4.4.3. Credit Transfers and Reprocessing Returns

(1) Purpose: Program Scope and Objectives: This section provides general instructions for Credit Transfers and Reprocessing Returns, as it pertains to the Examination Audit process and Centralized Case Processing (CCP).

(2) Audience: The audience for this Internal Revenue Manual (IRM) section will be Large Business & International (LB&I) and Small Business/Self-Employed (SB/SE).

(3) Policy Owner: The Director: SB/SE Technology Solutions who is under the Director, Operations Support.

(4) Program Owner: Examination Systems and Projects, Customer Service.

(5) Program Goals: The goal of this section is to provide an overview of Procedures and Processing Instructions, Credit Transfers and Reprocessing Returns.

(6) IRM deviations must be submitted in writing to the Director Small Business/Self-Employed (SB/SE) Division following instructions from IRM 1.11.2.2.4.3, Internal Management Documents System - Internal Revenue Manual (IRM) Process.

(1) The procedures, which were in this IRM, pertained to the Examination Audit Process. The procedures do not pertain to the AIMS Information Technologies (IT) System, which is the subject of this IRM. New IRM references for the procedures previously located in this IRM are listed in the material changes. CCP procedures remaining in this IRM will be included in the new IRM 4.38.1, Exam Processing, CCP, Organization and Responsibilities.

(1) Headquarters Examination is responsible for all policy and procedures related to CCP.

(1) This chapter contains instructions for processing credit transfers and miscellaneous adjustments for individual and business returns.

1. Transferring Payments and Credits Between Related Taxpayers is discussed in IRM 4.4.3.5, "Transferring Payments and Credits Between Related Taxpayers".

2. Refunds to Other Taxpayers, Group Responsibility is discussed in IRM 4.4.3.8, "Refunds to Other Taxpayers, Group Responsibility ".

3. Reprocessing SB/SE Cases Open Under Examination, Group Responsibility is discussed in IRM 4.4.3.14, "Reprocessing Instructions - SBSE Cases Open Under Examination, Group Responsibility".

4. Reprocessing LB&I Cases Open Under Examination, Group Responsibility is discussed in IRM 4.4.3.15, "Reprocessing Instructions - LB&I Cases Open Under Examination, Group Responsibility".

(2) This IRM frequently refers to tasks to be completed by the examiner/group. It is acceptable for any staff member in the group to perform the task at the manager's discretion.

(3) For additional guidance see the following IRMs:

• IRM 21.5.8, Credit Transfers.

• IRM 21.4.5, Refund Inquiries, Erroneous Refunds.

• IRM 3.17.21.13.5, Form 2424, Account Adjustment Voucher.

• IRM 3.17.21.13.6, Form 3809, Miscellaneous Adjustment Voucher.

(1) Related taxpayer examinations sometimes result in adjustments increasing the tax for one taxpayer and decreasing the tax for the other taxpayer. This usually occurs between parent and subsidiary corporations or between trusts and beneficiaries. See IRM 20.2.5.13.1, Underpayment Interest on Liabilities Credited from Another Module by a Different Taxpayer, for credit availability date and the need to manually compute interest by CCP.

(2) Often the taxpayer will ask that a refund of one taxpayer (primary taxpayer) be applied to the account of another taxpayer (related taxpayer). This agreement is documented in the form of a written statement signed by the taxpayer agreeing that its overpayment be credited to the related taxpayer and made part of the case file. It is in the interest of the Internal Revenue Service (IRS) to honor this type of offset.

(3) A credit will be transferred between accounts only if there is a written statement from the taxpayer entitled to the credit requesting such application. See IRM 20.2.4.3, Availability Dates for Overpayments for additional information.

(4) A credit may be transferred from an individual's Individual Master File (IMF) account to the same individual's Business Master File (BMF) account without a statement. The BMF account can be the individual's partnership, excise, or employment tax account.

(5) Cross reference primary and related taxpayer returns on Form 3198, Special Handling Notice, in the "Related Taxpayers or Key Cases" section and annotate to keep the returns together through the closure process.

(1) If the offset is to be made as described in IRM 4.4.3.5, Transferring Payments and Credits Between Related Taxpayers, follow the instructions below in addition to routine processing.

1. For the Related Taxpayer immediately input Hold Code "1" (in Item 07) on Form 5344 or Form 5403 to prevent a refund.

2. Input Form 2424, Account Adjustment Voucher or Form 3809, Miscellaneous Adjustment Voucher to post one cycle after the related or overpaid Form 5344 or Form 5403.

3. Input Form 5344 or Form 5403 to the Primary tax module Input to the receiving the credit one cycle after Form 2424 or Form 3809 to ensure that the credit is available at the time of settlement.

