TC 304: Tentative Carryback Disallowance by Examination

What the code actually does

IRS Document 6209 (the IRS’s reference guide to its data-processing codes) defines TC 304 as "Tentative Carryback Disallowance by Exam with Interest Computation Date," Doc Code 47 (an examination adjustment): it "adjusts a previously posted tentative allowance (e.g., TC 305 or 295), contains a beginning interest computation date," and behaves "same as TC 300" — the examination-track additional assessment code. Like TC 294, it cannot post without a TC 295 or 305 already in the module (the IRS's record for one tax period within the account), and the amount cannot exceed what that allowance paid out.

The Doc Code and the "same as TC 300" language are what distinguish TC 304 from its processing-side counterpart TC 294 (Doc Code 54, "same as TC 290"). TC 300 itself means an examination or Appeals assessment — so a TC 304 signals that Examination Division actually reviewed the tentative carryback claim and made a formal determination, rather than a routine processing correction.

Why the exam track matters procedurally

Because TC 304 rides on the examination assessment mechanics rather than the ordinary processing-adjustment mechanics, the disallowance behind it typically followed an actual audit of the carryback claim — meaning the taxpayer likely received examination correspondence, had an opportunity to respond, and may have had an examination conference that a routine TC 294 correction would not involve. Reading only the transcript code without asking whether an examination was actually opened and closed on the module risks missing a procedural history that matters for what can still be challenged.

IRM 21.5.9, Carrybacks, does not name TC 304. IRM 4.38.1.7.3.1.21.2 does: TC 304 adjusts a tentative allowance input with TC 295 or 305, cannot exceed the sum of the TC 295 and 305 amounts, and carries an interest computation date entered in Item 11 of Form 5344.

What this means for the account

A TC 304 means Examination looked at a previously paid tentative carryback allowance and determined some or all of it should not have gone out. Interest on the amount runs from the interest computation date carried with the transaction — which, as with TC 294, can predate the posting date by months. The client should expect the amount owed to be larger than the bare TC 304 figure by the time the notice arrives.

Because this followed an actual examination rather than a processing check, it is worth confirming whether the underlying exam was agreed or unagreed, and what examination correspondence preceded the TC 304 — that history determines what avenues, if any, remain open to dispute the disallowance.

What people mistake TC 304 for

TC 304's closest look-alike is TC 294, which does the identical job at the processing level rather than through an examination — same trigger (an over-large TC 295/305 allowance), same interest-computation-date mechanic, but a materially different procedural history behind it. Confusing the two means missing whether the client actually went through an examination.

It is also not the same as a general examination assessment like TC 300, even though TC 304 explicitly behaves "same as TC 300" in most respects — TC 300 raises the tax liability itself, while TC 304 is capped at reversing a specific prior tentative allowance and cannot exceed that amount.

What to do next

Confirm the TC 295 or 305 allowance TC 304 is reversing, and verify the TC 304 amount does not exceed the sum of the TC 295 and 305 amounts — a data or record-matching error is worth flagging if it does.

Ask the examiner or Appeals for the examination file (or ask the client for correspondence) to establish whether the disallowance was agreed or contested, since that history determines what appeal rights, if any, remain. For an open examination, IRM 4.2.5.6 tells examiners to give the taxpayer and representative a copy of the file on request, to the extent release would not impair tax administration, and says the taxpayer and representative need no Freedom of Information Act (FOIA) request to get copies of an open examination case file.

Compute interest from the transaction's own interest computation date, not the posting date, when estimating the true balance due.

Run the account history the client supplies through the IRS Transcript Decoder — a TC 304 sitting alongside an unresolved TC 420 examination indicator may mean the underlying exam is still open on other issues.