The Refund Intercept Program was created to review scheduled generated refunds (Transaction Code (TC) 846) and make a determination if issuing a manual refund within the 45-day interest-free period results in a reduced or eliminated credit interest amount.

Purpose: These procedures provide guidelines and requirements for the prevention of unnecessary credit interest issued by the IRS.

Audience: Director, Submission Processing Site Accounting Operations.

Policy Owner: Director, Submission Processing and Director, Customer Account Services.

Program Owner: Submission Processing (SP), an organization within Taxpayer Services (TS) division.

Program Goals: Program goals: the prevention of issuing unnecessary credit interest with systemic refunds.

This IRM provides guidance for the Refund Intercept Program to reduce refund interest paid on current year and prior year tax returns during original settlement processing, and on refunds issued with credit interest as a result of data processing tentative carryback (TCB) adjustments.

The BMF-IR Refund Intercept Listings are available on Ctrl-D under job name: OBMFIRxx (xx = campus Filing Location Code (FLC)). The data in these files is extracted from Enterprise Computing Center (ECC) Non-Tape Distribution to Submission Processing Centers under Report Name: BMF REFUND INTERCEPT Reports. These files are transmitted to Submission Processing Centers, each week on Friday, after Master File processing.

The Refund BMF-IR Refund Intercept Files are a weekly extract of all refunds with ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ credit interest posted to a campus controlling Document Locator Number (DLN). These refunds are grouped by Net Tax Refund Report Line numbers starting with line number 01. The account information is listed for each line number starting with the largest interest amount and ending with the smallest. Each line of the listing contains one account record:

The column header descriptions for the BMF Refund Intercept/45-Day Interest-Free Period Listings are as follows:

The pre-screened BMF listing File is available on Ctrl-D under job name PRTA60X on the immediate Friday after BMF processes. For example, BMF processes cycle 201505 on February 05, 2015; the BMF listing file will be on Ctrl-D on February 06, 2015. The files can be located under Report Name 160-44-XX (BMF) Reports. The listing contains records for BMF refunds with open 45-day periods and no limiting freeze or refund type conditions.

The column header descriptions for the BMF Edited Refund Report listings are as follows:

The listings must be reviewed immediately to ensure the 45-day interest-free period is met. Immediate review is critical to eliminate and/or reduce allowable credit interest.

Access the refund data on Control D and print the listing pages containing the line numbers subject to the 45-day period for BMF: 02 (see note),11, 12, 15, 16, 17, 21, 22, 25, 26, 27, 31, 32, 36, 37, 41, 42, 46, 47, 56, 57, 60, 61, 62, 65, 66, 87, 89, 90, 91 and 99. See IRM 2.4.20, Command Codes RFUND and REFAP, Exhibit 12 Description of Line Item Numbers. Documentation of all actions taken must be kept within each cycle folder and include the following:

When preparing the listing for review, a visual break between the first and last record for each line numbers (i.e., 61, 62, etc.) will facilitate the use of the listings. Separation of line items can be identified by underlining, outlining or highlighting.

After identifying the volume of accounts for the cycle that are subject to review, evaluate workload conditions. If the volume is high, notify the manager that assistance is needed to work the program. Management will determine if additional staffing or a tolerance adjustment is necessary.

There are a number of conditions that will prevent refunds from being worked even when the interest-free period is open or the last day for input has not passed. These conditions can be checked at the same time as the received date review. Other limitations may not be found until further research is performed.

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The Questionable Refund Program (QRP) is now under the program responsibility of the Return Integrity and Compliance Services (RICS). RICS identifies individuals filing false returns claiming refundable credits, income and withholding as part of schemes. These programs are implemented at the beginning of every filing season. Research transactions codes to determine if credits will be released. Contact with RICS could be required. The following examples of QRP account identifiers:

If there is an open control base on a module, employees are required to contact the area with the active control base prior to initiating a manual refund. Annotate that contact was made with the work area with the active control base in the remarks section of the Form 5792, Request for IDRS Generated Refund (IGR). Do not issue a refund if there is a pending assessment or TC 971 AC 665 on the module indicating a Form 2859, Request for Quick or Prompt Assessment is in process. The other work area could request that you stop the generated refund and not issue a manual refund. If this occurs, count the interest as savings.

If there is a TC 130 present on ENMOD (with service center indicator), there could be a Non-Master File balance due. Contact Kansas City Non Master File (NMF) Function ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to find out if the refund will be issued or stopped. If you are unable to take action on the account, annotate the listing as NMF. The Kansas City NMF function could request that you stop the generated refund (TC 846) but not reissue a manual refund (TC 840). If they do, count the interest as savings.

There could be more than one tax adjustment transaction posting at the same time as TCB refund account. If a TC 291 is posting in the same cycle as the TCB adjustment, annotate the listing as Mixed Cr. Credits against taxable income or credits against tax are allowable in the same cycle as the refund. These credits must be included in the overpayment amount.

Some TCB adjustment refunds have manually computed credit interest (TC 770) posting the same cycle as the refund. The employee that input the adjustment is required to enter an abbreviated reason, such as RSCH/CR (Research Credit) in the ACTON activity field. If there is no history item and the TC 770 appears questionable, call the employee to verify the correct action. If there is a TC 770 with money present, annotate the listing as TC 770.

