A Treasury Offset Program Bypass Indicator is assigned to all manual and systemic refunds certified to the Bureau of the Fiscal Service. The BPI is a one-digit indicator that identifies for BFS whether the refund is eligible for offset by TOP.

Generally, a BPI is generated systemically, but when issuing a manual refund, you must input the BPI on CC RFUND.

The BPI is posted/displayed along with the TC 840/TC 846 on all output screens such as CC TXMOD, CC IMFOL, CC BMFOL, and on CC MFTRA transcripts. The BPI also shows with the pending transaction. See the following example:

There are ten BPIs, 0 through 9.

BPI (0) indicates that any refund should offset for all TOP debts owed under the primary TIN, and secondary TIN if Filing Status 2 (FS2).

BPI (1) indicates that any refund should bypass offsets to debts owed by the primary spouse and may offset to any debts owed by the secondary spouse.

BPI (2) indicates that TOP should bypass offsets to debts owed by the secondary spouse and may offset to any debts owed by the primary spouse.

BPI (3) indicates TOP should bypass the refund completely.

BPI (4) indicates that TOP should bypass all debts except child support for both the primary and secondary TIN.

BPI (5) indicates that TOP should bypass all debts for the primary TIN and all debts except child support for the secondary spouse.

BPI (6) indicates that TOP should bypass all debts for the secondary TIN and all debts except child support for the primary spouse.

BPI (7) Indicates that TOP should offset for all TOP debts owed under the primary TIN (and secondary TIN if Filing Status 2 (FS 2) when the account module contains an unreversed TC 520 with closing code 60-67, 81, 83-89 with transaction date 10/17/2005 and subsequent.

BPI (8) Indicates that TOP should bypass offsets to debts owed by the primary spouse and may offset to any debts owed by the secondary spouse, and the account module contains an unreversed TC 520 with closing code 60-67, 81, 83-89 with transaction date 10/17/2005 and subsequent.

BPI (9) indicates that TOP should bypass offsets to debts owed by the secondary spouse and may offset to debts owed by the primary spouse, and the account module contains an unreversed TC 520 with closing code (cc) 60-67, 81, or 83-89 with transaction date 10/17/2005 and subsequent.

CC RFUND has a field entitled "BYPASS INDICATOR" . This indicator is normally set to "0" . When CC RFUND is input on a Master File Tax (MFT) Code not eligible for offset, the indicator is set to "3" . When CC RFUND is input on a module with a (-C) combat zone freeze, the indicator is set to "4" . Refer to IRM 21.4.6.4.2.2, IMF TOP Offset, and IRM 21.4.6.4.2.3, BMF and Civil Penalty TOP Offsets, for additional information. The following validity checks are made for BPIs on CC RFUND.

TOP offsets are made against any refund issued from MFT 29, MFT 30, MFT 31, MFT 35 and MFT 55 unless a Bypass Indicator (BPI) is generated on the TC 846 or input on a manual refund TC 840.

When married taxpayers file using the "married filing joint" status either taxpayer (or both) may have outstanding obligations that qualify for a TOP offset. As a result, there can be one or two TC 898(s) for each refund issued. TC 898(s) will display the DEBTOR-TIN for offsets to the secondary taxpayer's debt and offsets to the primary taxpayer's debt will not display the DEBTOR-TIN.

A bankruptcy -V or -W Freeze, set by the posting of TC 520, with closing code 60-67, 81 or 83-89 with a transaction date prior to 10/17/2005, generates a BPI (3) on a TC 846 issued from that module.

A combat zone -C Freeze generates a BPI (4) on a TC 846 issued from that module.

BPI (3) generates on all systemic and manual refunds issued from an individual NMF account, preventing TOP offset.

TOP offsets are made against any refund issued from MFT 02, 03, 07, 10, 13, 34, 43, 44, 46 (Doc Code 88 only) , 52, 60, 63, 64, 77, 78 and 79, unless a BPI is systemically generated on the refund or input on a manual refund. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

TOP offsets will not be made against refunds issued from an MFT not shown above. BPI (3) generates on all refunds from MFTs that are ineligible for TOP offset.

BPI (3) generates on all systemic and manual refunds issued from a business NMF account to prevent a TOP offset.

The Department of the Treasury (TOP) Bureau of the Fiscal Service (BFS) amended its regulation governing the offset of tax refund payments to collect past-due child support obligations. This change limits the time in which Treasury may reverse a tax refund offset to collect a delinquent child support debt to six months. The change does not apply to the processing of Form 8379, Injured Spouse Allocation. For telephone inquiries, see IRM 21.4.6.6.1, Taxpayer Inquiries on TOP Offset.

To address this change, the IRS must limit the time to reverse a child support offset to five months (150 days) from the refund payment date. To determine the date of offset, use the RFND-PYMT-DT associated with the TC 846/840. The five-month limit allows for internal system processing of the offset reversal request (TC 766 with an Offset Trace Number - OTN).

Offsets that occur during processing year 2016 and beyond will post with the Agency and Sub-Agency code. If the Agency code is “1” or “2”, the offset is for a delinquent child support debt and the five-month limitation rule applies except for a Form 8379, Injured Spouse Allocation. See Document 6209 Section 5 - Debtor Master File (DMF), for Office of Child Support Enforcement Agency and Sub-Agency codes.

Offsets due to delinquent child support occurring during processing years 2012-2015 will be identified by the posting of Transaction Code (TC) 971 Action Code (AC) 126. The Agency Code, OTN, and offset amount will be identified in the TC 898, MISC field.

To determine whether an offset to child support can be reversed, use the following chart:

For any ID Theft case that cannot be reversed, refer to IRM 21.4.6.5.1.2.4, TOP Offsets Involving ID Theft and ID Theft with Fraudulent Returns.

Any refund under $25 is not offset by TOP. This tolerance applies to both IMF and BMF.

The Bureau of the Fiscal Service issues a TOP offset notice when a taxpayer's refund is offset for child support, Federal non-tax debt, a state tax debt, or unemployment compensation debt.

The notice of offset informs the taxpayer that their federal tax refund was offset for a debt owed to an agency(s). The notice details are as follows:

If taxpayer inquires of an existence/non-existence of a TOP debt at Bureau of the Fiscal Service, do not use the Agency or Sub Agency codes found on CC TXMOD or CC IMFOL. Refer the taxpayers to the TOP Interactive Voice Response (IVR) system at Bureau of the Fiscal Service at 800-304-3107, Telecommunication Devices for the Deaf (TDD) 800–877–8339 for information. See IRM 21.4.6.6.1, Taxpayer Inquiries on TOP Offset.

TOP offsets and related transactions post to the tax module where the refund creating the offset originated.

The following Transaction Codes (TC) are used solely for TOP offsets:

The IRS personnel do not have access to the TOP debtor database and cannot tell if a debt exists before a TOP offset occurs.

Offsets that occur during processing year 2016 and beyond will post with the Agency and Sub-Agency Code at the beginning of the Offset Trace Number (OTN). If the Agency Code is “1” or “2” offsets due to delinquent child support occurring during processing years 2012-2015 will be identified by the posting of Transaction Code (TC) 971 Action Code (AC) 126. The purpose of the Agency/Sub Agency Code is for internal use only. Therefore, do not disclose this information to the taxpayer.

