TN 50 (07-19)

SI 02310.049 IRS Interface - Special Situations

A. Introduction

During the first few years of the IRS interface, several situations were identified which required special treatment. This section provides guidelines to address those situations.

B. Procedure

1. Interest Transactions

a. Identifying the Source of the Interest

If an alert shows an interest transaction from a financial institution but the taxpayer denies ownership of a bank account, question the taxpayer about any other dealings he or she may have had with the institution such as ownership of a Certificate of Deposit or a savings bank life insurance policy, a closed bank account,or the sale of negotiable instruments (e.g.,bonds).

b. Individual denies any dealings with the Institution

Request the taxpayer to sign an SSA-4641-U2,and contact the institution.

Request the institution to check its active and closed records of all interest-bearing items, not just savings or checking accounts. Since the institution is the source of the IRS data, it should have a record of the transaction.

See SI 02310.048C.5.d. about curtailing development.

See SI 02310.049B.6. for U.S. Government interest postings. See SI 02310.049B.8. regarding interest paid by IRS.

c. Verification of Interest Income

Do not verify interest income if:

  • It can be excluded as infrequent/irregular;

  • The individual agrees with the amount shown on the alert; or

  • The individual disagrees with the amount on the alert but provides a reasonable explanation to resolve the discrepancy.

Accept the individual's allegation. In any other situation, contact the payer for verification. Document the allegation per SI 00830.500.

2. Duplicate Interest Postings

  1. a. 

    Some banks inadvertently submit duplicate reports of interest payments to IRS. Disregard duplicate interest transactions where the payer data and amount are identical.

  2. b. 

    If, after disregarding one of the duplicate interest postings, the total amount of all the remaining resource indicators is less than the resource tolerance in SI 02310.045A.4., do not develop the resource indicators. Clear the alert if this is the only outstanding issue.

3. Payer Name/Address Is Blank or Appears Inappropriate

  1. a. 

    A transaction may show a payer which would not normally be expected to issue the type of payment involved, such as an antique company or plumbing company issuing an interest payment.

  2. b. 

    Obtain a detailed earnings query (DEQY) using the payer's employer identification number (EIN) to identify the payer.

    Do not request payer name/address data from IRS.

4. Payee Name Appears Inappropriate

  1. a. 

    A payee shown on an alert may be a company whose EIN contains the same series of digits as the recipient's or deemor's SSN.

  2. b. 

    If a payee shown on the IRS alert has a name and address different from the recipient's or deemor's, obtain a DEQY to determine if the SSN is also a company's EIN.

  3. c. 

    Do not contact IRS.

5. Life Insurance Company

  1. a. 

    If a life insurance company is shown as the payer for a transaction, do not assume that the individual owns a life insurance policy.

  2. b. 

    The transaction could represent distributions on the company's stock or an investment plan managed by the company (e.g., mutual fund).

  3. c. 

    Life insurance companies are not required to report partial returns of premiums (usually referred to as “dividends” by the company). However, a return of premiums may be erroneously reported as “interest” or “dividends” on the form 1099.

6. U.S. Government Interest Payments

a. General

Government interest payments represent interest paid on U.S. Government securities. Development will depend on the type of security involved.

See SI 01140.240 for information on U.S. Savings Bonds.

b. Security Identification

Identify the type of security involved based on the payer's EIN shown on the alert. The following chart lists the type of security associated with each EIN:

EIN: Security:
530197074 Treasury Bonds,Notes, or Bills
540985244 Series H or HH Savings Bonds
550416249 Series E or EE Savings Bonds redeemed directly through BPD
550624229 Retirement Plan Bonds or Individual Retirement Plan Bonds

If any other EIN is shown, the security will usually be a series E or EE savings bond redeemed at a local bank.

c. Verification of Security Value

Where possible, use the individual's records to determine the value of the security.

If the type and issue date are known, retroactive values may be obtained through the electronic stock verification process.

