Use the following procedures for non-refundable credit inquiries.

When a taxpayer asks by telephone:

Follow this table for all taxpayer inquiries about non-refundable credits. Refer to subsections in this section for specific credit information and procedures.

If written documentation is required, advise taxpayer to send it to the site receiving the contact.

Math verify the form or schedule, if one is required.

If the credit requires a qualifying child, use CC INOLE to verify the name control, TIN, and date of birth of the qualifying child.

For information on how adjusting non-refundable credits impact estimated tax penalty, see IRM 20.1.3.2.2, Manual Penalty Adjustments

To adjust the account based on a credit:

If a taxpayer paid someone to care for their child, spouse, or dependent, so they can work, be a full time student, or look for work, the taxpayer may be able to reduce their tax by claiming the Child and Dependent Care Credit (CDCC) on their federal income tax return, per IRC 21.

For tax year 2021 only, the Child and Dependent Care Credit is refundable if either the taxpayer, or spouse if married filing jointly, lived in the US for more than half the year. See IRM 21.6.3.4.1.3.2, Refundable Child and Dependent Care Credit, for more information. The taxpayer verifies residency by checking a checkbox on Form 2441, Child and Dependent Care Expenses, line B. If the box is not checked, the credit is non-refundable.

The taxpayer must submit a completed Form 2441, Child and Dependent Care Expenses, when claiming the credit.

Generally, married taxpayers must file a joint return to claim the credit, unless they meet the requirements listed under “Married Persons Filing Separately” in the Instructions for Form 2441, Child and Dependent Care Expenses.

The taxpayer must furnish one of the following types of valid TINs for every qualifying person.

A qualifying person is a taxpayer's:

See Publication 17, Your Federal Income Tax For Individuals, and/or Publication 503, Child and Dependent Care Expenses, for detailed information.

A taxpayer may be able to reduce their tax liability by claiming the Credit for the Elderly or Permanently and Totally Disabled provided under IRC 22. The taxpayer may claim the credit if:

Schedule R must be submitted. Schedule R is reported on Form 1040 / Form 1040-SR, Schedule 3, Additional Credits and Payments, (write-in for 2019 and 2020).

To adjust the account based on the credit:

See Publication 17, Your Federal Income Tax (For Individuals), Publication 524, Credit for the Elderly or the Disabled, or Publication 554, Tax Guide for Seniors, for detailed information.

Taxpayers may claim an education credit (Lifetime Learning Credit or American Opportunity Tax Credit (AOTC)) for qualified tuition and related expenses paid to an eligible educational institution, including accredited colleges, universities, and vocational schools.

For any given tax year, a taxpayer can only elect one of the credits for each eligible student.

If a taxpayer claims / lists an exemption for a dependent who is an eligible student, then only that taxpayer can claim a credit for the student's qualified education expenses.

Taxpayers cannot claim the credit if:

Students under age 24 do not qualify for the refundable portion of the AOTC if all the following apply:

The credit may be for expenses of the taxpayer, the taxpayer's spouse, or the taxpayer's eligible dependent claimed on the taxpayer's return.

All students claimed on Form 8863 must have a valid TIN issued on or before the due date of the return, including extensions. A valid TIN includes an SSN, ITIN or ATIN.

Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), must be submitted.

If the education credit appears frivolous (Social Media Promotion Scheme), see IRM 21.6.3.4 (11), Credits Procedures.

If there is a Transaction Code (TC) 810 Responsibility Code (RC) 4 (-E freeze) on the module and the taxpayer files an amended return to remove the credit, see IRM 21.5.6.4.10(4), -E Freeze.

References:

To qualify for the credit, the taxpayer must have paid or accrued income tax in a foreign country or U.S. possession.

The taxpayer may claim the credit against U.S. income tax or deduct the foreign tax as an itemized deduction.

If the taxpayer files an amended return in which the amount of the foreign tax credit is reduced (such as due to a refund of foreign taxes paid or accrued), which results in an increase in the amount of U.S. tax liability, manually compute and assess interest per IRM 20.2, Interest. Contact the taxpayer to determine the refund date, if necessary.

Form 1116, Foreign Tax Credit, must be submitted unless the following conditions are met:

If the total Foreign Tax Credit claimed is above the threshold amounts shown in (4), or requires math verification (see IRM 21.5.3.4.5, Math and Master File Verification of Claims and Amended Returns) and Form 1116 is attached, (both situations require a change to the Foreign Tax Credit), reassign the claim through the Correspondence Imaging Inventory (CII) to IMF International and update the data as follows:

See Form 1116, Publication 17, Your Federal Income Tax (For Individuals), and Publication 514, Foreign Tax Credit for Individuals, for detailed information.

To adjust the account based on the credit:

The nonconventional source fuel credit is not available for fuel sold after 2013. However, it may be reported as a carryforward on Form 3800, General Business Credits.

Form 8834, Qualified Electric Vehicle Credit, is used to claim any qualified electric vehicle passive activity credits from prior years.

Form 8834, Qualified Electric Vehicle Credit, must be submitted. The credit must be carried to Form 3800, General Business Credit, for purposes of figuring the allowable general business credit.

