3.17.80  Working and Monitoring Category D, Erroneous Refund Cases in Accounting Operations

Manual Transmittal

December 23, 2013

Note:DO NOT REMOVE AND INSERT PAGES OF PRIOR IRM TRANSMITTALS PRIOR TO JANUARY 1, 2014.

Purpose

(1) This transmits the revised IRM 3.17.80, Accounting and Data Control, Working and Monitoring Category D, Erroneous Refund Cases in Accounting Operations.

Material Changes

(1) All Financial Management Services (FMS) reference have been changed to Bureau Fiscal Services (BFS).

(2) IRM cross-reference updates throughout IRM 3.17.80.

(3) IPU 13U1556 issued 10-23-2013 IRM 3.17.80.1.2.1 Editorial changes for appropriate IRM reference and procedural changes.

(4) IPU 13U1556 issued 10-23-2013 IRM 3.17.80.1.5 Editorial change.

(5) IPU 13U1556 issued 10-23-2013 IRM 3.17.80.1.7(2) Additional clarification on the handling of DMER cases when Form 14165 is not provided.

(6) IPU 13U1556 issued 10-23-2013 IRM 3.17.80.1.8.7 Additional clarification on handling of Hardship manual refund cases.

(7) IPU 13U1556 issued 10-23-2013 Exhibit 3.17.80-16 providing updated business operating division points of contact.

(8) IPU 13U1370 issued 08-20-2013 IRM 3.17.80.1.8.2(9) Editorial changes and clarification.

(9) IPU 13U1370 issued 08-20-2013 IRM 3.17.80.1.8.7 Clarification on the handling of Hardship manual refund cases so that TAS can initiate manual refunds.

(10) IPU 13U1370 issued 08-20-2013 IRM 3.17.80.1.17(3) Editorial change.

(11) IPU 13U1334 issued 08-09-2013 IRM 3.17.80.1.2.1(9) Clarification on when to reject Forms 14165.

(12) IPU 13U1334 issued 08-09-2013 IRM 3.17.80.1.10 Clarification on quarterly follow-up correspondence on all outstanding erroneous refund cases.

(13) IPU 13U1334 issued 08-09-2013 IRM 3.17.80.1.11 Editorial changes.

(14) IPU 13U1334 issued 08-09-2013 IRM 3.17.80.1.14 Editorial changes.

(15) IPU 13U0897 issued 05-09-2013 IRM 3.17.80.1.2.1 Report all Duplicate Manual Erroneous Refund (DMER) cases within the same month the cases have been received by the site Erroneous Refund team.

(16) IPU 13U0897 issued 05-09-2013 Exhibit 3.17.80-16 providing updated business operating division points of contact.

(17) IPU 13U0897 issued 05-09-2013 IRM 3.17.80.1.3 updated to ensure IRM 21.4.4 manual refund instructions are followed for Manual Refunds.

(18) IPU 13U0897 issued 05-09-2013 IRM 3.17.80.1.13 updated to ensure IRM 21.4.4 manual refund instructions are followed for Manual Refunds.

(19) IPU 13U0630 issued 03-29-2013 IRM 3.17.80.1.5.1(4) and (5) clarification of instruction of 5-year statute cases within .

(20) IPU 13U0630 issued 03-29-2013 IRM 3.17.80.1.8.2 clarification of 510-C issuance date in

(21) IPU 13U0630 issued 03-29-2013 Exhibit 3.17.80-16 providing updated business operating division points of contact.

Effect on Other Documents

IRM 3.17.80 dated November 30, 2012 (effective January 1, 2013) is superseded. The following IPUs, issued from November 30, 2012 through October 23, 2013, have been incorporated into this IRM: 13U0630, 13U0897,13U1334,13U1370, and 13U1556.

Audience

All Submission Processing Accounting Operations Campuses (Wage & Investment and Small Business/Self Employed)

Effective Date

(01-01-2014)

Paul J. Mamo
Director, Submission Processing
Wage and Investment Division

3.17.80.1  (01-01-2014)
Recovering Category D, Erroneous Refunds

  1. Incorrect refunds are occasionally issued to taxpayers due to processing errors, misapplied payments, incorrect tax adjustments, taxpayers filing fraudulent returns or using an incorrect taxpayer identification number (TIN), etc.

  2. 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.

  3. 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.

  4. Section 3705 (a) of the IRS Restructuring and Reform Act of 1998 (RRA 98) requires employees to include their name, telephone number and Integrated Data Retrieval System (IDRS) number on manually generated and handwritten correspondence.

  5. See Enterprise Learning Management System (ELMS) Course 2493, Researching and Resolving Erroneous Refunds.

3.17.80.1.1  (01-01-2014)
General Overview

  1. Accounting Operation's role, to attempt recovery or request voluntary repayment of erroneous refunds, does not change. Report feedback to your respective site servicing areas if the causes are attributable to the actions of a particular functional area whether the Erroneous Refund was initiated locally or at another site (transferred). This not only alerts the area of processing errors to initiate corrective actions, but documents that we have informed management to prevent future erroneous refunds. (see table below)

    If: Then:
    The erroneous refund was issued and identified in Kansas City's servicing area
    1. Feedback will be sent by Kansas City's erroneous refund team to their local (servicing area) business or functional area.

    2. Kansas City's erroneous refund team will report the feedback information on their Monthly Erroneous Refund Report to Headquarters.

    The erroneous refund was issued outside of Fresno's servicing area and subsequently identified by Ogden’s servicing area
    1. feedback will be sent by Ogden’s erroneous refund team to Fresno's (servicing area) business or functional area

    2. Fresno's erroneous refund team will report the feedback information on their Monthly Erroneous Refund Report to Headquarters

    Note:

    For duplicate, manual, erroneous refund feedback, follow IRM 3.17.80.1.2.1.

  2. IRS must report disbursement losses per IRM 3.0.167, Losses and Shortages. Areas causing erroneous refunds must participate and provide documentation to support write-off actions if deemed un-collectible.

    1. Documentation consists of the circumstances surrounding the reason actions resulted in an Erroneous Refund.

    2. Management must take corrective actions to prevent processing errors in the future.

    3. In addition to working notices, transcripts and quality reviews, establishing a mechanism to provide feedback to the areas causing erroneous refunds to occur demonstrates the IRS proactive approach to reduce errors and suffer fewer disbursement losses.

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

    1. The category type of erroneous refund must be identified.

    2. Determine the correct Accountable Officer for recovery actions. If the Accounting Erroneous Refund team incorrectly receives a case belonging to another site accountable officer, reject the case back to the originator.

    3. If an Erroneous Refund team is maintaining a case that belongs to another site Accountable Officer, close the IDRS control base and follow IRM 3.17.80.1.22 to transfer the erroneous refund case to the site of the Accountable Officer.

    4. Where incomplete case files are received, they may be returned to the originator after attempts of contacting the originator by telephone and/or E-mail communication has been made to correct information/documentation on the account.

    5. Ensure the erroneous refund statute expiration date (ERSED) is open prior to returning the case to the originators for completion.

    6. If the ERSED is open, and/or if the case is incomplete, and/or if the case is routed incorrectly, return the case to the originators.

    7. Ensure Transaction Code (TC) 971 with Action Code (AC) 663 is input.

  4. History Sheets must be prepared from the point of discovery. Form 12356 must be used by the area discovering the erroneous refund per IRM 21.4.5.5, Account Actions for Category D Erroneous Refunds. Accounting Operations must also include documentation of actions taken, pending actions, telephone calls, copies all letters, etc., must be annotated on the 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.

  5. The ERSED is 2 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 5 years from the date the taxpayer receives the erroneous refund. However, cases deemed a 5-year ERSED must be coordinated with local Counsel before any action is taken. Seek assistance to pursue cases through coordination at the Planning and Analysis staff level or other management support functions to obtain local Counsel's approval to pursue recovery using the 5-year duration. Refer to IRM 3.17.80.1.5.1, Erroneous Refund Statute Considerations.

    Note:

    All payment over cancellation (POC) cases have a 5-year ERSED.

  6. 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.

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

    1. References to the erroneous refunds accounts (1530, 1535, 1540, 1545) are shown in text as "15XX" .

    2. See IRM 3.17.80.1.18, Write-Off Procedures for Unrecoverable Erroneous Refunds.

    3. Accounts 1530, Employee Fraud-Court Case Erroneous Refunds, 1535, Court Case Erroneous Refunds (Kansas City-Only), 1540, Non-Court Case Erroneous Refunds, and 1545, ID-Theft Erroneous Refunds, were established with Redesign Revenue Accounting Control System (RRACS). These accounts impact the Director's accountability.

    4. If it is determined that an erroneous refund is recoverable, one of the 15XX Accounts are debited and used to substantiate use of credit TC 700 posted to the taxpayer's account. This action prevents erroneous Master File (MF) notices from generating while corresponding with the taxpayer requesting repayment for the Erroneous Refund.

    5. A credit (false) TC 700 posts to the taxpayer's account, identified by Document Code 58 blocking series 950-999 in the document locator number (DLN). "Erroneous Refund (-U Freeze)" ERR-REF-BAL-DUE is displayed on TXMOD for these cases. This informs other employees that the account is being worked and monitored in Accounting.

    6. See Figure 3.17.80-1, for a view of the TXMOD screen and Exhibit 3.17.80-3, Erroneous Refund Accounts 1530 and 1540.

    Figure 3.17.80-1

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.17.80.1.1.1  (01-01-2014)
Accounts 1530, Employee Fraud and/or Civil Suit Erroneous Refund Court Cases, and Account 1540, Non-Court Case Erroneous Refunds

  1. This receivable account is used to record an employee fraud case and/or civil suit erroneous refund court case. Account 1530 will be supported by:

    • Court documents

    • Treasury Inspector General for Tax Administration (TIGTA) and/or Criminal Investigation (CI) Reports

    • Debit vouchers or other documents showing the name of each debtor, amount receivable and details of the transaction creating the indebtedness.

  2. Employee fraud cases are controlled in the 1530 Account. Access should be limited.

  3. Transfer case to the 4910 Disbursement Loss Account, when the case is determined un-collectible. Documentation will explain why the case is uncollected.

  4. The external subsidiary for the 1530 account is the file of paper documents described in (1) above.

  5. Account 1530, Civil Suit Erroneous Refund cases:

    1. This account records erroneous refunds that result in a court case. Account 1530 is supported by copies of all correspondence, court documents, TIGTA and/or CI or other agency reports, debit vouchers or documents showing the name of each debtor, amount receivable and details of the transaction creating the indebtedness.

    2. Transfer cases from the 1540 Account to this account when it is determined that the case is going to court.

    3. Transfer cases to the 4910 Disbursement Loss Account once the case is determined to be uncollectible. See IRM 3.0.167.8.4, Account 4910, Disbursement Loss, for additional instructions.

  6. Account 1540, Non-Court Case Erroneous Refund:

    1. This account records erroneous refunds that are NOT court cases. This account represents erroneous refunds that have NOT been collected, resulted in court cases, assessed or determined uncollectible. Account 1540 is supported by copies of all correspondence, debit vouchers (Form 2209, Form 3809, etc.) or other documents showing the name of the debtor, amount receivable and details of the transaction creating the indebtedness.

    2. Transfer cases to the 1530 Account when it is determined that the case is going to court.

    3. Transfer cases to the 4910 Disbursement Loss Account when the ERSED (either 2 or 5 years) expires.

    4. A case determined to be uncollectible before the statute expiration is transferred to the 4910 Disbursement Loss Account. Documentation explains why the account is uncollectible. See IRM 3.17.64.17.3.5, Account 4910, Disbursement Loss (Real Account, DR Normal Balance), and IRM 3.0.167.8.4, Account 4910, Disbursement Loss, for additional instructions.

3.17.80.1.2  (01-01-2014)
Monthly Reporting Category D Erroneous Refunds

  1. Management must report feedback to business or functional areas when employee actions cause the occurrence of erroneous refunds. This may be the result of lack of actions such as failure to monitor accounts or the originators of manual refunds (TC 840) who inadequately research accounts and fail to stop a system-generated refund (TC 846).

    1. Management's interest in the causes of erroneous refunds became elevated as a result of the 1998 TIGTA erroneous refunds audit report.

    2. It is suggested reports be centralized at the Operation level or Director's level.

    3. Reports at the sites will support documentation that we have provided notification to the areas causing the errors for corrective actions. Similar reviews have been performed by the Government Accountability Office (GAO), TIGTA, the Annual Assurance process, and related other internal control review requirements described in IRM 3.0.257, Systems Accountability Review.

    4. The calendar-year, monthly Erroneous Refund report is due to Headquarters (E-mail or fax) 10 business days after the last business day of the month (i.e., January 2014 report due on February 14th, February 2014 report due on March 14th, June 2014 report due on July 15th, etc.).

  2. Only the following descriptions of errors will be included when submitting the monthly reports to Headquarters (HQ) :

    • Bankruptcy

    • Credit Card Charge-back

    • Dishonored Check

    • Duplicate Filed Return

    • Duplicate Refund (TC 840 and TC 846-TC 840 in error)

    • Duplicate Refund (TC 840 and TC 846-TC846 in error)

    • Duplicate Refund (Two TC 840s)

    • Encoding Error

    • Fraudulent Returns (TC 840/841)

    • Health Coverage Tax Credit (HCTC)

    • Identity Theft

    • Incorrect Adjustment

    • Incorrect Hold Code

    • Incorrect Credit Interest

    • Incorrect Credit Transfer

    • Incorrect Manual Refund (TC 840)

    • Incorrect Withholding

    • Internet Tax Scheme

    • Misapplied Payment — Account #

    • Misapplied Payment — Master File Tax (MFT)

    • Misapplied Payment — Routing #

    • Misapplied Payment — Tax Year

    • Misapplied Payment — TIN

    • Misapplied Payment Lockbox — Account #

    • Misapplied Payment Lockbox — MFT

    • Misapplied Payment Lockbox — Routing #

    • Misapplied Payment Lockbox — Tax Year

    • Misapplied Payment Lockbox — TIN

    • Mixed Entity

    • Non-receipt Claim (for all recertification cases)

    • Omitted/Improper Monitoring

    • Other-Field Error (describe in detail)

    • Other-Service Center Error (describe in detail)

    • Payment Over Cancellation (POC)

    • Refund Intercept Processing Error

    • Re-sequencing - not systemic

    • Statute Expired Credit Release

    • Stopped Check


    Functional area or other cause of the error Description of the error Corrective actions taken Volume of cases Dollar amounts
    Taxpayer Advocate Service (Fresno Submissions Processing Campus) Omitted/Improper Monitoring Discussed importance of monitoring and stopping a generated (TC 846) when expediting a Manual Refund (TC 840) due to a hardship in team meeting 3 $25,750.28
    Accounts Management (Ogden Submission Processing Campus) Misapplied Payment — TIN Lead went over transferring procedures in a team meeting; also discussed importance of applying payments to correct taxpayer account 56 $325,756.47
    Data Conversion (Integrated Submission and Remittance Processing) Misapplied Payment — Tax Year Provided feedback on importance of transcribing information correctly in a group meeting. 24 $36,500.00

    Note:

    The monthly reports should mirror the above table. When describing the business or functional Area, descriptions, and corrective actions taken, be sure to provide clear and concise descriptions in the appropriate report fields. (see table above and descriptions found in IRM 3.17.80.1.2(2)

  3. When feedback is received and there is disagreement on who caused the erroneous refund, and if it is discovered the error feedback should have been sent elsewhere (i.e., a previous month lockbox error was really a taxpayer error), prepare an updated monthly report and send it to the HQ Erroneous Refund Analyst the same time the regularly scheduled monthly report is due.

  4. For lockbox cases that are being written-off, the above described report and copies of the cases should be sent to both the HQ Erroneous Refund Analyst and the HQ Losses and Shortages Analyst.

3.17.80.1.2.1  (01-01-2014)
Monthly Reporting and Error Feedback for Duplicate, Manual, Erroneous Refunds (DMER)

  1. TIGTA and other management internal control reviews cited a high incidence of duplicate refunds. Because of this, the Wage and Investment Commissioner has asked for additional focus on duplicate, manual, erroneous refunds.

  2. These are cases with any combination of:

    • Two or more TC 846/TC 840 combinations within six cycles

    • Two or more TC 840s within six cycles

  3. DMERs can be created by:

    • The input of an adjustment without a hold code (HC) 1, 2, or 4 Example: A manual refund was prepared for an overpayment that was being held by a -R freeze, -A freeze, etc. At the same time, an adjustment was input on the account to correct the posted information and a HC 3 was used. The posting of the TC 29X with HC 3 released the freeze (-R, -A, etc.), and a systemic refund (TC 846) was issued in addition to the manual refund.

    • A subsequent action, such as a credit transfer, taken without the necessary steps to hold the credit Example: An adjustment with a HC 1, 2, or 4 is input to hold the credit in order to offset part of the overpayment to another module and manually refund the remaining overpayment. A credit transfer (e.g., TC 662, TC 672, TC 820, etc.) without a TC 570, will release the -K Freeze set by the HC 1, 2, or 4, and allow a systemic refund (TC 846) in addition to the manual refund (TC 840).

    Note:

    There may be situations due to adjustments to a taxpayer's account where the money amounts may differ and not because of interest added to the refund. For more information regarding the definition of a DMER, refer to IRM 21.4.5.4.6, Duplicate Manual Erroneous Refunds (DMER).

  4. Form 14165, Erroneous TC 840/846 Report, will be included with all duplicate, manual, erroneous refund (DMER) cases forwarded to the Erroneous Refund Teams. (see IRM 21.4.5.4.6.1 and Figure 3.17.80–2) Lines 1 through 10 of the Form 14165 must be completed by the organization that forwards the case to the Erroneous Refund Teams.