If the individual's records are insufficient to determine the value of the security, request the taxpayer to sign an SSA-8510 (and an SSA-4641-U2 if the payer is a bank) and proceed as follows:

  • If payer is a bank (other than a Federal Reserve Bank), request the bank to provide any information it has about the security such as the value of the security, the date it was purchased, and the date it was redeemed; or

  • If the payer is not a bank (or is a Federal Reserve Bank) or the bank is unable to provide sufficient evidence, contact BPD as described below. Do not contact BPD if the individual knows the series (e.g., E, EE),the face value, and the issue date. See SI 01140.240 for instructions.

d. BPD Records

BPD maintains registration records for savings bonds and other Treasury securities.

Registration records for series E bonds issued prior to January 1974 are stored by the name and address of the owner (or first-named joint owner) given at the time of purchase.

Records for bonds issued between September 1957 and January 1974 are computerized. BPD personnel search for records using the owner's first and middle initials, first six letters of the surname, and the first four letters of the city or town.

Records for bonds issued prior to September 1957 required manual search. BPD will not search these records unless the FO request indicates that the bond was probably issued during this period.

Records for series E bonds issued from January 1974 to the present and series EE, H, and HH bonds are stored by the owner's SSN (or the SSN of the first-named joint owner).

e. BPD Contact

Because of BPD's method of recordkeeping, it is essential that FO's carefully question the individual to obtain as much information as possible about the bond(s).

  • If the bond is owned jointly, obtain the SSN, name, address (as of the date of purchase), and SSN of all joint owners. (Some of this information may be found on the microfiche or alphadent file.)

  • If the bond was received as an inheritance, ask for the original owner's name and SSN.

  • If the bond was received as a gift, ask the individual for the purchaser's name, address, and SSN.

Although interest on E or EE bonds is reported under the SSN of the individual who redeemed the bond, the registration may be under the name of a joint owner.

All contacts with the BPD must be made via an SSA-562-U3 to the parallel FO according to the following chart. BPD will not honor direct requests for information.

Type of Security

Parallel FO for contacting BPD

U.S. Savings Bonds (all series), Retirement Plan Bonds, and Individual Retirement Plan Bonds

FO 675

All Other U.S. Treasury Securities

FO 270

The SSA-562-U3 must be accompanied by a dated SSA-8510 with a signature and a copy of the IRS alert. (Obscure information pertaining to other transactions on the alert.)

NOTE: When a representative payee signs the SSA-8510, add the following statement:

SSA records confirm that the person that signed this form is a representative payee for the beneficiary, and as such, is permitted to authorize disclosure.

Furnish all available information, about the security e.g., type, series, face value, serial number, date of purchase, date of redemption, and names, addresses, and SSN's of any joint owners of the security.

Do not followup on the request until 45 days after the date the SSA-562-U3 was sent.

7. Agricultural Subsidies

  1. a. 

    Most agricultural subsidies list the payer as the U.S. Department of Agriculture, Agricultural Stabilization and Conservation Service (ASCS) in Kansas City, Missouri. That office does not have information concerning the payments.

  2. b. 

    If the individual does not have sufficient evidence to verify the payment(s), contact the local agricultural agency for the county in which the individual's farm is located.

  3. c. 

    The individual denies ownership of a farm and/or receipt of the payment, contact ASCS, via an SSA-562-U3 to the parallel FO (FO code 736) to identify the appropriate county using the payee account number shown on the alert. Attach a copy of the alert to the SSA-562-U3. (Obscure all other transactions.) Upon receipt of the response from ASCS, contact the county agency for verification of the payment.

8. Payer is IRS

Interest transactions which show the payer as the Internal Revenue Service are interest payments made on tax refunds.

Do not contact IRS for information on these cases.

Ask the individual to submit any available evidence of the date of receipt. If the individual does not have any evidence, accept his/her allegation as to the receipt (or nonreceipt) of the interest, including the date of receipt.

9. Co-op Dividends

This category includes several types of payments made in connection with business (usually farming) cooperatives.

The payments could represent dividends on the co-op's capital stock or could represent payment for products marketed by the co-op on behalf of the individual. This latter situation is common among dairy farm co-op's.

Carefully question the individual to determine the appropriate course of development.

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SI 02310.049 - IRS Interface - Special Situations - 11/14/2012
Batch run: 07/16/2019