, IRM Standards, and elevated through appropriate channels for executive approval.

IRM 1.2.2.2.6, Delegation Order 1-6, Certification and Approval of Internal Revenue Collection

IRM 1.2.2.2.15, Delegation Order 1-17, Audit and Settlement of Accountable Officer’s Accounts - Revenue Accounting and Submission Processing

IRM 1.2.2.2.16, Delegation Order 1-18, Settlement of Accounts and Relief of Accountable Officers - Administrative Accounts

IRM 1.2.2.2.17, Delegation Order 1-20, Collections from Employees of the Internal Revenue Service

IRM 1.2.2.2.22, Delegation Order 1-25, Termination of Collection Action against Federal Depositaries

Treasury Directive 32-04, dated February 16, 2007 TREASURY DIRECTIVE 32-04 | U.S. Department of the Treasury

Treasury Directive 34-02, dated February 25, 2016 TREASURY DIRECTIVE 34-02 | U.S. Department of the Treasury

Management has the primary responsibility for providing a system of internal controls. Management is held accountable for internal controls. Management is liable for losses where it fails to provide proper internal controls. However, all personnel have a responsibility for understanding and ensuring that internal controls are functioning as intended.

All IRS employees must take care to protect Personally Identifiable Information (PII). Any loss of PII could result in information being compromised to commit identity theft. PII information must be encrypted on computers and e-mail. Sanitize taxpayer PII or use secure messaging. If you suspect or know of a potential information loss, report it to your manager and:

There are laws requiring the appropriate reporting of records loss.

All IRS employees must refer to the Document 12990, IRS Records Control Schedules for the National Archives and Records Administration (NARA) retention and disposition requirement for the erroneous refund case files and forms throughout the IRM.

All IRS employees must have a clear understanding that Classified waste is documentation containing taxpayer entity or account information that is not part of the case and is not needed for audit trail purposes. Refer to IRM 21.5.1, General Adjustments for guidance on handling classified waste to prevent inadvertent/unauthorized destruction of records.

All applicable laws relating to funds and appropriations must be complied with. Each fund (e.g., General Ledger) or appropriation must be used for the purpose authorized by law. Accounting records must be designed to show compliance with this requirement.

The accounting system must provide financial records consistent with standards set by other agencies and the Department of the Treasury in connection with its central accounting and reporting responsibilities. The financial data must be correct and reported timely to meet the needs of the President and Congress for budget activities.

Each accounting system must maintain complete and reliable records for all funds, property, and other assets, as well as liabilities, obligations, receipts, and revenues. All financial transactions must have documents supporting a summary record and financial report. Procedures implemented in carrying out the operation will be simple, efficient, practical, and must apply all legal and regulatory requirements. The responsibility for each accounting function, such as preparing documents, preparing journals, posting ledgers, reviewing, and balancing must be performed by separate units within the Accounting Operation to provide internal checks and minimize opportunities for fraudulent, unauthorized, or irregular acts.

The organizational structure, operating procedures and administrative practices are adopted throughout management to provide reasonable assurance that programs and administrative activities are effectively carried out.

The highest standards of truthfulness and honesty must be applied in accounting for the receipt, disbursement, and application of public funds. Management and the Congress must be able to rely on the accuracy of all transactions in future planning. To meet these standards competent leadership and qualified technicians are of prime importance.

An erroneous refund is defined as “the receipt of any money from the IRS to which the recipient is not entitled”. This definition includes all erroneous refunds regardless of taxpayer intent or whether the error that caused the erroneous refund was made by the IRS, the taxpayer, or a third party.

Erroneous Refunds are processed according to categories (A1, B, etc.) based upon certain characteristics on the tax module. The categories are defined in IRM 21.4.5, Erroneous Refunds, and must be used for processing all erroneous refunds.

For Un-assessable (Category D) erroneous refund cases processed in Accounting Control/Services, Erroneous Refund Unit, it is imperative that technicians use and be familiar with the instructions outlined in IRM 21.4.5, Erroneous Refunds, when processing cases.

Accounting Erroneous Refund team employees must be able to identify Duplicate Manual Erroneous Refund (DMER) cases.

A DMER is created anytime a manual refund (TC 840) and a computer generated refund (TC 846), or two manual refunds are issued for the same overpayment, one of which the taxpayer is not entitled to receive. This definition applies regardless of taxpayer intent or whether the error that caused the DMER was made by the IRS, the taxpayer, or a third party.

Because of the seriousness of this kind of erroneous refund it is imperative for you to review:

Section 3705 (a) of the IRS Restructuring and Reform Act of 1998 (RRA 98) requires employees to include their title (e.g., Mr., Miss, Mrs., or Ms.), last name, telephone number and Integrated Data Retrieval System (IDRS) number on manually generated and handwritten correspondence.

Refunds issued to an identity thief are Category D erroneous refunds; however, the provisions of this IRM do not apply. Identity Theft (IDT) Erroneous Refunds, refer to IRM 3.17.64.16, Erroneous Refunds, Accounting Control General Ledger Policies and Procedures, IRM 3.0.167.8 Disbursement Losses, Losses and Shortages, and Exhibit 3.17.80-19 Write Off Cover Memorandum for Identity Theft Erroneous Refund Write-Off Procedures.

See Integrated Talent Management (ITM) Course 10824, Researching and Resolving Erroneous Refunds, located at: Integrated Talent Management (sharepoint.com).

Refer taxpayers to the Taxpayer Advocate Service (TAS) (See IRM Part 13, Taxpayer Advocate Service ) when the contact meets TAS criteria (See IRM 13.1.7, Taxpayer Advocate Case Processing, Taxpayer Advocate Service (TAS) Case Criteria and you can’t resolve the taxpayer’s issue the same day. The definition of “same day” is within twenty-four hours. These “Same day” cases include cases you can completely resolve in twenty-four hours, as well as cases in which you have taken steps within twenty-four hours to begin resolving the taxpayer’s issue(s). Do not refer these cases to TAS unless they meet TAS criteria, and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Taxpayer Advocate Case Processing, Taxpayer Advocate Service (TAS) Case Criteria Same Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance order).

TAS has reached agreements with the commissioners of the Taxpayer Services (TS) Division, Small Business and Self-Employed (SB/SE) Division, Tax Exempt and Government Entities (TE/GE), Criminal Investigation (CI), Independent Office of Appeals (Appeals) and Large Business and International (LB&I), that outline the procedures and responsibilities for the processing of TAS casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as service level agreements (SLAs).

The SLAs contain basic requirements for handling TAS-referred cases and includes specific actions to take on TAS referrals and specific time frames for completing those actions. Employees in the business operating divisions will acknowledge receipt and provide the name and phone number of the IRS employee assigned to work the case via Form 3210, Document Transmittal, secure messaging E-mail, facsimile, or by telephone within three workdays of the Form 12412, Operations Assistance Request (OAR) receipt. If necessary, the assigned employee/manager will contact the TAS employee and negotiate the completion date in resolving the OAR actions.

The SLAs are found at: Service Level Agreements (sharepoint.com)

While TAS can/will make requests (e.g., OAR) for taxpayers with hardship situations, under no circumstances will there be a release of credits to the taxpayer with the hardship unless the HQ Submission Processing (HQSP) Erroneous Refund Analyst (or Back-up) has been informed of the need for release of the credits.

If it is necessary to release credits to the taxpayer with the hardship

Continue monitoring the case for any available credits until the Erroneous Refund Statute Date.

Write-off the account if the balance is not re-paid.

Send the taxpayer a Form 1099-C if the balance is $600.00 or higher and not re-paid (See IRM 3.17.80.1.26 and IRM 3.17.80.1.26.1, Maintaining Case Files, instructions regarding the sending of the letter and the Form 1099-C).

General Ledger Accounts for Erroneous Refunds:

Each case is controlled with a unique document number on Form 3809. This document number allows for the tracking of an individual case from start to completion.

IRS must report disbursement losses per IRM 3.0.167, Losses and Shortages. Areas causing erroneous refunds must provide documentation to support write-off actions if considered uncollectible (ERSED has expired).

Erroneous Refund cases must be sent to the respective Submission Processing site Erroneous Refund function documented and accurately prepared, as outlined in IRM 21.4.5, Erroneous Refunds.