Information about clean vehicle credits is found in IRM 21.6.3.4.1.38, Form 8936, Clean Vehicle Credits.

To adjust the account based on the credit:

The investment credit consists of the sum of the following credits:

The advanced manufacturing investment credit (IRC 48D) is one of the credits eligible for elective payment election. See IRM 21.7.4.4.8.3.1.5, Form 3468, Advanced Manufacturing Investment Credit Under IRC 48D, for specific information about the credit and IRM 21.6.3.4.3, Elective Payment Elections (EPE), for information about EPE.

Form 3800, General Business Credit, must also be filed.

To adjust the account based on the credit:

See Instructions for Form 3468, Investment Credit, for detailed information.
Reference – IRC 46

To qualify for the credit, the taxpayer must have paid or incurred wages for employees who are certified as members of a targeted group. Wages shall not include any amount paid or incurred to an individual who begins work for the employer after Dec. 31, 2025.

For Examination criteria, see Exhibit 21.5.3-3, Examination Criteria (CAT-A) - Credits.

To adjust the account based on the credit:

See Instructions for Form 5884, Work Opportunity Credit for detailed information.

Reference - IRC 51

Form 6478, Biofuel Producer Credit, is used to claim the Second-Generation Biofuel Credit (previously called the Cellulosic Biofuel Credit) for second-generation biofuel used, or sold for use, as fuel in a trade or business. See IRM 21.7.4.4.8.3.4, Form 6478, Biofuel Producer Credit, for more information.

The credits are effective for fuels sold or used before January 1, 2025. For prior year credits, see previous versions of the Form 6478 and instructions.
Effective Jan. 2, 2013, biofuels produced from algae, cyanobacteria, or lemna feedstocks may also be eligible for the credit.

Taxpayers may be required to submit Form 6478, see the form and Instructions for Form 6478, Biofuel Producer Credit, for detailed information.

To adjust the account based on the credit:

Generally, to qualify for the credit, taxpayer must have qualified research expenses paid or incurred in carrying on an active trade or business.

The credit can be claimed as a general business credit on Form 3800, General Business Credit, or Form 6765, Credit for Increasing Research Activities.

Taxpayers must attach one of the forms listed in paragraph 2 to claim the credit.

Route all amended returns for research credits to CAT-A for consideration before processing the adjustment. This includes amended return with changes to the research credit from an amended Schedule K-1. See Exhibit 21.5.3-2 (box 26), Examination Criteria (CAT-A) General, for more information.

For claims filed between January 10, 2022, and January 10, 2025, if the claim is not complete, CAT-A will return to AM to send the taxpayer Letter 6426C, Additional Information Needed to Process Your Section 41 Claim.

For more information about Form 6765, see IRM 21.7.4.4.8.3.5, Form 6765, Credit for Increasing Research Activities.

To adjust the account based on the credit:

See Instructions for Form 6765, Credit for Increasing Research Activities (or for claiming the orphan drug credit) for detailed information.

Among other requirements, to qualify for the credit, taxpayers must own residential rental buildings providing low-income housing.

The credit must be claimed as a general business credit on Form 3800, General Business Credit. Taxpayers whose only source of credit is from pass-through entities, are not required to file Form 8586. Instead, they can report the credit directly on Form 3800. See Form 8586 for details.

Form 8609, Low-Income Housing Credit Allocation and Certification, is issued by the state or local housing credit agency authorized to make credit allocations to the building receiving the credit. The taxpayer must make a one-time submission of this form to the Low-income Housing Credit Unit at the Philadelphia Campus to the address specified in the instructions of the form.

To adjust the account based on the credit:

See Form 8586, Low-Income Housing Credit, and Instructions for Form 8609, Low-Income Housing Credit Allocation and Certification, for detailed information.

To qualify for the credit, the taxpayer must have an eligible small business which has eligible access expenditures.

If Form 8826, Disabled Access Credit, is filed with an amended return, one of the following must be present on the original or amended return in order to allow the credit:

If these schedules or items are not present, disallow the credit and use the following language when explaining the disallowance:
"We have not allowed your claim for the Disabled Access Credit. The Disabled Access Credit is a business credit. There is no indication of business ownership or activity based on your tax return information for this tax year."

The credit must be claimed as a general business credit on Form 3800, General Business Credit.

To adjust the account based on the credit:

See Form 8826 for detailed information.

To qualify for the credit, a taxpayer must sell electricity produced in the U.S. or U.S. possessions from qualified energy resources at a qualified facility to an unrelated person, per IRC 45.

For Tax Year 2006 through 2024, the credit, which is figured on Form 8835, can be claimed as a general business credit on Form 3800, General Business Credit. For wind facilities, a phaseout of the credit applies to the construction of which began after December 31, 2016.

See IRM 21.7.4.4.8.3.9, Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit, and Instructions for Form 8835, Renewable Electricity Production Credit, for detailed information.