  5. The Erroneous Refund Teams will complete lines 11 through 13 of the Form 14165.

    1. Box 11 should be entered and include the manual refund Approver's SEID.

    2. Box 12 should be entered and include the manual refund preparer's name and phone number.

    3. Box 13 should be entered and include the date the Erroneous Refund employee has completed the Form 14165.

  6. Any complete DMER case received during the month will be reported to SP Headquarters in the same month when the case was received by the site (e.g. a case received on May 15th will be reported within the May report, a case received on June 29th will be reported on the June report, etc.)

  7. Contact the Submission Processing Erroneous Refund Analyst for any DMER cases where it is believed they don't follow IRM 21.4.5. qualifications for being a DMER.

    1. Unless instructed to remove the case from the inventory, do not remove the case and always report it following the below instructions.

  8. The Erroneous Refund Teams will notate on every case's Form 14165 whether the taxpayer repaid the erroneous refund within the 21–day demand date time frame.

  9. Scanned copies of each duplicate, manual, erroneous refund (DMER) case will be forwarded to Headquarters. The monthly information is due to S.P. Headquarters ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 7 business days after the last business day of the month. The due date chart is below:

    2014 Month of Report Due Date of Report
    January February 11th
    February March 11th
    March April 9th
    April May 9th
    May June 10th
    June July 10th
    July August 11th
    August September 10th
    September October 9th
    October November 12th
    November December 9th
    December January 12th, 2015

    Note:

    Due dates exclude weekends and holidays.

  10. Scan every case file as a PDF file and include the report month within the scanned file (i.e., "April 2014 error case 1," "July 2014 error case 8," etc.)

  11. The information will include, in the following order:

    • Copy of each Form 14165 received when processing the erroneous refund (see Figure 3.17.80-2)

    • Copy of case history file associated with Form 14165 - including the manual refund form (Form 5792, Form 3753, or Form 12857) that is associated with the duplicate, manual, erroneous refund case

    • Copy of all documentation the Erroneous Refund team associates with any erroneous refund case, including the case history document(s)

    • Copy of a report specifically for these cases, using the same format described in IRM 3.17.80.1.2

      Note:

      For every case submitted for the monthly report, notate on the first history sheet whether the taxpayer repaid the refund within the first 21-days (plus grace-days)

    • Copy of Form 14165-A that was forwarded to the BOD Point of Contact (see below Form 14165-A information)

  12. There is an exception to the above when a Form 14165 is received and the tax account has been fully repaid. Only the Form 14165 is necessary and no other back-up documentation is needed.

    Note:

    Do not reject Forms 14165 when the tax account has been fully re-paid, unless box 10 is missing an explanation on the cause of the erroneous refund. Reject the case/form only when an explanation is missing.

  13. If a site received requests for information about reports that have already been forwarded to HQ, inform those individuals to contact the SP HQ Erroneous Refund Analyst.

    1. Do not change any report information unless the SP HQ Erroneous Refund Analysts provides instructions to make changes.

  14. Use ONLY Form 14165-A, Duplicate Manual Erroneous Refund Feedback, when preparing error feedback for this type of erroneous refund. Do not issue any additional error feedback (locally-developed) other than Form 14165-A which is found in Publishing's web site at this location: Pub http://core.publish.no.irs.gov/forms/internal/pdf/59099c12.pdf.

    1. Complete boxes 1–9 on Form 14165-A

    2. Using the Point of Contact information in Exhibit 3.17.80–16, send the Form 14165-A (with boxes 1–9 completed) to the appropriate contact via E-mail correspondence.

    Figure 3.17.80-2
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.17.80.1.3  (01-01-2014)
Account 1535 Court Case Erroneous Refund (Kansas City Only)

  1. This receivable account is used to record erroneous refund receivables that result in a court case.

  2. 1535 Account will be supported by:

    • Form 3809 documents

    • Backup documentation such as IDRS print reflecting erroneous refund

    Note:

    The case file for this account is maintained by the Ogden Scheme Development Office.

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

  4. Cases received from CI are identified with a "CRIMINAL INVESTIGATION RESTITUTION CASE" cover sheet.

  5. CI will:

    1. Reverse all erroneous credits

    2. Input TC 130

    3. Prepare Form 3809, Miscellaneous Adjustment Voucher, Form 3753, Manual Refund Posting Voucher or Form 12857, Refund Transfer Posting Voucher as appropriate. (see Figure 3.17.80-20 and 3.17.80-24 for examples of completed Forms 3809)

    4. Prepare any necessary manual refunds to the injured taxpayer, following IRM 21.4.4 manual refund procedures.

    5. Send a letter to the taxpayer requesting repayment (this letter is in lieu of the 510-C letter). A copy of the correspondence becomes part of the case file documentation

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

  7. If 45 days after the date of the initial letter, review each case file.

    Note:

    The initial letter which is initiated by the Ogden Scheme Development Center (CI-SDC) is an internal letter and is a request for notification to defendant for repayment.

  8. CI will follow-up with taxpayer.

  9. Monitor the account for payments/credits to post to the account as they become available using generated TC 844 transcripts (see IRM 3.17.80.1.14, Processing 844 Transcripts (TRANS-844) -U Freeze).

3.17.80.1.3.1  (01-01-2014)
Maintaining Account 1535 Court Ordered Restitution (QRP/RPP) Case Files (Ogden Scheme Development Only)

  1. Ogden CI-SDC will maintain the case files in alphabetical (last name first) order.

  2. Organize the case file as follows (each letter on the list below will have a corresponding tab in the case file):

    1. Court judgement in criminal case should be attached to the left of the case file.

    2. Completed case History Sheet should be on top right of case folder. (see Exhibit 3.17.80-12)

      Note:

      Important: All actions taken while working the case should be dated and recorded in detail on the History Sheet.

    3. A current TXMOD print showing any new activity on the account should be maintained in the case folder (print TXMOD pages showing NEW activity ONLY) directly under the History Sheet. If there is no activity (do not print the TXMOD) annotate History Sheet: "No activity on TXMOD" . The TXMOD should be updated when a review is conducted when an action is taken on the account (discard old TXMOD prints except for the original - see Note below).

      Note:

      The "ORIGINAL " TXMOD should always be kept in the case file under the History Sheet. This print will reflect the original account activity.

    4. A balance sheet showing the original erroneous refund balance and all subsequent payments should precede the Case History sheet and tax modules.

    5. CI-SDC will forward completed Form 3809s to the Kansas City Erroneous Refund team. All corresponding Form 3809s should follow the balance sheet with the most current on top. The Form 3809 must be stapled to the balance sheet to prevent it from being lost.

    6. Criminal Investigation Management Information System (CIMIS) summary and Criminal Investigation Closing report.

  3. Pull the case every three (3) months for review.

    Note:

    Annotate case history sheet that a review was performed and the findings of the review.

  4. CI-SDC will provide a cumulative balance sheet of all open cases to Accounting every six months with the following information: Name (Alpha order, last name first), TIN, Master File Tax (MFT), tax period, and money amount. This list will be used by accounting to ensure the case file balance (IDRS) matches the RRACS account balance.

    Note:

    Any inconsistencies will be expeditiously worked/corrected between Accounting and CI-SDC to avoid imbalances.

  5. If a Scheme Development case meets "write-off" criteria, CI-SDC will issue a memo requesting "write-off" processing. The “memo” with backup documentation will be sent to Kansas City's Submission Processing Accounting Operation (see Exhibit 3.17.80-4) and include the following:

    1. Write-off criteria and reference documented (Example: 20 year collection statute, or deceased taxpayer, IRM or IRC reference to the Statute expiration of Collection).

    2. Taxpayer Name.

    3. TIN.

    4. MFT/Tax Year.

    5. Case Number.

    6. Total amount to be written off

    7. Erroneous refund date(s) and amount(s) of the original refund(s).

  6. Follow IRM 3.17.80.1.18, Write-Off Procedures for Unrecoverable Erroneous Refunds, when transferring the loss from the 1535 Account to the 4910 and 6920 Accounts.

    1. A copy of the Field Director memo to the Submission Processing Director requesting relief/ write-off will be included with the copy of the Form 3809 that is sent to CI-SCD.

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

    Note:

    CI-SDC will complete a Form 3465, Adjustment Request, and forward to the Kansas City Erroneous Refund team requesting a TC 845 input. This form is used when the account is full-paid or written off, and the reversal of the TC 844, —U freeze, needs to be released.

3.17.80.1.4  (01-01-2014)
Interest Considerations

  1. Internal Revenue Code (IRC) Section 6404(e) requires that the Service abate any assessed interest from the date of the refund to the date by which repayment is demanded on any Erroneous Refund of ≡ ≡ ≡ ≡ ≡ ≡ or less, provided the taxpayer or any related party in no way caused the Erroneous Refund to occur. The Servicewide Interest Program has oversight of interest and penalty issues.

    Note:

    If the refund is greater than ≡ ≡ ≡ ≡ ≡ ≡ , interest abatement is not required, but may be allowed on a case by case basis. Questions on cases of erroneous refunds in excess of ≡ ≡ ≡ ≡ ≡ ≡ ≡ should be referred to interest specialists or to local Counsel.

  2. Interest assessments are abated when the interest is not legally due, the assessments were made in error, or an administrative decision was made to abate the interest.

  3. 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.

  4. See IRM 20.2, Interest, for further instructions or clarification on abatement of interest.

  5. 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 1.2.12.1.4, Policy Statement 2-10, Abatement of Interest on Erroneous Refunds.

    Exception:

    In instances where a prepaid credit was overstated causing an Erroneous Refund, interest will be charged on the amount of the Erroneous Refund from the date of the issuance or the due date of the return, which ever is later.

    1. Requires taxpayers not be held liable for interest on erroneous refunds until the taxpayer is asked to repay the refund.

    2. The Service must clearly be at fault in issuing the refund, however, and the refund must not exceed ≡ ≡ ≡ ≡ ≡ . Questions on cases of erroneous refunds in excess of ≡ ≡ ≡ ≡ ≡ ≡ ≡ should be referred to interest specialists or local Counsel.

  6. IRM 1.2.53.7, Delegation Order 30-6, states that Service officials have the authority to abate interest on Erroneous Refunds under IRC Section 6404(e)(2) interest can be abated when the following conditions apply:

    1. Documentation is present which leaves no doubt a Service error caused the Erroneous Refund to be issued.

    2. Documentation is present which substantiates repayment of the refund has been received in full.

    3. The official is satisfied after considering the relative size of the Erroneous Refund, the amount of interest involved, the circumstances surrounding any delay in the repayment of the Erroneous Refund and the handling and correction costs which would be entailed, a waiver would be fair and equitable to the Government and the taxpayer.

    4. The authority delegated herein may not be re-delegated.

    Note:

    Interest will be abated under IRC Section 6404(e)(2) from the date of refund to the date of demand of repayment.

  7. Interest considerations are covered in IRM 20.2.7.5, Erroneous Refunds IRC Section 6404(e)(2).

    1. IRM 20.2, Interest is available on Servicewide Electronic Research Program (SERP). The Office of Penalty and Interest Administration and IRM 20.2 provides oversight on computing interest.

    2. The Office of Penalty and Interest Administration developed restricted interest specialist position descriptions. The office suggests the various functions identify and develop Interest Specialists to compute restricted interest and provide support for their work areas.

    3. IRM 20.2 recommends that interest specialists work the complicated restricted interest cases.

3.17.80.1.5  (01-01-2014)
Methods Used to Recover Erroneous Refunds

  1. Assessable erroneous refunds are refunds which the IRS may assess (credit reversals are not assessments) under the IRC. The assessment may 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.

    1. These refunds are referred to as assessable erroneous refunds.

    2. The IRS' authority to assess assessable erroneous refunds is not limited to the amount of "total tax. "

    3. Provided that the applicable period for the assessment of the tax to which the refund relates is still open, the Service may assess the full amount refunded.

    4. Once the refund is assessed, it can be collected in the same manner as a tax within the collection statute expiration date (CSED).

    5. See IRM 21.4.5, Erroneous Refunds, for variety of the types, categories and processing procedures.

  2. 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.

    1. Erroneous Refunds carry a 2 or 5-year ERSED date and can only be recovered by following proper erroneous refunds procedures.

    2. See IRM 21.4.5, for types, categories and processing procedures.

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

    1. Civil suit under IRC Section 7405 is within 2 or 5 years from the time the refund is received by the taxpayer (when the check clears the bank). (see IRC Section 6532(b))

    2. The Erroneous Refund may be offset against any refund otherwise due the taxpayer for the same year and with respect to the same type of tax to which the refund is related. There is no time limitation on this right of offset.

    3. To the extent the refund is an unassessable erroneous refund, the refund may be offset against any refund otherwise due to the taxpayer with respect to any year or any type of tax. This right to offset is limited to the ERSED.

    4. The taxpayer may voluntary repay the erroneous refund.

3.17.80.1.5.1  (01-01-2014)
Erroneous Refund Statute Considerations

  1. The collection methods and statutes of limitation for recovering erroneous refunds are different than those used to collect tax liabilities. Three different statutes may apply to Erroneous Refund account modules:

    • Assessment Statute Expiration Date (ASED)

    • CSED

    • ERSED

  2. The ASED expires 3 years from the due date or the date the return was filed; whichever is later.

  3. The CSED expires 10 years from the date of the assessment.

  4. The ERSED expires 2 or 5 years from the date the refund check cleared (refer to IRC Section 6532(b)).

    Note:

    As a general rule, the TC 840 or TC 846 date can be used to determine the ERSED.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    If the RSED, seek further guidance from the Technical Unit.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Each site will direct employees to coordinate with the local Counsel to determine case types for applying the 5-year ERSED. Before referring to Counsel fill out a "Non-Rebate 5-year ERSED Check Sheet" to determine if the 5-year ERSED is applicable. (see Exhibit 3.17.80-13)

    Note:

    Here are some examples of cases that should be referred to Counsel: multiple returns filed, multiple TINs, etc.

3.17.80.1.5.2  (01-01-2014)
Statutes Determined by Erroneous Refund Category Type

  1. Always review cases to apply statute considerations. The statutes listed by categories below apply to erroneous refunds:

    1. Category A-1: ASED and CSED

    2. Category A-2: ASED and CSED

    3. Category B: ASED and CSED

    4. Category C: ASED and CSED

    5. Category D: CSED and ERSED

    Note:

    The CSED may be applicable on unassessable erroneous refund accounts when the taxpayer received an Erroneous Refund before satisfying their tax obligation. On cases in which the ASED or CSED shown have expired, apply the ERSED, if still open.

3.17.80.1.6  (01-01-2014)
Category A1 or A2 Erroneous Refunds

  1. 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.

    1. If assessment or abatement actions were previously input, the case does not meet Examination's criteria.

    2. Immediately respond to the area causing this to occur; Accounting should provide feedback to the area(s) causing errors to occur. Cite trends. Deficiency and appeals procedures must be followed. Errors impact Submission Processing Director's accountability.

      Note:

      For all duplicate, manual, erroneous refunds, feedback must be sent to both the area causing the erroneous refund and additional feedback must be sent to the individual that signed Section IV, box 4 and 4a of the Form 5792 for the case that resulted in the duplicate, manual, erroneous refund.

  2. For the Service to make an assessment, the taxpayer has to either agree to the assessment or a Notice of Deficiency has to be issued. The Notice of Deficiency gives the taxpayer 90 days to petition the tax court (150 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 90-day period has expired. Notices of Deficiency must be issued before the ASED expires.

    1. Research the Centralized Authorization File (CAF) using command code (CC) CFINQ (see Figure 3.17.80-3). A CAF representative may be entitled to the same information you are providing to the taxpayer.

      Figure 3.17.80-3

      This image is too large to be displayed in the current screen. Please click the link to view the image.

    2. Cases received in Accounting should be returned to originators for resolution unless an adjustment was made in error. This would be worked in Accounting as a Category D Unassessable Erroneous Refund. If the case is not a Unassessable Category D type, then return cases to the originator for resolution.

      Note:

      Letter 510-C without appeal rights is inappropriate here. The only cases worked in Accounting are those where the ASED has expired and the ERSED is open. There would be no assessments made on these cases and voluntary repayment would be applied to Excess Collections (or Unidentified Remittance File, URF).

  3. When a taxpayer repays the Erroneous Refund voluntarily:

    1. If ASED has expired but the ERSED is open, apply repayment to Excess Collections (or Unidentified Remittance File, URF).

    2. If the ASED is open and the ERSED is open, adjust the account.

  4. If the taxpayer repays, prepare Form 3245, Posting Voucher - Refund Cancellation or Repayment and update IDRS to post the credit transactions. (see IRM 3.17.80.1.12, Refund Cancellation, Repayments and Replies to Correspondence)

    1. Transfer to Excess Collections (or Unidentified Remittance File, URF) not to be refunded or reapplied if ASED is expired, but ERSED is open.

    2. If ASED is open ERSED is open, adjust account.

  5. If no response from the taxpayer:

    1. If ERSED is still open (see IRM 3.17.80.1.11, Maintaining Case Files).

    2. If the ERSED is closed:
      close the case on IDRS: C#,NOPAYMENT,C,ERRF
      notate actions taken on the case History Sheet
      file in the closed case file

  6. 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 3-year ASED has not expired.

  7. To determine whether interest is due from the taxpayer, see Exhibit 3.17.80-1, Erroneous Refund Interest Considerations, and IRM 3.17.80.1.4, Interest Considerations, 20.2.1, General and Legal Authorizations or IRM 21.4.5.7, Erroneous Refunds on Designated and Non-Designated Payments.