History Sheets (Form 12356) must be prepared from the point of discovery. The Form 12356 must be used by the area discovering the erroneous refund per IRM 21.4.5.6.1, Account Actions for Category D Erroneous Refunds. Accounting Operations must also include documentation of actions taken, pending actions, telephone calls, copies of all letters, etc., must be annotated on the accounting Erroneous Refund History Sheet and be retained in the case file. This assists in substantiating future write-off actions if not recovered in the manual billing process.

The ERSED is two years after making the erroneous refund unless the refund was induced by fraud or misrepresentation of a material fact, in which case the ERSED expires five years from the date the taxpayer receives the erroneous refund (first use TCIS paid date if available, then use TC 846 date on IDRS). If there are causes that do not appear to be covered in this IRM, seek assistance to pursue cases through coordination the Headquarters Erroneous Refund Analyst to obtain Chief Counsel's approval to pursue recovery using the five year duration. Refer to IRM 3.17.80.1.21.1, Erroneous Refund Statute Considerations.

Classification depends on the type of error which caused the Erroneous Refund. For additional information, See Exhibit 3.17.80-2 Erroneous Refund Flow Chart. All erroneous refunds will be classified into categories as described in IRM 21.4.5, Erroneous Refunds.

The entire amount of the unpaid erroneous refund must be reversed into the 1530/1535/1540/1543/1545/1547 General Ledger and recovered, within the ERSED, through voluntary repayment, right of offset, or civil suit pursuant to IRC 7405. This process forms the basis for the instructions in this IRM to monitor, recover or write-off as unrecoverable Erroneous Refund cases.

Figure 3.17.80-1

Shown is a TXMOD Screen which highlights the -U Freeze and ERR-REF-BAL-DUE which is under the Posted Transactions Section to the right of the TC 700.

Please click here for the text description of the image.

The Customer Account Data Engine (CADE) 2 solution is comprised of several components, to modernize the IRS to a daily processing environment with several transition states.

The components of CADE 2 Transition State 1 in January 2015 include:

IMF transactions posting time frames are outlined as follows:

CFOL Command Code IMFOL will contain an indicator on the screen to identify whether the account is a Daily account or a Weekly account.

For Notice Review and/or Erroneous Refund units, when CC NOREFP is initiated, the following chart explains when the TC 846 and systemic TC 841 will be displayed:

This receivable account is used to record erroneous refund receivables that result in a court case (initiated by Criminal Investigations).

The RRACS procedures for this account are in IRM 3.17.64, Accounting and Data Control, Accounting Control General Ledger Policies and Procedures, procedures for a review of this account are in IRM 3.17.15, Accounting and Data Control, Accounting Reports Analyst Responsibilities, and procedures for write off in the IRM 3.0.167, Accounting and Data Control, Losses and Shortages.

1535 Account will be supported by:

For court-ordered restitution (or IRS employee fraud) cases identified by CI, process as follows.

Cases received from the Criminal Investigation (CI) Field are identified with a "CRIMINAL INVESTIGATION RESTITUTION CASE" cover sheet.

CI will:

Update the IDRS Category Code to "ERRF," reassign the IDRS control base to the CI-SDC unit in Ogden, change the status to "A" with activity code "ERRORREF(CI-RestitutionCase)."

If 45 days after the date of the initial letter (use ENMOD for the initial letter date if there is not a copy of the letter), the Erroneous Refund team will review each case file.

The Erroneous Refund team will follow-up with taxpayer quarterly (balance $600.00 or over) or semi-annual (balance $599.99 or less) correspondence reminding the taxpayer of the current balance.

The Erroneous Refund team will monitor the account for payments/credits to post to the account as they become available using generated TC 844 transcripts (See IRM 3.17.80.1.29, Processing 844 Transcripts (TRANS-844) -U Freeze).

Internal Revenue Code IRC 6404(e) requires that the IRS abate any assessed interest from the date of the refund to the date by which repayment is demanded on any Erroneous Refund of $50,000.00 or less, provided the taxpayer or any related party in no way caused the Erroneous Refund to occur.

Determine whether the taxpayer caused the erroneous refund and if interest is due.

Interest assessments are abated when the interest is not legally due, excessive, or barred under IRC 6404(a) . See IRM 20.2.7.3, IRC 6404(a), Excessive or Not Legally Due.

In cases involving requests for abatement of interest on erroneous refunds, the facts must be sufficiently researched (e.g., information provided by a taxpayer, post mark dates on documents, TXMOD, etc.) and the documentation for acceptance or denial attached to the case.

See IRM 20.2.7, Abatement and Suspension of Debit Interest, for further instructions or clarification on abatement of interest.

Interest on the Erroneous Refund is recovered in the same manner as the Erroneous Refund to which the interest relates. Interest (at the applicable rate) is charged on the amount of the Erroneous Refund from the date of issuance until the date of recovery unless waived under IRM 1.2.1.12.1, Policy Statement 2-10, Abatement of Interest on Erroneous Refunds.

Policy Statement 2-10, Abatement of Interest on Erroneous Refunds, requires that:

Delegation Order 20-1 (Rev.2), paragraphs 14 through 16, IRM 1.2.2.14.1, Abatement of Interest, states that IRS officials have the authority to abate interest on Erroneous Refunds under IRC 6404(e) (2) interest can be abated when the following conditions apply:

Interest considerations are covered in IRM 20.2.7.7, Interest, Abatement and Suspension of Debit Interest, Erroneous Refunds, IRC 6404(e) (2).

After the Erroneous Refund is paid in full, interest must be computed and assessed ONLY if the credit is available to cover the amount of the interest. Only input TC 340 when any payments or credits are received before the ERSED expires and can be applied to the remaining interest owed. (See IRM 3.17.80.1.24.4, Taxpayer Repays in Full).

If the Erroneous Refund Statute Expiration Date (ERSED) is expired, the erroneous refund will be offset against any refund otherwise due the taxpayer so long as the offset involves the same taxpayer, the same type of tax, and the same tax year to which the refund is related and is under the $5,000.00 tolerance. You must send an email to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ each time the tolerance is applied, make sure to cc the SP HQ Analyst listed in Exhibit 3.17.80-15 on the email, see note below.

Assessable erroneous refunds are refunds which the IRS will assess (credit reversals are not assessments) under the IRC. The assessment will be either a TC 290 Reason Code (RC) 51, as in the case of Category B erroneous refunds, or deficiency, as in Category A-1 or A-2 erroneous refunds or other assessable taxes, as in Category C.

Category D erroneous refunds, referred to as "unassessable" erroneous refunds, are refunds not resulting from a tax determination and are not assessable under the IRC.

If the case does not qualify for assessment as described in IRM 21.4.5, Erroneous Refunds, the Erroneous Refund can be recovered only by the following:

When Category A-1 or A-2 (Assessable) erroneous refunds are identified, review the case to determine if it meets Examination's criteria. See IRM 21.4.5, Erroneous Refunds. Tax decreases made in error must be forwarded to the Examination function.

For the IRS to make an assessment, the taxpayer must agree to the assessment or a Notice of Deficiency must be issued. The Notice of Deficiency gives the taxpayer ninety days to petition the tax court (One hundred and fifty days if the Notice of Deficiency is addressed to a taxpayer outside the United States). If the taxpayer does not petition, then IRS can assess after the ninety day period has expired. Notices of Deficiency must be issued before the ASED expires.

When a taxpayer repays the Erroneous Refund voluntarily:

If the taxpayer repays, prepare Form 3245, Posting Voucher - Refund Cancellation or Repayment and update IDRS to post the credit transactions. (See IRM 3.17.80.1.27, Refund Cancellation, Repayments and Replies to Correspondence).

If no response from the taxpayer:

When the case meets Examination's criteria, process per local Examination Notice of Deficiency procedures. Before routing erroneous refunds to Examination, be sure the case meets Examination's criteria and that the three year ASED has not expired.

To determine whether interest is due from the taxpayer, See Exhibit 3.17.80-1 Exhibit 3.17.80-1, Erroneous Refund Interest Considerations, and IRM 3.17.80.1.20, Interest Considerations, IRM 20.2.1, Interest Introduction, Standards and Guidelines or IRM 21.4.5.8, Erroneous Refunds on Designated and Non-Designated Payments.

Cases forwarded to Accounting/Erroneous Refunds Units must meet Category D criteria as defined in IRM 21.4.5, Erroneous Refunds. The related training material can be found in ITM Course 10824, Researching and Resolving Erroneous Refunds. Within the first ten workdays of receipt Accounting employees must:

If necessary, documentation is not received with the case file, update the History Sheet stating the reasons a copy of the case is being returned to the originator. Maintain the case and IDRS open control base for monitoring, the erroneous refund must be resolved before the TC 844 - U freeze can be released and the IDRS control base closed.