A TOP offset appears on Command Code (CC) TXMOD as a Transaction Code (TC) 898 with an Offset Trace Number (OTN), the offset amount is shown as OFFST-AMT. If the secondary spouse owes the debt, the debtor TIN will also be shown DEBTOR-TIN. If there is no DEBTOR-TIN shown, the taxpayer with the primary TIN is the debtor.

A TC 971 AC 598 will appear on TXMOD with the OTN shown as MISC field and the offset amount will be shown as MEMO-MONEY-AMT. The debtor TIN (primary or secondary) will be shown as XREF-TIN

A TC 898 or TC 971 AC 598 must be netted against the refund it came from to determine the actual refund amount that Bureau of the Fiscal Service sends or deposits for the taxpayer.

Each TC 898 or TC 971 AC 598 can represent an offset to one or more agencies for the same TIN.

There can be one or two TC 898(s) or TC 971 AC 598(s) per refund.

This example shows a TOP offset to the primary spouse's debt for $1000. The taxpayer was sent a refund of $586 ($1586 - $1000). If the DEBTOR-TIN was present and filed with the secondary spouse's TIN, the offset would have been to the secondary spouse's debt.

The TC 898 or TC 971 AC 598 TOP offset is dated the same as the prior posted TC 840 from which it originated. The TC 898 Document Locator Number (DLN) is the same as the prior TC 840 from which it originated.

A TC 898 or TC 971 AC 598, originating from a computer-generated refund, will match the date of the TC 846. A TC 898 originating from a computer-generated refund, TC 846, has the same DLN except for the document code which is changed to 77.

The OTN is an "offset trace number" used by the IRS and the Bureau of the Fiscal Service to "connect" offsets with related reversals and the refund from which they came. It is 10 characters in length separated by a hyphen in the middle. The OTN begins with a "1" if the offset was for a primary taxpayer and a "2" if the offset was for a secondary taxpayer.

A TC 898 with document code 45, TOP offset of manual refund, re-sequences for 10 cycles, if TC 840 with the same DLN is not posted. After 10 cycles it unpost as Unpostable Code (UPC) 137 or UPC 437, RC 1.

See IRM 21.4.6.5.19.2 , UPC 137 or UPC 437.

In some instances, a TC 898 will unpost as UPC 151 RC 0 due to a name control mismatch when Bureau of the Fiscal Service returns the record to the IRS. See IRM 21.4.6.5.19.3, UPC 151.

A tax offset reversal may be required if the taxpayer's response to the tax assessment results in either a full or partial abatement on a married filing joint (MFJ) account. Any refund generated by the abatement must be paid jointly to both spouses unless one or more TC 706 credits is present and all four of the following items are true:

If the TC 706 credit(s) is/are present and all four of the above items are true, move the applicable TC 706 credit(s) back to the modules where it/they originated.

A TOP offset reversal may be required to resolve an account issue. See IRM , Allowable TOP offset Reversals and IRM Unallowable TOP Offset Reversal for a list of when a reversal can or cannot be input. See the IRMs below for reversal procedures.

A reversal of a TOP offset can be done to:

A reversal of a TOP offset cannot be input to:

If the injured spouse is not responsible for any part of the debt which offset, always reverse the injured spouse's share of the refund when working a Form 8379, Injured Spouse Allocation. See IRM 21.4.6.5.7.1, Allowable TOP Offset Reversals.

Form 8379, Injured Spouse Allocation, may be filed as an attachment to the original individual tax return or by itself.

A surviving spouse is entitled to file a Form 8379 and receive a refund on behalf of the deceased injured spouse even though the surviving spouse owes the obligation.

Taxpayers may file an Injured Spouse Allocation by attaching a Form 8379, Injured Spouse Allocation, to their tax return and noting “Injured Spouse” in the upper left corner of the Form 1040 series.

For Form 8379 received with the original return (Form 1040 series) indicating "Injured Spouse" in the upper left corner of the form:

Form 8379 received with an electronically filed return:

Form 8379(s) received without the original return are not numbered.

If there is a return attached to Form 8379 and research indicates that there is no TC 150 on the account, see IRM 21.6.7.4.2.3, TC 150 - Original Return Not Obtained, to process the return. Send a Letter 3179C, Refund Offset to Treasury Offset Program (TOP) and Injured Spouse Inquiries, with paragraph "o" informing the taxpayer of the delay in processing the Form 8379, Injured Spouse Allocation.

If you receive Form 8379 and there is no TC 150 on the account. Research to see if the Form 8379, is for another tax year. If the Form 8379 is for another year, update the CII case to the correct year and input the TC 971 AC 071 on the appropriate year. The received date of the Form 8379 is used for the transaction date of the TC 971 AC 071. If the Form 8379 is not for another year return the Form 8379 to the taxpayer advising them, we have no record of a return being filed for the tax year indicated on the Form 8379, use Letter 3179C. Close your case.

If you receive a Form 8379 and the return is located in ERS, you should monitor until the account is corrected:

When a Form 8379, Injured Spouse Allocation, filed with the original return, is received in Accounts Management, it must be worked within the 45-day interest free period, to avoid paying interest.

If the 45-day interest-free period is missed, allow credit interest on the overpayment. Generally, credit interest is allowed from the availability date of the overpayment to the refund schedule date (less the applicable back-off period). See IRM 20.2.4, Overpayment Interest. The availability date of the overpayment is determined by the payment(s) and/or credit(s) of which it is comprised.

Research Command Code INOLES or IAT Results IS tool under both the primary and secondary Taxpayer Identification Number (TIN), for the debt indicator:

The (I) indicator is not always set for all Federal tax debts. Research any cross-reference TINs along with CC IMFOL, CC BMFOL, CC TXMOD, MFT 29 and MFT 31, etc. for any outstanding tax debts. Always capture and/or attach INOLES or IAT Result Injured Spouse screen for both spouses showing the debt indicator (I), (F), (B) or (N) at the time the Injured Spouse Allocation is being worked. Be sure to include BMF screens when there is a X-REF EIN.

When working an injured spouse allocation with a federal tax offset "I" debt, the control base must be changed from DMFC (97140 paper)/DMFE (97144 electronic) to DMFT (40110 Tax Debt).

The status of a debt at Bureau of the Fiscal Service may change daily and the debt indicator on CC INOLE is updated weekly. The debt may be activated, inactivated or deleted within TOP before a refund is issued. Therefore, discrepancies may arise from one cycle to the next and the IRS may not be aware of a TOP debt. Consequently, the refund will offset, resulting in having to reverse the offset to process the Form 8379, Injured Spouse Allocation.

When working a Form 8379 and the debt indicator on CC INOLE is "N" for both taxpayers, do not release the overpayment with a TC 571. You will work the injured spouse case and issue a refund to the injured spouse for their share of the overpayment. In addition, retain the IDRS category code as DMFC (97140 paper)/ DMFE (97144 electronic).