Check for any pending assessment transactions, credit transfers or credit reversals that will affect the availability of the credit that is being refunded. Stop the generated refund and claim the interest saved if all of the available credit is being reversed. If only part of the credit is being reversed, claim the savings on the portion that is being reversed and issue a refund for the remainder credit. These reversals will require restricted interest computations.

Check the return display data against the posted data using IDRS CC BRTVU to identify possible fraudulent filers and misapplied payment errors.

Some refunds can include interest on offset credits or abated penalties and interest (i.e., TC 826, TC 197, TC 277, etc.). This interest must be paid and could reduce the amount that can be saved below the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for the program.

Research will indicate a manual refund was issued. Manual refunds are identified by TC 840 (Manual Refund, Form 5792, Request for IDRS Generated Refund (IGR) and Form 3753, Manual Refund Posting Voucher or TC 971 AC 664 (Manual Refund processed by Accounting, Form 3753, Manual Refund Posting Voucher only). If you identify either of these codes, do not issue a manual refund, unless certain it is NOT A DUPLICATE. Coordinate with the initiating function to determine if the potential refund is due to the taxpayer.

Cases identified with TC 846 as direct deposits (DD). Do not attempt to issue manual refunds on these cases.

Use CC BRTVU (BMF) to review the return line entry information prior to issuing manual refunds. Enter the TIN, Master File Tax (MFT) and tax period in the following format: (BMF) BRTVU NN-NNNNNNN NNYYYYMM.

The response will be a summary screen, which can be used to retrieve each page of the return information. Enter a 1, 2, etc., immediately to the right of the R on the first line of the response page to see a display of the data for the selected page.

Look for inconsistencies in the submitted return information compared to the posted information. Evaluate the amounts claimed in relationship to other entries. Question entries, such as the reported income being low compared to the amount claimed as withholding or the amount entered on the refund line being less than the generated amount.

If the amount being refunded exceeds the amount claimed on the BRTVU display, compare the estimated payments or other credit amounts claimed to the posted amounts. Periodically a payment intended for the next tax year will be applied to the current year account. If this is the case, transfer the excess credit to the next tax year using CC ADD24.

If the refund is based on a payment that is not claimed by the taxpayer and there is no indication it was intended for a future period, research the credit using the Remittance Transaction Research (RTR) database. If this application is not available to the employee(s) performing the review, contact one of the following Accounting functions for assistance: Payment Tracer or Erroneous Refund.

If the tax account is not already present on the Local IDRS file (TXMOD) or does not reflect all current information on CFOL, the current account information for the original settlement refunds must be updated to the Local IDRS file at the time the last day for input is determined to be open. This step is completed by using CC MFREQ and RECON. This step is also required to allow identification of any math errors reflected at the start of the review process for inclusion on the Notice Retype Fax List. Math errors can then be reviewed on the local file (TXMOD). Command Code RECON will be input for review of TCB refunds and is not required to be performed before the Notice Retype Fax List is prepared for Notice Review. The cut-off for faxing the Notice Retype List to Notice Review is 11:00 a.m. local time Wednesday, the first week of review. These times vary depending on local requirements. The cut-off time frame must be verified with the local Notice Review staff.

Use CC MFREQ with definer C to update the module on the local IDRS file when a No Data message is displayed when CC TXMOD is input.

Use CC RECON if the latest transactions shown on BMFOL are not present on the CC TXMOD module display on the local IDRS file.

A notice will be issued to the taxpayer when TCB or math error adjustments appear on the account. Any notice generated must be corrected by Notice Review (NR) to reflect the correct refund and interest amount.

NR must be alerted to request the applicable notices on the local control file before the BMF Refund Intercept Program report is available. Selections can be made by MFT or notice type. Coordinate with Notice Review by providing a list to request selection of the notices each week before 12:00 noon EST on Thursday.

If a restricted interest computation is required, annotate the listing with an NR next to the ME math error entry. Annotating the listing will provide a quick visual confirmation of the notices that need to be corrected.

Contact Notice Review to coordinate the notice correction.

It will be necessary to manually compute credit interest on accounts that include abatements of interest and or penalty (TC 197 or TC 277) or have TC 826 credit offsets with TC 776 credit interest that are posted in the same cycle as the generated refunds. The IRS is required to pay credit interest on penalty and interest abatements only when the taxpayer has paid the assessed penalty or interest and it is subsequently abated.

There could be occasions when part of the overpayment being refunded on an account needs to be held for a pending adjustment or dishonored check or credit reversal. This can occur when a locally input action comes onto an account right after the Master File analysis has been completed. This happens very infrequently so no description of the interest computation is included in this procedure. See IRM 20.2, Interest for additional information.

When the abated amount is more than the most recent assessment, there will be more than one computation line on the COMPA. The total of the abated amount (or amounts, if combined) will be shown on the last line of the COMPA screen with each preceding line showing the balance after subtracting the last assessment. Continue this sequence by always subtracting the assessment prior to the last.