If the applicable ERSED, CSED or ASED has not expired, but is imminent, expedite the processing of the case (See IRM 3.17.80.1.24.1, Working Statute-Imminent Cases). Prepare appropriate Erroneous Refund correspondence and Form 2209, Courtesy Investigation (or use Integrated Collection System (ICS) if it is available):

Review the case file for interest which will be due from the taxpayer (See IRM 3.17.80.1.20, Interest Considerations and Exhibit 3.17.80-1, Erroneous Refund Interest Considerations).

If the ERSED two or five year will expire in approximately three months, the Erroneous Refund amount is over ≡ ≡ ≡ ≡ ≡ ≡, issue the appropriate Erroneous Refund letter and issue Form 2209 (or access ICS if available). See IRM 3.17.80.1.24.1, Working Statute-Imminent Cases.

Erroneous Refund Unit employees must verify the correct blocking series posted with the TC 700 false credit (58 Document Code, 950-999 blocking series). This unique blocking code produces the displayed literal Erroneous Refund Balance ("-U" Freeze) on the IMF-only accounts. For all BMF accounts it will be necessary to place a history item on IDRS using the same literal, Erroneous Refund Balance.

Recovering multiple unassessable Category D erroneous refunds issued to the same taxpayer by different Submission Processing sites on the same tax year will be combined as one case and worked by the site according to (d) below to prevent multiple bills from being sent to the same taxpayer.

Maintaining multiple Erroneous Refund check issue cases by one site will benefit the IRS by offering equitable treatment of taxpayers and improved customer service.

If Erroneous Refund amounts are not recovered by the ERSED, return the appropriate portion of the amount and case to the issuing site Agency Location Code (ALC).

Submission Processing site Erroneous Refund Coordinators are listed in Exhibit 3.17.80-4.

Make sure that applicable statutes are still open. (See IRM 21.4.5, Erroneous Refunds)

History Sheets and supporting documentation are necessary to substantiate the Erroneous Refund and any future write-off actions. This applies to cases received from other areas. If pertinent documentation is not received with the case, including Form 12356, Erroneous Refund Worksheet, update the local History Sheet stating the reasons. Return a copy of the case by email to the originator for correction or request complete documentation.

Combination cases will have both a CSED and ERSED applicable. (See IRM 21.4.5.15.1, Collection Statute Expiration Date for Category D Erroneous Refunds)

When an assessable tax liability plus a unassessable erroneous refund amount exists:

See IRM 3.17.80.1.21, Methods Used to Recover Erroneous Refunds, for cases deemed valid as a five (5) year ERSED. See IRM 20.2, Penalty and Interest, and IRM 3.17.80.1.20, Interest Considerations, for instructions when interest will be applicable.

The following procedures apply to transferring refunds erroneously posted (TC 840 or TC 846) to the incorrect account. The unique TC 840 using the following blocking series will identify these as "dummy refunds," , and not refunds which are going to be issued. This must coincide with input of a TC 971 AC 030 with the cross reference account number.

Prepare Form 12857, Refund Transfer Posting Voucher, to post a TC 841 to the injured taxpayer's account and a TC 840 to the account of the taxpayer who received the erroneous refund (Refer to IRM 21.5.2.4.23.10, Moving Refunds). The TC 841 date must be the date of the erroneously posted TC 840 or TC 846. (See Figure 3.17.80-20)

Figure 3.17.80-20

Optional Form 12857, Refund Transfer Posting Voucher, per IRM 21.4.5, Erroneous Refunds, has been developed, and will be received by Accounting to accomplish these transfer actions. Form 12857 carries 920 Blocking, with a true Julian Date. Form 12857 must contain cross-reference DLN, tax period, taxpayer and TIN, and file location, to indicate the erroneous original posting. These actions for a dummy refund must not result in a refund being released.

Please click here for the text description of the image.

If using Form 3753 (original only) to post the "dummy refund" (TC 840), include in "Remarks" "Not an Erroneous Refund."

Before being transcribed, these documents must be hand-carried to the appropriate area responsible for processing Form 3753, Form 12857 and Form 3809.

Retain copies of Form 3753, Form 12857, and Form 3809 in the Erroneous Refund case file.

Annotate the History Sheet with all actions taken.

Input TC 971 AC 030 on both accounts to cross-reference the injured and Erroneous Refund taxpayers.

Additional instructions will be found in IRM 21.5.2.4.23.10, Moving Refunds.

Maintain the established paper cases Prior to July 1, 2023, in one of the following orders:

Organize the case file as follows:

Pull the case every three months (if the balance is $600.00 or more) or six months (if the balance is $599.99 or less) for review. Cases will be pulled based on the previously established review date for each case. Continue corresponding with the taxpayers every three months or six months or until the two or five year ERSED expires. (See IRM 3.17.80.1.33, Write-Off Procedures for Unrecoverable Erroneous Refunds (for General Ledger account types 1530, 1535, 1540, 1543)). Perform the following actions:

The case History Sheet Must reflect that the three month reviews are being performed. Refer to the chart below:

For semi-annual (six month) reviews, refer to the chart below:

If no correspondence is pending with the taxpayer. File the case if:

Enter on the History Sheet the interest start date (date of demand or date of refund).

Mail the Letter 510C, Letter 3414C or Letter 3064C to the taxpayer with a return envelope. Place a copy of the letter in the case file.

Although it will rarely occur, if there are excess credits on the taxpayers account (e.g., because misapplied payments have posted to the account) where there is a full-paid erroneous refund, make sure the payment belongs to the taxpayer, if designated to another year or belongs to another taxpayer move the payment to the correct account. Continue to close the case when corrective actions have posted to IDRS and input the TC 845.

If a Letter 510C is returned as undeliverable, search for a more current address (for example: IDRS, ENMOD, INOLE, IRPTR, or access Accurint) and document actions on History Sheet. If a better address is found, include Form 8822, Change of Address, with the re-mailing of the letter. Completion of this form by the taxpayer authorizes an address change. If a notice is returned as undeliverable again and:

Form 2209 :

Initiate follow-up action using Form 2209-A when Form 2209 was issued over ninety days prior, if appropriate.

When a case indicates the applicable two or five year ERSED has expired, and the Internal Revenue Service no longer has the legal right to recover the Erroneous Refund:

Remove repaid case, move to the "closed" file when TC 845 is input to release the Erroneous Refund Freeze, if appropriate.

Retire the closed Erroneous Refund case file according to the guidelines in Document 12990, Records Control Schedules.

When replies are received from the taxpayer in response to the Letter 510C, pull case file and research.

If the taxpayer returns the original refund check the category code on TXMOD history will update to 3913. If you receive the returned check forward to Refund Inquiry to be batched and sent to the Regional Financial Center. Monitor account for the TC 841 to post. The cancellation credit will generate a TC 777 for the credit interest amount in the refund. Update case History Sheet and IDRS control base.

If you receive a payment and the Erroneous Refund is not fully repaid, reply to taxpayers’ correspondence giving the new balance due, arrangements for a payment plan, etc. (See IRM 3.17.80.1.24.5, Processing Partial Payments)

Prepare Form 3809 for a TC 702 to reverse TC 700:

If the Erroneous Refund is fully repaid and there is additional credit remaining on the tax account, assess interest as follows:

When the Erroneous Refund is fully repaid, if applicable, verify TC 702 has posted:

If the taxpayer claims non-receipt of the check(s), See IRM 21.4.2, Refund Inquiries, Refund Trace and Limited Payability.

When there is no response from the taxpayer within forty-five days, and the Erroneous Refund is over ≡ ≡ ≡ ≡ ≡ ≡, within ten workdays of the forty-fifth day, initiate Form 2209 procedures, if not already completed, include the following when mailing Form 2209:

If the Erroneous Refund is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ follow guidelines in IRM 3.17.80.1.26, IRM 3.17.80.1.26.1 or IRM 3.17.80.1.26.2, Maintaining Case Files.

If photocopy of the check(s) received from Check Claims, with an accompanying BFS Form 1133 and BFS Form 3858 indicate different endorsement(s).

If no response from the taxpayer within forty-five days and the interest letter has not already been sent then follow procedures in IRM 3.17.80.1.26, IRM 3.17.80.1.26.1 or IRM 3.17.80.1.26.2, Maintaining Case Files.