(1) Prior to an examiner proposing a refund on taxpayer’s return, a current Master File (MF) transcript should be secured to ensure a tax liability does not exist.

(2) If the taxpayer requested to have the proposed refund used to offset another taxpayer’s deficiency and a liability exists on the same tax module, (based on a current MF transcript), that exceeds the proposed overpayment; the balance in module is reduced and causes the account to be in debt status.

(3) Therefore, when the tax module is in debt status, the refund cannot be offset to another taxpayer's deficiency.

(4) Advise the taxpayer that their request to offset the proposed refund to another taxpayer's deficiency cannot be accommodated. The refund will be applied to the debit balance of their account.

(1) These procedures should be followed when a refund is to be issued to someone other than the taxpayer in whose name the tax was paid - see IRM 21.4.3.5.5.2.1, Issuing Checks in Another Name.

(2) Provide documentary evidence to permit refunds to be made to, on behalf of, or in care of any of the following:

1. Deceased taxpayers

   Reminder: Refunds due on joint returns when one spouse has died and no executor or administrator has been or is appointed, may be made payable to the surviving spouse regardless of the amount. Documentary evidence is not required by the surviving spouse if the taxpayer was deceased prior to filing the joint return. On Form 3198, Special Handling Notice for Examination Case Processing in the "Special Features" section, check the "Other Instructions" box and write: "Manual Refund-Deceased Taxpayer".

2. Trustees or estates (both living and deceased taxpayers)

3. Guardians, minors, and incompetents

4. Dissolved corporations

5. Assignment, receivership, and bankruptcy cases

6. Reorganizations

7. Corporate change of name or successorship

8. Trusts and certain other cases

(3) Attachments will include:

1. Form 56, Notice Concerning Fiduciary Relationship; or

2. Court certificates, affidavits, letters testamentary or of administration; or

3. Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. See IRM 3.11.3.10.3, Documentary Evidence on a Decedent Return for guidance relating to the proper completion of Form 1310; or

4. Any documentation related to the return.

(4) Copies of wills, trust instruments or amendments, and other similar documents will remain with the case file.

(1) These procedures should be followed when a refund is to be issued to someone other than the taxpayer in whose name the tax was paid.

(2) Make sure the name entered on the allowance document is that of the person in whose name the check should be drawn. The refund checks are prepared and distributed by the disbursing center directly from the allowance documents - see IRM 21.4.3.5.5.2.1, Issuing Checks in Another Name for additional instructions.

(1) The evidence requirements are waived and no evidence is required when the entire amount allowable is credited to other taxes due from the same taxpayer, or when a fiduciary signed the return (or a claim containing a statement that the return was filed by the same fiduciary) within one year before the refund was made.

(1) Erroneous Refunds case files must be identified for CCP on Form 3198 in the "Special Features" section. Check the "Other Instructions" box and provide the following information:

1. The taxpayer’s name, address, and TIN (Taxpayer Identification Number) from whom the erroneous refund is to be recovered;

2. The tax period;

3. The tax return form number; and

4. The amount of refund to be recovered.

(1) Forward the request for recovery of the erroneous refund to the Campus Accounting Branch.

(2) Include a transcript of the account from which the erroneous refund was issued.

(1) This section contains instructions for the field examiners and CCP when it is necessary to reprocess a return to a correct TIN or a Tax Period.

(2) A statement must be made on Form 3870, Request for Adjustment, in Item 30, "Remarks", if the Assessment Statute Expiration Date (ASED) on the incorrect TIN or Tax Period has expired or is within six months of expiring.

(1) The examiner will secure the original return.

(2) The examiner must determine if the original return was paper filed or electronically filed prior to correcting the TIN or Tax Period.

(3) To determine if the original return was paper filed:

1. Secure a print of Command Code (CC) IMFOL ‘I’. Under the "Return Posted" column, if the tax period displays "Posted", it means that a paper return was filed. The examiner can secure the original paper return from the campus by requesting CC ESTAB using Form 2275, Special Search. Submit the completed form to the Area AIMS/ERCS Analyst for processing.

2. Go to the AIMS/ERCS website and click on the Contacts section. Look for the document titled, AIMS/ERCS Personnel Listing to locate your local AIMS/ERCS analyst.

3. The Area AIMS/ERCS Analyst will either receive the return and forward it to the requestor or a Form 4251 Return Charge-Outs will be sent stating where the return can be located or that the return is "Not in File".

4. The Area AIMS/ERCS Analyst will follow the lead provided on Form 4251, and inform the requestor of their findings. If the return is "Not in File" follow instructions in e) below.

5. If the return cannot be secured through ESTAB, using Form 2275, "Special Search", submit the request to the Area AIMS/ERCS Analyst to forward to campus to search the files - see IRM 3.5.61.16.1, Background.

