Caution:

If the IRS caused the overstated amount (key input error or misapplied payments), this case is considered a Category D (Non-rebate) case. Follow procedures for Category D cases.

Mark the disposition in OLNR as L. Add the appropriate erroneous refund label to the notice. See Erroneous Refund Labels chart below.

If

Then

The entire refund is erroneous

Use Label 15. You were issued an erroneous refund due to a processing error. Please return the uncashed check or a substitute payment.

A part of the refund is erroneous

Use Label 16. We sent you a refund in error. The correct amount of the adjustment is $____. You will receive a separate notice explaining the correction. We apologize for any inconvenience this may have caused you.

Input the adjustment on IDRS with Hold Code 0. Use the return (or a print of BTRVU for Electronic File (ELF) returns) as a source document. Attach adjustment tag to return/BRTVU and refile as usual.

Category D: Non-rebate Erroneous refunds. See IRM 21.4.5.6.1, Account Actions For Category D Erroneous Refunds, for more information.

Mark the disposition in OLNR as L. Add the appropriate erroneous refund label to the notice. See Erroneous Refund Labels chart below.

If

Then

The entire refund is erroneous

Use Label 15. You were issued an erroneous refund due to a processing error. Please return the uncashed check or a substitute payment.

A part of the refund is erroneous

Use Label 16. We sent you a refund in error. The correct amount of the adjustment is $____. You will receive a separate notice explaining the correction. We apologize for any inconvenience this may have caused you.

If the erroneous refund involves misapplied payments, reverse the payment(s) on IDRS using ADC/ADD24. Input a TC 570 on the debit side of the credit transfer to suppress a CP 260. Transfer the credit only if it belongs to another taxpayer.

If the erroneous refund is due to an incorrect tax or credit, input the adjustment with a Hold Code 3. Use a copy of the return or a print of BRTVU for Electronic File (ELF) returns as a source document. Attach the adjustment tag to the source document.

If any offsets have occurred due to the erroneous credits, reverse the offsets.

Input TC 470 on REQ77 with closing code 93, Posting Delay Code 1. This holds notices for 26 cycles.

Send 510C Letter to tell the taxpayer of the erroneous refund.

Input TC 844 on REQ77. Do not input until after the TC 846 date.

See TC 844 Decision Table below.

If

Then Input

The taxpayer is not at fault and the amount of the refund is $50,000.00 or less

TC 844

Extension Date: Use the date of input of 510C Letter plus 5 working days

Transaction Date: Use the date of TC 846

Freeze Release Amount: Erroneous part of the refund (including any erroneous credit interest)

Remark: Erroneous Refund

The taxpayer is at fault or the amount of the refund is more than $50,000.00

TC 844

Transaction Date: The date of TC 846

Remarks: Erroneous Refund

Complete Form 12356, Erroneous Refund worksheet. See IRM 21.4.5.6.2, Preparing Form 12356, Erroneous Refund Worksheet, for more information.

Attach a print of TXMOD, a copy of the 510C Letter, a copy of the payment voucher or check (if caused by a misapplied payment), and any other pertinent documentation to Form 12356. If the adjustment involves withholding, attach a copy of the return (or BRTVU for Electronic File (ELF) returns).

Route the Erroneous Refund package to Accounting. If sending the original return, recharge the document.