To adjust the account based on the credit:

The Indian Employment Credit is a general business credit based on the amount of qualified wages and health insurance costs paid to each qualified employee (up to $50,000). A qualified employee is an enrolled member of an Indian tribe who performs services within an Indian reservation for the employer and whose residence is on or near that reservation.

For Tax Year 2006 through 2021, the credit can be claimed as a general business credit on Form 3800, General Business Credit.

To adjust the account based on the credit:

See IRM 21.7.4.4.8.3.12, Form 8845, Indian Employment Credit, and Accelerated Depreciation for Business Property on an Indian Reservation, or Instructions for Form 8845, Indian Employment Credit, for detailed information.

Reference - IRC 45A

To qualify for the credit, the taxpayer must be an employer and have:

The credit is calculated on Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, and claimed as a general business credit on Form 3800, General Business Credit.

To adjust the account based on the credit:

See IRM 21.7.4.4.8.3.13, Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, and Form 8846 for detailed information.

The Orphan Drug Credit is, for tax years 2018 and later, 25% of the qualified clinical testing expenses paid or incurred by the taxpayer during the tax year.

The credit must be claimed as a general business credit on Form 3800, General Business Credit.

To adjust the account based on the credit:

See Form 8820, Orphan Drug Credit, for detailed information.

Reference - IRC 45C

The credit is no longer available and can only be claimed as a carryforward on Form 3800, General Business Credit.

To qualify for the credit, the taxpayer must have made payments into the Trans-Alaska Pipeline Liability Fund.

There is no supporting schedule or form for this credit. The taxpayer must claim the credit on Form 3800, General Business Credit.

See IRM 21.7.4.4.8.3.17, Trans-Alaska Pipeline Liability Fund Credit, for more details.

To adjust the account based on the credit:

To qualify for the credit, the taxpayer must have paid or incurred qualified wages, which can include certain training or educational expenses, to a qualified empowerment zone employee who lives and works in an empowerment zone. For more information, see IRM 21.7.4.4.8.1.3, Form 8844, Empowerment Zone Employment Credit.

The Empowerment Zone Employment Credit is available for tax years 2025 and prior.

Form 8844, Empowerment Zone Employment Credit, must be submitted. The data on Form 8844 (for IMF) is carried to Form 3800.

To adjust the account based on the credit:

See Form 8844 for detailed information.

Reference - IRC 1391, IRC 1396 and IRC 1397

Form 3800, General Business Credit, must be filed to claim any of the general business credits, and if applicable, the proper credit form must be attached.

If attached, Form 8582–CR, Passive Activity Credit Limitations, must be math verified.

Credits may generally be carried back one year and then carried forward twenty years. See IRM 21.5.9, Carrybacks, for more information.

Form 3800, General Business Credit, must be math verified.

To adjust the account based on the credit:

See Form 3800 and Instructions for Form 3800, General Business Credit for detailed information.

To qualify for the credit, the taxpayer must have:

Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts, may be attached but is not required in most cases.

To adjust the account based on the credit:

See Instructions for Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts, detailed information.

The Child Tax Credit (CTC) is a non-refundable credit which is used to reduce the taxpayer's tax liability. The credit has different rules depending on the tax year.

For tax year 2022 - 2024:

See IRM 21.6.3.4.2.8, Additional Child Tax Credit (ACTC), for more information on the refundable portion of the credit. For tax year 2021, ACTC is referred to as Refundable Child Tax Credit (RCTC) for taxpayers whose principal abode was in the United States for more than half of the year or was a bona fide resident of Puerto Rico for the year.

Reference - IRC 24

IRC 23 provides that a taxpayer who paid qualified adoption expenses (QAE) to adopt an eligible child in the tax year the adoption became final may be able to reduce their tax liability by claiming the Adoption Credit on Form 8839, Qualified Adoption Expenses.

All adoption credit claims processed in AM are worked at the Andover Campus. Update category to SPC1 and case type to XRET (you cannot reassign a MEFA/S/P). Reassign through CII to IDRS number 0830141335.

The eligible child must be:

Many provisions of the adoption credit (for example, the definition of QAE, the dollar limitation and the modified adjusted gross income limitation) apply to any type of adoption. For more information, see the rules and examples contained in the Instructions for Form 8839, Qualified Adoption Expenses. However, each category of adoption (domestic, foreign, or special-needs) also has rules that apply only to that category.

A domestic adoption (including an in-process or a never-completed adoption attempt) is one in which the child was a citizen or resident of the U.S. when the adoption process began.
The timing of the adoption credit depends on when (if ever) the adoption becomes final. Generally, a taxpayer paying QAE in a domestic adoption claims the credit in the year after the payment is made.

A foreign adoption is one in which the child was not a citizen or resident of the U.S. when the adoption process began. An adoption is classified as a foreign adoption even if the child is re-adopted in the U.S. (although the re-adoption expenses are QAE). The adoption credit for QAE paid before or during the year of finality may be claimed only in the year of finality.
If QAE is paid after the year of finality (for example, in connection with post-placement visits by a social worker), the adoption credit may be claimed in the year of payment. The Instructions to Form 8839 contain information on determining the year of finality of a foreign adoption.