6. If the original return could not be secured using the procedures above, contact the taxpayer. Request a faxed copy of the needed return or if you receive a copy of the return with a correspondence case. This faxed/correspondence copy may be reprocessed by following the applicable steps outlined below. The return information from the faxed returns does not have to be transferred to a new form.

(4) If the return still cannot be secured using the procedures above, a Dummy Return must be created. Available command codes, such as CC RTVUE / BRTVU or TRDBV, may provide sufficient information to recreate the return. If enough information is available, a "dummy" return can be completed and forwarded to Submission Processing for posting to the correct TIN or Tax Period.

(5) Attach a print of the command code information secured to the back of the "dummy" return. Secure a CC TRDBV print to obtain the correct tax return numbers to enter on a tax return you will complete for the reprocessing. Write Dummy Return across the top of the tax return.

(6) Write the Document Locator Number (DLN) from the document that could not secured across the top right hand corner of the "Dummy Return".

(7) To determine if the original return was filed electronically:

1. An electronically filed return can be determined by the first two digits of the DLN, associated with the TC 150 - see Document 6209, IRS Processing Codes and Information, Section 4 (3), Campus and File Location Codes, for a list of electronic filing DLNs.

2. A CC IMFOL, definer ‘I’ print can also be secured. Under the "Return Posted" column, if the tax period displays "MEF", it means that the return was filed electronically. Electronically filed returns can be secured using Master File Electronically Filed (MeF) application, Return Request Display (RRD) in the Employee User Portal (EUP).

3. CC TRPRT (Tax Return Print) can also be requested and used to reprocess the return. A TRPRT is a graphical (form image) print of a tax return stored on TRDB, (Tax Return Data).

(8) The examiner will complete Form 3870, and:

1. In Item 11, "Reason for Adjustment", write the following comments: "Return posted to the incorrect TIN or Tax Period. Please reprocess the attached return to the following TIN or Tax Period", whichever is applicable.

2. In Item 30, "Remarks", provide a complete explanation of how the account is to be reprocessed.

(9) Keep a copy of the return and information documents for your files.

(10) Forward the return and Form 3870 to CCP by either mail or EFax. If the original return is secured, it must be mailed. All other forms of the return can be EFaxed to CCP.

(11) If mailing an original return and Form 3870 to CCP, use the following address and mail via overnight mail:

Areas 201-207:
IRS - Centralized Case Processing
Attention: FORT (Field Office Resource Team)
5333 Getwell Road
Memphis, TN 38118
EFax: See the CCP Website for the EFax number to CCP in Memphis.

Areas 212-214 and 315:
IRS - Centralized Case Processing
Attention: CCP Manager
Mail Stop 8412-G
7940 Kentucky Drive
Florence, KY 41042
EFax: See the CCP Website for the EFax number to CCP in Cincinnati.

(1) The examiner will secure the original return from Files.

(2) The examiner can secure the original paper return from the campus by requesting CC ESTAB using Form 2275, Special Search. Submit the completed form to the Area AIMS/ERCS Analyst for processing.

(3) Go to the AIMS/ERCS website and click on the Contacts section. Look for the document titled, AIMS/ERCS Personnel Listing to locate your local AIMS/ERCS analyst.

(4) The Area AIMS/ERCS Analyst will either receive the return and forward it to the requestor or a Form 4251 Return Charge-Outs will be sent stating where the return can be located or that the return is Not in File.

(5) The Area AIMS/ERCS Analyst will follow the lead provided on Form 4251, and inform the requestor of their findings. If the return is "Not in File" follow instructions in a) below.

1. If the return cannot be secured through CC ESTAB, a "Special Search" will need to be conducted. Use Form 2275, "Special Search". Submit the request to the Area AIMS/ERCS Analyst to forward to campus to search the files - see IRM 3.5.61.16.1, Background.

2. Follow local procedures when asking your AIMS/ERCS staff to contact the Campus Files personnel. Go to the Exam Systems Knowledge Base Homepage Site: AIMS/ERCS Staff Listing. Click on the Contacts section. Look for the document titled, "Contact List - Area Office/Campus Contacts (XLS)." Each Campus has a contact listed for "Files and/or Form 2275 requests". Contact the person shown as the "Files" contact to help you locate the original return.

3. If the original return could not be secured using the procedures above, contact the taxpayer. Request a faxed copy of the needed return or if you receive a copy of the return with a correspondence case. This faxed/correspondence copy may be reprocessed by following the applicable steps outlined in paragraph 6) below. The return information from the faxed returns does not have to be transferred to a new form.

(6) If the return still cannot be secured using the procedures above, a Dummy Return must be created. Available command codes, such as CCs RTVUE / BRTVU or TRDBV, may provide sufficient information to recreate the return. If enough information is available, a "dummy" return can be completed and forwarded to Submission Processing for posting to the correct TIN or Tax Period.

