- 4.4.4.1 Overview/Claims
- 4.4.4.2 Source Code 30
- 4.4.4.3 Claim Amount
- 4.4.4.4 Claim Disposal Codes
- 4.4.4.5 Informal or Carryback/Carryforward Claims
- 4.4.4.6 Claim of Right Case
- 4.4.4.7 Claims for Abatement/Refund of Dyed Diesel Fuel Penalty Assessments
- 4.4.4.8 Claims for Excise Tax on Fuel
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This chapter provides instruction for processing claims.
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Taxpayers may file claims at any time. An amount claimed should be placed on the AIMS data base. A claim source code (30, 31, 32, or 35) may also be appropriate.
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See IRM 4.13, Audit Reconsideration if claims is filed due to a prior examination.
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The following should be used to determine the proper Source Code to use when establishing a claim/amended return on AIMS.
IF research shows that the original return THEN has never been examined use Source Code 30. was previously examined and is not on AIMS use Source Code 73. was previously examined but is still on AIMS in Status Code 90 Reopen AIMS and retain the original source code. -
A Transaction Code 30X will be present on the transcript indicates that the return was examined.
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The presence of a TC 29X should not be considered an examination of the return.
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The module balance has no bearing on which source code to use.
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Alpha statute "AA" is appropriate for use with all source codes but should be used only when the normal statute date is within 30 days of expiration or has already expired. ERCS requires that an amount claimed be present on the data base before AA is allowed.
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Source code 30 requires that a claim amount be present. However a claim amount can be use with any source code.
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If the correct amount of claim is not on the data base (Form 5546 or an AMDIS(A) display), use a Form 5348 to update AIMS with the correct amount. The corrected amount can also be entered on Form 5344 when the case is being closed, or Form 5349 after the case has been closed.
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If the correct amount is on the data base, then no entry is required on Form 5344 when the case is being closed.
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If there is an amount claimed on the data base, and it has been determined that the claim will not be examined or surveyed (Disposal Code 34), only disposal codes 28, 29, 33 and 99 are valid. To use any other survey disposal code, delete the claim amount.
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The amount claimed is the specific amount of refund requested. If the taxpayer has filed for "the entire amount of tax paid" , the amount claimed is the amount of tax shown on the return. If the taxpayer has filed for "$1 or more" or " such amount as may be due" , the amount claimed is the amount that the examiner has computed and recorded on the final notice to the taxpayer as the amount of claim. This notice will be in the form of a claim allowance, partial allowance, or disallowance.
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Forms 1045 and 1139 (Applications for Tentative Carryback) are not treated as claims when the amount requested has been refunded, even though a claim form with the same issue and tax period was filed at the same time.
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Occasionally a taxpayer will file a second claim for an additional operating loss allowance. If the taxpayer’s return is open in Examination, the refund is not made and the second claim is associated with the return. Enter the amount of the second claim.
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When several claims are made for different issues, the amount of claim entered is the net amount of all the issues.
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A jobber may file multiple claims, one for each customer. This is treated as one claim and the total amount claimed is entered.
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Multiple claims involving one employment tax return, Form 941 of the same employer, are treated as one claim and the total amount claimed is entered.
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When several claims are filed for the same issues, or if one claim has additional issues, enter the larger amount.
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Claims that cover longer than one tax period, must be recomputed so that an amount for each tax period is entered.
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Claims may use a variety of disposal codes depending on the situation.
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Use Disposal Code 03 for an examined claim allowed in full.
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For an agreed claim partially allowed use Disposal Code 03.
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For an unagreed claim partially allowed use an appropriate unagreed Disposal Code.
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Use Disposal Code 01 for a claim disallowed in full.
Note:
Item 41 is required with this disposal code.
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When the campus receives informal or carryback/carry-forward claims, they are hand carried to Adjustment Branch un-processed and without posting a TC 977 to establish an amended return freeze. If there is an open Examination control, Adjustments Branch will forward these claims to the Examination Branch at the campus with the print of the AMDISA display attached reflecting the open control. This is so that actions can be taken to prevent premature closing of the open case until claims are associated.