In the case of a child with special-needs, the adoption credit may be claimed in the year the adoption is final, even if the taxpayers never pay any QAE.

The adoption of a special-needs child is an adoption in which all the following statements are true.

Sometimes, particularly in the case of an in-process or never-finalized domestic adoption, the taxpayer is unable to provide complete information in Part I of Form 8839. In those circumstances, the taxpayer should complete the entries they can. Leave all other entries blank.

IRC 137 allows employees to exclude employer-provided adoption assistance from their gross income. The exclusion is taken in the year of payment.

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To adjust the account based on the credit:

Taxpayers may file amended returns for earlier periods to release carryforward of the adoption credit.

When working an Adoption Credit carryforward case, ensure all tax periods are controlled to the earliest tax period first and are being worked by one employee. Work the case as follows:

If a statute period claim comes in showing no change in tax liability and only a carryforward:

If a statute period claim comes in requesting a change in tax liability, follow procedures in IRM 25.6.1, Statute of Limitations Processes and Procedures.

If the statute period claims are returned to Accounts Management, process as follows:

To qualify for the credit, a taxpayer must have a mortgage credit certificate (MCC) issued under a qualified MCC program in connection with the taxpayer's principal residence.

Form 8396 must be submitted and math verified.

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To adjust the account based on the credit:

See Form 8396, Mortgage Interest Credit, Publication 17, Your Federal Income Tax (For Individuals), or Publication 530, Tax Information for Homeowners, for detailed information.

Form 5695, Residential Energy Credits, is used by qualified taxpayers who made qualified residential clean energy or energy efficient home improvement purchases. It is divided into two parts.

Part 1 - Residential Energy Efficient Property Credit (2021 and prior) Residential Clean Energy Credit (2022 and subsequent) (IRC 25D) Provides taxpayers a credit for qualified expenditures to their residence located in the United States. A taxpayer may receive a credit on the amounts spent for adding one or more of the following to their home:

Part 2 - Non-business Energy Property Credit (2021 and prior) Energy Efficient Home Improvement Credit (2022 and subsequent) (IRC 25C)
Provides taxpayers a credit for improving the energy efficiency of an existing home. The credit is available for costs related to items such as high efficiency heating and cooling systems, water heaters, windows, doors and insulation.
For 2023 and later, the allowable credit is 30% of the amount paid for qualified energy efficiency improvements, generally limited to $1,200. There is a separate annual limit of $2,000 for qualified expenditures for heat pumps, heat pump water heaters, and biomass stoves and boilers. Therefore, the total annual credit is limited to $3,200. There is no lifetime limit. Specifically, the credit is limited as follows:

If the Residential Clean Energy Credit is claimed in addition to the:

The credit is claimed on Form 1040, Schedule 3, Additional Credits and Payments.

To adjust the account based on the credit:

See Form 5695 and Instructions for Form 5695 Residential Energy Credits for detailed information.
For more information on residential clean energy property credits, see Frequently asked questions about energy efficient home improvements and residential clean energy property credits.

A taxpayer may be able to take a credit of up to $1,000 ($2,000 if married filing jointly) for making eligible contributions to one of the items below. Taxpayers claim this credit on Form 8880, Credit for Qualified Retirement Savings Contributions.

An eligible individual must:

Form 8880 must be submitted.

To adjust the account based on the credit:

See Form 8880, Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs), Pub. 907, Tax Highlights for Persons With Disabilities, or Publication 17, Your Federal Income Tax (For Individuals), for detailed information.

For information concerning the Credit for Small Employer Pension Plan Startup Costs, Auto-Enrollment and Military Spouse Participation, see IRM 21.7.4.4.8.3.20, Form 8881, Credit for Small Employer Pension Plan Startup Costs, IRM 21.7.4.4.8.3.20.1, Form 8881, Credit for Small Employer Pension Plan Startup Costs, IRM 21.7.4.4.8.3.20.2, Form 8881, Small Employer Auto-Enrollment Credit, and IRM 21.7.4.4.8.3.20.3, Form 8881, Military Spouse Participation Credit.

To adjust the account based on the credit:

Form 8882 is used by employers to claim a credit for qualified childcare and resource and referral expenses.

The credit must be claimed as a general business credit on Form 3800, General Business Credit.

For information concerning the Credit for Employer-Provided Childcare Facilities and Services, see IRM 21.7.4.4.8.3.19, Form 8882, Credit for Employer-Provided Childcare Facilities and Services.

To adjust the account based on the credit:

For information concerning the New Markets Credit, see IRM 21.7.4.4.8.3.21, Form 8874, New Markets Tax Credit.

To adjust the account based on the credit:

Form 8864, Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credit, is used to claim a credit for the tax year in which the sale or use occurs. The credit consists of:

For tax years 2006 through 2024, the credit can be claimed as a general business credit on Form 3800, General Business Credit. Taxpayers must attach Form 8864 to their return. See Form 8864 and Instructions for Form 8864, Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credit for detailed information.

To adjust the account based on the credit:

The Low Sulfur Diesel Fuel Production Credit generally is 5 cents for every gallon of low sulfur diesel fuel produced at a particular facility by a qualified small business refiner during the tax year.

