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Due to lost SSN mail I was unable to claim full child tax credit on my original 2018 and 2019 tax returns. So I was getting $500 child tax credit instead of $2000.

After finally learning the SSN for the child, I've filed form 1040-X to amend my tax returns. The change is very simple - Child tax credit increases by $1500 (from $500 to $2000) and so the refund increases by the same amount ($1500).

Recently I've received mail and checks from IRS. For some reason they amended each of my returns by $1207.00 instead of $1500 (plus interest, which was different for different years). There was no explanation regarding why the number is different.

What could be the reason the IRS has amended my tax return by $1207 instead of $1500?

Update: I've just noticed the "896 Overpayment credit offset" for $293 shown for older dates (before I've filed the amended tax returns). I bet it's what's causing the difference. But what is it? And why apply it only to the amendment refund?

P.S. On IRS website, the return transcripts have not changed, but the account transcripts list the $1207 amendment.

P.P.S.: Regarding ACA mandates: I do not think this is ACA: This issue occurred for years 2018 and 2019. I had health coverage for all years For year 2019, there is no health coverage mandate. And for year 2018 I have verified that the box is checked (I had health coverage for all years...).

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The IRS seems to think you owed the government some money, and took it out of your refund. This is allowed per the IRM, and is an effective tool for the government to collect its debts. You can read more details and how to check what exactly the debt was here.

Further reading of the IRM shows this:

TC 896, computer-generated tax offset from IMF to BMF, Individual Retirement Account File (IRAF) or Shared Responsibility Payment (MFT 35) without an Agency/Sub-Agency (AG/SA) Code

I'm guessing you missed some ACA mandate requirements and owed some penalty. The IRS is not allowed to collect the penalty, but it most definitely is allowed to deduct it from refunds. So... seems like the government got lucky. If you didn't amend for more refund, they wouldn't be able to collect these amounts from you.

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  • Hmm. Interesting. I had health insurance every year. But maybe I did not tick some box somewhere. Or maybe there was another reason. Thank you for the tip.
    – Ark-kun
    Dec 22, 2021 at 6:37
  • I do not think this is ACA: This issue occurred for years 2018 and 2019. For year 2019, there is no health coverage mandate. And for year 2018 I have verified that the box is checked (I had health coverage for all years...).
    – Ark-kun
    Apr 18, 2022 at 6:37
  • @Ark-kun there is a mandate, the mandate never went anywhere. It's still valid. What was zeroed out is the penalty for disobeying the mandate. TCJA eliminated the penalty starting 2019, so it was there for 2018. You may want to inquire with the IRS what specifically was the reason. The ACA is just my assumption, since that's one of the reasons the IRM states, but it may be something else.
    – littleadv
    Apr 18, 2022 at 6:41
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    @Ark-kun: could the penalty have been from an earlier year, before 2018? Although IRS was (and is) restricted in collecting it, it would remain owed for the 10year collection statute period.
    – dave_thompson_085
    Apr 20, 2022 at 3:40
  • I do not think so. I made amendment for tax year 2017 in 2018, then made amendments for tax years 2018 and 2019 in year 2021. I only see the penalties for years 2018 and 2019. The amendment for year 2017 did not result in "Overpayment credit offset".
    – Ark-kun
    Apr 21, 2022 at 7:00

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