When the wrong spouse is identified as the injured spouse on Form 8379, Injured Spouse Allocation, and the form is filed with an original signed Form 1040, Form 1040-X, or a duplicate filed return, process the form without contacting the taxpayer if either the following apply:

On all Forms 8379 (Rev. 11–2016 (MeF) and Rev. 11–2016), issue the Injured Spouse's portion of the refund in "one name only" unless line 11 on the form is checked to "Issue in both names" . For all Form 8379 revisions prior to 11-2014, issue the Injured Spouse's portion of the refund in "one name only" even if line 11, one name only box is not checked.

If the injured spouse is not entitled to any overpayment from tax year 20XX, the allocation should not be considered. See IRM 21.4.6.5.4.9, Form 8379 No Consideration Procedures.

Verify the Form 8379 has been processed in BS 920–929. All Forms 1040 series indicating "Injured Spouse" in the upper left corner are blocked in BS 920–929. This blocking series permits the CP 36D, Injured Spouse Claims Notice, to be issued. Two copies of the CP 36D notice, with a transcript of the account are generated. One copy of the CP 36D notice is used as a "charge out" in files; the other is scanned into CII or forwarded to the Accounts Management Function with the Form 8379, Injured Spouse Allocation.

When the CP 36D, Injured Spouse Claims Notice, is received in the AM Function, use Command Code (CC) RTVUE, (CC) TRDBV or Return Request Display (RRD) to view the return on-line and work the Form 8379. You must complete Form 8379 Allocation Worksheet and attach the Form 8379 Allocation Worksheet to the CII case. If the refund will be computer generated, input the adjustment with a 290 .00, RN 808/RN 810 or RN 809/RN 811.

If there is an outstanding IRS obligation for the primary or secondary taxpayer, compute the Injured Spouse refund. See IRM 21.4.6.5.6, Allocation of Injured Spouse Form 8379.

When the overpayment has not offset and there is an IRS obligation, follow the IF/AND/THEN Chart below:

The following conditions do not require a manual refund:

Send an explanation of the action taken to the taxpayers if applicable. Letter 3179C, Refund Offset to Treasury Offset Program (TOP) and Injured Spouse Inquiries, see IRM 21.4.6.5.6.4, Injured Spouse Refund-TOP Offset, for the information to include in the letter. Letter 285C, Refund/Overpayment Applied to Account, see IRM 21.4.6.5.6.5, Injured Spouse Refund - Tax Offset, for the information to include in the letter.

Some entity or module freeze may need to be resolved before the Form 8379, Injured Spouse Allocation, can be processed. Some freezes and the actions required to process the injured spouse allocation are:

Rev. Rul. 80–7 intends that income, deductions, personal exemptions, credits, and payments shown on the joint return be allocated to the spouse to whom they belong. Forms such as Form 1099-INT, reported under both names should be allocated to the spouse as entered on Form 8379.

The Form 8379, Injured Spouse Allocation, must be reviewed to determine that all income shown on the joint return has been properly allocated. Verify the allocated items with Form(s) W-2 and/or CC IRPTR, IMFOL, RTVUE, TRDBV or Return Request Display. Return Request Display - Modernized e-File (MeF) should only be used if none of the other options are available.

The taxable amount of Unemployment Compensation or Social Security Benefits shown on the joint return must be used when allocating the separate Adjusted Gross Income (AGI) for each spouse who received the benefit(s).

Always allocate income, withholding, expenses and other taxes to the spouse to whom they belong.

Allocate any child tax credit, child and dependent care credit and additional child tax credit to the spouse who was allocated the qualifying child’s exemption. Allocate the education credit to the spouse who would have shown the item on their separate return. Allocate business credits based on each spouse’s interest in the business. Allocate any other credits as the taxpayer has entered on Form 8379.

For 2018 and subsequent; Include Qualified Business Income deduction (QBID) with the standard or itemized deductions. The QBID will be allocated as a percentage of each spouse's Qualified Business Income if the Qualified Business Income (QBI) can be determined. For more information on what is considered Qualified Business Income, see Form 1040 Instructions or Publication 535, Business Expenses. If an allocation of QBI cannot be determined and each spouse has QBI, split the allocation of QBID in half (50/50).

Student loan interest deduction, IRA deduction, etc., should be allocated to the spouse obligated to the loan, owner of the IRA, etc. However, if the taxpayer allocates any of these deductions differently, accept the taxpayer’s allocation as entered on Form 8379.

When the Standard Deduction is taken along with Charitable contributions allocate the Charitable contributions as entered on the Form 8379. If the taxpayer did not allocate the Charitable contributions split the unallocated Charitable contributions in half (50/50) for each spouse. Send a letter informing the taxpayer we split the Charitable contributions. A letter is not needed for Community Property or Non-Community Property Short Cut (SC) 1.

Withholding credits must be verified and allocated to the spouse to whom they belong.

When a breakdown is not provided by the taxpayer, allocate estimated tax payments as follows: Divide the injured spouse's Married Filing Separate (MFS) tax by the sum of the MFS tax for both spouses and multiply that amount by joint estimated tax payments.

Earned Income Tax Credit (EITC) must be allocated if the injured spouse has qualifying earned income and EITC was included on the original tax return.

Review question 5 on Form 8379 to determine if the taxpayer resides in a community property state. Refer to IRM 21.4.6.5.5(3), Community Property Allocation, for a list of community property states.

If the Form 8379, Injured Spouse Allocation, is filed with the original return and the account is in zero or debit balance with no math error, do not consider the Form 8379. If the Form 8379 is filed by itself, and there was no offset on the module or a corrected math error has created a balance due, you should not consider the Form 8379. See IRM 21.4.6.5.4.9, Form 8379 No Consideration Procedures, for instructions.

On all Forms 8379, issue the Injured Spouse's portion of the refund in "one name only" unless the revised Form 8379 (Rev. 11-2016 (MeF and Rev. 11-2016) "Issue in both names" box on line 11 is checked. For prior revisions of Form 8379, always issue the Injured Spouse's portion of the refund in "one name only" even if the one name only box on line 11 is not checked.

If there are no IRS debts which must be by-passed and the address on ENMOD is not different than the address on the Form 8379, refer to paragraph (1) above to input the adjustment for the injured spouse’s portion of the overpayment.

Ensure there are no freeze codes on the account that would release by the input of a TC 290 other than the -R freeze.

If there are any IRS debts which must be by-passed or the address on ENMOD is different than the address on the Form 8379, issue a manual refund for the injured spouse’s portion of the overpayment.

On all Forms 8379, issue the Injured Spouse's portion of the refund in "one name only" unless the revised Form 8379 (Rev. 11-2016 (MeF) and Rev. 11-2016) "Issue in both names" box on line 11 is checked. For prior revisions of Form 8379, always issue the Injured Spouse's portion of the refund in "one name only" even if the one name only box on line 11 is not checked.

Determine the TC 898 offset to be reversed. There may be more than one on the account. See IRM 21.4.6.5.6.3, Determining the Injured Spouse Refund.