For Tax Year 2006 and subsequent, the credit can be claimed as a general business credit on Form 3800, General Business Credit. Taxpayers attach Form 8896 to their return. See Form 8896, Low Sulfur Diesel Fuel Production Credit, and its instructions, for detailed information.

To adjust the account based on the credit:

Form 8900, Qualified Railroad Track Maintenance Credit, is generally used to claim a credit for qualified railroad track maintenance expenditures. Generally, the credit is an amount equal to 50% of the qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer during the tax year. For tax years beginning on or after January 1, 2023, the credit is reduced to 40%.

The credit must be claimed as a general business credit on Form 3800, General Business Credit.

To adjust the account based on the credit:

See Form 8900 for detailed information.

Reference - IRC 45G

Form 8910, Alternative Motor Vehicle Credit, is used to claim a credit for the purchase of new qualified fuel cell motor vehicles. The credit is available for purchases through December 31, 2021, per IRC 30B.

A qualifying fuel cell vehicle is a motor vehicle that is propelled by power derived from one or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use.

The credit can be claimed as a general business credit on Form 3800, General Business Credit, if the vehicle is property that is subject to an allowance for depreciation.

See IRM 21.7.4.4.8.3.28, Form 8910, Alternative Motor Vehicle Credit, for more information.

To adjust the account based on the credit:

See Form 8910 and the Instructions for Form 8910, Alternative Motor Vehicle Credit, for detailed information.

Form 8911, Alternative Fuel Vehicle Refueling Property Credit, is used to claim a tax credit for a portion of the cost of qualified alternative fuel vehicle refueling property placed in service after December 31, 2005, and before January 1, 2033, per IRC 30C. The refueling property may be used in the taxpayer's trade or business or installed at the taxpayer's principal residence.
Taxpayers are allowed a credit of up to 30% of the cost of the installation of the qualified alternative fuel vehicle refueling property not to exceed:

The personal part of the credit is claimed on Form 1040, Schedule 3, Additional Credits and Payments. The business/investment part of the credit is claimed as a general business credit on Form 3800, General Business Credit, if the property is subject to an allowance for depreciation.

See IRM 21.7.4.4.8.3.29, Form 8911, Alternative Fuel Vehicle Refueling Property Credit, for more information.

To adjust the account based on the credit:

See Form 8911 and Instructions for Alternative Fuel Vehicle Refueling Property Credit, for detailed information.

Form 8912, Credit to Holders of Tax Credit Bonds, is not available for bonds issued after December 31, 2017.

See Instructions for Form 8912, Credit to Holders of Tax Credit Bonds, for detailed information.

The Inflation Reduction Act (IRA) of 2022 made several changes to the Qualified Plug-In Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles and New Clean Vehicles), adding fuel cell vehicles (FCV) (IRC 30D) and a new credit for previously-owned clean vehicles (IRC 25E). The credits are generally available for vehicles placed in service beginning January 1, 2023, through December 31, 2032. For vehicles placed in service prior to 2023, see IRM 21.6.3.4.1.38.4, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles and New Clean Vehicles) (Tax Year 2022 and Prior).

Taxpayers attach Form 8936, Clean Vehicle Credits, to their return to claim either of the credits. They must attach a Form 8936, Schedule A, Clean Vehicle Credit Amount, including the vehicle identification number (VIN) for each vehicle they are claiming the credit.

New Clean Vehicle Credit (IRC 30D) – Taxpayers can receive up to a $7,500 non-refundable credit (per qualifying vehicle) for the purchase of new clean vehicles providing the taxpayer and vehicle meet certain requirements. See IRM 21.6.3.4.1.38.1 (1-3), Form 8936, Clean Vehicle Credits - Qualifications.

Previously-Owned Clean Vehicles Credit (IRC 25E) - Taxpayers can receive up to a $4,000 non-refundable credit for the purchase of an eligible previously-owned clean vehicle providing the taxpayer and vehicle meet certain requirements. The credit amount is the lesser of $4,000 or 30% of the sales price of the previously-owned clean vehicle. See IRM 21.6.3.4.1.38.1 (4 and 5), Form 8936, Clean Vehicle Credits - Qualifications.

For more information on the Clean Vehicle Credit, see Frequently Asked Questions About the New, Previously-Owned and Qualified Commercial Clean Vehicles Credit.

Generally, IRC 45R offers a non-refundable tax credit to certain eligible small employers that provide health insurance coverage to their employees.

The credit is designed to encourage small employers to offer health insurance coverage to their employees for the first time or to maintain existing coverage. The credit is effective for taxable years beginning in 2010. The credit is calculated on Form 8941, Credit for Small Employer Health Insurance Premiums, and is claimed on Form 1040. Impacted IMF taxpayers could be Schedule C or F sole proprietors with employees, Schedule H household employers, or Schedule E filers.

In order to qualify for the credit, the small employer must have met the following conditions:

For tax year 2014 and subsequent, the maximum health insurance credit is generally equal to 50% of the lesser of the premiums paid by the employer, subject to a cap determined by the small group market in the rating area in which the employee enrolls for coverage.