These computations are based on the assessment dates and the manual refund input date without consideration of payments on the account following the assessment dates. See IRM 20.2, Interest for guidance.

The interest on the credit offset interest is combined into the TC 776 amount that is paired with the TC 846 refund transaction. This interest will be reversed when the generated refund reversal posts (TC 841), following input of the refund stop (NOREF). As a result, any interest due on the credit offset interest will have to be manually computed and entered in the TC 770 interest field on the Form 5792, Request for IDRS Generated Refund (IGR). Attach COMPA prints to the Form 5792, Request for IDRS Generated Refund.

The TC 776 interest transactions, paired with the TC 826 offsets, will not be reversed when the refund reversal posts. As a result, it will be included in the overpayment amount shown on the Form 5792, Request for IDRS Generated Refund. Note in the remarks section that the total TC 776 amount on the offsets is included in the overpayment amount.

In the abatement example, all of the transactions will be posted in the same cycle as the TC 846.

Occasionally, more than one offset amount could be paired with a single TC 776 amount. This occurs when the offsets are split to pay separate accruals on the gaining account and post with the same transaction date on the gaining account.

Any generated TC 776 interest amounts paired with offsets require no additional verification.

The posting dates on the TC 776 paired with the offsets will match the posting dates of the offsets on the gaining module. The TC 826 will post with the credit availability date of the TCB loss year module.

If generated interest is paid on a TC 826 transaction, the TC 826 will be immediately followed by an INT-TO-DT>MMDDYYYY. If no interest is paid on the offset amount, it will be followed by an INT-TO-DT>00000000. The INT-TO-DT dates are used as the start dates for the interest on the corresponding TC 776 amounts when the manual interest computation is completed.

The interest savings claimed for the refund must be reduced by the TC 776 amounts paired with the offsets and any additional interest paid on this interest. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Listed below is an example of the manual credit interest computation on accounts with TC 776 interest paired with TC 826 offsets.

Prior to June 20th, 2023, anytime a manual refund was initiated by Accounting, the technical lead, employee, or a designated individual would monitor the account daily (weekly for BMF) using the Erroneous Manual Refund Tool (EMT)/Case Monitoring Tool to ensure a duplicate refund condition has not occurred. Beginning on June 20th, 2023, monitoring of all manual refunds is handled by Accounts Management HQ with the use of their new automated EMT Tool. Any manual refunds entered into the old EMT tool prior to this date, will still need to be monitored until posted. See IRM 21.4.4.6.1, Monitoring Manual Refunds for more information.

The IDRS control base is established when initiating a manual refund on CC RFUND. The control base information reflected on IDRS can be used to track the status of account until all transactions are posted.

The table below reflect the IDRS control base display information and Field Description.

The IDRS CC input screen requires the input of a Status Code and Category Code. It automatically generates an Activity description.

The IDRS CC NOREF input screen requires the input of a Status Code and a Category Code and a revision to the Activity description.

When the reversal of the TC 776 and TC 846 is processed, the Category Code will be changed to 841P. This will provide an easy visual reference to check for on the weekly IDRS Inventory listing.

When all actions are completed, close the IDRS control base using CC ACTON.

The Refund Interception Savings Log is used for tracking the review statistics for the Refund Intercept Program. It is a spreadsheet maintained by fiscal year ending, with weekly results and broken down by posting cycle for BMF Accounts. It also provides combined totals. The BMF sites E-mail completed Logs weekly to Refund Interest Analyst Larenda.Jackson@irs.gov, Annette.Lloyd@irs.gov, Stuart.D.Simpson@irs.gov, and Richard.K.McErlane@irs.gov. A copy of the current Refund Intercept Savings Log can be obtained from the Submission Processing Refund Analyst, Richard McErlane or the backup.

The Refund Interception Savings log is designed to automatically provide weekly and monthly receipt totals, the number of refunds stopped input and the total interest saved. Also, the Log generates quarterly, half-year and full year totals. The log is designed to automatically modify all the totals when corrections to previously entered data are made.

The transaction dates (23C) of the TC 846 are used to designate the month the results are reported.

The data collected from the sites is used to compile Headquarters reports.

During receive date review of the Refund Intercept listings, it will become apparent returns have posted with incorrect received dates. Research for inconsistencies such as the received date is earlier than a previously posted TC 460 or a TC 140 posted later than the IRS received date. Other examples might be a number of returns posted with an odd received date such as 05-11-09 present on the cycle listing with a current Julian date and year shown in the Document Locator Number (DLN).

Order the questionable returns from Files within two weeks following the receipt of the cycle listing. If the posted received date is identified as correct/incorrect, issuance of an additional refund of the interest will be necessary. Subtract the savings and volume from the Refund Intercept Report.

If you determine the posted received date is in error, issue the manual refund without interest and stop the generated refund.

If the received dates are incorrect, the assessment statute expiration date (ASED) and correspondence received dates (CRD) will need to be updated and/or added to the modules. The collection statute expiration date (CSED) does not need to be corrected. They are established by the 23C posting date of the TC 150 and are correct as shown in the table below.