3.17.80.1.6.1  (01-01-2014)
Processing Categories A, B or C Erroneous Refunds

  1. Category A, B or C erroneous refunds received in Accounting are not considered unassessable type erroneous refund, upon receipt.

    Note:

    Do not follow these procedures if the adjustment did not result from a tax determination. Instead, process as a Category D unassessable erroneous refund.

    1. Immediately contact the Submission Processing site Planning and Analysis staff analyst to contact the area causing adjustments in error.

    2. Errors impact the Submission Processing Director's accountability over disbursement losses.

  2. Return cases to the originator for resolution (see IRM 21.4.5, Erroneous Refunds).

  3. Direct deposit refunds made in error or refunds determined to be sent to "unknown" or "unable to locate" recipients will eventually be written off. Case files citing these circumstances must provide sufficient explanation to support write-off actions. (see Figure 3.17.80–5).

    Note:

    For more information on direct deposits refer to IRM 21.4.5.10.1, IRS Error Direct Deposit).

    Figure 3.17.80-4
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Figure 3.17.80-5
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.17.80.1.7  (01-01-2014)
General Overview - Category D, Unassessable Erroneous Refunds

  1. 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 ELMS Course 10824, Researching and Resolving Erroneous Refunds. In general, within the first 10 days of receipt employees should:

    1. See IRM 21.4.5.6, Adjustments and Credit Transfers on Category D Accounts, for necessary actions and how to assemble and submit packages for processing by Accounting/Erroneous Refund Units.

    2. Review the case to ensure that the 510-C letter (see Figure 3.17.80-4) was issued and that TC 844, TC 470 with Closing Code (CC) 93, and TC 971 AC 663 were input. Form 12356, Erroneous Refund Worksheet must also be included. Ensure that all applicable Statutes are open. Follow site direction and IRM 3.17.80.1.5.1 to refer case types deemed meeting the 5-year ERSED to local Counsel, as appropriate.

      Note:

      Ogden Only - For 8038-CP cases, release any -U freeze that may be on the account. No contact is necessary.

    3. If IDRS actions were not input and/or documentation is not attached or incomplete, contact the originator by E-mail or telephone for resolution. If there is no response within 1 week (5 workdays) reject the case back to the originator informing them IRM 21.4.5 was not followed for preliminary preparation of the Category D erroneous refund case.

      Note:

      Do Not reject if the erroneous refund date is a future date and the TC 844 is not input, Form 12356 will state that a TC 844 be input by the Accounting Function upon receipt of the case.

      Note:

      Occasionally Field Offices without IDRS access will forward a case to Accounting Operations without completing the necessary requirements - Do Not reject these cases and send a 510-C, input Transaction Codes 844, 470 with Closing Code 93, and 971 with Action Code 663. (see IRM 3.17.4.5.12, Field Offices Without IDRS)

    4. If the case is complete and the taxpayer has not responded to the first notification within 45 days, follow-up within 10-days, with a 2nd letter, including interest due, and prepare Form 3809 to credit the taxpayer's account and debit the appropriate 15XX General Ledger account. Number Form 3809 and post the TC 700 with Document Code 58 in blocking Series 950 through 999 to display the literal Refund Balance Due notification on IMFOL and TXMOD. If reversing, post the TC 702 with Document Code 58 in Blocking Series 900 through 949.

    5. Credit the taxpayer's account (TC 700) for the amount of the Erroneous Refund only.

    6. Annotate actions taken on the History Sheet.

    7. If the case is complete, and the 45 day response time has not yet passed, monitor the account for recent transactions posting, for statute expiration dates, and to determine the date for the interest letter (2nd or later 510-C or 3414-C letter).

    8. Maintain case file and documentation.

    9. Suspense case file and monitor for subsequent follow-up actions (see IRM 3.17.80.1.11, Maintaining Case Files).

  2. If necessary documentation is not received with the case file, update the History Sheet stating the reasons the case is being returned to the originator.

    Note:

    Form 12356, Erroneous Refund Worksheet must be included as documentation for all Category D erroneous refunds. If this documentation is not received with the case, refer the sender to IRM 21.4.5.5(13) for completion of the Form 12356. Request this form be completed and sent to the erroneous refund team. If the request is ignored after sufficient time has been given, reject the case.

    Note:

    Form 14165, Erroneous TC 840/846 Report, must be included as documentation for al Category D Duplicate, Manual, Erroneous Refund (DMER) cases. If this documentation is not received with the case, refer the sender to IRM 21.4.5.6 for completion of the Form 14165. Request this form be completed and sent to the Erroneous Refund team. If the request is ignored, after sufficient time (10 business-days) has been given, reject the case.

  3. If the applicable ERSED, CSED or ASED has not expired, but is imminent, expedite the processing of the case (see IRM 3.17.80.1.8.1, Working Statute-Imminent Cases). Prepare appropriate Erroneous Refund correspondence and Form 2209, Courtesy Investigation if:

    1. The 3 year ASED and 10 year CSED have not expired.

    2. The amount of the Erroneous Refund exceeds≡ ≡ ≡ ≡ ≡ ≡ .

    3. The 2 or 5-year ERSED is open, but imminent.

  4. Review the case file for interest which may be due from the taxpayer (see IRM 3.17.80.1.4, Interest Considerations and Exhibit 3.17.80-1, Erroneous Refund Interest Considerations).

  5. If the ERSED 2 or 5-year will expire in approximately 3 months, the Erroneous Refund amount is over ≡ ≡ ≡ ≡ ≡ ≡ ≡ , issue the appropriate Erroneous Refund letter and Form 2209. (see IRM 3.17.80.1.8.1, Working Statute-Imminent Cases)

  6. Erroneous Refund Unit employees are reminded to input the correct blocking series when posting unassessable erroneous refund accounts with TC 700 (58 Document Code, 950-999 blocking series). This unique blocking code produces the displayed literal Erroneous Refund Balance ("-U" Freeze) on the account.

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

3.17.80.1.8  (01-01-2014)
Recovering Erroneous Refunds with Additional Balance Due

  1. Ensure that applicable statutes are still open. (see IRM 21.4.5, Erroneous Refunds)

  2. 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 the case to the originator for correction or request complete documentation.

  3. Combination cases may have both a CSED and ERSED applicable. (see IRM 21.4.5.14.1, Collection Statute Expiration Date for Category D Erroneous Refunds)

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

    1. See IRM 21.4.5.14.1, Collection Statute Expiration Date for Category D Erroneous Refunds, for further instructions.

    2. Research the CAF CC CFINQ for power of attorney (POA) indicators. The indicator requires the Service to issue notices or correspondence to the taxpayer's representative or POA.

    3. If the taxpayer does not respond to the first letter within 45 days, take the following steps:

      1. Within 10-days issue letters IDRS 510-C or 3414-C to notify the taxpayer of the erroneous refund amount and interest due.

        Note:

        Add to the correspondence text, "erroneous refund amounts are billed separately, you may receive a separate notice for any other unpaid portions of this tax period" . For the 510-C letter use paragraph 8.

      2. Prepare Form 3809 to post a TC 700, blocking series 950-999, Document Code 58, for the amount of the erroneous refund.

        Note:

        Input a TC 470 CC 93 (see above IRM 3.17.80.1.7(1)) prior to preparing the false credit (TC 700) to prevent balance due notices from generating to the taxpayer for the erroneous refund amount.

    4. Cycle the input of all transactions, as appropriate.

    5. If applicable, reverse interest and penalty.

    6. Research modules for TC 470, STAUPs and TC 844. If a TC 470, Closing Code (CC) 93, is not present on the Erroneous Refund tax module, input TC 470 using IDRS CC REQ77. This prevents erroneous MF notices from generating.

    7. Monitor the account for the above transactions to post to Master File. This posting action could take up to six (6) weeks.

    8. Once the TC 700 posts to the account, input reversal TC 472. This reverses the TC 470, CC 93, and allows normal notices to generate for tax liability balances due to IRS.

    9. See IRM 3.17.80.1.8.4, Taxpayer Repays in Full through IRM 3.17.80.1.8.5, Processing Partial Repayments for case monitoring and recovery actions.

    10. Update History Sheet case file when taking follow-up and monitoring actions and update IDRS history as appropriate.

  5. See IRM 3.17.80.1.5.1(4) for cases deemed valid as a 5-year ERSED. See IRM 20.2, Interest, and 3.17.80.1.4, Interest Considerations, for instructions when interest may be applicable.

3.17.80.1.8.1  (01-01-2014)
Working Statute Imminent Cases

  1. At times, areas may forward cases shortly before the related statutes may expire. These cases are known as Statute Imminent cases. Review credit transfer documents for both the ERSED and/or ASED. Route to appropriate area for expedite processing per site direction for case processing.

  2. If a 510-C letter was not sent, issue 510-C letter within 10-days of receipt. Include a self-addressed, return envelope.

  3. Photocopy documentation for case file. Record actions on History Sheet.

  4. If necessary seek recovery of the Erroneous Refund amount, follow procedures in IRM 3.17.80.1.11(8) and mail Form 2209, Courtesy Investigation to the appropriate Field Collection Group. Include copy of all correspondence (e.g., 510-C letter(s)).

    Note:

    Find the correct Collection Field Function group by going to http://irweb.irs.gov/ then click on the, "SERP," link. Next, click on the, "Who/Where," tab. Next, click on the, "RO by TSIGN/ZIP/STATE," link and select the drop-down, "Search By:" button and enter the zip code to select Zip Code and enter the taxpayer's zip code. Send the completed Form 2209 to the point of contact listed.

  5. Annotate the date and case control number on Form 2209 and specify Statute expiration date under the remarks as appropriate. In remarks notate: "Take No Enforcement Actions" "ERSED Expires (date)."

  6. Update History Sheet "Form 2209 requested" . Enter in remarks, "Notice sent to taxpayer on (date). Form 2209 initiated (date) to the Field Collection Group" .

  7. Update IDRS control base to "2209TOCOLL,M."

  8. Suspense File and monitor for necessary follow-up with Technical/Collections. (see Form 2209-A follow-up procedures in IRM 3.17.80.1.8.5(3))

3.17.80.1.8.2  (08-20-2013)
IDRS and Case Controls - ERRF

  1. If taxpayer fully repays or returns the original refund check:

    1. Assess additional interest, if appropriate.

    2. Prepare Form 3245 upon receipt of the Erroneous Refund payment. (see Figure 3.17.80-6)

    3. Update IDRS to post credit transactions.

    4. Monitor account for actions to post. Release TC 844 and 470, as necessary.

    Figure 3.17.80-6
    This image is too large to be displayed in the current screen. Please click the link to view the image.

  2. See subsection IRM 3.17.80.1.12, Refund Cancellation, Repayments and Replies to Correspondence.

  3. If the ERSED has expired, process as outlined in IRM 3.17.80.1.8.6, Statute Barred Refunds.

  4. Establish control on IDRS in category "ERRF" and status "A." After taking action, update the status to "M." Enter the ERRF control number on Form 3809 to transfer amounts to the 15XX Account, and in the history section on IDRS. Record the Statute expiration date for write-off.

  5. Verify that the TC 844, TC 470 CC 93, and TC 971 AC 663 were input correctly to the taxpayer's account that received the Erroneous Refund. Make other account adjustments where needed. The ERSED and TC 844 Date of Demand must be recorded on the History Sheet. When appropriate, TC 844 must be input as follows:

    1. If the taxpayer (or a related party) has in no way caused the erroneous refund to occur and the Erroneous Refund amount is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or less, the Service may: input TC 844, CC REQ77. (see Figure 3.17.80-7) The date on 510-C letter is the date by which repayment is demanded (EXTENSIONDT) which is 7 work days NOT including the day of input. (see IRM 20.2.7.5, Erroneous Refunds IRC Section 6404(e)(2))

      Note:

      If the refund is greater than ≡ ≡ ≡ ≡ ≡ , interest abatement is not required but may be allowed on a case by case basis.

    2. Use the date of the related TC 846 or TC 840 as the TC 844 transaction date (TRANSDT).

    3. Input the amount of the erroneous portion of the refund in the (Freeze RELEASEAMT) field.

      Figure 3.17.80-7

      This image is too large to be displayed in the current screen. Please click the link to view the image.

    4. If the taxpayer (or related party) has in any way contributed to the cause of the refund, deliberate or not, and the refund is greater than ≡ ≡ ≡ ≡ ≡ (regardless of fault): input TC 844, CC REQ77 (see Figure 3.17.80-8) using the date of the related TC 846/840 as the (TRANSDT).

    5. Do not input a date of demand or a freeze release amount.

      Figure 3.17.80-8

      This image is too large to be displayed in the current screen. Please click the link to view the image.

  6. Review for and reverse erroneous portion of credit interest refunded.

    1. Reverse only the erroneous portion of the credit interest if computer generated (TC 777) interest has not occurred.

    2. Input a TC 772 using CC REQ54 to reverse all or part of the allowable interest given. (see figure 3.17.80-9)

      Figure 3.17.80-9

      This image is too large to be displayed in the current screen. Please click the link to view the image.

  7. Prepare Form 3809 to debit the 15XX Account for the amount of the Erroneous Refund. Maintain the debit portion of Form 3809 in alpha sequence to debit the appropriate 15XX Account. Assign a case control number to the case and on the Form 3809, using the following guidelines:

    Note:

    If the ASED is still open and the refund is Category A-1, A-2, B, or C, forward to the appropriate function for assessment and do not debit 15XX Account.

    1. Calendar year, current Enterprise Computing Center (ECC) processing cycle and consecutive serial number (e.g., 2004-29-299).

    2. Each new year, start with serial number series beginning with 1.

    Example:

    Cases from October 12, 2012 through October 18, 2012, (EMartinsburg (ECC-MTB), posting cycle 43) have the control number prefixed by 201243.

  8. Prepare 2nd 510-C or 3414-C letter.

    1. Input TC 700 within the first 45 days after sending the first bill or letter, use Document Code 58, 950-999 blocking series .

    2. Input a TC 270 (.00) to restrict Failure to Pay (FTP) if the erroneous refund is the only amount due on tax module.

  9. Determine whether the taxpayer owes interest when issuing IDRS 510-C letter:

    If: Then:
    IRS caused the error and ≡ ≡ ≡ ≡ ≡ ≡ or less Interest is owed from the date by which repayment is demanded (510-C; usually a 21-day period),≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    IRS caused the error and ≡ ≡ ≡ ≡ ≡ ≡ ≡ or over Assess interest from the repayment date and demand date on a case by case basis.

    Note:

    See IRM 3.17.80.1.8.2(5)a above.

    Taxpayer caused the error, deliberate or not, and amount ≡ ≡ ≡ ≡ ≡ ≡ or less Interest is owed from the date by which repayment is demanded (510-C; usually a 21-day period), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    Taxpayer caused the error, deliberate or not, and amount ≡ ≡ ≡ ≡ ≡ or over Interest is assessed from the date of the refund (TC 846/840)

  10. Recovering multiple unassessable Category D erroneous refunds issued to the same taxpayer by different Submission Processing sites on the same tax year should be combined as one case and worked by the site who issued the erroneous refund to prevent multiple bills from being sent to the same taxpayer.

    Note:

    Erroneous refunds issued to the same taxpayer by different sites on different tax years should be worked as separate cases but transferred to the site who issued the erroneous refund.

    1. Combining these amounts will prevent the appearance of harassment, taxpayer burden and multiple billings and will ensure consistency nationwide.

    2. Combining these amounts will ensure the taxpayer's account is handled efficiently.

    3. Multiple refunds may be discovered during a variety of case and account management actions or reviews.

    4. Use the earliest IDRS assigned date to determine which site jurisdiction should manage the recovery. If dates are identical, then look for the largest dollar amount. If unable to make this determination, forward the issue to the respective Planning and Analysis staff analyst for a decision.

    5. Combine the liability amount, correspond with the taxpayer, freeze the account as appropriate and indicate the attributes of the refunds on the combined History Sheets as separate checks for maintaining the issuing site's identity. Use Bureau Fiscal Service's (BFS) Check Symbol and Serial Number information if possible to differentiate the checks.

    6. For example, annotate the documentation or History Sheet as follows:

    1. Check A: in the amount of $, issued (XX/XX/XXXX) by SPCampus (XX);

    2. Check B: in the amount of $, issued (XX/XX/XXXX) by SPCampus (XX);

    3. Total Dollar Liability Check A + B = $.

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

  12. 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).

    1. Describe the attempts by the Service to recover the Erroneous Refund amount. Provide a copy of the History Sheet when returning the portion of the case to the originating site.

    2. Both sites require supporting documentation that attempts were made to recover the funds for an eventual report. Follow instructions in IRM 3.0.167.8.9, Relief Request Procedures, for write-off to Accounts 4910/6920.

    3. Retain a copy of the case in the closed case file.

3.17.80.1.8.3  (01-01-2014)
Tax Refund Issued In Error

  1. These procedures are applicable when 510-C letters were not previously sent, incomplete, or issued incorrectly.

    1. The 510-C letter should explain the refund they received was incorrect and reason for being erroneously issued. If the refund was not caused by the taxpayer and ≡ ≡ ≡ ≡ or less, advise them that if the Erroneous Refund is repaid within 21 calendar days from the date of the letter, interest will not be charged. Request the refund check be returned, if not cashed. (see Figure 3.17.80–10)

    Figure 3.17.80-10

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    • The first 510-C letter may be considered a first notice or first bill.