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Claims received in the Examination Branch for cases under its control will be associated immediately upon receipt.
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Claims received for association with area controlled cases will be handled as follows:
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Input an "0" freeze on AIMS to prevent the case from being closed.
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Attach a buckslip to the claim with instructions to release the freeze code once the claim has been associated with the return.
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Input freeze code "P" to the carryback year only using Form 5348. The freeze code must remain on the AIMS through final processing by the Case Processing Support closing function. This freeze code will prevent the AIMS closing (CC AMCLS) unless an Interest Computation Date, Item 11 and/or an interest adjustment is present on Form 5344. Presence of either input element will cause the removal of the P freeze from the AIMS account. Freeze Code P identifies that a carryback claim was filed, must be associated with the open case file, and that a restricted interest computation must be considered by the area closing function.
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Make an AMDISA print (reflecting the freeze action) and forward it separately with a buckslip to the area Case Processing Support function. This information is needed since they act as the control point for all freeze codes used on area accounts.
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Forward the claims to the appropriate area office group or function for association with the open return.
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The procedures for Carryback Claim above also apply when Category A (pre refund) claims involving carryback issues are selected by the Examination Branch at the campus for area examination. Freeze Code P will be input with Form 5348 after AIMS has been established. This will ensure that a restricted interest computation is considered by the Case Processing Support closing function.
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Claim of Right cases are rarely seen in the area office. A claims of right occurs when, under the provisions of IRC Section 1341, a taxpayer includes an item in gross income for a prior taxable year (or years), but it was later determined that the taxpayer did not have an unrestricted right to that item of income.
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The taxpayer takes the deduction in the year in which the determination was made, but the amount of the tax decrease is based on the tax for the prior taxable year which would result solely from the exclusion of the item. For this reason, the decrease in tax is taken as a credit against tax and can be more than the total tax liability on the account. The proper way to apply the credit is to reduce tax. If there is any excess, it is applied as a miscellaneous credit.
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Attach Form 3198 to the front of the case file.
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Consult the Technical Support function when there are questions on these cases.
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Determine the total tax assessed from a transcript.
IF the total tax assessed is THEN sufficient to allow the total recommended overassessment Use TC 301 to reduce the tax on the module. not sufficient to allow the total recommended overassessment 1. Use TC 301 to reduce the tax on the module to zero. 2. Use reference numbers 766 or 767 to allow the additional credits needed to process the overassessment.
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Effective 1/1/97, all claims for abatement or refund of dyed diesel fuel penalty assessments are processed through the Cincinnati Campus. These claims, when denied, must be disallowed by certified mail, and the taxpayer does not have administrative appeal rights. The claimant can only seek relief by filing suit in the United States District Court or the United States Court of Claims within two years of our claim disallowance letter.
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To ensure uniformity for processing dyed diesel fuel penalty claims, the following procedures have been implemented:
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All claims received by the Cincinnati Campus Exam Classification will be checked against Master File for validity of claims (i.e. that corresponding penalty has been assessed and payment has been received) . If claim is determined to be valid, file will be forwarded to the Area PSP Support where the taxpayer resides
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Area PSP Support will assign the claim to either the excise or the Diesel Compliance Officer (DCO) group.
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All claims received directly by the area office for taxpayers residing in their area will be immediately established on NMF AIMS, using the NMFT code associated with the taxpayer's primary income tax return (20 for Form 1040, 32 for Form 1120)
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Regardless of who actually works the claim, the DCO manager will enter the appropriate claim information onto the Excise Fuel On-line Network (ExFON) system.
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If the penalty was assessed by a different area, the receiving area will contact the assessing area DCO manager and request that the penalty file be transferred. This will also require the assessing area to update/transfer the organization code on the ExFON system.
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All claims received directly by the assessing area for taxpayers not residing in the area will be forwarded along with a copy of the penalty file and control on ExFON, to the area of the taxpayer’s residence.
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The manager, upon receipt of the dyed fuel penalty claims file, should review the file and ensure that the claim is valid (i.e. the penalty has been assessed and payment has been received from the taxpayer).