The credit phases out gradually for the eligible small employers if the number of FTEs exceeds 10 or if the average annual wages exceed $32,400 for 2024, $30,700 for 2023, $28,700 for 2022, or $27,800 for 2021. For an employer with both more than 10 FTEs and average annual wages exceeding those amounts, the total reduction is the sum of the two reductions. This may reduce the credit to zero for some employers in this instance. See Notice 2010-44 for specific information on computing the phase out credit.

For tax years 2014 and subsequent, the credit is limited to 2 consecutive taxable years. Command Codes (CC) ENMOD and IMFOLE displays a 45R year indicator (in a 45R YR1 > YYYY / 45R YR2 > YYYY format).

The small business credit for the qualifying Schedule C or F small proprietor and Schedule H household employer is claimed on Form 8941, carried onto Form 3800 and then onto Form 1040. Schedule E filers, whose only source of this credit is from a pass-through entity, are not required to complete Form 8941. Instead, they can report this credit directly on Form 3800.

This credit is a non-refundable general business credit for taxable employers. For certain tax-exempt employers, the credit is refundable.

Verify the taxpayer has filed a Schedule C, E, F or H. If neither schedule was filed, follow no consideration procedures.

Action required:

Control amended returns claiming the 45R credit using category code ACAX (program 40320) and correspondence using category code ACA7 (program 40310).

See Instructions for Form 8941, Credit for Small Employer Health Insurance Premiums, for more specific information. Additional information can be found on Small Business Health Care Tax Credit and the SHOP Marketplace | Internal Revenue Service.

IRC 45S established a non-refundable tax credit for eligible employers that provide paid family and medical leave. The credit is equal to a percentage of wages (ranging from 12.5% to 25%) paid to qualifying employees while on family and medical leave. For more information, see Notice 2018-71.

The credit applies to wages paid in taxable years beginning after December 31, 2017, and before January 1, 2026. The credit is claimed on Form 8994, Employer Credit for Paid Family and Medical Leave, and carried to Form 3800, General Business Credit. Impacted taxpayers could be Schedule C or Schedule F sole proprietors with employees, Schedule H household employers, or Schedule E filers.

To be eligible for the credit, an employer must have a written policy in place that satisfies certain requirements:

The credit is limited to the employee’s normal hourly wage rate for each hour (or fraction) of actual services performed for the employer and the number of hours (or fraction of) for which family and medical leave is taken. Non-hourly wages earners are prorated to an hourly rate.

Control amended returns reporting Form 8994 using category code "TRFX" , correspondence about the form using "TRFC" .

See Exhibit 21.5.3-3, Examination Criteria (CAT-A) - Credits, for applicable criteria.

To adjust the account based on the credit:

An overpayment is refunded or applied as credit-elect only after all other outstanding obligations are satisfied (spousal obligations, non-tax debts, etc.).

Employers are required to withhold income tax on wages paid to employees. A Form W-2, Wage and Tax Statement, is issued to the employee by February 1 following the end of the tax year. This form shows the wages and the total withholding (W/H) deducted for the year. The amount withheld is allowed as a credit to the employee on the employee's individual tax return.

For information on Backup Withholding (BUWH), see IRM 21.7.4.4.10, Federal Income Tax Withheld (FITW)/Backup Withholding (BUWH) on Income Tax Returns.

Federal income tax is deducted (withheld) from various other types of income which the taxpayer receives. Verify the W/H amount is picked up from the correct box.

Taxpayer must furnish:

Examine all documents and related information before making adjustments or answering taxpayer inquiries.

Do not return an original Form W-2, Copy C, to the taxpayer. If no adjustment is necessary, re-file with the original return. If filed electronically, destroy as classified waste. Treat photocopies as classified waste.

If a taxpayer receives a notice showing math error code 283 or 582, refer to IRM 21.5.4, General Math Error Procedures.

Consider the following before deciding to allow the W/H:

Allow withholding increases of up to ≡ ≡ ≡ ≡ with oral statement or written request, if ALL the following criteria are met:

If the withholding exceeds the threshold in (9) AND documentation (paper or electronic copy of income documents (W-2, 1099, etc), is not available, OR the withholding associated with social security (SSA) benefits or other types of income is questionable (regardless of the tolerance in (9)), use CC IRPTR, or the Transcript Delivery System (TDS), to access a summary of the Information Returns Master File data extracted from Forms W–2/W–2G and Forms 1099.

If the taxpayer is amending the income and or withholding and the tax module contains a TC 971 AC 123 MISC 1040X INVALID IDOC, see IRM 21.5.3.4.18.4, Electronically Filed Amended Returns with Potential Bogus EIN/False Income TC 971 AC 123.

Federal Income Tax Withholding (FITW) reported, or should be reported, on a Form 1041, U.S. Income Tax Return for Estates and Trusts, in the Trust's or Estate's name and Employer Identification Number (EIN) CANNOT be transferred from the Trust or Estate to an individual taxpayer's (beneficiary's) Form 1040, U.S. Individual Income Tax Return, account. There are no provisions of law that allow us to distribute FITW to beneficiaries. Backup withholding distributed to the beneficiary is reported on Schedule K-1.

