As described in Rev. Rul. 2004-33, taxpayers may claim erroneous reparation tax credits against the U.S. government for past injustices resulting from slavery and economic oppression, or from other historical mistreatment. They usually indicate "Black Investment Taxes" , "Reparation for African Americans" , "Reparations for Native Americans" , or a similar statement. The amount claimed per person, is often, but not always, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Taxpayers claim entitlement to a tax credit because of these hardships and try to claim the credit:

DO NOT ALLOW the claim. Refer to IRM 21.5.3.4.16.7, Identifying Frivolous Returns/Correspondence and Responding to Frivolous Arguments. If the taxpayer erroneously received a refund based on this credit, they should file an amended return to correct their account. Refer to IRM 21.4.5, Erroneous Refunds, for additional instructions.

If the taxpayer has questions regarding the legitimacy of the claim advise as follows:

Generally, for damages received after August 20, 1986, to be excluded from gross income under IRC Section 104(a)(2), the damages must be received on account of personal physical injuries or physical sickness (IRC Section 104(a)(2) as amended by Section 1605 of the Small Business Job Protection Act of 1996). DisallowForm 1040X, Amended U.S. Individual Income Tax Return, claiming income payments as excludable under IRC Section 104(a)(2) based on age discrimination. Include in the Letter 105C the following disallowance language "Only amounts received on account of personal physical injuries or physical sickness may be excluded from gross income under IRC Section 104(a)(2) " .

Taxpayers who claim a deduction for alimony paid but do not provide the Taxpayer Identification Number (TIN) of the recipient, are contacted during pipeline process for this information. Correspondence, including late replies, may be received requesting:

The following table will help you decide if the Failure to Provide Information Penalty may be abated.

Rev. Rul. 90-38 prohibits retroactive changes in accounting methods on amended returns. Taxpayers might file amended returns, based on the "Albertson's, Inc." court case, to claim:

Disallow the following:

The disallowance language is as follows: "In order to change your accounting method, you must submit Form 3115, Application for Change in Accounting Method and receive consent from the Commissioner (Internal Revenue Code Section 446)."

IRC Section 127 allows employers to exclude educational expenses from the employee's taxable income. The maximum annual exclusion is $5,250.

The Economic Growth and Tax Reconciliation Act of 2001, permanently extended IRC Section 127. It also reinstated its applicability to graduate courses beginning after December 31, 2001.

For complete information concerning Form 8857,Request for Innocent Spouse Relief, refer to IRM 25.15, Relief from Joint and Several Liability.

Refer to IRM 21.4.6, Refund Offset, and IRM 25.18.5, Community Property, Injured Spouse, for complete information concerning injured spouse claim procedures.

State trooper expenses for meals eaten while on duty are inherently nondeductible, except for the following narrow exceptions.

You may receive claims from taxpayers outside the Eighth Judicial Circuit citing a Georgia State patrolman's article asserting that the Service had changed its position in 1993 to allow such deductions generally. This is not correct, disallow such claims using the language in paragraph (1) above.

IRC Section 119(b)(4), (RRA98 Act. IRC Sect. 5002) states that all employee meals provided on an employers business premises are excludable if more than half of the employees who receive the meals on the premises receive them for the "convenience of the employer" . The law became effective on July 22, 1998 and applied to all taxable years beginning before, on, or after the date of enactment.

The Expanded Tax Benefit for Health Professionals Working in Underserved Areas was created by the Affordable Care Act of 2010. Health care professionals whose student loans were forgiven under various state programs that reward those who work in underserved communities may qualify for refunds on their 2009 federal income tax returns.

Prior to this act, only student loans repaid or forgiven under the National Health Service Corps Loan Repayment Program or certain state loan repayment programs eligible for forgiveness under the Public Health Service Act qualified for a income exclusion.

Under the new law, amounts received under other state loan repayment or forgiveness programs intended to increase the availability of health care services in underserved or health professional shortage areas are also excluded from income and are tax-free retroactively effective starting in 2009.

Health care professionals participating in the above programs who already reported repaid or forgiven loan amounts as income on their 2009 returns may be due refunds.

Health care professionals who meet the requirements and have not yet filed their 2009 tax returns do not need to report eligible loan repayment or forgiveness amounts when they file.

Those who meet the requirements and have already filed a 2009 tax return should file 1040X, Amended U.S. Individual Income Tax Return.

These returns will be centralized in Accounts Management (AM) in the Fresno campus. If you receive one of these cases and are not part of the Fresno centralized team(s), follow procedures below to route all related cases to Fresno.

The procedures below are for the Fresno AM centralized team(s) only:

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

Normally, debt that is forgiven or cancelled by a lender must be reported and included as income and is taxable, but the Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude certain cancelled debt on their principal residence from their income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies only to forgiven or cancelled debt used to buy, build or substantially improve the taxpayers principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax-relief provision. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

The amount of debt forgiven must be reported on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) and must be attached to the tax return.

Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form, if any of the information shown is incorrect the taxpayer must notify the lender immediately.