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The manager should evaluate the file and determine if assignment to an examiner or DCO is required. ExFON will not allow assignment to an examiner, therefore in this situation, control on ExFON will remain with the DCO manager.
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All contacts with the taxpayer or representative, as well as disposition of claim (allowance or denial) and supporting reason must be recorded on ExFON in the Taxpayer Contact application.
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If any portion of the claim is allowed, Form 8278 will be prepared to abate the penalty (using the MFT the penalty was assessed under, i.e. 13 or 55) and sent to closing function for processing. The closing function will follow procedures for processing civil penalties using blocking series 52X.
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If the claim is disallowed, the group will prepare the certified claim disallowance letter, send the original by certified mail, and suspense the case for ten days with another copy of the letter in case the taxpayer initiates contact.
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At the end of the suspense period, Form 8485 will be prepared by the area with the tax period and correct MFT for the taxpayer's related return (i.e. MFT 30 for the individual return) . Enter the transaction code (TC) 290 for .00, using blocking series 15, (this will not generate a refile DLN or associate the claim with the return) . Enter in the Explanation Section of Form 8485, Disallowed Dyed Diesel Fuel Claim. Submit the file for terminal input and forwarding to the Campus Files function.
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If the claim is disallowed for a taxpayer that has an income tax filing requirement, but the return has not been filed, the closing function will follow procedures in Text 4.4.8.6.
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The NMF AIMS controls will be closed using Disposal Code 28, following normal procedures.
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There is an excise tax on gasoline, gasohol, aviation gasoline, diesel fuel, aviation fuels other than gasoline, special motor fuels and fuels used in commercial transportation on inland waterways.
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In order to file a claim for refund, the taxpayer MUST have either a social security number (SSN) or an employer identification number (EIN) . Entities, including state and local governments, nonprofit educational organizations, foreign individuals and businesses must use an EIN.
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At this time, these claims cannot be processed through AIMS. These claims must be established on AIMS as a NMF account (MFT 45) for control purposes only.
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The examining officer will identify the case as a fuel excise tax claim via Form 3198. Form 3198 must identify the specific type of claim that is being processed, e.g., gas used on a farm or aviation fuel-farm. If the specific type of claim is not identified, the case file will be returned.
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Research the entity through Command Codes EINAD, ENMOD, and/or INOLE and request a MFTRA transcript to verify that the TIN used on the claim is on record and to verify the taxpayer’s filing requirement. It is important that account research be reviewed to ensure that the claim has not already been allowed and refunded to the taxpayer by the campus. MARS (Manual Accounting Replacement System) /Unit Ledger Card research must also be performed to determine if a claim was allowed Non-Master File. If research indicates that the claim has already been allowed, contact the examining officer so that appropriate adjustments can be made that will provide for proper disposal of the case file.
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If there is no record of the TIN, the claim will be returned to the group. The group should reject the taxpayer’s claim advising that the claim may be refiled after the TIN is obtained. Form SS–4 (for an EIN) or Form SS–5 (for an SSN) will be sent to the taxpayer along with a form letter outlining the reason(s) for the claim rejection.
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Processing procedures are outlined below based on the specific type of claim being processed.
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Claims for refund or credit can be filed for the following non-taxable or exempt uses.
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Off highway business use;
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Use in commercial fishing;
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Exclusive use of state or local governments;
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Exclusive use of non-profit educational organization.
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Export, including shipment to a possession of the U.S.;
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Supplies for vessels;
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Use on a farm for farming purposes;
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Use for intercity or local bus or school bus;
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Blend stocks or additives not used to produce gasoline;
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Commercial aviation;
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Supplies for aircraft;
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Aircraft museums and helicopters;
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Gasohol blending.
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A quarterly claim can be filed if claiming a refund of $1,000 or more for any of the first three quarters of the taxpayer’s tax year. In arriving at the $1,000, taxpayers cannot include Items (i) through (m), listed above, with the first eight non-taxable uses. The taxpayer could submit a separate quarterly claims if Items (i) through (m) amounted to $1,000 or more for the quarter.