When the taxpayer returns completed Form 1133 , follow procedures in IRM 3.17.80.7, Processing Payments Over Cancellation.

If the taxpayer requests to pay monthly payments, and the ERSED is still open, accept the offer made by the taxpayer and inform the taxpayer they can make payments by mail or through the IRS online services.

If the taxpayer requests to pay monthly payments, but no offered amount is provided by the taxpayer, determine the status of the two or five ERSED. Divide the amount of the Erroneous Refund by the number of months it would take the taxpayer to repay before the ERSED expires. The payment plan will not be extended beyond the ERSED.The TC 700 false credit must be on the account to avoid an erroneous Installment Agreement (IA) being setup. Category D Erroneous Refunds are unassessable and must be collected through voluntary repayment or right to offset.

Figure 3.17.80-21

Shown is an example of a payment schedule calculation.

Please click here for the text description of the image.

Send the taxpayer a Letter 3414C or Letter 3064C.

If the taxpayer requests to pay after the ERSED (two or five years from the date of the refund), inform the taxpayer that voluntary payments are accepted. However:

Monitor for payments. If the taxpayer defaults on their payment plan, continue to send the quarterly (balance $600 or more) or semi-annual (balance $599.99 or less) reminder letters until the ERSED expires. Then, if necessary, follow the write-off procedures. If the balance due is over $20,000 and it is within six-months of the ERSED, communicate with Collection Field Function via Form 2209 or ICS and inform them there has been a default on their payment plan agreement and request that a Revenue Officer contact the defaulting taxpayer. If requested, forward taxpayers original request for their payment plan and brief explanation of case to the Collection or Compliance Services Collection Operations (CSCO) function. Retain a copy of the letter from the taxpayer in the Erroneous Refund case file.

Monitor items where follow-up action is needed.

When there is a debit balance due on the taxpayers’ payment plan agreement, assess interest only on the amount of the Erroneous Refund from either:

Send taxpayer a Letter 3414C stating another area is handling the remaining balance due on their account. Forward taxpayer’s original request for a payment plan and brief explanation of case to the appropriate Collection Field Function group. Retain a copy of letter from the taxpayer in the Erroneous Refund case file.

If an erroneous refund involving a direct deposit has been returned or refused from a bank but the bank has taken bank fees, there is still an outstanding balance from the original erroneous refund:

Figure 3.17.80-22b

Shown is a IDRS Screen print of CC REQ54 and example of control base information.

Please click here for the text description of the image.

When replies are received from the Collection Field Function, note the information from Form 2209 on the History Sheet.

If the reply indicates the taxpayer will not repay, note on the History Sheet whether or not civil suit was recommended, or an extension was signed. Associate with the case file. Store case file in the "Suspense" file.

Hold the case in the "Suspense" file until a credit becomes available for offset (two or five year). When offset(s) have satisfied the 15XX Account or the two or five year statute has expired, input TC 845 using CC REQ77, close the IDRS control base and file the case in the closed file. If no offset(s) become available or the two or five year statute expires, write-off the unrecoverable refund as outlined in IRM 3.17.80.1.33, Write-Off Procedures - Disbursement Loss 4910 Account for Unrecoverable Erroneous Refunds (for General Ledger account types 1530, 1535, 1540, 1543).

If the taxpayer claims non-receipt of the refund check, the Collection Field Function will retain Form 2209 , but will return Form 2209-A, Status Report, and the taxpayer's statement (if practical). Initiate CC CHKCL or SF 1184 for an unavailable check cancellation and attach the taxpayer's statement, if available. Photocopy or Scan all information for the case file. When a reply is received from inquiry to CHKCL SF 1184, notify the originator of the status.

If a repayment agreement has been accepted, retain case in the cycle file under a review date for the date payments are expected.

Background: When a TC 844 is input to a taxpayer's module, it Freezes the entire account (-U Freeze) for credits becoming available for offset. No credits are refunded to the taxpayer or offset to another outstanding balance within the account until the (-U Freeze) is released by a TC 845. TC 845 has restricted input by Accounting/Erroneous Refund employees only. TC 845 must be input on the same module where the TC 844 is present.

Verify that the taxpayer's account has an open control base.

Determine if the credit is available for transfer to the 15XX Account. Other liability Freezes will be involved. If the credit is not available for transfer, associate the transcript with the case file. Inform the appropriate function of the available credit.

If a TC 150 is not present on the transcript, the credit is not available for transfer unless the payment is designated for the ERRF repayment (payment was misapplied).

Transfer the available credit for the Erroneous Refund, plus any interest due to the tax period involved. Input CC ADD24 or CC ADC24 with appropriate Transaction Code per IRM 2.4, IDRS Input Instructions . (See Figure 3.17.80-23)

Figure 3.17.80-23

Shown is an IDRS screen print of CC ADD24. The TC 820, TC 700 and the remarks section are highlighted. The remarks have verbiage that read: TO TR CR TO 20XX12 ERRF CASE 20XX-17-0714.

Please click here for the text description of the image.

If the -U Freeze (TC 844) has not been released, transfer available credit to the 15XX Account, to the debit balance held in the 15XX Account. (See Figure 3.17.80-24) The remaining credit, is applied to the debit balance including any interest due on the tax module. Notify the taxpayer using the Letter 285C.

Figure 3.17.80-24

Shown is a Form 3809 which highlights completed fields numbered 1 through 16 as follows: Universal Location CodeName and address - Debit Side (Remember to underline the name control on the side that posts to the Master File; address is optional.)X-ref TIN - taxpayer's TINX-ref MFTRoute to - Always check MFX-ref tax periodTransaction date - Date of TC 700, used for 15XX Account1st TC - Always use TC 702 to reverse original TC 700Debit amount (If full payment is received, reverse original TC 700; if partial payment is received, reverse TC 700 by payment amount only.)Always 15XX accountRoute to - Always check NMFTransaction date - Date of original TC 700Credit amount - Must be the same as the Debit amountExplanation of remarks (i.e. To reverse refund received by another taxpayer SSN/EIN: (Fill in), ERRF Case #: (Fill in).Prepared by - Your name and/or employee numberDate prepared

Please click here for the text description of the image.

If the statute for offset (ERSED 2 or 5 years) expired and a TC 700 is on the account, input the TC 845 using CC REQ77 to release the (" -U" Freeze). Do not transfer the credit to the 15XX Account without approval from the taxpayer. If approval is not received, initiate action to write-off the unrecoverable amount in the 15XX Account, per IRM 3.17.64.4.10, Accounting Control. Follow write-off procedures outlined in IRM 3.17.80.1.33, Write-Off Procedures - Disbursement Loss 4910 Account for Unrecoverable Erroneous Refunds (for General Ledger account types 1530, 1535, 1540, 1543).

Notate the case History Sheet that a TC 844 transcript was received and what actions were taken.

Release TC 844 Freeze when the 15XX Account is repaid, or when written off and annotate History Sheet with actions taken. Follow procedures for interest in IRM 3.17.80.1.20, Interest Considerations. Close IDRS control base and file in the closed case file.

A TC 130 will be used to legally offset the issuance of the refund to the Erroneous Refund 15XX Account. Although TC 844 is usually sufficient if the ERSED has not passed, the TC 130 is needed to Freeze a refund on an account other than that which had the Erroneous Refund such as:

If a manual refund is prepared for any remaining credit, follow IRM 21.4.4, Refund Inquiries, Manual Refunds, manual refund procedures and you must research for:

Releasing TC 844 (-U Freeze) for offset.

Annotate the case file. Maintain in the closed case file, electronic cases will be placed in the yearly closed case document library on the Category D Erroneous Refund SharePoint.

Upon notification of a dishonored refund repayment from the Dishonored Check Unit, research file, 15XX Account, etc., to determine if the case is still active.

If the Erroneous Refund case is active, research TXMOD and case file to determine the status of the dishonored check. Verify that:

Determine if a Letter 510C has been issued to the taxpayer and the status of the two or five year statute.

If the five year statute has not expired and the Letter 510C has not been issued, monitor case for forty-five days, awaiting a reply to Form 2287 (c) notice, Check Not Accepted By Bank (issued by the Dishonored Check Unit). If no repayment is received within forty-five days, send the taxpayer a second Letter 510C as outlined in IRM 3.17.80.1.26, IRM 3.17.80.1.26.1 and IRM 3.17.80.1.26.2, Maintaining Case Files.