    • Accounts Management may have communicated with the taxpayer to return or repay the erroneous refund. Verify CC ENMOD and/or the case history information Accounts Management (AM) sends with the case to determine whether AM did tell the taxpayer to repay the erroneous refund. If AM did tell the taxpayer, that communication will be considered a first notice and the issuance of a first 510-C letter will not be necessary.

    • If a replacement 510-C letter is issued due to a correction, acknowledge the letter is a change from the original letter.

    Note:

    A Form 12356, Erroneous Refund Worksheet should have some indication that there was a communication of first notice.

  2. If there is no response from the taxpayer, after the 45th day of the initial 510-C letter or correspondence, issue a second 510-C (or 3414-C or 285-C) letter and include interest that should be assessed. (see IRM 21.4.5.5, Account Actions for Category D Erroneous Refunds)

    Note:

    Issue the 2nd letter no later than 10 days after the 45 days (by the 55th day).

  3. Prepare related case file, Form 3809 and assign case controls.

  4. See IRM 3.17.80.1.4, Interest Considerations, IRM 20.2, Interest, and Exhibit 3.17.80-1, Erroneous Refund Interest Considerations.

    Note:

    When using 510-C letters (or 3414-C, or 285-C), include debit interest The debit interest is figured using COMPAD. (see Figure 3.17.80-11 and Figure 3.17.80-12)

    Figure 3.17.80-11

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Figure 3.17.80-12

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Note:

    The 510-C, 3414-C, or 285-C letter should be reviewed by the lead/manager before being mailed to the taxpayer.

  5. Annotate on the case History Sheet and Case Label, the date the ERSED expires. (The Statute expires 2 or 5 years from the date of the refund check (IRC Section 6532(b)).

    Note:

    For administrative convenience, use the TC 846 or TC 840 as the date of the refund.

  6. Photocopy correspondence or 510-C letter for the case file and send a 510-C letter to the taxpayer (allow 45 days for a reply or repayment).

    1. Update the IDRS control base.

    2. Update case History Sheet with the actions taken.

    3. Annotate the first 510-C letter date as the date of demand (if applicable).

  7. For those cases not meeting collections referral criteria, under IRM 3.17.80.1.11(8), suspense and review each case every 3 months and re-issue a 510-C, 3414-C, or 285-C, letter including updated Interest, until the ERSED expires. (see IRM 3.17.80.1.11, Maintaining Case Files)

3.17.80.1.8.4  (01-01-2014)
Taxpayer Repays in Full

  1. If the taxpayer responds with full repayment of the Erroneous Refund amount, follow procedures below. Repayments must be processed through Receipt and Control.

  2. Determine if the taxpayer responded, with payment and within the specified time frame on 510-C letter.

  3. If repayment is within the specified time frame ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , and if the 15XX account was used to credit the erroneous refund in the taxpayer's account, prepare Form 3809 (TC 702, Document Code 58, blocking series 900-949) to reverse the debit in the appropriate 15XX Account (Use the date of the TC 700).

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If repayment is not within the specified time frame, compute interest due before case is closed. (see IRM 3.17.80.1.8.4(6))

  5. In both situations above, also:

    1. Update IDRS control base to reflect current actions.

    2. Update case History Sheet.

    3. Place case in file and monitor for actions to post.

  6. Once TC 720 and TC 702 post:

    Note:

    Full repayment on Category D unassessable erroneous refunds should "NEVER" post as a TC 670 to avoid erroneous interest and penalty accruals.

    1. Compute interest manually, using the correct "to" and "from" dates. Interest is abated or assessed, if the amount of interest on the Erroneous Refund is ≡ ≡ ≡ ≡ or less input a TC 340 (.00) and close control base. Before closing the Erroneous Refund case, verify interest.

    2. Input CC INTST. Check for interest/penalty accruals. (see Figure 3.17.80-13) If accruals are incorrect and the taxpayer(s) were timely with full repayment of the Erroneous Refund, input a TC 340 and or TC 270 (.00) using CC REQ54 to restrict the module and remove any accruals (see Figure 3.17.80-14).

    Figure 3.17.80-13

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Figure 3.17.80-14

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  7. After the Erroneous Refund is paid in full, interest should be computed and assessed "ONLY" if the credit is available to cover the amount of the interest. Any payments or credits received before the ERSED expires can be applied to the interest owed.

    Note:

    If remaining interest exceeds ≡ ≡ ≡ you must keep case open and monitor for additional credit until ERSED expires.

  8. To input a TC 340 for interest use date of last payment as your DB-INT-TO-DT. (see Figure 3.17.80-15)

    Figure 3.17.80-15

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  9. Interest should be assessed ONLY on the Erroneous Refund amount if the taxpayer(s) made payments or credit is available to cover the interest due. However, after the 15XX Account has been reimbursed, any payment received before the ERSED expires can be offset against interest.

  10. Accounting will input TC 845 using CC REQ77 to release the ("-U" Freeze). Close the IDRS control base and record information on the case History Sheet. File case in the "Closed File" . (see Figure 3.17.80-16)

    Figure 3.17.80-16
    This image is too large to be displayed in the current screen. Please click the link to view the image.

  11. For cases where additional interest is due and the 2 or 5-year ERSED has not expired, DO NOT release the TC 844 (-U Freeze). File case in the "Suspense," file, pending additional payments or potential offsets.

    Note:

    Research modules before closing an Erroneous Refund case where accruals are in error.

  12. Notate on the case History Sheet, the amount used to compute interest and the date to when interest was computed.

  13. If/when interest applies on an IRS-caused erroneous refund, the "from" date is the date of demand; the "to" date, the date of the second (or subsequent) 510-C letter (or other letters previously mentioned).

3.17.80.1.8.5  (01-01-2014)
Processing Partial Repayments

  1. If the taxpayer responds with a partial repayment, process as outlined below. All remittances are now processed by Receipt and Control.

  2. When partial repayment is received and the ERSED is open:

    1. Prepare Form 3809 (TC 702, Document Code 58, blocking series 900-949) to reverse the debit portion in 15XX Account repaid by the taxpayer.

    2. If partial payment is received without indication as to when final payment will be received, correspond with the taxpayer. Use a 510-C letter or 3414-C letter, unless it meets the criteria outlined in (3) below. The letter to the taxpayer should include interest due.

    3. Update the IDRS control base to: PARTIALPMT,M,ERRF

    4. Update the case History Sheet to show the partial repayment and indicate when final payment will be made, if indicated by the taxpayer.

    5. Place the case file in suspense and monitor the account.

  3. When partial repayment(s) is (or are) received and the remaining erroneous refund exceeds ≡ ≡ ≡ ≡ ≡ ≡ and ERSED is open:

    1. Process as above in IRM 3.17.80.1.8.5(2).

    2. Complete Form 2209, Courtesy Investigation. Send Form 2209 to the appropriate Collection Field Function group. Note on Form 2209 that partial payment was received from the taxpayer.

      Note:

      Find the correct Collection Field Function group by going to http://irweb.irs.gov/ and click on the, "SERP," link. Then, click on the, "Who/Where," tab. Next, click on the, "RO by TSIGN/ZIP/STATE" link and select the drop-down, "Search By:" button and select Zip Code and enter the taxpayer's zip code. Send the completed Form 2209 to the point of contact listed.

      Figure 3.17.80-17

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Note:

      If Form 2209 has already been sent, complete Form 2209-A to inform RO of partial payment. (see Figure 3.17.80-18a and 3.17.80-18b) While updating the case status on the Integrated Collection System (ICS) is optional, Form 2209-A is required.

      Figure 3.17.80-18a

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Figure 3.17.80-18b

      This image is too large to be displayed in the current screen. Please click the link to view the image.

    3. Indicate only the unassessable erroneous refund amount; include in remarks: ERSED date and "Take No Enforcement Actions" .

    4. Suspend case for three months (90 days). If no reply, follow up with Form 2209-A. (see Figure 3.17.80-18a and Figure 3.17.80-18b)

      Note:

      Updating ICS is optional but not a requirement. Form 2209-A is required.

    5. Continue processing as outlined in IRM 3.17.80.1.11, Maintaining Case Files.

  4. If repayment is received after expiration of 2 or 5-year statute, process as outlined in IRM 3.17.80.1.16, Erroneous Refund Repayments After the 2 or 5-year Statute Has Expired.

  5. When taxpayers agree to repay in installments, process cases as outlined in IRM 3.17.80.1.12(13-20).

3.17.80.1.8.6  (01-01-2014)
Statute Barred Refunds

  1. If an Erroneous Refund is issued after the statute for refund has expired (RSED), establish a case file and work as an Erroneous Refund.

  2. Statute Barred Refund cases are rare. Cases identified by master file (MF) analysis (e.g., STEX -B Freeze, etc.).

    1. Seek further guidance from the Technical Unit, if appropriate. Process as unassessable, although no credit taken from Account 1540 and suspense pending ERSED. No debit or false credits are placed on the accounts.

    2. Correspondence is issued by the discovering site. Suspense, monitor to ERSED and close case. The site Refund Schedule Number (RSN) defines where case assigned; usually to the RSN of the site where the refund was released (TC 840/846).

    3. See IRM 3.17.80.1.16, Erroneous Refund Repayments after ERSED has expired.

    4. If the taxpayer does repay, post the repayment to the taxpayer's account as a TC 720, Refund Repayment. Prepare Form 8758, Excess Collections File Addition, to move credit to Excess Collections File (6800 Account). (see Figure 3.17.80-19)

      Figure 3.17.80-19

      This image is too large to be displayed in the current screen. Please click the link to view the image.

    5. If the taxpayer(s) do not repay, continue processing as outlined in IRM 3.17.80.1.11, Maintaining Case Files.

    6. Hold case in the "Suspense" file until the ERSED expires for offset with related documentation.

    7. When ERSED expires, close IDRS control base "ERSEDEXP,C."

    8. Annotate actions on History Sheet. Retain in the closed case file.

      Note:

      Do not reverse any interest allowed on a refund with TC 772 until payment is received.

3.17.80.1.8.7  (01-01-2014)
Hardship Manual Refund Request

  1. Accounting Operations' employees may receive OARs from TAS requesting a manual refund to relieve an economic hardship. These accounts would not normally require a manual refund however based on the facts and circumstances of the case TAS has determined that a systemic refund will not be received in time to relieve the hardship.

  2. When a request for a hardship manual refund is received on an erroneous refund case, refer to the W&I TAS Service Level Agreement (SLA) for further information about OAR processing and procedures. Then, take the following actions:

    1. If the overpayment has not been offset to the erroneous refund balance due, advise TAS bypassing the –U freeze is approved for the amount of the Hardship request. TAS has the delegated authority to issue manual refunds per Delegation Order No. 13-2 (Rev. 1)

    2. If the overpayment has already been offset to the erroneous refund balance due, reverse the offset for the approved Hardship requested amount and advise TAS the overpayment is now available and bypassing the –U freeze is approved. TAS has the delegated authority to issue manual refunds per Delegation Order No. 13-2 (Rev. 1)

    3. If TAS submits a Taxpayer Assistance Order (TAO) requesting to bypass the –U freeze on a Hardship request, immediate action must be taken by the Accounting, Erroneous Refund function to issue the manual refund requested. The Accounting, Erroneous Refund function will adjust the account as appropriate and issue the manual refund request. (See IRM 21.4.4) Advise TAS of all actions taken.

    4. If Accounting initiates the manual refund, the procedure to monitor the manual refund must be followed. See IRM 21.4.4.5.1 Monitoring Manual Refunds.

    5. If a duplicate, manual or systemic, erroneous refund occurs, erroneous refund procedures must be followed. See IRM 21.4.5.4 Account Actions for Category D Erroneous Refunds instructions.

3.17.80.1.9  (01-01-2014)
Transferring Refunds Erroneously Posted (For Information Only - Accounts Management Procedures)

  1. The following procedures apply to transferring refunds erroneously posted (TC 840/846) 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 should coincide with input of a TC 971.

  2. 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) 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

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Note:

    Form 12857, Refund Transfer Posting Voucher, per IRM 21.4.5, Erroneous Refunds, has been developed, and must be received by Accounting Operations to accomplish these transfer actions. Form 12857 carries 920 Blocking, with a true Julian Date. Form 12857 should contain cross-reference DLN, tax Period, taxpayer's name and TIN, and file location, to indicate the erroneous original posting. These actions for a "dummy refund" will not result in a refund being released. Forms 3809 and 3753 may be used together in lieu of Form 12857.

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

    1. Enter in Section 1, Block 10, "MAKE CHECK PAYABLE TO" block print the phrase "DO NOT ISSUE CHECK."

    2. Assign Document Code 45 (TC 840) with a unique Blocking Series, starting with 920. This Blocking Series will identify "dummy refunds."

    3. Cross-reference the Form 3753 to its related Form 3809 and to the DLN of the original, erroneously posted refund. This transaction reverses the erroneous posting of the refund.

    4. Input TC 971 (use Action Code 030) via CC FRM77. (see IRM 2.4.19, IDRS Terminal Input - CCs REQ77, FRM77 and FRM7A)

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

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

  6. Annotate the History Sheet with all actions taken.

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

  8. Additional instructions may be found in IRM 21.5.2, Adjustment Guidelines.

3.17.80.1.10  (01-01-2014)
Maintaining Case Files

  1. Maintain the cases in one of the following orders:

    • DOC-ID

    • TIN

    • Alphabetical

  2. Organize the case file as follows:

    1. Completed case History Sheet.

      Note:

      All actions should be dated and recorded in detail on the History Sheet.

    2. A current TXMOD print showing any new activity on the account should be maintained in the case folder (print TXMOD pages showing NEW activity ONLY) directly under the History Sheet. If there is no activity (Do Not print the TXMOD) annotate History Sheet: "No activity on TXMOD" . The TXMOD should be updated when a review is conducted (see IRM 3.17.80.1.11(3)) or when an action is taken on the account (discard old TXMOD prints except for the original. (see Note below)

      Note:

      The "ORIGINAL" TXMOD should always be kept in case file under the History Sheet. This print will show the original account activity prior to being worked by the Erroneous Refund function.

    3. Place the original Erroneous Refund case on the bottom of the right hand side of the case file (Information from the identifying area, copy of 510-C letters, TXMOD print, supporting documents, etc.).

      Note:

      If a Manual Refund (TC 840) caused the erroneous refund, copies of the TC 840 documentation must also be attached.

    4. Each time an action is taken on the account place all prints and/or copies associated with the actions on the right side of the folder. "Exception:" Do not include Form 3809 (see IRM 3.17.80.1.11(2) f). Keep the most current on top.

    5. A balance sheet showing the remaining balance on the Erroneous Refund should be stapled to the left side of the case folder and updated with each transaction.

    6. Form 3809 should be stapled to the left side of the folder, the most current on top with a journal number clearly printed on each form.

  3. Pull the case every 3 months for review. Cases will be pulled based on the previously-established review date for each case. Continue corresponding with the taxpayers every 3 months or until the 2 or 5-year ERSED expires. (see IRM 3.17.80.1.18 for write-off procedures)

    1. Follow-up correspondence must be done within 3 months and 10-days of the previous correspondence action.

  4. The case History Sheet MUST reflect that the 3 month reviews are being performed. Refer to the below chart.

    2014 First Month to Review 2014 Second Month to Review 2014 Third Month to Review
    January April July
    February May August
    March June September
    April July October
    May August November
    June September December
  5. If no correspondence is pending with the taxpayer. File the case if:

    1. No reply is received 45 days after the second or any additional notification or correspondence is sent to the taxpayer, and no Form 2209 was sent to the Technical/Collection function.

    2. Form 2209 is closed by Technical/Collection without securing repayment, a signed waiver or a recommendation for Civil Suit.

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

  7. Mail the 510-C/3414-C/3064-C letter to the taxpayer with a return envelope. Place a copy of the letter in the case file.

    1. Determine when the ERSED expires, and annotate the ERSED date on the outside of the case file folder and on the History Sheet in the box labeled ERSED.

    2. If the Erroneous Refund balance is ≡ ≡ ≡ ≡ ≡ or more notify the taxpayer, before the end of the calendar year in which the ERSED expires, that a Form 1099-C will be issued, if not repaid. Include the below verbiage but revise it for the correct dates: The statute for collection on your Erroneous Refund will/has expired on Month DD, YYYY. We will continue to accept voluntary repayment. However, if we do not receive repayment by Dec. 31, YYYY, we will issue a Form 1099-C, Cancellation of Debt. You will be required to report the amount you owe to the IRS on your Federal Income Tax Return.

      Note:

      The 1099-C notification is a courtesy to the taxpayer, and should be sent in the same year the statute expires. Do not include this notification on the interest letter.

    3. See IRM 3.17.80.1.19, Forms 1099 - Unrecoverable unassessable erroneous refunds, for Forms 1099-C procedures.

    4. Annotate the History Sheet with all action taken.

    5. Notate the case file for the next follow-up.

  8. If a 510-C letter is returned as undeliverable, search for a more current address (for example: IDRS, ENMOD, INOLE, IRPTR, etc.) and document actions on History Sheet and re-mail. If a notice is returned as undeliverable again and:

    1. Total Erroneous Refund is less than ≡ ≡ ≡ ≡ ≡ place the case in the open file for offset of credits which may become available. When all applicable Statutes have expired, refer to IRM 3.17.80.1.18, Write-Off Procedures for Unrecoverable Erroneous Refunds.

    2. If Erroneous Refund is ≡ ≡ ≡ ≡ ≡ ≡ or more, prepare Form 2209 as required in IRM 3.17.80.1.11(8) below.

    3. Notate the History Sheet and file.

  9. Form 2209:

    1. If the Statute expiration period is less than 3 months and the amount is less than≡ ≡ ≡ ≡ ≡ , annotate History Sheet, "No Form 2209 Issued," and file (after letter(s) has or have been mailed) pending possible offset or write-off.