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Claims filed by farmers for "gasoline used on a farm for farming purposes" cannot file a claim for refund on Form 843. They must file for credit on their income tax return. Farmers can file Form 843 for refund of other types of gasoline excise tax used for purposes other than as stated.
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Gasoline claims must be filed by the last day of the third month following the end of the quarter.
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Only one claim can be filed for each of the first three quarters of the tax year. The fourth quarter, for any amount, must be claimed on the income tax return. The Internal Revenue Code (IRC) does not restrict the term "quarter" to mean a " calendar quarter." The term "quarter" means any three consecutive months in a 12 month period. Therefore, a fiscal year taxpayer’s first quarter would be the first three months in their taxable year.
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A yearly claim, including the fourth quarter, can be filed by an entity that is not required to file an income tax return (state or local government or an exempt organization are not required to file an income tax return) . These taxpayers can file quarterly claims for the first three quarters and/or one yearly claim covering the fourth quarter and any amounts for which the taxpayer did not file a quarterly claim.
Note:
Taxpayers that HAVE an income tax filing requirement, CANNOT FILE a fourth quarter claim. If the taxpayer DOES NOT HAVE an income tax filing requirement, a yearly or quarterly claim can be filed.
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Quarterly claims are filed and received prior to the posting of a return (TC 150).
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If research determines that the TAXPAYER HAS AN INCOME TAX FILING REQUIREMENT, the gasoline claim can be processed on an MFT Code 02, 05, 06, 30, 33, or 34 tax module. The entity that filed the claim will determine what MFT Code to process it against. If the claim was filed by a corporation, use MFT 02; an individual, MFT 30, etc.
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Process the adjustment on Form 8485 to input the claim through IDRS via CC ADJ54.
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The tax period used will be the current tax period, (e.g., 9112). Ensure that TC 150 HAS NOT POSTED for the tax period used. If TC 150 HAS POSTED, the claim will be processed as a "post-assessment claim. " Refer to (9) below.
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Input TC 290 for a zero (–0–).
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Use Credit Reference Number 301 with the corresponding money amount for GASOLINE tax claims. The credit reference number will convert to a TC 766 when posted to Master File. The credit reference number with a negative amount will decrease the credit and generate a TC 767 on Master File. There should not be more than three claims filed by the taxpayer for gasoline tax claims. Contact the examining officer if this situation occurs. When there are multiple claims (not to exceed three), input each claim amount separately using Form 8485, with the appropriate reference number and amount for the claim being processed.
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Use Blocking Series 40.
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Credit interest is automatically restricted from generating when the transaction is input with Blocking Series 40.
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IF THE TAXPAYER DOES NOT HAVE ONE OF THE FOLLOWING INCOME TAX FILING REQUIREMENTS, MFT CODE 02, 05, 06, 30, 33, OR 34, input the adjustment on a module based on whether the taxpayer filing the claim is an individual, corporation, etc. (e.g., if the taxpayer is an individual, input the claim on MFT 30) . Use of Blocking Series 40 will prevent the adjustment from unposting because a return has not posted and it will prevent a filing requirement from being established for the taxpayer.
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In the "Explanation" area of Form 8485, annotate "Excise Claim for gas credit."
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If an original return has posted, Blocking Series "00" (adjustment with original return) or "15 " (adjustment without original return) should be used. If the claim filed is for refund of excise tax paid, no interest is to be allowed on the claim.
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IF A TAXPAYER SUBMITS A FORM 4136 AND IS TAKING A CREDIT AGAINST HIS INCOME TAX, THE MODULE WOULD NOT BE RESTRICTED FOR CREDIT INTEREST.
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A wholesale distributor is any person who sells gasoline to producers, retailers, or to users who purchase in bulk quantities and delivers to bulk storage tanks.
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A wholesale distributor may obtain a credit or refund on their own behalf if they sell gasoline (on which they have paid the tax) at a tax excluded price for exempt use.
