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4 - Erroneous AbatementThe timely filed TC 150 return for TY 2018 is determined to be a nullity. The valid taxpayer filed a return reporting tax of $.00 and withholding of $2,500 which posted as a TC 976. Form 14039 is included with the return. The ASED for the valid return is expired. Based on the original return, the account shows TC 150 tax of $5,000, and withholding of $6,000. A CP 2000 proposing a tax increase of $2,000 based on unreported income is issued to the valid taxpayer’s last known

Reminder:

Internal Revenue Manual Part 25. Special Topics · 2026-10-03 edition · updated 2026-10-04 · United States

Lost refunds will be addressed following normal procedures for the case type.

When the TC 150 return is valid, the taxpayer qualifies for more RRC than they received (including advance payments), and the taxpayer did not claim any amount of the RRC (blank or zero) or claimed less than they are entitled to, recalculate the RRC based on the valid taxpayer’s information. Adjust the account to add/increase the credit, as allowable. Do not set a math error. Issue a closing Letter 4674C to explain the changes made to their tax return figures. You may use the suggested paragraph below or similar verbiage when explaining the changes made:"We changed the amount you claimed as Recovery Rebate Credit (RRC) because we determined you are eligible for more of the credit than you reported. You included $XX.XX of RRC on your return. We recalculated the credit and allowed $XX.XX of RRC. The result of this action is (use appropriate fill in here)." Use numerical figures in place of the X’s in the dollar amounts provided.Select an appropriate fill in from the list below:• an increased refund• a decreased balance due

When the valid taxpayer filed a return and claimed more RRC than they are entitled to, recalculate the RRC based on the valid taxpayer’s information. Correct the account, as allowable. When the valid taxpayer’s return posted as a TC 976, follow procedures in IRM 21.5.4.4.1, Setting the Initial Math Error Action, to set the math error and issue a closing Letter 474C to provide an explanation of the correction made. When the valid taxpayer’s return posted as the TC 150, the account should already reflect the math error. Send a closing Letter 4674C to provide an explanation of the correction made.

Refer to the table below for additional account considerations:

Condition

Additional Considerations

(1) Valid Bal Due for another year:

RRC cannot be applied toward that balance.

(2) Credit Elect:

RRC can be applied as a credit elect.

Issue a closing Letter 4674C to provide an explanation when the amount of credit elect is not the amount the taxpayer(s) expected.

(3) Issuing a manual refund:

Credit interest is allowed for RRC.

(4) Lost refund includes RRC:

Address the lost refund as instructed in the applicable streamline, non-streamline, or IJE procedures.

(5) RRC was offset:

EIP 1 is restricted to offset to child support obligations, only, and is not subject to repayment when the taxpayer received more than they were entitled to.

EIP 2 is not subject to offset or repayment when the taxpayer received more than they were entitled to.

EIP 3 is not subject to offset or repayment when the taxpayer received more than they were entitled to.

RRC is not subject to offset for a federal tax debt and must be returned to the originating module when offset in error.

RRC is subject to offset for a TOP debt.

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▸Contents — Internal Revenue Manual Part 25. Special Topics
Internal Revenue Manual Part 25. Special Topics

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