Compare the Injured Spouse's refund allocation with the TC 898 on the module and reverse only the net amount needed for the injured spouse's refund.

Input TC 766 with the OTN to reverse the TC 898 with the same OTN, RC 086, SC 7 & HC 2 with the correct blocking series. A HC 2 is not needed when box 11 is checked.

Input 290 .00, RN 810 or RN 811, RC 086, SC 7 with the appropriate PDC or issue a manual refund if applicable.

Review the form for the signature of the injured spouse unless it was filed with an original signed return.

If the Form 8379, Injured Spouse Allocation, is incomplete, attempt to contact the taxpayer or authorized representative by phone and request the missing information such as:

If a Form 8379, Injured Spouse Allocation, is unsigned and was not filed with the original signed return or attached to a signed Form 1040-X, Amended U.S. Individual Income Tax Return:

If the taxpayer does not provide the missing information within 40 days, 55 days for overseas taxpayers, see IRM 21.4.6.5.4.9, Form 8379 No Consideration Procedures, for instructions.

Form 8379, Injured Spouse Allocation, should not be considered:

Send the taxpayer a Letter 916C, Claim Incomplete for Processing; No Consideration, letter advising the taxpayer why the allocation is not being considered. If the taxpayers are no longer living at the same address, send one letter to the injured spouse at the address on the Form 8379 and a copy of the letter to both spouses at the address of record. Manual copying is not required in instances in which a correspondex letter would systemically be sent to both addresses.

Input a TC 290 .00 with the appropriate blocking series (e.g., blocking series 00 if the original return is attached to the allocation or blocking series 05 if the original return is not attached). Use a HC 3, RC 086, SC 7 when inputting the TC 290 for .00, see IRM 21.5.3.4.6.3, No Consideration Procedures. See IRM 21.5.1.5.3, CII Source Documentation, for Blocking series (BS) and NSD adjustment examples.

If TC 150 or TC 976 is in blocking series 92 in error (Injured Spouse is not annotated on the top of the Form 1040 and no Form 8379 is attached to the document):

If the taxpayer responds to a Letter 916C, Claim Incomplete for Processing; No Consideration, research CII for an explanation for the previous no consideration. If the taxpayer sends additional information and the Form 8379, Injured Spouse Allocation, can be allowed, follow normal injured spouse processing procedures. If the Form 8379 cannot be allowed, send the taxpayer a Letter 916C with the explanation for the no consideration.

If the taxpayer responds to a previous Letter 105C, Claim Disallowed, or Letter 106C, Claim Partially Disallowed, research CII for an explanation of the previous denial and explain the reason for the denial to the taxpayer. If the taxpayer sends additional information and the Form 8379, Injured Spouse Allocation, can be allowed, follow normal injured spouse processing procedures. If the injured spouse allocation cannot be allowed, do not send another disallowance letter. See IRM 21.5.3.4.6.2, Appeals and Responses to Letter 105C and 106C, for further instructions.

Form 8379, Injured Spouse Allocation, is not a separate claim. See IRM 21.5.3.2(3), What Are Claims for Credit, Refund, and Abatement?. The non-debtor spouse uses the form to provide additional information to the IRS regarding their share of the overpayment shown on a jointly filed original tax return (Form 1040, U.S. Individual Income Tax Return, or amended return Form 1040-X, Amended U.S. Individual Income Tax Return).

Taxpayers may file Form 8379 with the return or as a standalone form.

If the IRS offsets the refund claimed on a Form 1040 or Form 1040-X (in whole or in part) to a Federal tax debt or a TOP debt, the IRS does not issue a Notice of Claim Disallowance, because no claim has been disallowed.

If the Form 8379 is not attached to the joint Form 1040 or Form 1040-X, but is instead filed separately, the time frame for filing Form 8379 for Federal Tax Debts or TOP Debts is the same as the time frame for filing the claim for refund (generally three years from the date the return was filed or two years from the date that the tax was paid, whichever is later, but there are numerous exceptions see IRC 6511, and IRM 25.6.1.10.2.7, Claims for Credit or Refund – General Time Period for Submitting a Claim. The date of the offset by the IRS or BFS is not relevant for the purposes of determining timeliness of the request to reallocate the overpayment.

Form 8379, Injured Spouse Allocation, are not sent to EXAM. However, an EXAM freeze on an account which also has a -R freeze, may affect the timing when the injured spouse allocation is worked. The following table may assist you in resolving injured spouse cases when an EXAM freeze (-L, -Q, -E), CI freeze (-Z or Z-) or RIVO Freeze (-E) is present. Before reversing any offset to Office of Child Support Enforcement (Agency Codes 1 and/or 2), see IRM 21.4.6.4.2.4, Child Support TOP Offsets.

Allocate items of income, deductions, and exemptions, as determined by the taxpayer on Form 8379, Injured Spouse Allocation, or as reported on their original return to arrive at the taxable income for each spouse. This is in accordance with Rev. Rul. 80–7.

Rev. Rule. 87–52 allows for allocation of the Earned Income Tax Credit (EITC) shown on the joint return. If EITC is not shown on the joint return, do not figure EITC on the allocation.

Use the appropriate EITC table and worksheet, or CC EICMP with definer R for the tax year for which the form is being worked.

Determine a new, separate EITC that would be available for each spouse if that spouse had filed a separate return and if EITC were available on a MFS return. This is a theoretical situation used for computation only.

Compute each spouse's separate EITC, with (Y) indicator, based on each individual’s earned income, using the same number of qualifying dependents used to compute the EITC on the joint return.

Figure the injured spouse percentage of EITC by dividing the injured spouse’s new separate EITC by the sum of the EITC for both spouses and multiply the percentage by the amount allowed on the joint return.

Provisions of the Heartland Disaster Tax Relief Act of 2008 allow impacted taxpayers to use their 2007 earned income for purposes of figuring any EITC for 2008 if the 2008 earned income is less than the 2007 earned income and:

If the taxpayer qualifies to use their 2007 earned income, you will determine the EITC allocation based on the 2007 income not the 2008 income.

Under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, taxpayers may elect to use their 2019 earned income to figure the EITC for 2020 if their 2019 earned income is more than their 2020 earned income.

Under the American Rescue Plan Act of 2021 (ARPA), taxpayers may elect to use their 2019 earned income to figure the EITC for 2021 if their 2019 earned income is more than their 2021 earned income.

Compute the injured spouse share of the joint overpayment by subtracting the injured spouse's share of the joint tax liability, as well as any previous refunds or offsets to other IRS obligations, from the injured spouse's contribution toward the joint liability.

Research for Outstanding Balance Liabilities (OBLs) for both spouses before completing the allocation. Any amount of the overpayment credit that will offset to another tax obligation, attributable either individually or jointly to the injured spouse, must be subtracted from the injured spouse's share of the joint overpayment. See IRM 20.2.4.4, Availability Dates for Overpayments, and IRM 20.2.5.13, Underpayment Interest on Liabilities Paid by Credit/Offset, to determine the amount to satisfy the outstanding balance due.