    2. If the Statute expiration period is 3 months and the amount is ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more, route copies to the Collection function with Form 2209. Annotate Form 2209 as Erroneous Refund Case. Specify ERSED statute expiration date under remarks: Civil Suit Statute Expires (Month, DD, YYYY), Unassessable Take No Enforcement Action. Be sure to use date of check and not date of TC 846/840 for 2 year ERSED on Form 2209. Watch for accelerated cycles. Refer to 21.4, Refund Inquiries, for cycle and check dates.

    3. Annotate History Sheet with actions taken.

    4. Note the case file with the next review date (90 days).

  10. Initiate follow-up action using Form 2209-A when Form 2209 was issued over 90 days prior, if appropriate.

  11. When a case indicates the applicable 2 or 5-year ERSED has expired and the Internal Revenue Service no longer has the legal right to recover the Erroneous Refund:

    1. Refer to IRM 3.17.80.1.18, Write-Off Procedures for Unrecoverable Erroneous Refunds.

    2. Annotate on case History Sheet: ERSED expired, no letter sent to taxpayer.

      Exception:

      If the Erroneous Refund is ≡ ≡ ≡ ≡ ≡ or more and the ERSED expired in the current calender year, issue a voluntary repayment letter.

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

  13. Retire the closed Erroneous Refund case file according to the guidelines in IRM 1.15.29, Records Control Schedule for Submissions Processing site Records, and IRM 1.15.2, Records Management - Types of records and Their Life Cycles.

3.17.80.1.10.1  (01-01-2014)
Maintaining Case Files (Cases ≡ ≡ ≡ or Less Only)

  1. Erroneous Refund Cases received where the Erroneous Refund is ≡ ≡ ≡ ≡ ≡ or less will be worked as follows:

    1. Prepare case file.

    2. Monitor the case for payments and/or credits for 45 days after the first Demand Letter.

    3. If fully repaid, follow procedures in IRM 3.17.80.1.8.4, Taxpayer Repays in Full.

    4. If no reply or partial payment is received then follow normal write-off procedures and no more collection actions will be taken.

    Note:

    If the refund amount is ≡ ≡ ≡ ≡ ≡ or less the system will reverse the amount with a TC 606. If there are other outstanding balances follow normal write-off procedures.

3.17.80.1.10.2  (01-01-2014)
Working the Monthly TC 844 (-U Freeze) Listing

  1. Once a month (dependent on when programmer provides extract) the Headquarters Erroneous Refund Analyst provides each site with an Microsoft Excel file containing newly input TC 844s. The purpose of this file is to ensure that all new erroneous refund cases have a TC 844 (-U Freeze) input prior to being received in Accounting as instructed in IRM 21.4.5, Erroneous Refunds.

  2. Open the file and click on your site corresponding tab on the lower left corner of the spreadsheet.

  3. There should be a TIN on the spreadsheet for each erroneous refund case received in Accounting from the functional area (AM, TAS, etc.). The listing should be worked as follows:

    1. If there is a TIN on the listing and no corresponding case file, research should be conducted to verify the validity of the TC 844. If there was never a case file after research, the TC 844 should be reversed.

    2. If there is no TIN on the listing but a case file is present, notify the originator that a TC 844 should be input. (see IRM 3.17.80.1.1(1) b)

3.17.80.1.11  (01-01-2014)
Refund Cancellation, Repayments and Replies to Correspondence

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

  2. 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 amount of credit interest in the refund. Update case History Sheet and IDRS control base.

  3. 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 3.17.80.1.8.5, Processing Partial Payments)

    1. When payments post to the Master File prepare the Form 3809 for the TC 702 as appropriate.

    2. If it is determined that the taxpayer should be assessed debit interest, verify that a TC 777 posted for the correct amount. If the credit interest is incorrect input a TC 772.

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

    • TC700, 58 Document Code, 950-999 Blocking Series.

    • TC702, 58 Document Code, 900-949 Blocking Series.

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

    1. If the available credit exceeds the interest due, assess the full amount of interest and allow the remaining credit to refund.

    2. If the interest due exceeds the available credit by less than $25.00, assess interest only for the amount of available credit and close the case.

    3. If the interest due exceeds the available credit by $25.00 or more, assess interest for the amount of available credit and use letters 285-C, 3414-C, 672-C, or 3064-C to notify the taxpayer of the amount of interest still due

  6. When the Erroneous Refund is fully repaid and the TC 702 has posted, input TC 845 using CC REQ77 and close control base.

    1. Release TC 470 when other balances are due.

    2. If the account is overpaid, release any applicable Freezes (Refer to Document 6209).

    3. Annotate History Sheet with payments and other actions and close case.

    Note:

    If a TC 777 generates to reverse credit interest that has already been manually reversed via TC 772, correct the account by using TC 770 prior to closing case.

  7. If the taxpayer claims non-receipt of the check(s), see IRM 21.4, Refund Inquiries.

    Note:

    Prior to initiating IDRS CHKCL actions , verify that the refund was not fully offset through the TOP (TC 898s) for the same amount.

    1. After inputting CC CHKCL, a photocopy of the check(s) is subsequently received from Bureau of Fiscal Services (BFS, formerly known as Financial Management Service (FMS)) Check Claims with an BFS Form 1133, BFS Form 3858, indicating proper endorsement by the taxpayer. Send the taxpayer a photocopy of the negotiated check(s) and BFS Form 1133.

  8. When there is no response from the taxpayer within 45 days, and the Erroneous Refund is over ≡ ≡ ≡ ≡ ≡ ≡ initiate Form 2209 procedures, if not already completed, include the following when mailing Form 2209:

    1. The taxpayer's initial correspondence;

    2. The photocopy of the check; and

    3. History Sheet.

  9. If the Erroneous Refund is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ follow guidelines in IRM 3.17.80.1.11, Maintaining Case Files.

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

    1. Send the taxpayer a photocopy of the negotiated check(s), BFS Form 1133, and a 206-C or 3414-C letter as appropriate.

    2. Explain per the taxpayer's request, a copy of the refund check(s) is attached and BFS Form 1133 for each check.

    3. Taxpayers must complete the Form 1133 for each check and send back to the Erroneous Refund function, in the self-addressed envelope provided.

  11. If no response from the taxpayer within 45 days and the interest letter has not already been sent then follow procedures in IRM 3.17.80.1.11, Maintaining Case Files.

  12. When the taxpayer returns completed Form 1133 , follow procedures in IRM 3.17.80.1.2.4, Processing Payments Over Cancellation.

  13. If the taxpayer requests to pay by installments, and the ERSED is still open, accept the offer made by the taxpayer and send the taxpayer pre-addressed envelopes to make payments (Refer to Note in IRM 3.17.80.1.13(2)).

  14. If the taxpayer requests to pay by installments, but no offer is made, determine the status of the 2 or 5 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 should not be extended beyond the ERSED.

    Exception:

    If the Erroneous Refund is ≡ ≡ ≡ ≡ or more and the ERSED expired in the current calender year, issue a voluntary repayment letter.

    1. A suggested payment schedule is shown in Figure 3.17.80-21.

    Figure 3.17.80-21

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Note:

    Each case must be considered individually. Consult with lead/manager.

  15. Send the taxpayer a 3414-C or 3064-C letter.

  16. If the taxpayer requests to pay after the ERSED (2 or 5 years from the date of the refund), inform the taxpayer that voluntary payments are accepted. However:

    1. Inform the taxpayer that he/she is not legally obligated to repay.

    2. Inform the taxpayer if the amount is not repaid and the amount is ≡ ≡ ≡ ≡ ≡ or more, the Service will consider the amount income and the Service will issue Form 1099-C, Cancellation of Debt.

    3. Process as outlined in IRM 3.17.80.1.16, Repayments after ERSED Expires.

  17. Monitor installment payments. If the taxpayer defaults on an installment, contact the taxpayer and send 3064-C or 3414-C letter stating the following. (see IRM 3.17.80.1.12(20) below)

  18. Monitor items where follow-up action is needed.

  19. When the 15XX Account is written off and there is a debit balance due on the taxpayers installment account, assess interest only on the amount of the Erroneous Refund from either:

    • the date of demand

    • or the date of refund (TC 840 or TC 846 Transaction Code date)

    Interest will be calculated to the 23C date of the cycle that TC 340 is input. Establish in the control base of TXMOD on IDRS and indicate on the History Sheet. Input the date you computed interest to and amount on module. See example in Figure 3.17.80-22 below:

    Figure 3.17.80-22

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  20. Send taxpayer a 3064-C or 3414-C letter stating another area is handling the remaining balance due on his/her account. Forward taxpayers original request for installments 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.

3.17.80.1.12  (01-01-2014)
Replies to Form 2209 Cases from Collection Field Function

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

  2. 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.

    Note:

    IRC Section 6159 only authorizes installment agreements for the payment of "tax" . Extensions under Section 6532(b) should always contain an expiration date and should be obtained only when (1) the taxpayer is willing to repay the Erroneous Refund but needs time beyond the ERSED, or (2) the taxpayer disputes that the refund is erroneous and the amount at issue is significant (i.e., the Service will file an Erroneous Refund civil suit if the taxpayer does not repay the Erroneous Refund).

  3. Hold the case in the "Suspense" file until a credit becomes available for offset (2 or 5-year). When offset(s) have satisfied the 15XX Account or the 2 or 5-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 2 or 5-year statute expires, write-off the unrecoverable refund as outlined in IRM 3.17.801.18.

    Note:

    Be sure and follow procedures for interest considerations in IRM 3.17.801.8.4 before you close case.

  4. 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 all information for the case file. When a reply is received from inquiry to CHKCL/Form 1184, notify the originator of the status.

    1. If the reply to SF 1184 indicates the cancellation or that Treasury will take further action, prepare Form 2209-A to recall the original Form 2209. Retain the case in the file.

    2. If the photocopy of the check indicates a proper endorsement, forward the photocopy to the originator of the Form 2209-A.

    3. Annotate the History Sheet of the 510-C letter, photocopy the document and retain the case in the file.

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

    1. As payments are received, process as outlined in IRM 3.17.801.8.5 and re-file under the new anticipated payment date.

    2. When full payment is achieved, input TC 845 using CC REQ77, close the IDRS control base, annotate History Sheet, and place the case in the closed case file.

    3. If there has been payment default for 2 or more months, communicate with the Collection Field Function via Form 2209 and inform Collection Field Function there has been a payment default. Collection Field Function will return Form 2209-A providing an update.

3.17.80.1.13  (01-01-2014)
Processing 844 Transcripts (TRANS-844) (-U Freeze)

  1. 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.

    1. See IRM 3.17.801.8.2(5) for TC 844 actions.

    2. TC 844 , Erroneous Refund Freeze (-U Freeze) transcripts (Trans-844) electronically generated via Control-D( ???? and ????? files) for Accounting/Erroneous Refund function, when credits become available on the frozen account.

    3. If no case file, research account to determine area responsible for identifying the Erroneous Refund or for other Freeze conditions or status codes.

    4. If case is a Category D, Unassessable Erroneous Refund, and has not been sent to the Erroneous Refund Unit, contact the responsible area by phone/E-mail and request case documentation history unless there is enough credit to full pay the Erroneous Refund then process accordingly. If only partial credit is available then offset and request documentation. Maintain TC 844 transcript as a case file. Update IDRS and history sheet.

    5. If case is NOT a Category D, forward transcript to appropriate area. Update IDRS with actions taken and the area it was forwarded to.

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

    1. If another site has an open control base and the case was not transferred to your site, notify them of the available credit by faxing the Transcript. (See Exhibit 3.17.80-4, Erroneous Refund Coordinators)

    2. If no 15XX Account or case reference is found, research to determine what function input the TC 844. Route transcript to them or input TC 845 to release the Freeze (if applicable).

  3. Determine if the credit is available for transfer to the 15XX Account. Other liability Freezes may 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.

  4. 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).

  5. Transfer the available credit for the amount of the Erroneous Refund, plus any interest due, to the 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

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  6. 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 285-C letter.

    Figure 3.17.80-24

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  7. 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 unrecovered amount in the 15XX Account, per IRM 3.17.63.0, Accounting Control. Follow write-off procedures outlined in IRM 3.17.80.1.18, Write-Off Procedures for Unrecoverable Erroneous Refunds.

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

  9. 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 3.17.80.1.8.4(6). Close IDRS control base and file in the closed case file.

  10. A TC 130 may 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:

    1. Cases where a joint account received an Erroneous Refund and taxpayers are now filing separate returns or filing under a different Social Security Number.

    2. If a judgment or waiver has been secured without any limitation to time (for example: for Court-Ordered Restitution Cases, there is no expiration of the 10 year Collection statute).

  11. If a manual refund is prepared for any remaining credit, follow IRM 21.4.4 manual refund procedures and you must research for:

    1. Any outstanding balances (OBLs).

    2. Balance due or open control bases or a "V" Freeze on the account.

    3. Centralized Authorization File (CFINQ)" Should the refund be issued to the representative?"

  12. Releasing TC 844 (-U Freeze) for offset.

    1. TC 845 is restricted to Accounting/Erroneous Refund IDRS organization codes.

    2. Other areas desiring to release an Erroneous Refund Freeze must request (-U Freeze) release in writing or by a phone call.

    3. State actions requiring release of (-U Freeze) if the Erroneous Refund was not repaid nor credit was offset.

    4. Copy of completed History Sheet with closing actions taken.

    5. Current TXMODA showing all posted actions.

    6. IDRS Employee number and area requesting input of TC 845.

    7. IDRS Employee number of employee inputting TC 845.

    8. Update IDRS History Item on TXMODA with requestor of TC 845 and reason.

    9. Update History Sheet in Case file and retain if future questions arise pending expiration of statutes or write-off actions.

  13. Annotate the case file. Maintain in the closed case file.

3.17.80.1.14  (01-01-2014)
Dishonored Check Erroneous Refund Repayments

  1. 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.

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

    1. The dishonored check has been reversed;

    2. The debit has been applied to the 15XX Account; and

    3. TC 844 is on the module, re-input if necessary.

  3. Determine if all 510-C letters have been issued to the taxpayer and the status of the 2 or 5-year statute.

  4. If the 5-year statute has not expired and the 510-C letters have not been issued, monitor case for 45 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 45 days, send taxpayer a second 510-C letter as outlined in IRM 3.17.80.1.10, Maintaining Case Files.

  5. If the 5-year Statute has not expired and the 510-C letters have been issued, follow instructions in IRM 3.17.80.1.14(4) above, except do not send 510-C letter. Send 3064-C letter 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 3064-C is limited to the specifications of the 5-year Statute.

  6. If the 5-year statute has expired, follow write-off procedures as outlined in IRM 3.17.80.1.17.

  7. Notate History Sheet with actions taken and re-file case for follow-up.

3.17.80.1.15  (01-01-2014)
Erroneous Refund Repayments After the ERSED Has Expired

  1. When a repayment is received after the 2 or 5-year recovery Statute has expired, follow procedures below:

    1. Notify the taxpayer that the Service no longer has a legal right to recover the Erroneous Refund (e.g. 3414-C letter).

    2. However, the taxpayer may choose to apply the money to the Erroneous Refund liability or

    3. The taxpayer may designate the payment be applied to an outstanding tax liability or refunded.

  2. If the taxpayer repays:

    1. Reopen case file and establish IDRS control base.

    2. Post repayment to taxpayer's account as a TC 720. Reverse TC 700 on the account with a TC 702 to the 15XX/6920 Account.

    3. Update case file with actions taken. Monitor case for transactions and repayments from the taxpayer to post.

    4. When all transactions post, re-close control and re-file in closed case file.

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

    • Review the case file and ensure that the taxpayer was advised that should he/she fail to repay the Erroneous Refund, the ERSED has expired and the Erroneous Refund balance is ≡ ≡ ≡ ≡ ≡ or more, the Service would consider the amount income and issue Form 1099-C, Cancellation of Debt. If documentation exists that the taxpayer was adequately advised (the same year the ERSED expired in) , forward to area to issue Form 1099-C for the Erroneous Refund amount (Follow write-off procedures at IRM 3.17.80.1.18).

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

    1. Adjust the 15XX/4910/6920 Accounts as appropriate.

    2. Monitor case for posting actions. Reverse the 15XX/4910/6920 Accounts accordingly as payment or posting documents are received (reverse TC 700 with 702, as necessary).

    3. Post repayments as TC 720. Once transactions post, close case and re-file.

  5. "If the taxpayer does not reply:"

    1. After monitoring account for 45 days, update IDRS and History Sheet.

    2. Reverse the TC 700 for the amount of the credit.

    3. Follow write-off procedures as outlined in IRM 3.17.801.18 for any remaining Erroneous Refund balance due.

  6. The procedures above leave a proper audit trail of repayments.

3.17.80.1.16  (01-01-2014)
Treasury Offset Program (TOP) Erroneous Refund Cases

  1. 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.

    1. Errors may result from the reversal of a Debtor Master File (DMF) offset.

    2. See IRM 21.4.6, Refund Inquiries - Refund Offset, for instructions.

  2. Refer to IRM 21.4.6.5.24.1, Injured Spouse Returned Refunds.

  3. 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.

  4. Erroneous Refunds occur on TOP offsets when:

    1. a manual refund was issued, that also required reversal of an offset made in error.

    2. the creditor agency reports a refund of the offset that posts as a TC 131 on ENMOD with the year of offset the same as the offset being reversed.