If the five year Statute has not expired and the Letter 510C has been issued, follow instructions in IRM 3.17.80.1.30, Dishonored Check Erroneous Refund Repayments, above, except do not send another Letter 510C. Instead, send Letter 3064C to taxpayer, using open paragraphs as follows: "The check you submitted for repayment of an Erroneous Refund issued to you has been dishonored. Form 2287 (c) has been issued to you requesting payment. Therefore, your account remains in balance due status, accruing penalties and interest until paid in full." The issuance of a Letter 3064C is limited to the specifications of the five year Statute.

If the five year statute has expired, follow write-off procedures as outlined in IRM 3.17.80.1.33, Write-Off Procedures - Disbursement Loss 4910 Account for Unrecoverable Erroneous Refunds (for General Ledger account types 1530, 1535, 1540, 1543).

Notate History Sheet with actions taken and re-file paper or electronic case for follow-up.

When a repayment is received, or when credit has been available, after the two or five year recovery Statute has expired, follow procedures below:

If the taxpayer repays any or all of the erroneous refund, the credit(s) will be sent to Excess Collections:

If the taxpayer chooses not to repay the Erroneous Refund after expiration of the ERSED:

If repayments are received after the ERSED has expired and the taxpayer is making payments, the IRS will continue to issue a Letter 510C or Letter 3414C to the taxpayer on a quarterly (balance $600.00 or more) or semi-annual (balance $599.99 or less) basis until the erroneous refund is paid or the taxpayer stops making payments.

If repayments are received after the Form 1099-C was issued, initiate requests and prepare a corrected Form 1099-C via the 1099 software that is made available to the Site Accounting Operations:

"If the taxpayer does not reply:"

The procedures above leave a proper audit trail of repayments.

TOP erroneous refunds can occur before or after the creditor agency reports to IRS that they made a refund to the taxpayer of an IRS offset.

Refer to IRM 21.4.6.5.22.1, Injured Spouse Returned Refunds.

TOP erroneous refunds that occur after BFS reported that they issued a refund of the offset are processed using Erroneous Refund procedures found in IRM 21.4.5, Erroneous Refunds.

Erroneous Refunds occur on TOP offsets when:

These erroneous refunds will occur on TOP offsets when:

Figure 3.17.80-25

Shown is an IDRS screen print of CC TXMODA which highlights the TC 899 and TC 766.

Please click here for the text description of the image.

Figure 3.17.80-26

Shown is an IDRS screen print of CC TXMODA highlighting the OFFST-AMT and money amount of TC 766.

Please click here for the text description of the image.

The 4910 Account, Disbursement Loss, provides internal control for disbursement losses (unrecoverable erroneous refunds). Cases are maintained in this account while requesting administrative resolution for the Accountable Officer.

Unrecoverable Erroneous Refund disbursement losses are written off when the two or five year ERSED expires unless one of the exceptions below is present.

The conditions below must be met to prepare the case for the Accountable Officer.

When reviewing or working an Erroneous Refund case and the two or five year ERSED has expired, follow the procedures below unless an exception in (2) above is met.

Figure 3.17.80-28

Shown is a completed Form 2209-A which highlights completed fields numbered 1 through 12. See Figure 3.17.80-28 for explanation of completed/numbered fields.Name of taxpayer (Name used on Form 2209)Address as shown on Form 2209New Address, if differentDate of form 2209Date of this reportIdentifying number (taxpayer's TIN)Address of Area Office indicated on Original Form 2209Payment received and date (if applicable)Information or documents necessary for completion (if applicable) Additional information requested as indicated under RemarksRemarks (e.g., for additional follow-up, recalling original Form 2209, etc.)Address of office making report

Please click here for the text description of the image.

Management must review the 1530, 1535, 1540, and 1543 Accounts monthly to make sure that expired cases are timely identified. Management must make sure administrative resolution for Statute expired cases are submitted within one month of the expired statute date and are requested monthly.

Once management or designee has reviewed and approved for write-off, cases are placed on the erroneous refund write-off listing then transferred to the 4910 Account. A memorandum is prepared requesting administrative resolution from the Director, Submission Processing and/or Director, Customer Account Services. (See Exhibit 3.17.80-26 and Exhibit 3.17.80-27)

Compare the RRACS Report 051S to make sure each case on the listing has been journaled to the 4910 account and the total amount is correct, and matches the memorandum and listings total for the month.

If Erroneous Refund repayments are received after write-off actions have taken place (Refer to IRM 3.17.80.1.31 , Erroneous Refund Repayments After the ERSED Has Expired).

Unrecoverable erroneously paid refunds will be considered income to the recipient. Form 1099-C, Cancellation of Debt, or Form 1099-MISC, Miscellaneous Income, are issued to IMF and BMF taxpayers receiving such refunds instructing them to include these amounts as income on their returns for the year indicated on the Forms 1099.

In situations where the unassessable erroneous refund is income in the year it is received, a Form 1099-C, Cancellation of Debt must not be issued for any other year. Instead, the IRS must issue a Form 1099-MISC, Miscellaneous Income, with respect to the year the unassessable erroneous refund is received and include the unpaid amount of the erroneous refund under line item entry number 3, "Other Income" .

Erroneous Refunds, whether Assessable or Unassessable, must not be reported on Form 1099–C in the year the Erroneous Refund was received if:

Careful case review is necessary to determine which year to report erroneous refunds of more than $600.00 on Form 1099-C or Form 1099-MISC.

Enterprise Computing Center (ECC) - Martinsburg, Information Returns Program (IRP) publishes annual revisions to the Instructions and Specifications for preparing Form 1099, Form 1098, Form 5498, and Form W2-G Reporting (Publication 1220).

Review case files. Prepare Form 1099-C, Cancellation of Debt, if the outstanding Erroneous Refund balance is $600.00 or more.

When no reply is received from a taxpayer after the second letter is sent and/or if Form 2209 is closed by Technical or Collections without repayment, and/or if the statutory periods have expired (or about to expire).

For cases where it has been determined that a Form 1099-C or Form 1099-MISC will be issued, it is considered as additional customer service to send a Letter 3414C, Letter 510C or a Letter 3064C to remind the taxpayer(s) they will receive some type of a Form 1099.

Complete the Form 1099-C or Form 1099-MISC:

Part A of all paper Form 1099 copies must be sent to the IRS with Form 1096, Annual Summary and Transmittal of U.S. Information Returns; Part B is furnished to the taxpayer/debtor unless this process has been automated by your site.

A copy of Form 1099 must be kept for, at least, four years from the due date of the return, or sufficient information to be able to reconstruct the data (case file) must be retained for, at least, four years from the due date of the return.

When the RACS team receives the Whistleblower package there are three items:

For each informant, a Form 1099-MISC. must be completed and sent to the taxpayer no later than the last workday of the month of January.

For cases where it has been determined that a Form 1099-C or Form 1099-MISC, it is considered as additional customer service to send a Letter 3414C, Letter 510C or a Letter 3064C to remind the taxpayer(s) they will receive some type of a Form 1099.

If the undeliverable letter has received a Return address containing an IRS address, the tax return will involve ID-theft. Contact the appropriate point of contact in the IRM 3.17.80.2.6, Resolving Unpostable Identity Theft Cases Where There is Duplicate TC 841, or Identity Theft - Liaison Listing - Who/Where - SERP (irs.gov) SP Specialized IDT Units and make any address update based on those communications.

Research Undeliverables using CC ENMOD, CC NAMES, CC NAMEI, CC IMFOLE, CC BMFOLE, CC IRPTR, CC TPIIP, Accurint, and RTR (submitted checks often contain a more current address). Check ENMOD, BMFOLE, 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 TC 014 and the unique DLN of xx26399599999Y, with “xx” representing the Internal Revenue Service Centers (IRSC) of each campus. Update the Form 1099-C using the more current address or the pending change-of-address. Do not change the address on CC ENMOD

If a yellow USPS forwarding label is attached, verify the address on the label using CC ENMOD and CC NAMES.

Perfect any new address by entering into USPS.COM - Zip Code Finder at ZIP Code™ Lookup | USPS.

If a better address is found, include Form 8822, Change of Address, with the re-mailing of the Form 1099-C. Completion of this form by the taxpayer authorizes an address change.

Use CC ACTON to enter a history item, "8822toTP" if CC TXMOD is present on IDRS. Do not create a dummy module to input a history item.