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The exempt uses are:
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Exclusive use of state or local government or non-profit educational organization;
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Export;
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Supplies for vessels and aircraft, or;
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Production of special motor fuels.
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The distributor may file a Form 843 or take the credit on their Form 720 return as a "Line 2" adjustment up to the amount of tax assessed for that quarter. Any remaining credit (that exceeds the Form 720 tax liability) must be processed Non-Master File. Non-Master File claim processing procedures are found in IRM 21.14, BMF and NMF DP Tax Adjustments.
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There is no restriction on the number of claims that can be filed by a gasoline wholesale distributor.
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Claims by a gasoline wholesaler for DIESEL FUEL are not valid and are not to be processed. If received, they are to be returned to the group advising that the claim is invalid and unallowable.
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Gasohol is a blend of gasoline and alcohol that is at least 10% gasohol. Blenders of gasohol who buy gasoline for gasohol production at a price that includes the full rate of tax are eligible for a credit or refund of part of the tax. For this credit, the gasoline must be used to produce gasohol and must be used in the taxpayer’s trade or business. The amount that can be claimed is the difference between the full rate and the reduced rate for each gallon of gasoline used to make gasohol. No refund is available if the gasoline was purchased at the reduced rate.
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Gasohol blenders may file Form 843 to claim a refund of the difference in rates for any period in which the claim is $200.00 or more and the period is not less than one week. These claims must be processed within 20 days of the received date of the claim. If the refund is not issued within this time frame, interest must be paid on the claim amount. These claims will be processed as a manual refund.
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Follow procedures in Text 4.4.8.6, Gasoline Claim Processing, using credit Reference Number 312 and Blocking Series 49.
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CAUTION MUST BE EXERCISED IN ALLOWING THIS CLAIM. ENSURE THE CLAIM HAS NOT ALREADY BEEN ALLOWED BY THE CAMPUS.
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CLAIMS FOR DIESEL AND AVIATION FUEL SHOULD BE VERY RARE BECAUSE THERE ARE PROVISIONS FOR TAXPAYERS TO PURCHASE TAX-FREE FUEL WHEN USED FOR A NON-TAXABLE PURPOSE.
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Claims for refund or credit of diesel or aviation fuel can be filed for the following non-taxable or exempt uses.
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Used for a qualified local bus or school bus.
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Used for intercity or local buses.
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Off-highway business use.
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Use other than as a fuel such as in a diesel-powered highway vehicle; pleasure and commercial boats; heating oil and use in stationary motors.
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Exclusive use of state and local governments.
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Exclusive use of non-profit educational organizations.
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Export, including shipment to a possession of the United States.
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Use in a diesel-powered train.
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Vehicle use by aircraft museums.
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Commercial aviation.
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Aircraft museums and helicopters.
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A quarterly claim can be filed if claiming $750 or more for any of the first three quarters of the taxpayer’s tax year. A special rule for diesel and aviation fuel allows the taxpayer to aggregate the amount of fuel used in each quarter. If the amount is less than $750 in one quarter, but the amount of the claim for more than one quarter is at least $750, a claim can be filed for the quarter in which the combined total is at least $750.
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The claim must be filed by the last day of the third month following the end of the quarter.
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Only one claim can be filed for each of the first three quarters of the tax year. The fourth quarter claim, for any amount, must be claimed on the income tax return.
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Follow claim processing procedures in Text 4.4.8.6, Gasoline Claim Processing. Use Reference Number 303 for diesel fuel and 310 for aviation fuel.
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Special motor fuels includes benzol, benzene, naphtha, liquefied petroleum, gas, casing head and natural gasoline and any other liquids other than gasoline, diesel fuel, kerosene, gas oil, or fuel oil that does not fall within certain specifications.
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Claims for refund or credit can be filed for the following non-taxable or exempt uses.
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Any use other than as a fuel for the propulsion of a motor vehicle or motor boat.
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Off-highway business use.
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Use in the fisheries or whaling business.
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Export, including shipment to a possession of the United States.
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Supplies for vessels.
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Exclusive use for state and local governments.