Subtract any previous offset or non EIP refund, such as TC 820/TC 826, TC 840/TC 846, BMF or IRAF TC 896, attributable individually or jointly to the injured spouse, from the injured spouse's share of the joint overpayment.

Continue to determine the refund amount depending upon the type of offset that was made. Before reversing any offset to Office of Child Support Enforcement (Agency Codes 1 and/or 2), see IRM 21.4.6.4.2.4, Child Support TOP Offsets.

After deducting prior tax offsets and refunds, subtract from the remaining amount:

If interest was included in the refund that was offset, further computation is needed when the injured spouse is not entitled to all of the overpayment. See IRM 20.2.4.4, Availability Dates for Overpayments.

If you are reversing a TOP Offset that includes computer-generated credit interest and you are going to allow another computer generated refund, you must calculate the additional interest owed on the original offset manually. Use CC COMPA to calculate the additional interest (TC 770) owed to the injured spouse. Using the total reversal amount, the FROM date will be the posted TC 776 credit interest to date “DB-CR-INT-TO-DT>” found on TXMOD. The TO date will be the 23C Date (assessment date) of the adjustment releasing the overpayment minus 18 calendar days.

Use the IDRS On-Line input Chart found in Document 6209 Section 16 - Julian Date, Cycle and Notice Calendars to determine the 23C date of the releasing adjustment. Add two days to the date of Input to allow for the two-day suspense for review. For instance. if your input is on 6/3/XXXX, adding two days will move your Cutoff for Release of Transactions date to 6/10/XXXX.

If a TOP offset (TC 898) reversal is needed on MFT 35 and credit interest needs to be manually computed (TC 770) :

When the injured spouse is entitled to all or part of the joint refund and the Injured Spouse's allocated share of the overpayment is reduced or will be reduced in whole or part by their, TOP debt, Federal tax offset, credit elect, or any prior refund, then send Letter 3179C, Refund Offset to Treasury Offset Program (TOP) and Injured Spouse Inquiries, or Letter 285C, Refund/Overpayment Applied to Account, giving the injured spouse:

If an offset has occurred to a separate tax liability for which the injured spouse is not responsible, compare the injured spouse's allocation to the amount of offset. The injured spouse's refund could be equal to or less than the amount that offset to the debt. Transfer the Injured Spouse's portion of the refund back to the joint account. Use a TC 570 on the credit side of the ADC 24 to hold the credit.

A manual refund is required on all injured spouse refunds of tax offsets to prevent the credit from offsetting back to the same tax debt. On all Forms 8379, issue the Injured Spouse's portion of the refund in "one name only" unless the revised Form 8379 (Rev. 11-2016 MeF) and Rev. 11-2016) "Issue in both names" box on line 11 is checked. For prior revisions of Form 8379, always issue the Injured Spouse's portion of the refund in "one name only" even if the one name only box on line 11 is not checked. The manual refund must also have a BPI applicable to the injured spouse to show ownership of the refund for TOP offset eligibility. See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

When working an injured spouse form for a tax offset (I) debt, the control base must be changed to something other than DMFC (97140 Paper)/DMFE (97144 Electronic). Change the control base for paper and electronic filed form to category and program code DMFT (40110 Tax Debt).

When the injured spouse is entitled to all or part of the joint refund and the injured spouse's allocated share of the overpayment is reduced in whole or part by their own, TOP debt, Federal tax offset, credit elect, or any prior refund, then send Letter 3179C, Refund Offset to Treasury Offset Program (TOP) and Injured Spouse Inquiries, or Letter 285C, Refund/Overpayment Applied to Account, giving the injured spouse:

On all Forms 8379 (Rev. 11-2016 (MeF) and Rev. 11-2016), issue the Injured Spouse's portion of the refund in "one name only" unless line 11 on the form is checked to "Issue in both names" . All Form 8379 revisions prior to 11-2014, issue the Injured Spouse's portion of the refund in "one name only" even if line 11, one name only box is not checked.

Injured spouse refunds of TOP offsets generate systemically with the input of TC 766 with the appropriate Offset Trace Number (OTN). Injured spouse refunds of tax offsets must not be allowed to generate systemically. See IRM 21.4.6.5.6.5, Injured Spouse Refund - Tax Offset. A manual refund must be issued for the injured spouse's portion of the overpayment in the following instances:

Follow instructions in IRM 21.6.3.4.2.1, Outstanding Balance Considerations Prior to Refund or Credit-Elect, when reversing offsets and issuing a manual refund from an account where the taxpayer previously made a credit election.

Research under both TINs for Outstanding Balance Liabilities (OBLs) for which the injured spouse is liable. Use CC INOLE for cross- reference Taxpayer Identification Number (TIN) OBL checks. Also, check for any OBL that may have occurred with a prior year-spouse.

For manual refunds of TOP offset reversals, research the tax module where the offset was reversed for an agency refund (TC 899 Type 2 or TC 971 AC 599 Type 2) and an agency refund reversal (TC 899 Type 4 or TC 971 AC 599 Type 4) with the same OTN as the offset being reversed. If an agency refund has occurred, see IRM 21.4.6.5.8.1, Input of TOP Offset Reversals Reference Number (RN) 766 with OTN.

Compute normal interest on manual refunds resulting from offset reversals.

When determining the "TO" date, do not consider the 45-day interest-free period that applies to claims for credit or refund.

If the research shows no Federal Outstanding Balance Liabilities (OBLs) or an agency refund, continue processing the Manual Refund according to normal procedures as outlined in IRM 21.4.4, Manual Refunds Also see IRM 21.4.4.5 Preparation of Manual Refund Forms. .

When the wrong spouse is identified on Form 8379 and you are issuing a manual refund, you must notate in the remarks section "INJ SP Incorrect on F8379" , of Form 5792, Request for IDRS Generated Refund (IGR) or Form 3753, Manual Refund Posting Voucher.

Under certain hardship circumstances, the IRS may issue manual refunds of excess credits without first satisfying the IRS Outstanding Balance Liability (OBL). This type of refund is called an Offset Bypass Refund (OBR). Hardship for purposes of an OBR is economic hardship within the meaning of IRC 6343, and the corresponding Treasury regulations (i.e., unable to pay basic living expenses). Handle each OBR on a case by-case basis. There is no exclusive list of expenses which would qualify a taxpayer for an OBR.

Initiators of an Offset Bypass Refund (OBR) must input a TC 971 Action Code 036 prior to the manual refund (TC 840) to identify that the offset liability was bypassed.

OBR requests should generally not be referred to the Taxpayer Advocate Service. A request for an OBR must be worked immediately upon receipt.

Send the OBR to TAS if the taxpayer requests TAS assistance or if the request meets TAS criteria 1-4 and you cannot resolve the request (or steps taken to resolve) within 24 hours. See IRM 13.1.7.3.1, TAS Case Criteria 1-4, Economic Burden.

Send to TAS when an OBR phone request is received on the Customer Service line if the 23C date has not passed OR a clerical error occurred that prevented processing the taxpayer's OBR request before the 23C date, if inquiry the meets TAS criteria per IRM 13.1.7.3.1, TAS Case Criteria 1-4, Economic Burden.