(7) Attach a print of the command code information secured to the back of the "dummy" return. Secure a CC TRDBV print to obtain the correct tax return numbers to enter on a tax return you will complete for the reprocessing. Write Dummy Return across the top of the tax return.

(8) Write the DLN from the document that could not be secured across the top right hand corner of the "Dummy Return".

(9) The examiner will then complete Form 3870, and:

1. In addition, write in Item 11, "Reason for Adjustment", write the following the following statements: "Return posted to the incorrect TIN or Tax Period. Please reprocess the attached return to the following TIN or Tax Period", whichever is applicable.

2. In Item 30, "Remarks", the examiner should also provide an explanation of how the account is to be reprocessed.

(10) Keep a copy of the return and information documents for your files.

(11) The original return and Form 3870 should be forwarded to the following address via overnight mail:

IRS-CCP-Mail Stop 4020
Attention: FORT
1973 N. Rulon White Blvd.
Ogden, UT 84404-5402

(1) The reprocessing of returns takes approximately eight weeks to complete. Once the field examiner has been notified by CCP that the reprocessing action has been completed, the examiner will close both the AIMS and ERCS controls for the incorrect TIN or Tax Period.

(2) The examiner will close the AIMS and ERCS controls of the incorrect TIN or Tax Period by completing Form 10904, Request for Record Deletion from AIMS/ERCS, using Disposal Code 33. Provide the reason for the request on the form. Update the case control to Status 41 on ERCS. Forward Form 10904 to the local AIMS/ERCS Analyst section for processing.

(3) The group secretary will establish new AIMS and ERCS controls using the correct TIN or Tax Period with managerial approval. Assistance from the local AIMS/ERCS analyst is available as needed.

(4) Once the return has been reprocessed, the AIMS/ERCS controls for the incorrect TIN or Tax Period must be closed.

(5) New AIMS/ERCS controls must be requested and fully established for the correct TIN or Tax Period. Only then should the examiner forward the completed audit to the appropriate CCP Fort or Technical Services for the final closure of the examination.

(1) This section contains instructions for CCP when a request is received to reprocess a return to the correct TIN or Tax Period.

(2) Most requests for reprocessing will come through the FORT. When the request comes into the FORT team, CCP will determine if all of the information is available to reprocess a return. If not, instructions are provided to the field examiner as to what additional information is needed to reprocess the return.

(1) When a return must be reprocessed using Form 3893, Re-Entry Document Control, for IMF cases or a Form 13596, Reprocessing Returns, for BMF cases, refer to IRM 21.5.2.4.23 (7), Reprocessing Returns/Documents, for complete instructions on preparing these forms.

(2) Edit all BMF tax returns using a Green marker or pen.

(3) When a "dummy" return is reprocessed in place of an original or duplicate return, use the same received date as the original or duplicate, respectively.

(4) Input Transaction Code (TC) 599, Closing Code 18 using IDRS CC FRM49 on the tax module to which the return is being processed when the receiving module is in MF Status Codes 02 or 03 (no TC 150 will be posted to the module).

(5) Input TC 971 with the appropriate Action Code (AC) on the incorrect module. This will identify the cross reference TIN or Tax Period data whenever a return posted to an incorrect TIN or Tax Period is being reprocessed to the correct module.

(6) Input TC 971 with AC 017 on the tax module for the return being reprocessed to regardless of MF status. When inputting TC 971, use the correct transaction date (TRANS-DT) on IDRS CC REQ 77.

1. A TC 971 AC 001 indicates reprocessing of a TC 150. Use the" return received date" on CC TXMOD located in the "RET RECVD DT" (Return Received Date) field for the Transaction Date (TRANS-DT).

2. A TC 971 AC 002 indicates the reprocessing TC 976. Use the posted TC 976 date on TXMOD for the TRANS-DT.

3. TC 971 AC 017 indicates a processing return is being reprocessed to this period. The date depends on whether the original TC 150 is being reprocessed or the TC 976. Follow instructions as shown above for TRANS-DT. However, if the return posted to an earlier tax period with an incorrect date, use the actual received date of the return as the transaction date of the TC 971 AC 017.

   Note: A TC 971 AC 017 cannot be input on a tax period with a fiscal year month that differs from the one on ENMOD. (ENMOD displays name, address and other entity information).

   Example: A fiscal year taxpayer files a short period final return. It posts as a TC 976 on the tax period ended 200512, but needs to be processed to tax period 200603. Do not input a TC 971 AC 017 on 200603. This causes an unpostable condition since the fiscal year month (FYM) on ENMOD indicates 12. Do not change the FYM on ENMOD.

(7) If a TC 971 with one of the action codes listed above is incorrectly input on an account, reverse it with a TC 972 with the same Action Code.