    3. the offset reversal, TC 897, attempts to post after the cycle of the TC 131 and the amount is greater than the offset available for reversal (TC 896 TC 131).

    4. an Unpostable Code (UPC) 142 results.

  5. These erroneous refunds may occur on TOP offsets when:

    1. a manual or systemic refund was issued that required reversal of a TOP offset

    2. the creditor agency or BFS made a refund of the offset (TC 899, type 2 or 3) or BFS has already initiated an offset reversal as a result of a Check Claim, undelivered refund, etc.

    3. the offset reversal, TC 766 with OTN, Offset Trace Number, attempts to post after the TC 899 posts, the amount is greater than the offset available for reversal and a manual refund was issued; or, the TC 766 posts and BFS rejects the reversal because an agency refund or Check Claim is being processed.

    4. TC 766 will cause a UPC 189 if the amount is greater than the offset available for reversal. If the TC 766 is rejected in whole or in part by BFS, it will appear on the BFS TC 766 Reject Listing. Refer to subsection 21.4.6 entitled Tax Refund Offset.

      Note:

      See Figure 3.17.80-25 and Figure 3.17.80-26.

    Figure 3.17.80-25

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    Figure 3.17.80-26

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.17.80.1.17  (08-20-2013)
Write-Off Procedures for Unrecoverable Erroneous Refunds

  1. With the exception of ID-theft erroneous refunds or erroneous refunds on which a judgment or extension has been secured, unrecoverable Erroneous Refund disbursement losses are written off when the 2 or 5-year ERSED expires. (see IRM 3.17.80.1.8.2)

    1. History Sheets must be current.

    2. IRM 3.0.167, Losses and Shortages, provides specific instructions for requesting relief of the Accountable Officers.

    3. Expired Statute or uncollectible cases should be transferred from the 1530 or 1540 Account to the 4910 Account when relief is requested.

    4. Once relief is granted, transfer from the 4910 Account to the 6920 Account.

    5. See Exhibit 3.17.80-3, Erroneous Refund Accounts 1530 and 1540.

    Note:

    When an Erroneous Refund, Direct Deposit account owner cannot be identified, and the BFS Form 150.1 has been returned stating that fact, you may choose to take write-off actions immediately, as long as there is reasonable assurance that employee fraud is not involved. This may be a local decision, but should receive a next management level of review for approval.

  2. When reviewing or working an Erroneous Refund case and the 2 or 5-year ERSED has expired, follow the procedures below:

    Note:

    See IRM 21.4.5.14.1, Collection Statute Expiration Date for Category D Erroneous Refunds.

    1. Prepare and process Form 3809 to debit and credit the appropriate accounts. (see Figure 3.17.80-27)

      Figure 3.17.80-27

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Note:

      The amount on Form 3809 is the amount in the 15XX Account.

    2. If the ERSED has expired in the current calendar year, send the taxpayer a 510-C, 3414-C, or 3064-C letter via IDRS.

    3. Also explain that the taxpayer is no longer legally obligated to repay the Erroneous Refund amount, however, if the ERSED expired in the current calendar year and erroneous amount is ≡ ≡ ≡ ≡ ≡ ≡ or more the Service considers the amount income and will issue Form 1099-C, Cancellation of Debt if it is not repaid by December 31st. (see IRM 3.17.80.1.10(7)(b) for suggested wording)

      Note:

      ALL LETTERS MUST/WILL BE REVIEWED BY LEAD TECHNICIAN AND/OR MANAGER FOR LANGUAGE AND CONTENT.

    4. Before closing case, review for possible accruals of Interest. If accruals are present and in error, input TC 340 (.00). Attach back-up documentation.

    5. Monitor the case file until the 15XX Account amount posts.

    6. Input a TC 845 using CC REQ77 if a TC 844 (-U Freeze) is still on the module.

    7. Update the IDRS control base for write-off.

    8. Update case History Sheet.

    9. Send a Form 2209-A to recall Form 2209, if there is still one outstanding. (See Figure 3.17.80-28)

    Figure 3.17.80-28

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  3. If Erroneous Refund repayments are received after write-off actions have taken place (Refer to IRM 3.17.80.1.15, Erroneous Refund Repayments After the 2 -year or 5-year Statute Has Expired).

3.17.80.1.18  (01-01-2014)
Form 1099 - Unrecoverable unassessable erroneous refunds

  1. Unrecoverable erroneously paid refunds may be considered income to the recipient. Forms 1099-C, Cancellation of Debt, or 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 1099s.

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

    1. A taxpayer does not have income if the taxpayer returns the check to the government within the same tax year.

    2. If a taxpayer cashes the unassessable erroneous refund check, but repays the amount within the same tax year received, it is not income.

    3. Most unassessable erroneous refunds are not income in the year they are received.

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

    1. the Service intends to recover these amounts,

    2. various periods for collection (CSED and ERSED) have not yet expired,

    3. and collection activity, including offsets, will continue.

  4. Careful case review is necessary to report discharges of indebtedness on Forms 1099-C or 1099-MISC of more than ≡ ≡ ≡ ≡ ≡ ≡ ≡ in a calendar year. Although filing is not required under Statute or regulations, it is consistent with reporting history, agency and sound tax administration.

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

    1. The Headquarters Erroneous Refund Analyst will transmit information to IRS, ECC, as described in the instructions using the appropriate transmittal, Form 1096, Annual Summary and Transmittal of U.S. Information Returns, for fewer than 250 items reported. The due date for filing information returns is generally by February 28, annually.

    2. The Site Accounting Operations will retain copies of Forms 1099-C and 1099-MISC for 4 years.

    3. The Site Accounting Operations will ensure that Forms 1099-C and 1099-MISC are issued by January 31 annually.

  6. Review case files. Prepare Forms 1099-C, Cancellation of Debt, if the outstanding Erroneous Refund balance is ≡ ≡ ≡ ≡ or more.

    1. Report the amount of the discharged debt in Box 2 of Form 1099-C.

    2. Enter the date of the discharge in Box 1.

    3. Review the case file to ascertain that the taxpayer was notified in the year of the Statute expiration that this amount would be considered income and reported to IRS if not repaid.

    4. The Restructuring and Reform Act of 1998 (RRA 98), Section 3705(a) requires a contact name, and telephone number in the event the taxpayer has questions about the document. Include the appropriate site Unit's telephone number in the Form 1099-C and 1099-MISC box entitled" Creditor's name, address " . If this is not a toll-free telephone number, indicate not toll-free. This will ensure that the taxpayer will reach the appropriate area to pose questions.

  7. 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).

    1. Review cases to determine the year in which the Erroneous Refund would be considered income to the taxpayer.

    2. If correspondence or notification of the Services intent to issue Form 1099-C or 1099-MISC was sent to the taxpayer in the year the ERSED expired a Form 1099-C will be issued.

    3. If correspondence or notification of the Service's intent to issue Form 1099-C or 1099-MISC cannot be determined, review by manager is required.

  8. For cases where it has been determined that a Form 1099-C or 1099-MISC should be issued and a 3414-C/510-C/3064-C letter has been sent:

    1. Determine whether a Form 1099-INT for interest paid was or will be issued.

    2. If Form 1099-INT has already been or will be issued for the interest amount but the Erroneous Refund principal has not been recovered, photocopy the 1099-C notification letter. Note the copy for issuance of the Form 1099-C, principal amount only, and forward to the appropriate area.

    3. If Forms 1099-INT have not or will not be issued, follow the instructions in IRM 3.17.80.1.19(4), above to issue Form 1099-C or 1099-MISC for the Erroneous Refund Principal and Interest. Add the following statement in Box 5, Debt Description - Erroneous Refund dated 06/21/20XX for $1,100.00 Notice Dated 07/15/20XX. (see Figure 3.17.80-29)

      Figure 3.17.80-29

      This image is too large to be displayed in the current screen. Please click the link to view the image.

  9. The appropriate function will process the case by completing the Form 1099-C only if the taxpayer was previously notified. If taxpayer was NOT previously notified, send a 3414-C letter informing the taxpayer why they are going to receive a Form 1099-C or 1099-MISC.

  10. Complete the Form 1099-C/1099-MISC:

    1. Always use "Detroit Computing Center" in first name line.

    2. Always use "Internal Revenue Service" in the second name line.

      Note:

      Important: Include the contact name and telephone number of the unit "not a toll-free number" in name line. This is required by RRA 98, Section 3705.

    3. Always use Submission Processing site Address (Where the 1099-C originates) as the Filer's address.

    4. Creditor's Federal Identification Number should always be: "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

    5. Debtor's identification number: taxpayer name, SSN or EIN

    6. Box 1: Enter the date the debt was cancelled. Use format MMDDYY.

    7. Box 2: Enter amount of the cancelled debt.

    8. Box 3: Enter Interest amount which is included in the cancelled debt (Box 2), if appropriate. Use for 1099-MISC.

    9. Box 4: Penalty amount, if any.

    10. Box 5: Enter "Erroneous Refund" , "Date:" and "Amount:" as a description of the origin of the debt.

    11. Box 6: Enter "X" if the debt was discharged in bankruptcy, if known.

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

  12. Record keeping Form 1099 instructions indicate filers of Forms 1099 are required to retain a copy of Forms 1099 or be able to reconstruct the data (case file) for at least 4 years from the due date of the return/date of issue.

3.17.80.1.19  (01-01-2014)
Forms 1099 MISC. and Whistleblower Activities

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

    • Memo signed by the Submission Processing Director for the award payment and one for funds transfer to special funds receipt. The second one releases money from the whistleblower account to the 4625 informant account.

    • Memo for funds transfer to special funds receipt, releasing money from the Whistleblower account to the 4625 Informant account.

    • Manual refund form which is processed by the Manual Refund team.

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

3.17.80.1.20  (01-01-2014)
Release Claim Form Secured by Secret Service

  1. When Form 1081/Treasury Receivable Accounting, and Collection System (TRACS) and Bureau Fiscal Services (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 3.17.80.1.18, Write-off Procedures for Unrecoverable Erroneous Refunds.

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

    1. Inform the taxpayer to submit a signed letter to the IRS stating that he/she did not understand the claim form he/she signed or did not cash the check in question.

    2. Upon receipt of the taxpayer's correspondence, prepare and send a 2 way memo or Form 3864 (see Figure 3.17.80-30) explaining the situation to BFS. Attach the following information:

       
      • Letter from the taxpayer.

      • Copy of the check in question.

      • Release claim form secured by Secret Service.

      Figure 3.17.80-30

      This image is too large to be displayed in the current screen. Please click the link to view the image.

    3. Send the taxpayer an interim letter stating his/her correspondence has been received and was forwarded to BFS for further investigation.

    4. Update the IDRS control base.

  3. Monitor the case for 60 days. If no reply after 60 days:

    1. Follow-up with BFS on Form 3864 or 2 way memo allowing 30 days for a reply.

    2. If no reply from BFS to the follow-up, call the BFS Check Information telephone answering unit at (855) 868-0151. Have the following information available: check number, check symbol, check date, payee's name, and the dates the initial follow-up information was sent to BFS.

      Note:

      This information can be obtained from IDRS using CC IMFOL#.

  4. If the reply to Form 3864 or 2-way memo indicates the taxpayer benefited from the proceeds of the check:

    1. Resume the manual billing process and send a 2218-C letter informing the taxpayer of Bureau Fiscal Services' decision that they benefited from the proceeds of the check and she/he should repay the amount.

    2. Inform the taxpayer that his/her only recourse is through civil suit action through the courts system.

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

    1. Inform the taxpayer that his/her account is being settled.

    2. Monitor for the credit to be sent from BFS. Close the case file and IDRS control base once the credit has been reversed.

      Note:

      If the situation in IRM 3.17.80.1.20.(5) above occurs and the debit is in the 15XX Account, reverse the appropriate debit back to the taxpayer's account before posting TC 841.

3.17.80.1.21  (01-01-2014)
Transferring Category D, Unassessable Erroneous Refund Cases

  1. 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 Director's accountability for Category D, unassessable erroneous refunds.

    1. Manual refunds (TC 840) are usually considered the Erroneous Refund when there are duplicate generated system refunds (TC 846) or duplicate manual refunds. Erroneous Refunds are generally caused due to improper monitoring of accounts and failure to intercept duplicate generated refunds. When the TC 846 went to the incorrect individual or is part of the Refund Intercept Program the TC 846 is considered the Erroneous Refund.

    2. If a duplicate TC 846 (due to a duplicate or reprocessed return), use the latest TC 846 date.

    3. Submission Processing site codes in the Refund Schedule Number (RSN) for TC 846 and TC 840 determine the site with recovery responsibilities for the Erroneous Refund. The former use of the Document Locator Number (DLN) or the File Location Code (FLC) may be overruled by the sort by Refund Schedule Number.

    4. Amounts may be required to be reported as a disbursement loss if not repaid or recovered, and may also require issuance of Forms 1099-C, Cancellation of Debt. (see IRM 3.17.80.1.19, Forms 1099 - Unrecoverable unassessable erroneous refunds)

    5. However, if it is determined that the Erroneous Refund was caused by another location due to improper monitoring and actions, the DLN area of the transaction causing the Erroneous Refund will be held responsible for documenting the circumstances for the loss.

    6. Review cases for completeness and be on the lookout for cases identified as misapplied credit or estimated payments. Ensure appropriate actions have been taken to properly allocate payments on the appropriate accounts.

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

    1. Contact the gaining site Erroneous Refund Coordinator by fax or phone,

    2. Prepare accurate transfer documentation,

    3. Update IDRS with actions taken to maintain control of the case.

    4. Send the taxpayer a letter (e.g. 86-C letter) stating that the case is being transferred. Provide the name, telephone number and address of the gaining site Erroneous Refund Coordinator. (see Exhibit 3.17.80-4, Erroneous Refund Coordinators)

    5. Do not transfer original returns or original posting vouchers.

    6. Retain complete copy of file (including pertinent check copies) in the closed case file for 2 years.

  3. The losing SP site must:

    1. Contact the gaining site Erroneous Refund Coordinators. (see Exhibit 3.17.80-4)

    2. Update IDRS, CC TXMOD, showing the transfer, e.g., TRSFTO63.

    3. Update status to "M." Do not close control base.

    4. Do not input TC 845 or TC 700.

    5. Take actions to prevent erroneous or duplicate notices to taxpayer.

    6. Prepare Form 3210, Document Transmittal and maintain record of cases transferred to and received from other sites.

       
      1. Attach TXMOD Print

      2. Issue transfer letter to taxpayer

      3. Attach taxpayer correspondence or Form 4442 (if applicable)

      4. Attach and update History Sheet

      5. Attach other pertinent information

    7. Update status only after the receiving site updates existing control base on IDRS and acknowledges receipt of Form 3210.

    8. Provide documentation related to the case (History Sheet from the point the Erroneous Refund was discovered, 510-C letter, Form 2209, Form 3809, correspondence, transcripts, etc.).

    9. Monitor the gaining site CC TXMOD via IDRS (IMFOL, C, Refund Research Screen) until the case is updated.

      Note:

      Follow-up should be made for transfer requests not acknowledged by the gaining site within 30 days from the Release Date on Form 3210 (Refer to 3.17.243, Miscellaneous Accounting).

    10. Transfer cases to the site of the Accountable Office as soon as possible no matter the date of the first 510-C letter.

    Exception:

    If the ERSED is expired and no 510-C letter was issued, transfer the account immediately. Ensure that Form 12356, TC 470 CC 93, TC 971 AC 663, and TC 844 are input. Do not input TC 700.

  4. The gaining SP site must:

    1. Update existing IDRS control base within 30 days.

    2. Acknowledge (sign) receipt of Form 3210 and return copies to originator within 30 days from the Release Date on Form 3210.

      Note:

      If case(s) are forwarded to an incorrect site for processing, reject the cases to the originator and include feedback that the case(s) belong(s) to another site and Accountable Officer.

    3. Input a NEW TC 844. This allows the TRANS-844 transcript to generate to the Submission Processing site maintaining the account.

    4. Do not return cases. Communicate with the originator to secure necessary documentation.

    5. Input TC 700 and TC 844.

    6. Determine if a 510-C letter has been issued. If a second 510-C letter is due, issue the second 510-C letter.

    Exception:

    If the ERSED is expired, do not issue any notices or correspondence unless the unpaid Erroneous Refund balance is ≡ ≡ ≡ ≡ or more and the ERSED expired in the current calender year then issue 3414-C letter advising of 1099-C issuance. Input TC 700 and TC 844 and prepare case for relief request. See IRM 3.17.801.18, Write-Off Procedures for Unrecoverable Erroneous Refunds and IRM 3.0.167.0, Losses and Shortages.

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

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

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

3.17.80.2  (01-01-2014)
Processing Payments Over Cancellation (POC)

  1. A "Payment Over Cancellation (POC)" case occurs when a taxpayer files a claim for non-receipt of a refund check, a replacement (Recertified) check is issued, and it is determined that both checks were cashed. When a taxpayer files a claim for non-receipt of a refund, the Bureau Fiscal Services (BFS) issues one of the following to the IRS:

    1. Credit SF 1081 or IPAC Bill - When the first check is still outstanding (not cashed or expired), the BFS issues SF 1081 to return the credit to the IRS for application to the taxpayer's account and issuance (Recertification) of a second refund. The original check remains negotiable until it expires.