The following are some references on this topic which may be of assistance:

Generally, if a debt is canceled or forgiven, other than as a gift or bequest, the canceled amount must be included in income. Refer to Publication 17, Your Federal Income Tax , Chapter 12, and Publication 525, Taxable and Nontaxable Income, "Repayments" for details and exceptions. One exception, not outlined in Publication 17, involves the issuance of Form 1099-C, Cancellation of Debt, and a subsequent repayment of the debt by the taxpayer.

The regulations under IRC Section 6050P generally require that Form 1099-C be issued to a debtor if one of eight events occurs. One of those events is: if for at least a 36 month period, no payments are made toward the debt, then the creditor must issue a Form 1099-C, solely for reporting requirements, whether or not an actual discharge of indebtedness has occurred.

In some cases, the taxpayer includes the amount reported on the Form 1099-C, as income on their income tax return, not understanding the fact that the creditor may still pursue collection activity.

If the creditor resumes collection activity, e.g., garnishment of the taxpayer's earnings, and the debt is paid, the taxpayer may be entitled to file an amended return to remove the income from the year it was reported. If an amended return is filed, the amount of debt discharge income should be treated as a reduction to the income reported in the year the Form 1099-C is received and not as a Claim of Right adjustment in the year of payment of the debt.

Taxpayers using the cash accounting method takes the deduction in the tax year in which the repayment was made.

The Department of Army or taxpayer may submit DA Form 5174-R, Refund for Prior Year Salary Overpayment. No adjustment activity is necessary.

Associate the form with the return for the year of overpayment.

All claims for refund of prior year income taxes paid on periodic partial distributions from employee savings, retirement, and investment plan distributions are worked using normal adjustment procedures.

Taxpayer must show the aggregate amount contributed and withdrawn before the claim can be worked. Do not send to Examination as Category A.

Taxpayers may claim seller paid points when purchasing a principal residence. The deduction is claimed on Schedule A, Itemized Deductions. Appraisal, inspection, title, and attorney fees are NOT deductible. Property taxes paid are not deductible as points even if designated as points. Reject the claim if proof of the claim is not provided. Taxpayer must submit:

Refer to IRM 21.5.3, General Claims Procedures.

Whenever Integrated Data Retrieval System (IDRS) Command Code (CC) LETER is input on a joint account, the system determines if the spouse is the same for the current year.

Taxpayers may file amended returns to claim a deduction for daily transportation expenses between a taxpayer's residence and a temporary work location.

In Rev. Rul. 57-383, the Service considered the Federal Income Tax treatment of certain unemployment benefits received by union members while separated from their jobs.

Rev. Rul. 57-383 provides that:

The strike fund benefits received may be offset by the amount of payments into the fund. The benefits received in excess of the payments are includible in the taxpayer's income.

Coal companies may file a claim for refund of premiums paid to the UMWA Combined Benefit Fund (the Combined Fund). Even though the amounts paid are premiums and were not paid to the Service, the companies are seeking a refund pursuant to the decision of the United States Court of Appeals for the Fourth Circuit in Pittston Co. v. United States , 199 F.3d 694 (4th Cir. 1999). In that decision, the Fourth Circuit held that the premiums are taxes and that it was appropriate for a coal company to bring a tax refund action to seek a refund of premiums that it contests were wrongly assessed.

Check the taxpayer's address, if address did not originate in the Fourth Circuit ( that is, did not originate in Maryland, North Carolina, South Carolina, Virginia, or West Virginia) research to see if taxpayer may have moved and may in fact be eligible. Additional research (e.g., CC IRPTR) needs to be completed prior to disallowing the claim. If the claim did not originate in the Fourth Circuit, disallow it. Send Letter 105C, Claim Disallowed, include the following information: "We disallowed your claim for refund of premiums paid pursuant to IRC Section 9704 of the Internal Revenue Code to the United Mine Workers of America Combined Benefit Fund. The Service is not following the decision of the Fourth Circuit in Pittston Co. outside the Fourth Circuit." Route the claim to Files to be filed in the Alpha File. If case is on Correspondence Imaging System (CIS) the CIS image is the source document and it remains on CIS for further recall if needed. Since the image will remain available on CIS, Alpha File association is not necessary. For additional information pertaining to CIS refer to IRM 21.5.1.5, Correspondence Imaging System (CIS) procedures.

If the claim originates in the Fourth Circuit, refer to Examination as Category A. They will contact Chief Counsel and make an initial determination of whether the claim has merit.

If the claim does not have merit, they will disallow it. When the disallowed claim is returned by Examination, send Letter 105C, include the following information: "We disallowed your claim for refund of premiums paid pursuant to IRC Section 9704 of the Internal Revenue Code to the United Mine Workers of America Combined Benefit Fund. You have not alleged a ground for which a refund can be granted." Route the claim to Files to be filed in the Alpha File. If case is on Correspondence Imaging System (CIS) the CIS image is the source document and it remains on CIS for further recall if needed. Since the image will remain available on CIS, Alpha File association is not necessary. For additional information pertaining to CIS refer to IRM 21.5.1.5, Correspondence Imaging System (CIS) procedures.