Once the tax is assessed (23C date), the overpayment is created and the offset occurs. There is no longer any overpayment to refund and the OBR cannot be initiated; however, if a freeze code or other condition exists on the account, preventing the overpayment from offsetting to the outstanding liability, an OBR can be initiated because the overpayment is still available on the module. See paragraphs (9) and (10) below for additional details. The presence of a -Y freeze on one or more of the balance due accounts (unreversed TC 480 pending offer in compromise with no TC 780 in collection status 71) does not preclude an OBR even if some of the overpayment would otherwise be applied to this module. See SBSE-05-1021-0063, Interim Guidance on Refund Recoupments.

If the current date is more than 30 days past the 23C date and review of the case indicates a clerical error did not occur, the employee should inform the customer that the overpayment has been applied to the balance due account and the IRS cannot undo it. This will resolve the OBR inquiry on the same day and therefore should not be transferred to TAS.

If a clerical error did not occur, an OBR must generally be issued before the tax assessment date or 23C date for the original return (TC 150) on which the overpayment was reported. The manual refund document must be received by Accounting no later than the Friday cut-off-time before the Assessment Document Date (23C Date, always a Monday) of the original return. See paragraphs (9) and (10) below for situations when the OBR can be issued after the 23C date.

Specific account conditions, such as freeze codes, will determine the date by which the OBR must be processed. Timing must be considered when processing an OBR and releasing an IDRS freeze condition. If there is a balance due module; a freeze release will prompt an offset to that account. The OBR must be approved and processed prior to the freeze release, there are certain conditions in which a TC 840 will release the freeze code or condition. Refer to Document 6209 Section 8A - Master File Codes.

Certain IDRS freeze conditions will hold the overpayment beyond the return posting date (Assessment Document Date or the 23C Date) of the original return (TC 150). Any actions on the overpayment, either refund or offset, are prevented by the IDRS hold until the resolution of the IDRS Freeze condition. Determine whether the IDRS freeze condition can be released based on the applicable IRM provisions. This may include coordination with another IRS function. When the resolution of the IDRS freeze condition results in an overpayment, the overpayment can be issued in a manual refund after the 23C date, so long as:

If an OBR is requested before the 23C date of the tax assessment which created the overpayment; but a clerical error occurred preventing the processing of the request, the IRS can correct the clerical error by reversing the tax offset and issuing the OBR.

OBRs may also be made if subsequent adjustments are made to a tax module. These may include: a payment or credit transfer, an audit tax adjustment, a math error correction, and an amended return or claim that is filed and processed. Therefore, the subsequent overpayment can be issued in a manual refund for those taxpayers eligible for an OBR.

An OBR may not be issued if a Treasury Offset Program offset will occur.

When the taxpayer provides the dollar amount and documentation of their hardship the OBR is issued for that amount. Do not exceed the amount of the hardship request.

Evidence of the credit condition and documentation must be provided when an OBR manual refund is submitted to the Accounting Branch. Evidence may be either a copy of the unfiled tax return (including all forms and W-2s) or an IDRS print showing the amount of the overpayment available for refund.

Complete Form 5792, Request for IDRS Generated Refund (IGR), or Form 3753, Manual Refund Posting Voucher, as required and process as follows:

If the TAC or designee agrees with the OBR, they must initial in the remarks section of the manual refund form and forward the OBR to the Accounting Function.

If the TAC or designee disagrees with the OBR, the case must be turned over to the Taxpayer Advocate Service for resolution.

If the OBR is rejected, the OBR initiator must input on CC REQ77, TC 972 AC 036 to reverse TC 971. Input a history item on IDRS, "REJECT/OBR."

In limited circumstances involving a clerical error by the IRS or TAS that prevented processing of the OBR request, the IRS may reverse an offset that has already occurred and issue the taxpayer a refund. A clerical error includes bookkeeping, ministerial, inadvertent, or accidental errors, or even mistakes of fact.

Use TC 290 and TC 766 with an Offset Trace Number (OTN) to reverse a Treasury Offset Program offset (TC 898) with the same OTN. The OTN field is 10 characters that includes a hyphen (-), e.g. 12345-67890. CC ADJ54 has a field for input of the OTN in position 64–74 of line 6. You must always input the OTN when reversing a TOP offset with a RN 766. Before reversing any offset to Office of Child Support Enforcement (Agency Codes 1 and/or 2), see IRM 21.4.6.4.2.4, Child Support TOP Offsets.

Input the offset reversal using CC REQ54, blocking series (BS) 00 with original return or BS 05 without original, source code (SC) 7, and the appropriate reason code. See IRM 21.5.1.5.3(3), CII Source Documentation, and IRM 21.4.6.5.10, TOP Source and Reason Codes. Use Hold Code (HC) 1 or 4 unless specifically instructed to use another HC. Use HC 2 for Injured Spouse cases.

The TC 766 amount may not exceed the net TOP offset amount. A TC 766 input for more than the net amount results in an UPC 189. See IRM 21.4.6.5.1.2.3, Netting TOP Offsets and Reversals.

The OTN input with TC 766 must match an OTN of a prior posted TC 898. Multiple TC 898 offsets from the same refund must be reversed separately. The order in which they are input does not matter.

For Form 8379, compare the injured spouse's refund allocation with the TC 898 on the module and reverse only the portion needed. If all the offset is needed, reverse the entire amount.

A manual reversal is required when you have an IMF/BMF offset which was sent to Bureau of the Fiscal Service in error and cannot be reversed with a TC 766 (IRS reversal) or TC 899 (Bureau of the Fiscal Service reversal). Before reversing any offset to Office of Child Support Enforcement (Agency Codes 1 and/or 2), see IRM 21.4.6.4.2.4, Child Support TOP Offset.

Examples of offsets which can never be reversed using a TC 766 are:

On occasion, you may have a TC 898 transaction that was deleted in error and a systemic reversal (TC 766) cannot be done. Take the following actions:

The TOP Liaison will prepare the Form 3809, Miscellaneous Adjustment Voucher, and include it with the substantiating documents to AM Policy & Procedures BMF Analyst for inclusion in the manual reversal request package. The TOP Liaison will refer to IRM 3.17.63.5.26.4, Treasury Offset Program (TOP)/Debtor Master File (DMF) Manual Offset Reversal Transactions.

On occasion, you will have a UPC condition or Agency Refund Record TC 899 Type Code 2 which was submitted in error and cannot be reversed or corrected.

A TC 766 reject occurs when the IRS requests a specific TOP offset reversal and the Federal agency has already refunded the offset or Bureau of the Fiscal Service has initiated a reversal of the offset because it was undeliverable or a debt was canceled.

A TC 766 Reject Listing is created weekly. Upon the receipt of the listing, the IRS Headquarters analyst must review and reconcile the listing with other TOP reports for accuracy prior to sending the listing for resolution.

The TC 766 Reject Listing must be worked upon receipt to avoid erroneous refund conditions and correct the taxpayer's account.