    2. Debit SF 1081 or IPAC Bill - When the original check is listed as cancelled (expired) and BFS issued the credit back to the IRS, but the BFS later concludes the original check was actually cashed, the BFS will issue SF 1081 requesting that the IRS apply a debit to the taxpayer's account for recovery as an erroneous refund. (see Figure 3.17.80-31)

    3. POC - When a replacement refund is issued and it is concluded by BFS that both checks were cashed, BFS issues a Payment Over Cancellation notification to the IRS. The site receives a Claims Document Package which includes a BFS Form 3858 (Claims Document), BFS Form 1133 (Claim Against the United States for the Proceedings of a Government Check), and a photocopy of the front and back side of the refund check(s). (see Figures 3.17.80-33, 3.17.80-34, and 3.17.80-35)

      Note:

      Images of endorsed refund checks can be obtained via the Treasury Check Information System (TCIS) and Payment Claims and Enhanced Reconciliation (PACER) systems. A TCIS navigation job-aid can be found in the Erroneous Refund Job aid, 2493-701, found in the Submission Processing Design Center's list of IMF Accounting courses at http://coursebooks.enterprise.irs.gov

    Figure 3.17.80-31

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    Figure 3.17.80-32

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    Figure 3.17.80-33

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    Figure 3.17.80-34

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    Figure 3.17.80-35

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  2. You will receive the original Form 1081, an IPAC Bill or one of the following TRACS listings of SF 1081 cases which list refunds issued by both the IRS and BFS. (see Figure 3.17.80-32)

    1. TRACS Listing: Reclamation Credit (to apply a credit)

    2. TRACS Listing: Unavailable Check Cancellation (to apply a credit)

    3. TRACS Listing: Payment Over Cancellation (to apply a debit)

3.17.80.2.1  (01-01-2014)
TRACS Listing Research

  1. 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.

  2. 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 later is common when your case involves the TIN of the secondary taxpayer on a jointly filed tax period where a refund occurred. (see Figure 3.17.80-35)

3.17.80.2.2  (01-01-2014)
Processing SF 1081 or TRACS Debits

  1. All processing for TRACS/GOALS transmission and TRACS listings must be completed within 10 workdays from the received date. The TRACS listing which is produced from ECC, provides an individual breakdown of the charges by taxpayer. Included on the listing is (see Figures 3.17.80-36 and 3.17.80-37):

    1. SF 1081/TRACS Schedule number

    2. Date prepared

    3. Agency Location Code

    4. Budget Clearing Account being charged

    5. Agency Reference Information

    6. Check symbol

    7. Check number

    8. Check date

    9. Payee's name and TIN

    10. Applicable status code

    11. Amount being charged

    12. SF 215 number and date

  2. 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:

    1. Submission Processing site Agency Location Code (ALC) is correct.

    2. Taxpayer's TIN is provided.

    3. BFS Forms 3858 with taxpayer's name and address are provided.

    4. Photocopies of the front and back of the check(s) are attached.

    5. The charge is intended for the correct Submission Processing site ALC.

    6. The total amount on the TRACS listing is the same as the amount of GOALS transmission.

    7. Account number is present.

    Note:

    Verify that all charges are for tax refunds.

    Figure 3.17.80-36
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Figure 3.17.80-37
    This image is too large to be displayed in the current screen. Please click the link to view the image.

  3. Contact Check Claims Group (CCG) by telephone (202) 874-7920 if any of the following discrepancies are found:

    1. Agency Location Code is incorrect.

    2. Account cannot be identified.

    3. Charge belongs to another agency or Submission Processing site.

    4. Charges are not for tax refunds.

    5. Taxpayer identifying information (SSN, EIN, name or address) is missing or incorrect.

    6. Amount of the TRACS/GOALS transmission does not equal the total amount of the detail on the TRACS listing.

    7. Photocopies of the check(s) are not provided.

  4. Check Claims Group (CCG) will:

    1. Provide the missing date.

    2. Reverse the charge via SF 1081/TRACS and, if appropriate, issue a corrected SF 1081/TRACS.

    3. Take the necessary action to correct any differences when the amount shown on the SF 1081/TRACS Listing and SF 1081/TRACS Schedule differ.

  5. 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/TC 840 posted and take one of the following actions based on the circumstances described:

    1. Post TC 840 when the BFS issues a settlement (replacement) check, but later concludes that the taxpayer did, in fact, cash both checks. The IRS accounts for the duplicate refunds by posting the second refund as a TC 840 (Manual Refund) and IRS pursues recovery of the duplicated refund as a Category D Erroneous Refund with a 5-year Erroneous Refund Statute Expiration Date (ERSED).

    2. Post a TC 843 when a TC 841 was posted based on an earlier non-receipt claim on which, at the time, the first check had not been cashed, and the IRS issued a second refund. The BFS has now concluded that both checks have been cashed. The TC 843 moves the tax account into balance due status and the duplicated refund is pursued as a Category D Erroneous refund with a 5-year ERSED.

  6. TC 840 Procedures - Copy of settlement check present:

    1. Prepare Form 3245 in triplicate to input TC 840 on the taxpayer's account. Use the date of the settlement check as the date of the TC 840 (Schedule date). (see Figure 3.17.80-38)

    2. Attach to both "Copy 1" and "Copy 2" of Form 3245, photocopies of the settlement check, the BFS form or listing, a CC TXMOD printout, and all other documentation.

    3. Use CC ACTON to update and close your control base, then deliver the package to the team that does the numbering.

    4. Retain and file your "Copy 3" of Form 3245 and back-up items according to local procedures.

    5. Once numbered, copy and retain one numbered set with your case file.

    6. Input a TC 470 CC 93 to hold balance due notices, then deliver the numbered sets to Data Control.

    Figure 3.17.80-38

    This image is too large to be displayed in the current screen. Please click the link to view the image.

  7. TC 840 Procedures - No copy of settlement check:

    1. Check CC TXMOD for a TC 971 with Action Code 078 or 079. If present, the Refund Inquiry Function has included a copy of the original refund check with their TC 290 for $.00

    2. Use the "Symbol" and "Serial" numbers from the original refund check (see Figure 3.17.80-39) to search the TCIS database for an image of the cross-referenced replacement check (settlement check). Erroneous Refunds Job Aid 2493-703 contains precise TCIS navigation instructions for this task.

    3. If still unable to locate an image of the settlement check, refer to IRM 3.17.80.2.5(5), or local procedures, for obtaining a copy from the BFS.

      Figure 3.17.80-39

      This image is too large to be displayed in the current screen. Please click the link to view the image.

  8. TC 843 Procedures - follow the instructions in IRM 3.17.80.2.2, Paragraph (6) above, for TC 840s with a check copy except that:

    1. Use Form 3245 to post a TC 843. (see Figure 3.17.80-38)

    2. Form 3245 remarks will carry a different explanation.

    3. There will be no settlement check copy.

  9. Monitor for posting. Once your TC 840 or TC 843 posts, return the case file to the work leader for reassignment. An examiner will correspond with the taxpayer requesting repayment of the settlement check and include a copy of the original refund check, a copy of the settlement check, and a Form 1133 package for each refund. The return address should be that of the Erroneous Refund team.

3.17.80.2.3  (01-01-2014)
Processing Debits, SF 1081 or TRACS Credit

  1. In most credit cases, you will only post a TC 841 to the affected tax period. Verify that the proposed credit amount on the SF 1081-TRAC-IPAC matches the refund in question. If they match, take the following actions:

    1. Complete the triplicate Form 3245 Posting Voucher.

    2. Attach copies of the SF 1081 or TRACS listing and a CC TXMOD printout to both copy 1 and copy 2 of Form 3245.

    3. Use CC ACTON to update and close the IDRS control base.

    4. Deliver the package to Accounting Operation's Numbering team.

    5. Retain and file the third copy of Form 3245 and back-up items according to local filing procedures.

    6. Once numbered, copy and retain one numbered set of Form 3245 with your case file and deliver the numbered sets to Data Control.

3.17.80.2.3.1  (01-01-2014)
Corrected SF 1081

  1. A corrected SF 1081 can be identified by Schedule Number "B700. . ." . These items should also contain sufficient information to describe the initial GOALS transmission Schedule Number being reversed or corrected.

  2. BFS Accounts Branch attempts to maintain accurate end-of-month records of paper SF 1081 issued. Each ALC receives a listing of the paper SF 1081 for the prior accounting period. If SP sites do not receive this document to verify transmittals by the 15th of the month following the accounting period, contact the BFS Accounts Branch at FTS (202) 874-7920.

  3. Within 10 workdays of receipt of the SF 1081, using the SF 1081 listing, prepare a Form 3245, Posting Voucher-Refund Cancellation or Repayment, for each taxpayer listed. This will input a TC 843 to the tax module reversing the corresponding TC 841. (see Figure 3.17.80-42)

  4. Not all required information to complete Form 3245 appears on the SF 1081. The DO or ULC code and Schedule date need to be researched on IDRS, IMFOL or specific MFTRA.

    Note:

    IMFOL should be used instead of MFTRA whenever possible.

  5. Control on IDRS. Include a History item showing the Schedule Number.

    ACTON ACTON
    C#, 1081/843, M, MISC H, (SF1081 Number)
    *, (SF1081 Received Date)  

  6. After research is complete and Form 3245 is prepared, close the IDRS control base.

    ACTON
    C#, 843TOPOST, C

  7. Verify amounts of Forms 3245 listed with the SF 1081 listing for balancing. Maintain a log of Forms 3245 by DLN and date.

  8. Photocopy (1 copy) of Forms 3245, the SF 1081 listing and any back-up provided (copies of checks, 1133 claims forms, etc.). Make 2 copies of the SF 1081 Schedule.

  9. Prepare Form 813, Document Register, listing all Forms 3245 containing the same DO or ULC and tax class codes. Verify amounts for balancing. (see Figure 3.17.80-40)

  10. Prepare Document Transmittal (to debit Master File). Attach the original SF 1081 Schedule, copy two of the Form 813 and a tape verifying the money amounts to the Document Transmittal. Route to the Redesign Revenue Accounting Control System (RRACS) Unit for journal action.

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

    1. Route the original Forms 813 with Forms 3245 to Batching and Numbering for processing.

    2. Route a photocopy of the SF 1081, listing and back-up to the Refund Inquiry Unit. Note that a TC 843 will be input to the tax module to reverse the TC 841.

    3. Maintain a photocopy in Accounting of the SF 1081 Schedule, the original SF 1081 listing, any back-up, and a photocopy of all Forms 3245.

  12. Occasionally, an SF 1081 is received stating that the taxpayer received and cashed both an original and recertified (substitute) check.

    1. DO NOT order IMFOL/MFTRA.

    2. Make two copies of the SF 1081 if additional copies are not already available.

    3. Prepare Document Transmittal (Form 3210). Route the Document Transmittal, the original plus a photocopy of SF 1081 to the RRACS Unit for journal action to the 4970 Account. Request that the duplicate SF 1081 be routed with the journal number indicated to the Erroneous Refund Unit.

    4. Maintain one photocopy of the SF 1081 in Accounting.

    Figure 3.17.80-40
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    Figure 3.17.80-41
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3.17.80.2.4  (01-01-2014)
BFS Form 3858 - "GOALS" Automated Payments Over Cancellation

  1. When a Payment Over Cancellation (POC) is processed through “Government On–Line Accounting Link System (GOALS)”, you will receive BFS Forms 3858 and 1133 from the BFS. Both transactions 841 and 843 should already be systemically generated on the tax account. The TC 841 will post in Blocking Series 88888. The debit TC 843 moves the account to balance due status by reversing the credit TC 841.

  2. Take the following steps when working Payment Over Cancellation cases:

    1. Notate all actions taken on the Form 5706 Case History Sheet and maintain an up-to date Control Base on IDRS.

    2. Review the taxpayer’s account to determine if the TC 841 (Blocking 88888) and the TC 843 are posted.

    3. Determine whether the taxpayer repaid or returned either refund check, or if the BFS sent a “Recertified” credit (TC 841 Blocking 88888) to full pay the account because forgery was established. A “returned” refund check will post with TC 841 in block and series 99999.

    4. If the account is in credit status and no freeze condition is present, research for any pending transactions or open control bases. If either is found, consult your Lead Examiner. If not, open a control base and input a TC 570 to prevent refunding until the TC 843 posts or the account moves to debit status.

    5. Use CC INTST to look for penalty and interest accruals. If present, and the accrual amounts are incorrect, input both Transaction Codes 270 and 340 for zero or 341 for credit (if posted on TXMOD) to remove and restrict the accruals.

    6. If the BFS sent the credit back, your IDRS control base will automatically close with category code “ST32” and the posting of a TC 841 in block and series 88888.

    7. While the posting of a TC 706 (automatic offset credit applied) may fully pay the account, it does not resolve the POC conditions. You will continue with standard POC processing. It may be necessary to reverse the offset at the conclusion of POC processing.

    8. Input a TC 470 CC 93, to prevent the issuance of balance due notices for 26 cycles.

    9. Use CC CHKCL to notify the BFS of the taxpayer’s non-receipt claim, the refund(s) involved, and to request a Form 3858/1133 package from the BFS for inclusion in your taxpayer correspondence. Take the following steps.

      1. Use CC IMFOL# to determine the issue date of each check. (see Figure 3.17.80-42)

        Figure 3.17.80-42

        This image is too large to be displayed in the current screen. Please click the link to view the image.

      2. If the issue dates are in different calendar months, use CC CHKCL. (see Figure 3.17.80-43)

        Figure 3.17.80-43

        This image is too large to be displayed in the current screen. Please click the link to view the image.

      3. If the issue dates are in the same calendar month, use CC CHKCL with the “serial” number and issue month of the check requested. Do not enter the check "symbol" number. (see Figure 3.17.80-44)

        Figure 3.17.80-44

        This image is too large to be displayed in the current screen. Please click the link to view the image.

      4. If for some reason you need to cancel your CC CHKCL input, use CC TERUPC with the TIN, MFT, Tax Period, and Sequence Number to void your CC CHKCL transaction by close of business the same day. If necessary, Quality Review can reject the transaction the next day. After that, there is no way to prevent an “OOPS” update to your control base.

    10. If a TC 971 with Action Code 078 or 079 is present, check for a TC 290 .00 in blocking series 18 (for paper returns) or 05 (for electronic returns). That is the Refund Inquiry Unit’s method of retaining, in files, source documents pertaining to a taxpayer’s refund inquiry. Use CC ESTAB through the "Integrated Automated Technologies (IAT)" application to order that transaction. You may find check copies in the source documents.

    11. If you do not receive the Form 3858/1133 package within 30 days of its request, contact the BFS Check Claims Branch to request the claims package.

    12. Issue correspondence requesting the taxpayer to either repay the duplicate refund, or complete and return the forms provided to claim non-receipt of the refund check.

    13. Update your Control Base to: C#,1133TOTP,M,MISC and file your case in the suspense files pending the taxpayer’s reply.

3.17.80.2.4.1  (01-01-2014)
Limited Payability

  1. U.S. Treasury checks are negotiable for one year. If not cashed and not returned undeliverable after 12 months, a TC 740 in block and series 66666 generates to the account reversing the refund. If you are working a POC case involving a check that is:

    1. Between 12 and 14 months old, and no TC 740 has posted to the account, use CC CHKCL to get a copy of the check and a Form 1133 package.

    2. More than 14 months old, and no TC 740 has posted, obtain a copy of the check through the TCIS (See Exhibit 3.17.80-17 and Exhibit 3.17.80-18) or PACER systems and send Form 13818, Limited Payability Claim, to the taxpayer.

      Note:

      Use CC CHKCL if the check is not found on either system.

  2. Remember to input a TC 971 with Action Code 011 whenever PACER is used.

  3. Refer to IRM 21.4.2.7 for further information on Limited Payability Rules.

3.17.80.2.4.2  (01-01-2014)
Undeliverable or No Taxpayer Reply

  1. If the taxpayer replies by telephone and you determine that Erroneous Refund procedures apply, you may deliver the erroneous refund information verbally. The date of the conversation is the official date of demand. Thoroughly document the conversation.

  2. If the taxpayer does not reply within 45 days (60 for foreign addresses), process as an Erroneous Refund.

    1. Complete Form 12356, Erroneous Refund Worksheet. (see Figure 3.17.80-45)

    2. Issue letter 510C, and

    3. Input TC’s 844 and 470/93.

    4. Refer to IRM 3.17.80.1.8.2 if the erroneous refund was issued from a site other than yours.

  3. If your correspondence returns undeliverable:

    1. Research IDRS and Master File for a corrected or more recent address.

    2. If a more current address is located or if the address can be corrected, re-mail the BFS Forms 1133 claims package to the taxpayer.

    3. Update the IDRS control base using activity code "Re-mail 1133" .

    4. If a more current address is not available, input TC 844, TC 971 AC 663, and TC 470 CC 93, and treat the case as an erroneous refund.

    5. Complete Form 12356, Erroneous Refund Worksheet. (see Figure 3.17.80-45)

    6. Refer the case to the responsible site immediately after performing initial ERRF procedures.

    Figure 3.17.80-45
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3.17.80.2.4.3  (01-01-2014)
Taxpayer Replies

  1. If the taxpayer submits an incomplete Form 1133 package, use an IDRS letter to return the package to the taxpayer and to explain that he or she has 10 days to re-submit the completed claim package.

  2. If the taxpayer responds with a completed Form 3858/1133 or Form 13818 package indicating that two refunds were not received:

    1. Photocopy the completed Form 1133 or 13818 for the case file.

    2. Return page 2 of Form 3858, completed Form 1133, and a copy of the refund check to BFS. As long as the Form 3858 has a Stop Reason of “D”, the package can be sent to BFS no matter how old it is.

