CCA 9939002: Chief Counsel recommends written agreement before reversing refund offset

Plain-English summary

The National Taxpayer Advocate ordered a hardship refund after the IRS applied an overpayment to another tax year instead of refunding it to the taxpayers. Chief Counsel was not prepared to dispute the Advocate's implicit view that the posting was a clerical error that the IRS could undo. Because the overpayment had already been credited to the taxpayers' account, the memorandum recommended obtaining their written agreement before reversing the credit. That agreement would leave a properly assessed amount unpaid and reduce the chance of a later account dispute. The memorandum did not say the ordered refund had already been paid.

Ruling snapshot

• Question: How should the IRS handle an overpayment credit after a Taxpayer Assistance Order directed a refund?
• Outcome: Advice given: obtain the taxpayers' written agreement before reversing the credit.
• Key authorities: IRC § 6213(b)(1).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224

April 16, 1999
Number: 199939002
Release Date: 10/1/1999
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UILC: 69.04-00-00

MEMORANDUM FOR

FROM: Gary D. Gray
Assistant Chief Counsel (General Litigation)

SUBJECT: Hardship Refund Request of

LEGEND:

Taxpayers
Service Center X
Date A
Date B
Date C

DISCUSSION:

The National Taxpayer Advocate has issued a Taxpayer Assistance Order (TAO) dated Date A, to the Service Center Director, Service Center X, directing the issuance of a refund to Taxpayers. This TAO was issued because the National Taxpayer Advocate concluded that the Service made a mistake in the process of crediting the account of the Taxpayers for the Date B year with an overpayment from the Date C year rather than refunding the amount to them.

Based on the facts presented, we are not prepared to dispute the National Taxpayer Advocate’s implicit conclusion that the mistake constituted a clerical error. Mathematical or clerical errors may generally be undone by the Service. See, e.g., I.R.C. § 6213(b)(1), Matter of Bugge, 99 F. 3d 740, 745 (5th Cir. 1996)(unauthorized and accidental abatement of assessment is ineffective); Crompton-Richmond Co., Inc. v. United States, 311 F.Supp. 1184, 1186 (S.D. N.Y. 1970)(when abatement issued because of mistake of fact or bookkeeping error, assessment may be reinstated).

In view of the fact that the Taxpayers’ account has already been credited with the amount of the requested refund, we would recommend that the Service obtain the Taxpayers’ written agreement that the credit can be reversed leaving a properly
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assessed amount unpaid. This will serve to avoid any future controversy about the account.

cc: Associate Counsel (Domestic)