If no better address is found:

When Standard Form 1081 Treasury Receivable Accounting, and Collection System (TRACS) and Bureau of Fiscal Service (BFS) 1133R (Release of Claim Against the United States for Proceeds of a Government Check) are received in Accounting, follow the procedures outlined in IRM 3.17.80.1.33, Write-Off Procedures - Disbursement Loss 4910 Account for Unrecoverable Erroneous Refunds (for General Ledger Account types 1530, 1535, 1540, 1543).

If the taxpayer's response to Letter 510C or by telephone inquiry is: they did not cash the refund check or did not understand when they signed the release Form BFS 1133R (provided by Secret Service), follow the instructions outlined below.

Monitor the case for sixty days. If no reply after sixty days:

If the reply to Form 3864 or two way memo indicates the taxpayer benefited from the proceeds of the check:

If the taxpayer did not benefit from the check and BFS indicates that a future SF 1081/TRACS or a Limited Payability credit will be issued to IRS:

Identify Unassessable types of erroneous refunds and determine the correct Accountable Officer for recovery actions. These procedures serve as guidelines for transferring cases due to the Director's accountability for Category D, unassessable erroneous refunds.

If multiple unassessable Category D erroneous refunds issued to the same taxpayer by different Submission Processing sites on the same tax year will be combined as one case and worked by the site according to (d) below to prevent multiple bills from being sent to the same taxpayer.

Maintaining multiple Erroneous Refund check issue cases by one site will benefit the IRS by offering equitable treatment of taxpayers and improved customer service.

If Erroneous Refund amounts are not recovered at the expiration of the ERSED, return the appropriate portion of the amount and case to the issuing site Agency Location Code (ALC).

If Unassessable Category D Erroneous Refund cases must be transferred to another site:

The losing SP site must:

The gaining SP site must:

Cases already in Litigation are exempt from these procedures and will not be transferred.

TC 844 transcripts must be forwarded to the appropriate Submission Processing site.

Before closing cases with TC 845, research account(s) and IDRS to determine whether any other open control bases exist.

The following procedures apply to the stolen identity theft cases processed as an erroneous refund. The Unpostable TC 720 or TC 740 will be for accounts that have a TC 841, or a TC 700 posted.

The Unpostables function assigns a control on IDRS (CC TXMOD) to the Accounting Erroneous Refund Team’s generic IDRS number for UPC 138-0 which cannot be resolved in Unpostables.

The Erroneous Refund Team will receive a Case Control Activity (CCA) Report showing the Unpostable documents. These Unpostables will have the category RTCK (returned check).

If there is an existing open control base by another area, notify the other area of the actions being taken.

The CCA report and any supporting documentation must be maintained for a three month period.

The Erroneous Refund Team will verify TC 841 on taxpayer's account.

The Erroneous Refund Team prepares a Form 3245 for a TC 843 to debit the taxpayer's account. Assign a DLN using Doc code 45 and a 540-549 blocking series to the debit portion. Prepare Form 813.

Prepare a Form 3809 for the credit side to the RRACS GL Account, include the taxpayer's TIN, money amount and transaction date and in explanation field include Doc-ID. Prepare Form 813 and forward to RACS.

Stamp or write the 400/480 journal number on the Form 3425, Form 3809, and Form 813.

RACS will hand carry Form 3245 and Form 813 to Batching under cover of Form 3210 so that the Form 3245 can be batched and sent to ISRP for transcription.

RACS will give the Form 3809 credit side to the area maintaining the General Ledger account on the credit side of the document.

The Erroneous Refund Team will monitor weekly, on Friday, to look for the TC 843 posting to the taxpayer's account and ensure TC 470 or STAUP actions are taken to stop an incorrect notice.

Once the TC 843 has posted, notify the Unpostables Team, using CC UPDIS, that they can post the Unpostable TC 720 or TC 740 to process the refund cancellation. Close the control base.

There will be cases where the TC 841 posted by one site and the subsequent input of a TC 720, TC 740, or a TC 841 input by another site is going Unpostable. The following scenario and procedures explain the actions needed to resolve this Unpostable.

The Erroneous Refund Team will verify the TC 700 is posted on the taxpayers' account.

The Erroneous Refund Team prepares a Form 3809, using a Doc Code 58 and blocking series 790-799 to post a TC 702 (debit) to the taxpayers' account and credit the applicable general ledger account. Prepare a Form 813 and forward to RACS.

Stamp or write the 400/480 journal number on Form 3809 and Form 813.

RACS will hand carry Form 3809, Form 813 to Batching under cover of Form 3210 so that the Form 3809 can be batched and sent to ISRP for transcription.

RACS will give the Form 3809 credit side to the area maintaining the General Ledger account on the credit side of the document.

The Erroneous Refund Team will monitor daily for TC 702 posting to taxpayer's account and ensure TC 470 or STAUP actions are taken to stop an incorrect notice.

Once TC 702 has posted, contact the Unpostable Team and tell them to process request to post TC 720 or TC 740, Unpostable (code 138 0) to process refund repayment. Close the control base.

The Unpostables function will assign a control on IDRS (CC TXMOD) to the Accounting Erroneous Refund Team’s generic IDRS number for UPC 138-0 which cannot be resolved in Unpostables.

The Erroneous Refund Team will receive a Case Control Activity (CCA) Report showing the Unpostable documents.

If there is an existing open control base by another area, notify the other area of the actions being taken.

The Erroneous Refund Team will verify TC 841 or TC 848 and that there is no TC 971 AC 663 present.

The Erroneous Refund Team will review IDRS to locate a TC 971 showing the XREF-TIN.

If present, prepare a Form 12857 to debit (TC 840) the true taxpayers’ account and credit (TC 841) the cross-reference TIN. In most cases, this will be an IRSN.

If the XREF-TIN is not present, prepare Form 2275 to request the original Form 12857 from files, using the DLN of the posted TC 841. This will give you the XREF-TIN.

Ensure TC 470 or STAUP actions are taken to stop issuance of incorrect notices and monitor daily for TC 840 to post to the taxpayers’ account.

Once TC 840 has posted, contact the Unpostable Team and tell them to process the request to post TC 720 or TC 740, Unpostable (code 138-0). Close your control base.

The Unpostable operation will 8 code the duplicate TC 841 to the Rejects operation.

Rejects will immediately work these cases. The Rejects function will perform a Reject 630 (4–0) and prepare a Form 4028 (0–2) for the duplicate TC 841, so that this item can be deleted from Service Center Control File (SCF). Rejects will route the case and Form 4028 under cover of a Form 3210 Accounting.

The Accounting operation will:

When Non-Accounting Operations identify duplicate posting of a TC 841 or TC 700.

Non-Accounting Operations will:

The Erroneous Refund Team will:

Due to systemic programming, duplicate TC 700 transactions will post to the taxpayers' module and will result in an erroneous refund. If the Accounting operation identifies cases where there is a duplicate TC 700, they will take the following actions.

If the TC 700 has posted on the account and a credit balance remains:

If the TC 700 has posted on the account and a refund has been issued:

Once extracts are received (IRM 3.17.64.16.4.8), Account 6905 ID Theft Erroneous Refund Write-Off (Nominal Account, DR Normal Balance), pull Form 3809 copies for the corresponding cases identified on the extracts.

Verify volume and totals of cases listed on extracts with the Form 3809 copies.

Verify five year statute expiration date has expired, which is determined by the transaction date.

Add a column for the Doc ID on each extract.

Update the extract with the Doc ID for each case, ensuring the Doc ID format is input correctly so that cases are grouped correctly.

Sort extract by Doc ID. This sorting process will ensure all Form 3809 copies from the same Doc ID will be captured and grouped together on the spreadsheet.

Prepare and submit the memorandum along with the extract for ID theft cases for approval and signature from the Accounting Operation Manager (See Exhibit 3.17.80-19).

Receive signed memorandum and extracts with corresponding Form 3809 copies. Once the journal actions are completed, RACS will forward a copy of the memorandum, extracts and Form 3809 copies to the function maintaining the documents, if not RACS, for balancing and GAO audit file as a closed case.

When NMF identity theft is identified, prepare a Form 3809 to credit the tax account and debit the GL 1545. The designated team in Accounting will number the Form 3809.

Once the forms are numbered, prepare a Form 813 and forward to the RACS Team for journalization.

RACS will receive identity theft erroneous refund Form 3809 and three Form 813.