    3. Include the BFS Cover Sheet and highlight F"MS DO NOT ISSUE SETTLEMENT CHECK" . Also write "DO NOT OPEN IN MAIL ROOM" on the outside of the envelope. (IRM Exhibit 3.17.80-10)

    4. The Form 13818 package will go to the National Forensic Laboratory (NFL) to determine if the taxpayer’s signatures are genuine.

    5. Place the case in 60-day follow-up file.

    6. Update Control Base to: C#,1133TOBFS,M,MISC or C#,1133TONFL,M,MISC

    7. Issue Letter 206-C to notify the taxpayer that their Form 1133 package was forwarded to the BFS.

  3. If the taxpayer responds either by telephone or written response that they did receive two refunds, but they do not have the funds to repay:

    1. Inform the taxpayer of the obligation to repay.

    2. Attempt to get the taxpayer to agree to a repayment plan.

    3. Continue processing the case as an Erroneous Refund with a 5-year ERSED.

3.17.80.2.4.4  (01-01-2014)
Bureau Fiscal Services (BFS) Determinations

  1. If BFS determines the taxpayer did not receive two refund checks, they will issue a credit, TC 841. Once posted, reverse any offset credits applied (TC 706/700) and allow them to refund from their original tax period.

  2. If a Claim Disposition Notice (CDN) is received from BFS stating "FORGERY ESTABLISHED" , input a TC 971 with Action Code 078.

  3. If BFS determines the taxpayer did receive two refund checks, process as an Erroneous Refund case. Complete Form 12356, Erroneous Refund Worksheet, and send the taxpayer a 2218C letter. Wait for 45 days and then route to the appropriate site.

  4. If BFS or NFL determines that the endorsement on one or more refunds was forged, complete Form 3809 to post the TC 841 credit transaction. (see Figure 3.17.80-46)

    Figure 3.17.80-46
    This image is too large to be displayed in the current screen. Please click the link to view the image.

  5. Attach the following to the 6565 Account Cover sheet.

    1. Form 3809

    2. History Sheet

    3. CC TXMOD print out

    4. Copy of Form 3911, Taxpayer Statement Regarding Refund,

    5. All taxpayer correspondence

    6. Form 13818, Claim Against the United States for the proceeds of an Internal Revenue Refund Check.

    7. Photocopy of front and back of the check(s)

    8. The BFS/NFL response

  6. Monitor for the posting of the TC 841. The DLN will carry Document Code "48" with block and series "88999" .

  7. Limit the refund interest to the amount of the original TC 770/776.

  8. If BFS does not respond within 90 days, follow up with BFS Claims Processing.

3.17.80.2.4.5  (01-01-2014)
Monitor Case for Credits

  1. If the response to the SF 1184 indicates the recertified credit is available (Status 32), a credit will be returned through TRACS.

    1. Maintain an open IDRS control base and monitor for the TC 841 credit to post. If the TC 841 has not posted following the status code date, prepare BFS 3864. Follow instructions in IRM 21.4, Refund Inquiries.

    2. When the TC 841 posts, close the IDRS control and suspense case in closed file. Release any TC 570, as appropriate.

  2. On rare occasions, Check Claims will respond on Form 3859 "settlement recommended" and subsequently reverse their decision claiming that the taxpayer did benefit from the original refund check.

    Note:

    Erroneous Refunds procedures in both IRM 21.4.5, Erroneous Refunds and/or IRM 3.17.80, Working and Monitoring Category D unassessable erroneous refund Cases are available for appropriate handling of the case.

3.17.80.2.5  (01-01-2014)
SF 1081 Debits Other Than Status 61 and 65

  1. The following actions should be taken when SF 1081/TRACS involving two checks are received (see Figure 3.17.80-47):

    1. Do not order MFTRA.

    2. Prepare Document Transmittal. Route Document Transmittal, the original or TRACS print and a duplicate SF 1081/TRACS to the RRACS Unit for journaling to the 1530 Account. Request the duplicate or copy of SF 1081/TRACS be routed "with journal number" to the Erroneous Refund Unit.

    3. Maintain a copy of the SF 1081 in Accounting.

  2. If debit SF 1081/TRACS processing is done within the Erroneous Refund Unit, the journaling to the 1530/1540 General Ledger Account will be done within this unit.

  3. The Erroneous Refund Unit will follow Erroneous Refund procedures as outlined in IRM 3.17.80.

    Figure 3.17.80-47
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3.17.80.2.6  (01-01-2014)
Refund Repayments Made to Check Claims Group

  1. In some instances, a taxpayer will erroneously repay the amount of the duplicate refund by personal check made out to the Check Claims Group. When the taxpayers are contacted by IRS, they will submit a copy of the cancelled check showing that the funds were deposited into Check Claims' Reclamation Suspense Account. In these cases, the Submission Processing site should prepare SF 1081 to charge the Reclamation Expense Account and credit the applicable IRS appropriation or Fund Account. The SF 1081 should contain a statement of facts surrounding the case. Attach a copy of the front and back of the check.

  2. If a taxpayer sends a payment to IRS and it is erroneously received and cashed by Check Claims, Accounting will write a memorandum to Check Claims Group requesting that the funds be returned to IRS. Provide the pertinent information; Submission Processing site name and address and Agency Location Code . A copy of the cancelled check should be attached to assist Check Claims in locating the funds.

3.17.80.2.7  (01-01-2014)
Erroneous Payments Made by Regional Financial Centers

  1. BFS Regional Financial Centers are responsible for adjusting all check issue discrepancies, such as:

    1. Checks issued for less than, or in excess of, amounts shown by the certified refund schedules (SF 1166 or SPS).

    2. Checks printed in different amounts, thus causing the payees to be underpaid or overpaid.

    3. Two checks issued to one payee and no check issued to a rightful payee.

  2. When taxpayers send these erroneous checks to the Submission Processing site or tender remittances to cover erroneous payments, check cancellation or deposit action will NOT be taken by the Submission Processing site. Rather, the checks and repayments will be routed to the Director of the Regional Financial Center for credit in his accounts. Returned checks are stamped "Not Negotiable" as outlined in IRM 21.4.3, Refund Inquiries - Returned Refunds/Releases, before they are transmitted to the Regional Financial Center.

  3. If the refund appropriation(s) has been erroneously credited with check cancellations or repayments that should have been credited to the Director, Regional Financial Center accounts, the over-assessment clerk will make the necessary adjustment by processing SF 1166 to charge the refund appropriation and pay the amount to the Director, Regional Financial Center.

Exhibit 3.17.80-1 
Erroneous Refund Interest Considerations

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Exhibit 3.17.80-2 
Erroneous Refund Flow Chart

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If/Then Flow Chart for Erroneous Refund Identification
If the: Example Then the Category Is:
Error relates to TCs 150, 29X, and/or 30X and MFTs are not 01, 04, 08, 09, 10, 11, 12, 16, or 88.
  1. IRS lowered the tax when originally processing the Form 1040 or 1120 and later determines the taxpayer's amount was correct.

  2. Incorrect tax or incorrect adjustments (TC 29X or 30X), Form 1040X or 1120.

"A1"
Refund relates to disallowed Earned Income Tax Credit (EITC), TCs 764, 765, and 768 or Child Tax Credit Issue (Refundable part). Non Refund TC 766.
  1. Taxpayer calculates the EITC by including interest in the Earned Income. (TC 764)

  2. Issuance of the refund before finding the error. (TC 846 with 764 credit)

"A2"
Refund was caused by taxpayer's overstatement of prepaid credits (TC 66X or TC 80X)
  1. Taxpayer claimed W/H of $1,000.00 but the correct W/H is $500.00. The refund is $500.00 more than it should be.

"B"
Error relates to BMF TCs 150, 29X, and/or TC 30X and the MFT is 01, 04, 08, 09, 10, 11, 12, 16, or 88.
  1. Incorrect tax (TC 150) on Forms 941 or 940.

  2. Incorrect adjustment to tax (TC 29X or 30X). Refer to IRM 21.4.5.4.4.3

"C"
Error relates to any erroneous refund that is not included in the above categories.
  1. A misapplied payment with TC 650, 660 or 670.

  2. Incorrect refundable credits not included in Categories A2 and B.

  3. TC 840 and 846 same overpayment.

  4. Refund issued after Statute expiration.

  5. Entity errors.

"D"

Note:

At times the Category A1 and A2 cases require a Notice of Deficiency to be issued (EITC or other tax decrease errors). Employees must refer cases requiring a tax assessment to Examination for issuance of the Deficiency Notice. Follow local procedures when referring cases to Exam.

Exhibit 3.17.80-3 
Erroneous Refund Accounts 1530 and 1540

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Exhibit 3.17.80-4 
Erroneous Refund Coordinators

Erroneous Refund Coordinators
Submission Processing site Name and Address Telephone # Fax #
Austin
18
IRS - Austin SPC
Attn: SP Accounting Operations Erroneous Refund Coordinator
AUSPC Stop 6271
PO Box 934
Austin, TX 78767
or
3651 S IH 35
Austin, TX 78741
(512) 460-7632 (512) 460-4546
Cincinnati
17
IRS - Cincinnati SPC
Attn: SP Accounting Operations Erroneous Refund Coordinator
PO Box 2345
Stop 21, Team 206
Cincinnati, OH 45201
or
201 Rivercenter Blvd.
Covington, KY, 41017
(859) 669-2696 (859) 669-5317
Fresno
89
IRS - Fresno SPC
Attn: SP Accounting Operations Erroneous Refund Coordinator
PO Box 12866 - Stop 37103
Fresno, CA 93888
or
5045 E. Butler Ave.
Fresno, CA 93727
(559) 454-6259 (559) 454-6317
Kansas City
09
IRS - Kansas City SPC
Attn: SP Accounting Operations Erroneous Refund Coordinator
333 W. Pershing Rd.
Stop 6250 P-6
Kansas City, Missouri 64108
(816) 325-3740 (816) 292-6206
Ogden
29
IRS - Ogden SPC
Attn: SP Accounting Operations Erroneous Refund Coordinator
PO Box 9950 - Stop 6714
Ogden, UT 84409
or
1973 North Rulon White Blvd. Stop 6714
Ogden, UT 84404
(801) 620-7660 (801) 620 6682

Exhibit 3.17.80-5 
Regional Financial Centers

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Exhibit 3.17.80-6 
Blocking Series Chart for Document Code 45, SF 1098 and TRACS Processing

Blocking Series Chart for Document Code "45" For Miscellaneous Processing (i.e. SF 1098, 1081, ID-Theft Processing
AO/SC Code Blocking Series Description Document Code 45 Trans Code Freeze Code Processed By
SC 220-299 Repayment of Erroneous IMF/BMF Form 3245 720 - Receipt & Control
ULC 500-519 IMF/BMF SF 1098
Form 3245
841/740 - Accounting
ULC 520-529 ANMF SF 1098
Form 3245
841/740 - Accounting
ULC 530-539 IMF-IRAF SF 1098
Form 3245
841/740 - Accounting
ULC 540-549 IMF/BMF/ANMF TFS 3813
Form 3245
843/742 - Accounting
ULC 550-554 IMF/BMF SF 1081 Debit/POC TRACS
Form 3245
843 - Accounting
ULC 550-553 IMF/BMF SF 1081 Debit Settlement Authorized Form 3245 840   Accounting
ULC 555 Intercepted Checks Manually Processed 1098 Listing SF 1098/Form 3245 841 P- Accounting
ULC 666 IMF/BMF/ANMF Limited Payability Cancellation Credit/TRACS Form 3245 740 S- Accounting
ULC 800 Repayment of Erroneous Refunds ANMF Form 3245 720 - Receipt & Control
ULC 888 IMF/BMF/ANMF SF 1081 Credit/RC/UCC TRACS Form 3245 841 - Accounting
ULC 889 Use for MFT 06/08 Only SF 1081 Credit/RC/UCC TRACS Form 3245 841 - Accounting
ULC 55555 Intercepted Checks Master File Tape Processing 841 P- Computer Generated
ULC 66666 Limited Payability Master File Tape Processing 740 S- Computer Generated
SC 77777 Undelivered ELF (Electronic Filed Return) Master File Tape Processing 841 - Computer Generated
SC 88888 Recertified Credit Master File Tape Processing 841 - Computer Generated
SC 88899 Returned Credit (Due to CHKCL) Master File Tape Processing 841 P- Computer Generated
SC 99999 Undelivered Check Master File Tape Processing 740 S- Computer Generated
SC 99999 Returned Checks Master File Tape Processing 841 P- Computer Generated

Exhibit 3.17.80-7 
Blocking Series Chart for Document Code 45, Forms 3753 (Manual Refund Posting Voucher)

AO/SC Code Blocking Series Description Document Code 45 Trans Code Processed By
ULC 200-299 IMF/BMF Refunds/Form 3753 840 Accounting
ULC 300-399 BMF (F4466 Only) Refunds/Form 3753 840 Accounting
ULC 900 -0- Amount Form 3753 Dummy Refunds to Release X- Freeze 840 Accounting
ULC 920 IMF/BMF/NMF Form 3753 Used When Transferring Refunds to Proper Account and in Conjunction with Form 3809 (*Optional Form 12857, top portion) 840 Accounting
ULC 600 Manual Refund/Direct Deposit IRS Error 840 Accounting
* Option Form 12857, Refund Transfer, may arrive in accounting to transfer accounts only. These items do not create a refund condition. Forms 12857, top portion only, are numbered Document Code 45 and separated from the bottom portion prior to sending to RRACS area via Form 813.
* If posting document requires DLN for Document Code 45, Blocking Series 92X, aka "dummy refunds" , enter "0" (zero) in Block 4 on Form 3753 (Schedule Number) or Form 12857 (Refund Schedule Number).

Exhibit 3.17.80-8 
BFS Treasury Receivable Accounting, and Collection System Contact List

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Exhibit 3.17.80-9 
Reason For Cancellation Codes (SF 1098)

Reason for Cancellation Codes SF 1098 Electronic Funds Transfer (EFT)
RRC Code Description Trans. Code Freeze Code Block and Serial Number
01 Intercepted Checks 841 P- 55555
02 Undeliverable Checks 740 S- 99999
03 Returned Checks (other than intercepted or undeliverable) 841 P- 99999
08 Unavailable Check Cancellation Credit (returned on outstanding checks as a result of a check claim, CC CHKCL/ Status 32) 841 P- 88899
09 Unavailable Check Cancellation Credit 841 None 88888
09 Reclamation Credit 841 None 88000
09 Outstanding check as the result of a paper 1184. 841 None 88111
11 Taxpayer correspondence attached. (Also could include a photocopy fee refund cancelled that would not show on the MF.) 841 None 99999
40 Limited Payability (LP) expired credit 740 S- 66666 666XX (prior to 1992)
71 Unavailable Check Cancellation Offset Return. As a result of an agency claim, only the TOP offset amount of the original payment is returned. See IRM 21.4.6, Refund Offset 841 See IRM 21.4.6, Refund Offset 88888
72 Unavailable Check Cancellation Partial Payment Return. As a result of an agency claim, only the net amount of the original payment after TOP offset is returned. See IRM 21.4.6, Refund Offset 841 See IRM 21.4.6, Refund Offset 88888
Reason for Cancellation Codes SF 1098 Electronic Funds Transfer (EFT)
RRC Code Description Trans Code Freeze Code Block & Serial Number
60 Invalid/Missing Routing Transit Number 841 None 77777
61 Invalid/Blank Bank Account Number or Account Type. Must indicate (C) Checking or (S) Savings 841 None 77777
62 Direct Deposit Check Receiving Financial Institutions Non-ACH Participant 841 None 77777
63 EFT Payments without Financial Organization Address on Financial Organization Master File (FOMF) 841 None 77777
Note: All EFT cancellation transactions will carry block and serial number 77777 and will flip to paper check.

Exhibit 3.17.80-10 
BFS Coversheet - Do Not issue Settlement Check

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Exhibit 3.17.80-11 
Form 3809 Miscellaneous Adjustment Voucher

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Exhibit 3.17.80-12 
Erroneous Refund Case History Sheet

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Exhibit 3.17.80-13 
Unassessable Erroneous Refund (5-year) Check Sheet

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Exhibit 3.17.80-14 
2013 Enterprise Computing Center (Posting Cycles)

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Exhibit 3.17.80-15 
2013 POSTING CHART

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Exhibit 3.17.80-16 
Business Operating Division (BOD) Points of Contact (POCs) for Duplicate, Manual, Erroneous Refund Feedback, Form 14165-A,

Send the Form 14165-A (with boxes 1–9 completed) to both primary and back-up (when listed) BOD POC identified below. That point of contact will forward the form to be completed (boxes 10–12) by the area that caused the duplicate, manual, erroneous refund. Be very specific when completing Box 7 of Form 14165-A so the BOD POC will know where to send the form for completion.
BOD Primary POC Back-up POC Primary POC Contact Information Back-up POC Contact Information
APPEALS ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
Criminal Investigations ≡ ≡ ≡ ≡ ≡ ≡ ≡   ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡  
LB&I ≡ ≡ ≡ ≡ ≡ ≡ ≡   ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡  
SBSE ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
TEGE ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
TAS ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
W&I AM ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
W&I CARE ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
W&I Compliance ≡ ≡ ≡ ≡ ≡ ≡ ≡   ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡  
W&I RICS ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
W&I SP ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
A copy of the completed form will be returned to the Accounting Operation Erroneous Refund team that initiated the Form 14165-A. A copy of the completed form, with the error feedback must be included in each duplicate, manual, erroneous refund case file.

Exhibit 3.17.80-17 
Treasury Check Information System (TCIS) Query Display - 1

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Exhibit 3.17.80-18 
Treasury Check Information System (TCIS) Query Display - 2

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