A taxpayer not eligible for an SSN must use an ITIN when filing their return. The taxpayer provides an SSN to the employer to obtain employment. Thus, the employer withholds income tax on the taxpayer's wages under the SSN the taxpayer provided, and any Form W-2 or Form 1099 filed with the IRS contains the SSN.

Estimated tax (ES) is the method used to pay:

ES payments are submitted with Form 1040-ES. Payment due dates for a calendar year return (unless the due date falls on a Saturday, Sunday, legal holiday, or as otherwise extended) are:

Prior to providing information about ES payments, refer to IRM 21.1.3.2.3, Required Taxpayer Authentication, and IRM 21.1.3.3, Third-Party (POA/TIA/F706) Authentication, if necessary.

Taxpayer requests to apply current year ES payments to a previous year's outstanding tax liability cannot be honored. IRC 6402(a) provides that in the case of an overpayment, the Secretary, within the applicable period of limitations, may credit the amount of the overpayment against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall refund any balance to such person. The IRS is authorized to make a refund only if an overpayment exists. Therefore, the IRS does not have the authority to apply an ES installment to an outstanding tax liability until the ES installment constitutes an overpayment. An "overpayment" cannot be determined until after the close of the tax year when the tax liability is determined.

If an estimated tax payment is processed incorrectly and is erroneously refunded to the taxpayer, advise the taxpayer to write VOID on the check and return it with an explanation and documentation to support it was intended as an ES payment.

If the taxpayer is not liable for ES payments based on the account history (i.e., no prior ES payment history, SE income, etc.), or current income situation, and a payment is posted as an ES payment, it can be refunded back to the taxpayer. Disregard any properly completed ES voucher. The payment can either be refunded back to the taxpayer or applied to the correct year's balance due.

Taxpayers who do not report payments they made (ES payments or a credit elect) of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ on their return are sent a Letter 12C, Individual Return Incomplete for Processing, asking them to verify the dates and amounts of these payments. If a taxpayer calls in response to the 12C letter, do not provide the payment amounts, dates or a transcript of the account. Advise the taxpayer to respond in writing to the address provided on the letter.

Employees are subject to social security tax and the equivalent portion of the RRTA Tier I Tax based on the following wage limitations:

Employees are subject to the employee portion of Medicare tax (shown separately on Form W-2, Wage and Tax Statement), at the rate of 1.45%. There is no wage base limit for Medicare tax. All wages are subject to the tax. Thus, there is no excess Medicare tax credit.

For withholding purposes, the above social security tax (and equivalent portion of the RRTA Tier I tax) maximum applies separately with respect to each employer for whom an employee works. If an employee works for one employer and receives the maximum social security wages and also works for another employer in the same calendar year, the second employer is also required to deduct social security tax from the employee's wages up to the maximum social security tax.

If more than the maximum social security tax (or equivalent portion of the RRTA Tier I tax, or more than 6.2%) is deducted from the wages of the employee, the employee can receive a credit for the social security tax or RRTA Tier I withheld more than the maximum social security tax or RRTA Tier I tax. This credit is available only if such withholding is the result of the employee working for two or more employers. This credit is taken on Form 1040 / Form 1040-SR, Schedule 3, Additional Credits and Payments

If an employee has more than the maximum social security or RRTA Tier I taxes deducted from their total wages, the action depends on the information entered on the Forms W-2 received by the employee.

If FICA taxes were withheld when the taxpayer is not liable for FICA tax, see IRM 21.7.2.4.4.4.2, Excess Social Security and Medicare Tax Withheld - Employee Claims for Refund.

If an adjustment is required, take the following action:

For information about RRTA Tier I, Tier II or CT-1 claims, see IRM 21.7.2.6.5.7, Claims filed on Form CT-1X and Form 843. Excess RRTA Tier II tax credits must be claimed on Form 843, not the Form 1040.

A Regulated Investment Company (RIC) or Real Estate Investment Trust (REIT) that does not distribute all of its net capital gain to its shareholders must pay tax on the undistributed part. The RIC or REIT may issue a Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, to each of its shareholders to designate the amount of the undistributed long-term capital gains required to be reported on the shareholder's Form 1040, Schedule D. In addition, Form 2439 includes the shareholder's share of the tax paid by the RIC or REIT on the undistributed long-term capital gains. That amount may be claimed by its shareholders as a credit or refund on their respective return.

The shareholder should attach Form 2439, Copy B, to the original or amended tax return.

Loose Forms 2439, Copy A and/or B, may be received. If "NOMINEE" is noted on the form, no adjustment is made to the taxpayer's account. Associate the form with the return of the taxpayer who appears in the "Shareholder's" name and address box. If this refers to a Form 990, refer to Ogden AM per IRM 21.7.7.6.3.10, Composite Form 990-T. If this is a company entity refer to IRM 21.7.4.4.9.2.2, Loose Form 2439, Copies A and B, for BMF instructions.