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Exclusive use of non-profit educational organizations.
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Resale.
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Intercity, local and school buses.
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A quarterly claim can be filed if claiming a refund of $1,000.00 or more for any of the first three quarters of the taxpayer’s tax year.
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Farmers claiming for "special motor fuels used on a farm for farming purposes" must take the credit on their income tax return; they cannot file Form 843. Farmers can make other claims on Form 843.
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The claim must be filed by the last day of the third month following the end of the quarter.
Only one claim can be filed for each of the first three quarters of the tax year. The fourth quarter, for any amount, must be claimed on the taxpayer’s income tax return.
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Follow claim processing procedures in Text 4.4.8.6, Gasoline Claim Processing. Use Reference Number 304 for special motor fuel tax claims.
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Claims for refund of excise tax paid on purchases of certain types of fuel are allowed under various sections of the Code. The fuel tax claims are allowed and processed against a taxpayer’s income tax module. In the case of taxpayer’s that do not have an income tax filing requirement, the claim is processed against an income tax module based on the taxpayer that has filed the claim. An individual would be processed against a Form 1040 module, etc. See IRM 4.4.4.8.6. for fuel tax claim processing procedures).
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If the claim has been disallowed and there is no income tax filing requirement, input a TC 290 for .00 in Blocking Series 40 (IMF MFT 30, BMF MFT 02) and forward along with workpapers to the campus in the source document folder. The claim will be filed behind the TC 290 DLN for future reference.
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For disallowed claims that can be associated with a tax return, except that the return has not been filed yet (pre-assessment claim processing),
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Input TC 930 via Form 3177 on Master File, to file the disallowed claim, disallowance letter and workpapers;
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When the income tax return (TC 150) posts, it will be associated with the claim and returned to the originator for input of TC 290 for .00 using Blocking Series 99.
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IT IS IMPERATIVE THAT TC 930 BE INPUT ONLY FOR DISALLOWED CLAIMS FOR TAXPAYERS THAT HAVE AN INCOME TAX FILING REQUIREMENT WHERE IT IS KNOWN THAT A RETURN WILL BE FILED AT A FUTURE DATE.
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After terminal input of Form 3177, maintain a copy/original of the form in a tickler file. The form will be used as a reference for TC 930 follow-up action. The Campus Files function will forward a CP 98 or 198 to the originator of the TC 930. See IRM 4.4.4.8.6.5.1. for TC 930 follow-up procedures.
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For AIMS control purposes, if the claim has been established as a NMF account, the AIMS data base will be closed using Disposal Code 28. If the account has been established as a Master File 720 module, close the AIMS data base using Disposal Code 33, Error Account.
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Claims for refund of excise tax paid on purchases of certain types of fuel are allowed under various sections of the Code. The fuel tax claims are allowed and processed against a taxpayer’s income tax module. In the case of taxpayer’s that do not have an income tax filing requirement, the claim is processed against an income tax module based on the taxpayer that has filed the claim. An individual would be processed against a Form 1040 module, etc. (refer to Text 4.4.8.6 for fuel tax claim processing procedures).
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When a fuel tax claim is disallowed for a taxpayer that HAS an income tax filing requirement (but the return has not yet been filed for the income tax module that the claim is processed against), special action is necessary to ensure the claim source document(s) are associated with the return when it is filed.
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A TC 930 "push code" is input that causes a CP 98 (IMF) or CP 198 (BMF) to generate that alerts the Campus Files function to associate the claim source document(s) with the tax return when it is filed. The Files function will route the tax return and claim documents to the function that input the TC 930.
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When this package is received by the area/campus Processing function, the following action is necessary:
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Prepare Form 8485 with the tax period as reflected on the return received from Files;
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Input TC 290 for .00, using Blocking Series 99;
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Enter in the Explanation Section of Form 8485, " Disallowed Excise Fuel Tax Claim."
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Submit the file for terminal input and forwarding to the Campus Files function.
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The above action is necessary so that the income tax module that the claim was processed against will reflect consideration and disallowance of the excise fuel tax claim.