The account must be reviewed to identify the condition that caused the TC 766 to be rejected, see IRM 21.4.6.5.1.2.2, TC 899, Reversal or Agency Refund of TOP Offset. In general, a TC 899, type 1, 2, 3 or 4 will be pending or posted to the account. If the TC 899 is unpostable, research the condition that caused the unpostable and make the necessary corrections to correct the taxpayer's account. If a TC 899 is not reflected on the account, contact Bureau of the Fiscal Service to verify the transactions that transpired before any adjustment is made.

For each TC 766 rejection, Bureau of the Fiscal Service provides a reason for the reject and is displayed on the report as a "result code" .

The most common result codes, with an explanation, are listed below:

Once the condition creating the TC 766 reject is identified, use the IF/THEN chart above to resolve the TC 766 Reject.

Upon each cycle's completion, the TOP Liaison will send an e-mail to the IRS Headquarters Analyst acknowledging that the listing has been processed. Before reversing any offset to Office of Child Support Enforcement (Agency Codes 1 and/or 2), see IRM 21.4.6.4.2.4, Child Support TOP Offsets.

Cases involving bankruptcy and TOP offsets require that the agency receiving the offset make the refund unless:

Research the account for agency refunds (TC 899 or TC 971 AC 599 Type 2) or prior reversals (TC 766 with an Offset Trace Number (OTN)). Before reversing any offset to Office of Child Support Enforcement (Agency Codes 1 and/or 2), see IRM 21.4.6.4.2.4, Child Support TOP Offsets.

If research shows that the TOP offset is available for reversal, immediately call the Centralized Insolvency Operation (CIO) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or fax Form 4442, Inquiry Referral, clearly labeled "Expedite" to the CIO ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ before making any account adjustments so the potential stay violation may be resolved within 48 hours. Once Insolvency determines the offset is in violation of the automatic stay, Insolvency will complete the Insolvency Referral Form and send the completed form as an Encrypted Email to *TS AM TOP LIAISON. The TOP Liaison will either approve or disapprove the request for a TOP offset reversal depending on information acquired during research.
Cases approved for TOP offset reversal may be referred to Accounts Management (AM) by Insolvency. Insolvency will detail the action necessary on Form 4442 or Form e-4442 and submit it to the appropriate AM function.

If Insolvency states not to issue the refund, send Letter 3179C, "Refund Offset to Treasury Offset Program (TOP) and Injured Spouse Inquiries" , informing the injured spouse the result of the allocation and advise the injured spouse to contact Insolvency.

When the injured spouse files a Form 8379, Injured Spouse Allocation, that results in a reversal and refund of the TOP offset, and the agency also refunds the offset for some reason, the injured spouse often returns the IRS refund.

If the TC 841 creates a credit balance and it is determined that the TOP offset reversal was honored by Bureau of the Fiscal Service, inform the taxpayer that they must return the refund to the agency. Explain that the IRS has already obtained the offset funds from the agency and that the agency is now owed the money. The IRS can no longer manually repay the refund to the agency. Allow the credit to refund if there are no other open issues. Refer to IRM 21.5.6.4.31, P- Freeze Overview.

If the injured spouse explains that the agency issued a refund and the TC 841 satisfies a debit balance in the module, no further action is necessary. This occurs when a TOP offset reversal, TC 766 with OTN, was denied by Bureau of the Fiscal Service (subsequent TC 767 in the module with the same OTN).

A UPC 134, RC 03, is an IMF unpostable that occurs when an account containing a full or partially unreversed TC 898 (net offset amount greater than zero) attempts to merge with another account, and the 23C date of the TC 898 is within six years of the current date. Refer to IRM 21.6.2, Adjusting TIN-Related Problems.

A UPC 134, RC 05, occurs when a TC 766 with an Offset Trace Number (OTN) attempts to reverse a TC 898 with the same OTN, and the 23C date of the offset is more than six years from the date of reversal.

UPC 137 and UPC 437 are IMF and BMF UPC(s) unique to the posting of a TC 898 or TC 899.

The Unpostables unit attempts to correct each of the above conditions. The case is referred to the appropriate Accounts Management (AM) Function if Unpostables is unable to correct the transaction.

For TOP Offset (TC 898) and Agency Reversal (TC 899), UPC 151 RC 0 occurs when the TC 898/TC 899 transaction returned by Bureau of the Fiscal Service has a different name control than the one used by .

Occasionally, the TC 898 was deleted in error (DU 898 on CC TXMOD). When this occurs, you cannot do a TC 766 to reverse the offset systemically. You will need to do a manual reversal request. See IRM 21.4.6.5.8.2, Manual Reversal of TOP Offset.

If there is no DU 898 on CC TXMOD, research CC UPTIN of the campus identified in the Refund Schedule Number (RSN) of the TC 846/TC 840 on the account. To determine the appropriate campus, use the 8th and 9th position of the RSN. See IRM 3.17.79–4, Refund Schedule Number Format, for additional information. If research indicates the TC 898 was deleted, see IRM 21.4.6.5.8.2, Manual Reversal of TOP Offset, to initiate procedures for a manual reversal request.

UPC 168, RC 0, is an IMF unpostable code that occurs when TC 766 with OTN fails to find a previously posted TC 898 with the same OTN. Input the reversal with the correct OTN or on the correct tax period, MFT, etc.

UPC 168, RC 0, also occurs when an RN 808/809/810/811 is input after a RN 808/809/810/811 was previously input, but the refund didn’t release due to a hold code or TC 570. Input a TC 290 for .00 without the corresponding RN 808/809/810/811 to release the overpayment. The TC 846 will generate the appropriate bypass indicator based upon the previously unreleased RN 808/809/810/811 that is posted.

For TOP offsets, UPC 189, RC 06, occurs when a TC 766 with OTN is greater than the net TOP offset amount. See IRM 21.4.6.5.1.2.3, Netting TOP Offsets and Reversals.

UPC 342, RC 05, is a BMF unpostable code which occurs when TC 766 with OTN fails to find a previously posted TC 898 with the same OTN.

UPC 342, RC 06, occurs when a TC 766 with OTN is greater than the net TOP offset amount. See IRM 21.4.6.5.1.2.3, Netting TOP Offsets and Reversals.

UPC 342, RC 07, occurs when a TC 767 with OTN is greater than the net TC 76X with same OTN. See IRM 21.4.6.5.8.3, TC 766 Reject Listing.

UPC 342, RC 08, occurs when a TC 766 with OTN attempts to reverse a TC 898 with the same OTN, and the 23C date of the offset is more than six years from the date of reversal.

The First-Time Homebuyer Credit (FTHBC), IRC 36 (f)(5), provides that for the recapture tax, 50 percent of the amount of the credit claimed on a joint return is treated as having been allowed to each spouse.

Research CC IMFOLF to determine if both spouses on the joint return are liable for the repayment of the recapture tax. Allocate it accordingly on the injured spouse worksheet.

When working Injured Spouse Allocation Cases involving recapture research 2008/2009 returns to determine how the credit was allocated. Refer to IRM 21.6.4.4.17.1, Recapture of First-Time Homebuyer Credit, for guidelines on the recapture. Some examples are provided below:

When working Injured Spouse Allocation Cases involving math errors with First-Time Homebuyer Credit, follow procedures in IRM 21.4.6.5.4.3(17)(c), Processing of Form 8379 Injured Spouse Allocation, and IRM 21.5.4.5.7, Math Error with Injured Spouse.