If the claim appears to have some merit Examination will suspend the claim until a final determination is made. Because coordination with the Combined Fund and the Social Security Administration may be necessary, there may be some delay in making a final determination.

A disabled veteran is a veteran who applied for disability benefits from the Veterans Administration (VA) and their application was approved. The veterans disability compensation is a tax-free compensation paid by the Veterans Administration (VA) to veterans who have become disabled or chronically ill during their military service. This monetary benefit is based on an injury or disease incurred or aggravated during active military service. These disabilities are considered to be "service-connected" or "service related" . The veteran must have been terminated through separation or discharge from the military under conditions that were other than "dishonorable" . The disability compensation varies with the degree of the disability and the number of dependents, and is paid monthly by the VA.

The VA determination process can take several months, and sometimes years. VA benefits are retroactively excluded from gross income from the date of the application for VA disability. The VA disability benefits are expressed in percentages, intended to represent the degree of impairment in the veteran's earning capacity. A veteran who receives retirement benefits and is later retroactively determined by the VA to be eligible for "service-connected" disability benefits, may exclude from their gross income the amount of their disability benefits from their military retirement pay. The effective date applies to any additional award for retroactive benefits. In general, military retirement benefits is based on length of service and included as income, whereas veterans benefits on a "service-connected" disability is excluded from income. Veterans may file claims for refund of taxes paid on the retroactive amounts of VA benefits for prior years covered by a waiver, back to the earliest year not barred by the statute of limitations, for additional information refer to IRM 21.6.6.3.20.1, Extension of the Statute of Limitations to File Claims for Refunds Relating to Disability Determinations by the Department of Veterans Affairs (Section 106 of the Bill and Section 6511(d) of the Code). To file a claim, the veteran must submit a Form 1040X, Amended U.S. Individual Income Tax Return for each year they wish to reduce the taxable pay, and a VA Determination letter covering those years. Refer to Publication 525, Taxable and Nontaxable Income. Veterans can appeal the disability compensation with the Department of Veterans Affairs therefore the VA Determination letter will have the total amount listed, before inputting the adjustment review the account for any previous adjustment.

Review claims for completeness following the guidelines in IRM 21.5.3, General Claims Procedures .

A copy of an official letter VA Determination letter with the table showing amount withheld and effective date from the VA granting the retroactive benefit must be attached to the claim. If the required documentation is not attached, return the claim as incomplete using the Letter 178C, input transaction code (TC) 971 with action code (AC) 270, (use current date in Trans-DT field), refer to IRM 21.5.3, General Claims Procedures. If the claim is received within 180 days of the statute barred date refer to IRM 21.6.6.3.20.1, Extension of the Statute of Limitations to File Claims for Refunds Relating to Disability Determinations by the Department of Veterans Affairs ( Section 106 of the bill and Section 6511(d) of the Code) and IRM 21.5.3.4.3 , Tax Decrease and Statute Consideration.

To verify and calculate the correct tax reduction the VA determination letter must have a table listing the "Amount Withheld" and the "Payment Start Date" , may also be listed as "Effective Date" . In general, the VA Determination letter will list a table containing five headings, we only use the "Amount Withheld" and the "Payment Start Date" or "Effective Date" when verifying/calculating the tax reduction.

Example of the table:

Below are two examples on how to verify/calculate the correct amount for the tax reduction using the example of the table listed above:

Disallow any claim citing "Internal Revenue Service Section 1.122-1" or "Pursuant to 26 CFR" , unless the VA Determination letter with table as shown above in (5) is included with the claim. If the VA Determination Letter is included verify/calculate the correct amount for the tax reduction using the table, the adjustment is not based on the taxpayer's claim for "Internal Revenue Service Section 1.122-1" or "Pursuant to 26 CFR" .

Combat Related Special Compensation (CRSC) and Concurrent Receipt of Disability Pay (CRDP) are programs managed by the Army, Navy, Air Force or Marines for retired veterans. The Defense Finance and Accounting Service (DFAS) must provide a corrected Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA's, Insurance Contracts, etc., before adjusting the military retirement pay from taxable to non-taxable.

Payments under the Department of Veterans Affairs (VA) Compensated Work Therapy (CWT) program are no longer taxable and disabled veterans who paid tax on these benefits can claim refunds, subject to the statute of limitations, by filing an amended return using the IRS Form 1040X, Amended U.S. Individual Income Tax Return.

Information may be received indicating a taxpayer is deceased. Verification needed prior to updating the entity includes one of the following:

Refer to IRM 3.11.3.10.2, Documentary Evidence, for additional information.

IRC Section 692 provides for the forgiveness of certain Federal income taxes for certain U.S. military and civilian employees who are killed or die of injuries received as a result of military or terrorist action. For additional information, refer to Publication 3, Armed Forces' Tax Guide and Rev. Proc. 2004-26 (2009-19 C.B. 890).

The following subsection includes procedures for processing claims/returns received under IRC Section 692.