Within 24 hours of receipt, the RACS Team prepares a Form 8166 using Doc ID and item count, listing each money amount separately from the Form 3809. The total amount listed on the Form 8166 must equal the Form 813 total. The DOC ID input to RACS will be 15 digits as follows: DOC ID = DLN of Form 813 (without sequence number) plus two-digit year plus total volume on Form 813. e.g., XX000000000XXXX.

The RACS Team will:

After the RACS Team has journalized the Form 3809 copies and forwarded them for processing, the general ledger (GL 1545) side of the Form 3809 is forwarded to the Erroneous Refund Team. The Erroneous Refund Team will:

Once the five year erroneous refund statute expiration date (ERSED) has passed, the cases will be identified via an extract listing. When the extract is received, prepare a write off memo.

Forward the write off cover memo to the Accounting Operation manager for signature. An example of the write-off cover memo has been added. See , Exhibit 3.17.80-19.

Forward the signed memo and listing to RACS for journalization, using a 490 window, to credit 1545 and debit 6905 using the same DOC ID as when the case was opened.

On a daily basis, the RACS Team will drop a UPC for the total of Form 3809 copies received that day (receipts). A total of Form 3809 copies are released to Batching that day (production) using OFP 710-01047.

Use the DOC ID and total amount of the Form 813 on the monthly trial balance spreadsheet to balance to Redesign Revenue Accounting Control System (RRACS).

The RRACS report 0155 will not show a true case volume. Therefore, to get the true case volume to report on the Form 3997:

Refund checks are returned to Regional Financial Centers for reasons other than being "undeliverable." Taxpayers will return tax refund checks directly to the Taxpayer Assistance Center (TAC) offices or to Submission Processing Centers and at times will even return them directly to the RFC. Tax refund envelopes have the return address of the issuing RFC.

The "SF 1098 listing" provides a summary of each cancellation by type and Reason for Return Code.

Master File checks (TC 846) are cancelled and controlled under Standard Form 1098, Schedule of Cancelled Checks, and forwarded to ECC on tape for posting TC 841's to the taxpayers’ accounts. These checks are listed on Standard Form 1098, and forwarded to the appropriate Submission Processing Center Agency Location Code (ALC) to be used in posting credits to taxpayer accounts.

ANMF, IRAF and Form 4506 Photocopy Fee, checks which are pulled or intercepted are cancelled and controlled under Standard Form 1098. The Standard Form 1098 schedule and listing are forwarded to the ALC. Accounting Operations forwards a copy of the SF 1098 schedule and SF 1098 listing reflecting Photocopy Fee (4506) cancellations to the Photocopy Fee/RAIVS function. IRM 21.2.5, Miscellaneous Forms and Processing, was updated requiring Units to maintain these credit documents for research and subsequent re-issuance of the Photocopy Fee Refund if correspondence is received from the taxpayer. Prepare Form 3245 for all other cancellations with the following information (See Figure 3.17.80-40):

Code 02 Within ten workdays of receipt of the Standard Form 1098 schedule and Standard Form 1098 listing, prepare Form 3245, Posting Voucher-Refund Cancellation or Repayment, for all Code 02 check cancellations to input a TC 740 in the amount of the undelivered refund. (See Figure 3.17.80-40)

Stamp "Refund Check Cancelled" on applicable Refund Schedules (1166/1167) and supporting refund document (Form 3753, Form 5792, and/or Refund Voucher List).

List on Form 813 (See Figure 3.17.80-41), Document Register, all Form 3245 having the same Office and Tax Class codes. Hold these documents until all work on Standard Form 1098 is complete, then route the original copy of the Form 813 with Form 3245 to Batching and Numbering.

Forward Standard Form 1098 schedule, Standard Form 1098 listings, and all supporting refund documents for undeliverable refunds (Code 02) to Refund Inquiry.

Forward second copy of Form 813 for input to RRACS for journal action.

Code 03 Within ten workdays of receipt of Standard Form 1098 Schedule and Standard Form 1098 listing, prepare Form 3245 (See Figure 3.17.80-40) for all Code 03 check cancellations to input TC 841 in the amount of the returned check.

On Form 813, list all Form 3245, Blocking Series Chart (Exhibit 3.17.80-6) for Document Code 45, Standard Form 1098 and TRACS Processing having the same Office Code (formerly known as DO)/Business Operating Division (BOD)) and Tax Class codes. Hold these documents until all work on the Standard Form 1098 is complete, then route the original Form 813 with Form 3245 to Batching and Numbering.

Forward for input to RRACS for journal action.

Within ten workdays of receipt of Standard Form 1098, associate refund documents (e.g., Form 3753, Form 5792, Form 1331-B, and/or Refund Voucher List), and accompanying forms (e.g., SPS or SF 1133) with the Standard Form 1098 Schedule and Standard Form 1098 listing.

Stamp "Refund Check Cancelled" on applicable Refund Schedules (SPS or SF 1166), and supporting documents (Form 3753, Form 5792, Form 1331-B, and/or Refund Voucher List).

Cancelled Refund Schedules are photocopied (three copies). Taxpayer correspondence and any other attachments are also photocopied.

Processing Form 1331-B.

Prepare a Document Transmittal to route the original Form 3245, ANMF Transcript, original Standard Form 1098 Schedule, Standard Form 1098 Listing and cancelled refund documentation to RRACS for journaling.

Forward the Form 3245 with a copy of the Standard Form 1098 to ANMF Accounting.

The journaled Standard Form 1098 Listing is forwarded to the Refund Inquiry function for processing as outlined in IRM 21.4.1, Refund Inquiries.

Changes to the MFT were revised in 2005 to allow IRAF overpayments to be computer generated. In the meantime, there could be instances when Centers receive these returned items issued prior to 2005.

Prepare Form 3245 (See Figure 3.17.80-40) for each cancellation credit reflecting returned IRAF checks, within 10 workdays of receipt of Standard Form 1098 Schedule and Standard Form 1098 Listing.

The transaction code for Form 3245 depends on the Reason for Return Code displayed on the Standard Form 1098 Listing. Some Codes 02 cancellations require input of TC 841.

Prepare Form 813 (See Figure 3.17.80-41) for all Form 3245 containing the same Office Code (formerly known as DO/Business Operating Division (BOD) and transaction codes. Route original Form 813 and corresponding Form 3245 to Batching and Numbering for processing.

Forward original and copy of Standard Form 1098 Listing and duplicate copy of the Form 813 to RRACS for journaling.

All Standard Form 1098 Listings must be noted by the RRACS Journaling function as "deposited" and routed for filing.

Due to systemic problems (e.g., cancelled for wrong check number or with the incorrect check symbol number, etc.), the Bureau of the Fiscal Service, Regional Financial Center (RFC) will advise the Internal Revenue Service to correct a payment cancelled in error by the RFC . These items will require reversal through the input of a TC 843. A Treasury TFS Form 3813, Schedule of Uncollectible Checks, will be received from the RFC to correct this information explaining the nature of the correction.

When TFS Form 3813 is received, research 4970 Account for a matching credit.

To correct erroneously posted TC 841:

When received from the RFC, credit items are journaled into the 4970 Account.

The TFS Form 3813 will provide necessary information about the reason for the TFS 3813 reversal and when the Standard Form 1098 must be forwarded to the Submission Processing Center Agency Location Code (ALC) by the Regional Financial Center (RFC).

Input additional TC 470(s) if the original notice holding code will expire prior to the posting of the credit.

If a TC 841 or TC 740 amount shown on the Standard Form 1098 tape or listing is input to a taxpayer module and the cancellation amount does not match the amount of the corresponding TC 840/846, the credit will not post to Master File except as noted below. The Refund Inquiry or Unpostables function will advise Accounting Operations when these differences in amounts or money mismatches (MM) occur.

Accounting Operations will initiate correspondence to the issuing Regional Financial Center (RFC) to advise them that a cancellation credit has been received for an amount different from the original check amount. The correspondence must request that the RFC immediately issue a TFS Form 3813, Schedule of Uncollectible Checks, to reverse the incorrect amount and to issue a Standard Form 1098 for the correct amount.

Include the following information in the correspondence:

To determine the correct amount when a TOP offset has occurred:

Route the correspondence to the issuing Regional Financial Center (See Exhibit 3.17.80-5 for list of RFC mailing addresses). Format the address of such correspondence to the Payments and Claims Branch.