If the Refund Statute Expiration Date (RSED) has expired, see IRM 21.4.6.5.8(4), TOP Offset Reversals with Adjustments.

A taxpayer has excess advance payment of PTC (excess APTC) if the amount of the APTC paid on the taxpayer’s behalf exceeds the taxpayer’s allowable PTC. For tax years other than 2020 the taxpayer must repay all or a portion of the excess APTC. The repayment amount is reported on line 29 of Form 8962, Premium Tax Credit, and on:

Taxpayers may allocate the excess advance premium tax credit repayment on Form 8379, any way they choose.

If the taxpayer reported excess APTC on their original return but did not allocate the excess APTC on Form 8379, allocate one-half the APTC for each spouse (50/50). Send Letter 3179C, Refund Offset to Treasury Offset Program (TOP) and Injured Spouse Inquiries or Letter 285C, Refund/Overpayment Applied to Account, to the taxpayer informing them that we allocated it for them. Suggested response: Our records show the Excess Advance Premium Tax Credit Repayment (APTC) was not allocated on Form 8379. We allocated the repayment for you, giving each spouse one half of the excess APTC repayment. If you do not agree, you must submit a new Form 8379 allocating the repayment as you determine.

Some modules appear to have a TOP offset and can be identified by the posting of a TC 898 with an Agency ID of “XX” and an Agency Site ID “DF” or “PF”. However, these are not true TOP offsets. A systemic recovery was implemented to correct these accounts. However, in some instances the recovery did not work.

If calls are received regarding an account with a TC 898 with an Agency ID of “XX” and an Agency Site ID “DF” or “PF”, take the following actions:

If calls are received or you have correspondence regarding an account with a TC 898 with an Agency ID of “XX” and an Agency Site ID “DF” or “PF”. Review the account to determine if the account was corrected during the recovery process. If the account was corrected no other action is needed.

If the taxpayer’s filing status is other than Married Filing Joint (MFJ) and filed a zero or $1 return and there is no credit on the account, close your case using Document Type-Internal Transcript, IDRS Cat Code IRRQ, Program Code 40000.

If the taxpayer’s filing status is other than MFJ and filed a zero or $1 return, there is a credit on the account release the credit. Close your case using Document Type-Internal Transcript, IDRS Cat Code IRRQ, Program Code 40000.

If the taxpayer is MFJ and filed a zero or $1 return and there is a credit on the module you should determine if either spouse has a debt.

The Recovery Rebate Credit (RRC) is a refundable credit for people who didn't receive the full Economic Impact Payments (EIPs) in 2020 and/or 2021 and whose circumstances may have changed, making them eligible now for some or all the unpaid portion. As of March 18, 2021, the 2020 RRC amount will no longer be applied to past due federal income tax debts. The 2020 RRC can be reduced to pay TOP debts owed to other Federal government agencies as well as to state agencies. The IRS will not be reversing any RRC tax offset which occurred before March 18, 2021, unless an Injured Spouse Allocation, Form 8379, is filed requesting the injured spouse’s share of the offset. EIP 3, issued in 2021, was not subject to offset.

When you have a Form 8379 for the original refund, which has been processed and the stimulus payment is posted, you will work the Form 8379 for both the original refund and the stimulus payment.

In most cases, the RRC is split 50 percent regardless of the amount of income, credits/children claimed or community property jurisdiction if it falls within the period of limitations for refunding. However, if only one spouse received their EIP refund and RRC is claimed on the joint return, then the spouse who did not receive their EIP refunds should be allocated the RRC up to the amount of the EIP they did not get.

When RRC is involved and the overpayment for 2020 or 2021 is split between the injured spouse and other spouse and either spouse has a tax debt, you must issue manual refunds to both spouses. The injured spouse’s manual refund must include the appropriate BPI and be issued in either one name only or both names, depending upon how the Form 8379 was completed by the taxpayers. The other spouse’s manual refund must include a BPI 0, no Blocking Series 9, and should be issued in the joint nameline. The election to have the refund issued in one name only is only a procedure for issuing the injured spouse’s refund, if that is what the taxpayers chose on their Form 8379. For each spouse’s allocation, you must manually transfer any overpayment amount above their allocated portion of the RRC to any tax debt(s) owed in earliest CSED order. These procedures apply to both pre-offset and post-offset injured spouse cases.

If part of the RRC payment was offset and part was refunded to the taxpayers, deduct the refunded amount from the credit amount to determine if the injured spouse is entitled to any additional refund.

Once the RRC offsets to pay a TOP debt, it loses its identity as a RRC payment. Normal Interest rules apply when considering credit interest if all or part of the credit is subsequently refunded.

When working an injured spouse case after offset of the original overpayment and EIP is involved, you may need to input two adjustments. One adjustment will be for the original overpayment and the second adjustment will be for the EIP. Be sure to use the correct OTN for each adjustment. The RRC is worked using normal injured spouse procedures. For additional information refer to IRM 21.6.3.4.2.14, Recovery Rebate Credit (RRC), and IRM 21.6.3.4.2.14.1, Recovery Rebate Credit (RRC) - Adjusting the Credit.

Advance Child Tax Credit (CTC) is an advanced payment of the Child Tax Credit for tax year 2021. Eligibility for the payment is based on the CTC shown on the tax year 2020 return (2019 if a 2020 return has not posted). Advance payments are not subject to reduction or offset.

Payments can be identified by a TC 290 .00 with CRN 272 on the tax year 2021 module. Each payment’s DLN will contain a unique sequence number to identify the month for which the payment was issued. See IRM 21.6.3.4.1.24.2, Advance Child Tax Credit (AdvCTC).

Advance CTC is not subject to offset. However, if the CTC is claimed on the 2021 tax return it is subject to normal offset rules. Additionally, normal injured spouse allocation rules apply if CTC is claimed on the 2021 return.

The CTC should be split 50/50 if the taxpayer does not provide an allocation.

The American Rescue Plan Act of 2021 allows the taxpayer "subject to income limitations," to exclude $10,200 (MFJ - $10,200 per spouse) of Unemployment Compensation from income for tax year 2020. See IRM 21.6.6.2.48, Unemployment Compensation Exclusion (UCE) due to American Rescue Plan Act (ARPA) of 2021, and IRM 21.6.6.2.48.1, Account Adjustments for the UCE.

Normal offset rules apply to the Unemployment Compensation Exclusion.

Form 8379, Injured Spouse Allocation, must be reviewed to determine that all income shown on the joint return has been properly allocated and verified. The taxable amount of Unemployment Compensation shown on the joint return must be used when allocating the separate Adjusted Gross Income (AGI) for each spouse who received the benefit(s) of the exclusion.

Input any adjustment needed for the UCE before processing the Form 8379, Injured Spouse Allocation. See IRM 21.6.6.2.48.1, Account Adjustments for the UCE.