Action required if "NOMINEE" is not noted:

Form 4136, Credit for Federal Tax Paid on Fuels, is used to claim certain nontaxable uses or sales of fuel during the income tax year. The corresponding Credit Reference Number (CRN) applicable to the type fuel tax paid is shown in column (e) of the Form 4136.

Form 4136 must be attached to an income tax return (Form 1040) or an amended tax return (Form 1040-X), if the credit claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

Amounts previously claimed on Form 8849, Claim for Refund of Excise Taxes, or Form 720, Quarterly Federal Excise Tax Return, (Schedule C, Claims), cannot be included on Form 4136. For information about Form 8849 claims, refer to IRM 4.24.22.4.5, Form 8849, Claim for Refund of Excise Taxes, and for Form 720 claims, refer to IRM 4.24.22.4.1.6, Form 720, Schedule C Claims.

The same documentation required for Form 8849 must be included with Form 4136.

Form 4136 claiming a credit of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. See Exhibit 21.5.3–3, Examination Criteria (CAT A) - Credits.

Claims on Form 4136, Line 1, Non-taxable Use of Gasoline, cannot be made for personal use. If the taxpayer does not show any business activity, such as a Schedule C, E, or F, follow no consideration procedures shown in IRM 21.5.3.4.6.3, No Consideration Procedures.

If the fuel tax credit appears frivolous (Social Media Promotion Scheme), see IRM 21.6.3.4 (12), Credits Procedures.

If there is a Transaction Code (TC) 810 Responsibility Code (RC) 4 (-E freeze) on the module and the taxpayer files an amended return to remove the credit, see IRM 21.5.6.4.10(4), -E Freeze.

Earned Income Tax Credit (EITC), as established by IRC 32, is available for certain low-income individuals who meet earned income, adjusted gross income (AGI) and certain other requirements. EITC greater than the tax liability is refunded to the taxpayer.

Use CC DDBCK when processing all amended or duplicate returns received in the current processing year and two prior years resulting in an increase to EITC due to adding, changing, or deleting a qualifying child. When adding or increasing EITC, DDBCK determines if the claim meets CAT-A criteria, and in most cases, updates the Duplicate TIN database. CC DDBCK must be used in conjunction with the correct IRM procedure to determine the next actions.

Certain individuals who get less than the full amount of the non-refundable Child Tax Credit (CTC) are entitled to the refundable Additional Child Tax Credit (ACTC). ACTC may result in a refund even if no tax is owed. See IRM 21.6.3.4.1.24, Child Tax Credit, and subsequent subsections, for rules and regulations pertaining to the Child Tax Credit prior to addressing Additional Child Tax Credit.

For tax year 2021 only, for taxpayers whose principal abode was in the United States for more than one‐half of the year (Schedule 8812, Line 13, Box A), ACTC is referred to as Refundable Child Tax Credit (RCTC) and the entire amount is refundable.

Taxpayers must claim the qualifying child as a dependent to be a qualifying child for the Child Tax Credit.

Earned income generally does not include workfare payments to the extent subsidized under a state program for work experience (including work associated with the refurbishing of publicly assisted housing if sufficient private sector employment is not available), work in community service programs, or certain Medicaid waiver payments (see IRM 21.6.6.2.35, Qualified Medicaid Waiver Payments/Difficulty of Care Payments, for more information). However, the taxpayer may include certain Medicaid waiver payments received as wages or self-employment income in earned income if they benefit from the inclusion (even if this payment is excluded on Schedule 1).

Taxpayers who file Form 2555, Foreign Earned Income, cannot claim the credit.

For taxpayers indicating a religious (e.g., Amish/Mennonite) or conscience-based objection to obtaining a TIN, refer to IRM 21.6.1.6.1, Determining the Exemption/Dependent Deduction.

For tax years 2020 and prior, a bona fide resident of Puerto Rico must have 3 or more children to qualify for the ACTC if the taxpayer is excluding all their income under IRC 933.

For tax year 2021, bona fide residents of Puerto Rico are eligible for enhanced refundable child tax credit (RCTC). The following applies for tax year 2021.

A special rule applies for certain taxpayers affected by disaster areas shown below. Qualified individuals whose earned income in the applicable taxable year is less than the earned income in the preceding taxable year may elect to use their earned income of the preceding taxable year when figuring ACTC. Taxpayers who do not claim Earned Income Tax Credit (EITC) should enter "PYEI" and the dollar amount of the prior year earned income on the dotted line for ACTC. Taxpayers who also claim EITC must follow the election they made when they figured EITC.
The main home of qualified individuals must have been in:

As part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, individuals whose earned income for tax year 2020 is less than the earned income for 2019 may elect to use their 2019 earned income when figuring ACTC. Taxpayers should enter "PYEI" and the dollar amount of the prior year earned income on the dotted line for ACTC. If they file a joint return and make the election, their 2019 earned income is the sum of their 2019 earned income and their spouse's 2019 earned income. Taxpayers who elect to use PYEI in figuring their 2020 ACTC, and who also claim EITC, may also elect to use PYEI when figuring their 2020 EITC, but they are not required to do so.