Establish a control base on IDRS as follows:
ACTON
C#,MMLTRTORFC,M,MISC
*,*

Monitor the case until the TFS Form 3813 is received from the Regional Financial Center. When received, prepare Form 3245 (See Figure 3.17.80-40) to input TC 843 or TC 742. Update the control base to show that TFS Form 3813 has been received as follows:
ACTON
C#,3813RECD,M,MISC
*,*

If the correct cancellation credit is received but the FMS TSF Form 3813 is not (or vice versa), immediately contact the appropriate RFC by telephone and request the missing document.

Credits will be journaled to the 4970 Account during research and until FMS TSF Form 3813 is received. After FMS TSF Form 3813 (debit) is received from the RFC, it will cancel the incorrect amount of the Standard Form 1098 held in the 4970 Account.

Monitor for receipt of the reissued/corrected Standard Form 1098. Follow-up with the RFC may be required.

When the correct Standard Form 1098 and/or TC 841 is received and posted, close the control base as follows:
ACTON
C#,TC841PSTED,C

The Regional Financial Centers receive, cancel, and code undeliverable IMF/BMF ECC computer generated (TC 846) refund checks as outlined in IRM 3.17.80.4.1, Treasury Checks Returned to the Submission Processing Center and Regional Financial Center.

The Regional Financial Centers transmit to ECC all computer generated (TC 846) undeliverable refund checks (Reason for Return Code 02) for posting a TC 740 with an S- Freeze, in the amount of the check to the taxpayer's account (both IMF and BMF) and sorted by Agency Location Code (ALC). This is accomplished through the Standard Form 1098/145/1185 cancellation runs at ECC -MTB. ECC - MTB posts the TC 740 (S Freeze) and forwards the taxpayer account data to the Centers for printing Undelivered Refund Check Notices: CP31 for IMF taxpayers; CP231 for BMF taxpayers.

Submission Processing Centers process to RRACS and reclassify as required in IRM 3.17.63, Accounting and Data Control - Redesign Revenue Accounting Control System.

For IMF/BMF checks, follow the processing procedures contained in the applicable sections of this IRM. Consider that, in some instances, e.g., hardship, decedent cases, it will be necessary to perform CC RFUND procedures.

For BMF checks issued, the Regional Financial Center (RFC) produces Standard Form 1098 and a related Standard Form 1098 Listing for the Agency Location Code Submission Processing Center for posting TC 740 to the BMF at MCC.

The Regional Financial Centers produce, Standard Form 1098 and a consolidated listing of all ANMF, Photocopy Fee Refund and IRAF checks, separate file totals for various program areas:

Input Correction Operation, Unpostable or Reject functions will not be able to correct some unposted Transaction codes (TC) 841, 740 or 843. If this occurs the unposted transaction will be closed with a closing code 1 or 8 to the Accounting function for resolution.

Unpostable Codes (UPC) or Reason Code (RC) can vary for example:

There are several conditions that will cause the Unpostable or reject condition. One of the following will have occurred:

Thorough account research must be performed to resolve these cases. See If and Then chart below.

Competitive Equality Banking Act of 1987, Public Law 100-86, requires that negotiation of government checks occurs within one (1) year from check issuance. If checks are not negotiated, BFS must cancel outstanding checks and return credits to the issuing agency.

TRACS is an automated system implemented by BFS to handle all accounting, billing and collection activities associated with the refund check claims process.

There are three types of transactions issued from BFS:

The system automates summary accounting transactions and supporting detail records previously received via SF 1081, Voucher and Schedule of Withdrawals and Credits, and SF 1081 listings.

When a refund check has been cashed and forgery is involved, Check Claims Group will adjudicate the claim. Once the adjudication process is completed and the funds are recovered from the financial institution, credit is forwarded to IRS' Budget Clearing Account. Monies recovered, as the result of the adjudication process, are called reclamation credits.

When a set of TRACS reclamation credit listings (IMF, BMF and Miscellaneous) is received, record information and verify that:

Immediately contact BFS Accounts Branch by email at PFC Customer Engagement Center (use the Encrypt Only feature on emails) and inform them if:

BFS will:

Occasionally, an amount shown on the TRACS listing will differ from the TC 840/846 amount shown on the taxpayer's account. When this occurs, immediately contact BFS Accounts Branch in writing to inform them of the discrepancy. Attach a copy of the print from the CARS transmission, the TRACS listing and a photocopy of the refund check (or any other documentation available showing the correct check amount) and forward to the address shown above.

All processing for TRACS listings must be completed within ten workdays from the received date. The TRACS listing from ECC, provides an individual breakdown by taxpayer.

Prepare appropriate Document Transmittal (Debit 4970 Account and Credit Master File). Attach a copy of the TRACS listing, a photocopy of the CARS/IPAC transmission and route to the Redesigned Revenue Accounting Control System (RRACS) function for journal action.

Hold all other documents until the RRACS function returns the Document Transmittal with the journal number, then:

When a tax refund non-receipt claim is submitted by a taxpayer and the claim is forwarded to BFS via paper SF 1184, Non-Receipt Claim, Check Claims determines the refund check is outstanding (never been cashed), and a UCC credit is forwarded to IRS's Budget Clearing Account via CARS.

When a UCC TRACS listing is received, record information and verify that:

Immediately contact BFS Accounts Branch by email at PFC Customer Engagement Center (use the Encrypt Only feature on emails) and inform them of any discrepancies as described in IRM 3.17.80.6.2, Processing Reclamation Credits (REC).

All processing for TRACS listings must be completed within ten workdays from the received date. The TRACS listing, produced from a magnetic tape received by ECC, provides an individual breakdown by taxpayer.

Prepare appropriate Document Transmittal (to Debit 4970 Account and Credit Master File). Attach a copy of the TRACS listing, a photocopy of the CARS/IPAC transmission and route to the Redesigned Revenue Accounting Control System (RRACS) function for journal action.

Hold all other documents until the RRACS function returns the Document Transmittal with the journal number, then:

Under the provisions of the Competitive Equality Banking Act of 1987 (Limited Payability or LP), U.S. Treasury checks must be negotiated (cashed) within 1 year of the check issue date or before October 1, 1990. After expiration of the 1 year period, any checks outstanding (not cashed) will be cancelled by Bureau of the Fiscal Service (BFS). More detailed instructions about Limited Payability are in IRM 21.4.2.4.7, Limited Payability (LP) Rules and Procedures.

LP cancellation listings are processed within ten working days of receipt as follows:

The Miscellaneous listing is processed manually.

Most entries on the Miscellaneous listing are for Photocopy Fee Refunds. The check issuance date will determine whether the Refund Voucher and Schedule of Payments Number, ending with "PC" , indicating a Photocopy Fee Refund, is still in files. Performing this research will prevent duplicate refunds and identify if documentation is available:

Other entries on the Miscellaneous listing will be IMF, BMF, ANMF, IRAF or General Ledger credits.

Some entries on the Miscellaneous listing will be from a General Ledger Account, such as 6800, 4620, 9999, etc.

Prepare Document Transmittal. Attach a copy of the IMF, BMF and Miscellaneous listings and the second copy of any Form 813 to the Document Transmittal and route to the RRACS function for journal action.

Hold all other documents until the RRACS function returns the Document Transmittal with the journal number. Then:

If the TRACS listing provides only the check's "symbol" and "serial" numbers, use CC IMFOLC with the check "symbol" and "serial" number to retrieve the taxpayer information.

Master File will display either the tax period from which the refund issued, or the Refund Research Database record for the check if no tax module exists. The latter is common when your case involves the TIN of the secondary taxpayer on a jointly filed tax period where a refund occurred. (See Figure 3.17.80-32)

All processing for TRACS/GOALS transmission and TRACS listings must be completed within ten workdays from the received date. The TRACS listing is produced from ECC, provides an individual breakdown of the charges by taxpayer. Included on the listing is (See Figure 3.17.80-36 and Figure 3.17.80-37):

Review each TRACS/GOALS transmission with the TRACS listing, and the TRACS listing with the Payment Over Cancellation (POC) Claims Package when received to ensure the following:

Figure 3.17.80-36

Shown is an SF 1081 (Page one).

Please click here for the text description of the image.

Figure 3.17.80-37

Shown is an SF 1081 (Page two).

Please click here for the text description of the image.

Contact PFC Customer Engagement Center by email at PFC Customer Engagement Center if any of the following discrepancies are found (use the Encrypt Only feature on emails):

PFC Customer Engagement Center will:

Post either a TC 840 or a TC 843. If necessary, use CC IMFOLC to locate the tax period on which the related TC 846 or TC 840 posted and take one of the following actions based on the circumstances described:

TC 840 Procedures - Copy of settlement check present: