21.7.4  Income Taxes/Information Returns (Cont. 1)

21.7.4.4 
Income and Information Returns Procedures

21.7.4.4.1 
Form 1041,

21.7.4.4.1.12  (01-01-2005)
Form 1041-T, Allocation of Estimated Tax Payments to Beneficiaries

  1. Form 1041-T is used by a trust, or for its final tax year, a decedent’s estate, which has made a Section 643(g) election to allocate the estimated tax payments made on Form 1041, among the beneficiaries.

  2. The beneficiary who is treated as making the payment is deemed to receive a distribution on the last day of the taxable year of the estate or trust and is deemed to make a payment of estimated tax on January 15 following the taxable year.

  3. The provisions in (2) above apply only to the extent the payments of estimated tax made by the trust for the taxable year exceed the tax shown as due on its return for the same taxable year.

  4. There are no provisions of law for transferring the credit for Federal Income Tax Withheld (FITW) on a Form 1041 Trusts and Estates account, to an individual taxpayer's (beneficiaries) Form 1040 account. Section 643(g) allows the allocation of estimated tax payments on Form 1041-T and IRC 643(d) allows for the allocation of back-up withholding but not for transferring FITW. See the Instructions for Form 1041, line 24e and IRM 21.6.3.4.2.2 , Withholding (W/H) Tax Credit, for more information.

  5. An overpayment may be transferred from the estate or trust account to an individuals account if the request is received in writing. Transfer with a TC 820/TC 700, using the later of; the due date of the Form 1041 return; or the date of payment that created the overpayment. DO NOT transfer with a TC806/TC 807.

  6. Correspondex Letter 2305C, Estimated Tax Credits to Beneficiary - Form 1041-T was revised to answer inquiries received on Form 1041-T. However, you may use another letter if it fits the situation better.

21.7.4.4.1.12.1  (01-01-2005)
Form 1041-T Filing Dates

  1. Form 1041-T must be filed on or before the 65 day (March 6) after the close of the calendar year, or March 5 if it is a leap year. However, if the due date falls on a Saturday or Sunday, or is a legal holiday, then the due date is the next business day. For calendar year 2012, the due date is March 6, 2013. For 2013, the due date is March 6, 2014.

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21.7.4.4.1.12.2  (10-24-2012)
Transferring Credits/Payments (Form 1041-T)

  1. Since these payments are claimed as ES credits by the beneficiaries, the credits must be transferred on an expedited basis. TC 150 does not have to be posted before transferring these credits. Once the election is made and the credits transferred to the beneficiaries, it cannot be revoked.

  2. Form 1041-T is considered correspondence and must meet "Policy Statement P-21-3" (Action 61) time frames.

  3. Follow the table below when making credit transfers.

    1. Use CC INOLE with definer "T" or "S" and determine if the beneficiary is the primary taxpayer.
    1.1 Credit should only be transferred to the primary SSN.
    1.2 For businesses, credit should be transferred to their income tax return.
    2. Use CFOL command codes to research the accounts of all the beneficiaries listed on Form 1041-T. If an account is not present on master-file, input TC 000 to establish the account. See IRM 3.13.5.115, Establishing a New Account, for information on establishing an account.
    3. Verify the total amount of estimated taxes shown as being allocated to the beneficiaries on line 1 and 4 (these two amounts must be equal) on Form 1041-T, is posted to the Form 1041 account.
    4. If the amount is not posted, adjust the allocation for each beneficiary by the percentage shown on Form 1041–T and inform the trust of the change.
    5. When additional information is needed to complete the credit transfers, correspond (L2305C) or phone the trust to obtain the needed information.
    6. Advise the trust of any action taken which changes the information originally submitted.
    7. Input CC ADD/ADC24 to transfer all calendar year Form 1041 ES payments received by January 15 using the January 15 date of the year following the tax period ending date of the trust. (Send the appropriate closing letter notifying an estate of the credits transferred.)
    7.1 Enter TC 820 on the debit side.
    7.2 Enter TC 660 on the credit side.
    7.3 Insert a "1" in the Bypass Indicator Field on the credit side to bypass the unpostable check or input TC 570 blank as appropriate.
    7.4 Use the payment date with TCs 820 and 660 on ES payments posted after January 15.
    7.5 Use TC 672 to reverse payments posted with a TC 670.
    8. If the Form 1041 was filed for a fiscal year and the due date is earlier than January 15 of the year following the close of the calendar year during which the trust return was due, transfer the credit(s) using the due date of the trust’s return on the TC 820 debit side.
    8.1 Use TC 700 with a 1/15/XXXX (for example, 1/15/2013) date and a designated payment code of "00" on the credit side of the credit transfer.
    8.2 Also, use an override indicator of "2" on both sides of the credit transfer.
    9. If the Form 1041-T is received late ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , reject the form ( 21.7.4.4.1.12.1(2) if the return is a final return.)
    9.1 Send Letter 2305C explaining the reason for the rejection and request information for the disposition of the credit on the trust’s account.
    9.2 This credit can be applied to the trust’s ES payments for next year or can be refunded.
    9.3 If no reply is received, refund the money and send L2305C.
    9.4 To refund the credit and release the -P freeze, input an ADD24 credit transfer with a TC 820 debit and TC 700 credit to the same tax period. This releases the freeze and allows the credit to refund.
    10. If TC 150 has not posted, and you have a CIS case, follow the procedures in IRM 21.5.1.5.7, CIS Push Code. Otherwise, input TC 930 to have Form 1041-T attached to Form 1041 after action has been completed.
    10.1 If TC 150 has posted to master file (MF), do not input TC 930, route Form 1041-T for association with TC 150.

21.7.4.4.1.12.3  (01-01-2005)
CP 208 Notice, Potential Credit Transfer Action Form 1041

  1. When Form 1041 posts with credit shown on the election line and the credit has not been transferred, a -P freeze generates. The freeze is released when the module balance becomes zero or debit status.

  2. If the freeze is not released within 6 cycles after the return has posted, a CP 208 Notice, Potential Credit Transfer Action Form 1041 generates.

  3. Action required:

    If Then
    Form 1041-T is located (filed on or before the 65 day after the close of the taxable year) Follow procedures in IRM 21.7.4.4.1.12.2 above.
    Credit cannot be transferred due to Form 1041-T not being timely filed 1. Correspond with or phone the trustee to explain the credit balance and why the credit cannot be applied to the beneficiaries accounts.
    2. Request information for disposition of the credit.
    3. Suspend the case for 40 days awaiting the taxpayer’s response.
    4. Upon receipt of the taxpayer’s response, take the necessary action to resolve the -P freeze. ( 21.7.4.4.1.12.2, Step 9.4 in the table.)

21.7.4.4.1.12.4  (01-01-2005)
Balance Due Notices on IMF Accounts

  1. In situations where Form 1041-T is not processed because of late filing, the beneficiary may receive a balance due notice from the IMF account.

  2. The Accounts Management employees (IMF and BMF) may need to coordinate resolution of the case when there is an indication the credits were to come from the trust’s account. Action required:

    1. Determine the status of Form 1041-T by researching the trust’s account. (Form 1040, Schedule E, can provide the trust’s Employer Identification Number (EIN).

    2. If Form 1041-T is located and credit can be transferred, follow procedures in IRM 21.7.4.4.1.12.2 above.

    3. If there is no record of Form 1041-T being filed, or if Form 1041-T was filed and later rejected, send a letter to the beneficiary explaining the balance due is correct and the trust should be contacted to resolve the balance due on the IMF account.

21.7.4.4.1.13  (10-01-2008)
Victims of Terrorism Tax Relief Act of 2001 - Tax Forgiveness

  1. The Victims of Terrorism Tax Relief Act of 2001 (the Act) was enacted on January 23, 2002. The Act amends IRC 692, by adding IRC 692(d) which provides that the IRS will forgive the federal income tax liability of those killed in the following attacks for certain tax years:

    • The April 19, 1995, attack on the Alfred P. Murrah Federal Building (Oklahoma City attack).

    • The September 11, 2001, attacks on the World Trade Center, the Pentagon, and United Airlines Flight 93 in Somerset County, Pennsylvania (September 11, attacks).

    • Terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002, (anthrax attacks).

    • The Military Family Tax Relief Act of 2003, amended IRC 692(d) to include families of astronauts whose death occurs in the line of duty after December 31, 2002. This includes the Space Shuttle Columbia heroes.

  2. IRC 692(d) also allows that the minimum amount of relief for victims of the specified attacks is $10,000. The $10,000 minimum forgiveness applies to the original or amended Form 1040, U. S. Individual Income Tax Return, and Form 1041, U. S. Income Tax Return for Estates and Trusts. See the October 1, 2002, through October 1, 2007, revisions of this IRM for more information on the Victims of Terrorism Tax Relief Act of 2001 - Tax Forgiveness.

21.7.4.4.1.14  (01-01-2005)
Pooled Income Trusts (GNMA)

  1. Government National Mortgage Association (GNMA) Trusts are each assigned a pool number which becomes the name of the trust with the first four digits of the pool number being the name control on the account. The fiduciary name is the owner of the GNMA. When an EIN is assigned to a GNMA pool number, it must remain with the pool number even when purchased by another fiduciary. ENMOD shows the pool number assigned to the GNMA at the beginning of the first name line. Therefore, when a GNMA account is sold, the EIN and pool number remain the same and only the fiduciary name changes.

  2. GNMA Pool Returns are Non-Taxable Grantor Trust returns which should contain no taxable income.

  3. When a GNMA trust is sold and bought during the year, each fiduciary files a short period return, which results in a Duplicate Filing Condition (DUPF). Determine which fiduciary is selling and which one is purchasing to perfect the fiduciaries name and address on ENMOD to the purchasing fiduciary.

  4. It is not necessary to process the short period return to the current period. Adjust the account accordingly. The seller should show in box F and G; the pool number, that it is a final return, and the date of sale. The buyer should show in box F and G; the pool number, that it is an initial return, and the date of purchase. If you cannot determine which fiduciary is selling and which one is buying from the available information, attempt to contact the taxpayer. If unable to secure the information, DO NOT change the care of/sort name line and the address currently on ENMOD.

  5. If you receive a DUPF in which the pool number does not match the EIN:

    • Search CC NAMEE for the correct EIN.

    • If unable to secure the correct EIN, contact the Fiduciary for the correct number.

    • If unable to obtain the correct EIN from the Fiduciary, send to Entity to assign a new number.

    • Wait for the new EIN to post. Reprocess the return to the new EIN after the new number posts.

    • Entity will send a notice to the taxpayer with the new EIN information.

    • See IRM 21.7.9, Duplicate Filing Conditions, for more information on processing DUPFs.

21.7.4.4.1.15  (11-13-2012)
Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, Received in Conjunction with Form 1041

  1. If an estate or trust is the recipient of a portion of an early distribution, or if the trust or estate fails to receive at least the minimum required distribution (excess accumulations) from their Individual Retirement Arrangement (IRA), they may be required to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts. Estates and trusts who would not otherwise be required to file Form 1041, may file Form 5329 by itself.

  2. If the trust or estate fails to receive at least the minimum required distribution, a 50 percent excise tax (penalty) is assessed on the excess accumulations. Part VIII, Additional Tax on Excess Accumulation in Qualified Retirement Plans (Including IRAs), is completed when the taxpayer did not receive the minimum required distribution from their qualified retirement plan. The amount posts to Master File as part of the TC 150.

  3. If you receive a loose Form 5329 from a trust or estate reporting an addition to tax, and if:

    • A TC 150 is not on the module, prepare a "dummy" Form 1041 for processing. Complete the entity section and write-in the amount of the addition to tax, on page 2, Schedule G, line 7. Write "Form 5329" to the left of the entry. Carry this amount from line 7 to line 23, total tax, on page 1 of Form 1041.

    • A TC 150 is on the module and the TC 150 amount is different than that reported on Form 5329, assess the additional tax with a TC 290 for the amount shown on Form 5329, allow CP 210/CP 220 to generate to the taxpayer.

    • A TC 150 is on the module and the amount reported on Form 5329 is the same amount as the TC 150, and is a Correspondence Image System (CIS) case, input 290 $.00 and leave history item, "F5329N/C." If not a CIS case, associate the form with the TC 150 following local procedures.

  4. The excise tax in Part VIII can be waived if the taxpayer establishes that the excess accumulation was due to a reasonable error and that steps were taken or are being taken to correct the situation. If you receive a request for abatement on an account with TC 150 and you determine that the 50 percent excise tax (penalty) should be abated, abate with TC 291 and allow CP 210/220 Notice to generate to taxpayer.

  5. If you receive a loose Form 5329 with no TC 150 and a request for abatement of the 50 percent tax in Part VIII, you must prepare a dummy return as directed in paragraph (2) above. If you determine that the 50 percent tax should be abated, enter $.00 on page 2, Schedule G, line 7. Write "Form 5329" to the left of the entry. Carry this amount from line 7 to line 23, total tax, on page 1 of Form 1041. Send the taxpayer Letter 1803C, IRA/Keogh Inquiry, and advise them that we have waived the 50 percent additional tax.

  6. If you receive a loose Form 5329 with a TC 150 on the account and a request for abatement of the 50 percent tax in Part VIII, and you determine that the 50 percent tax should not be assessed, close with a TC 290 for $.00 and send the taxpayer Letter 1803C, IRA/Keogh Inquiry, and advise them that we have waived the 50 percent additional tax. If you decide to assess the additional tax, input with a TC 290 for the amount shown on Form 5329, and allow CP 210/220 to generate to the taxpayer.

  7. Only the additional tax reported in Part VIII on Excess Accumulations can be waived. If a taxpayer requests abatement of the 6 percent, 10 percent or 15 percent addition to tax in Parts I through Parts VII, check the Instructions for Form 5329, for exceptions to when the additional tax does not apply. If no exception applies, send Letter 916C, Claim Incomplete for Processing; No Consideration, and advise the taxpayer that there are no provisions to waive the additional tax.

21.7.4.4.2  (10-24-2012)
Form 1065, U.S. Return of Partnership Income

  1. A partnership is a relationship between two or more persons who join to carry on a trade or business. The term partnership includes a limited partnership, syndicate, group, pool, joint venture, or other unincorporated organization, through or by which any business, financial operation, or venture is carried on that is not a corporation, trust, estate, or sole proprietorship. (See Publication 541, Partnerships, for additional information.)

    1. Each partner contributes money, property, labor, and/or skill and all expect to share in the profits and losses of the business.

    2. The partnership must file a Form 1065 to report its taxable income or loss.

    3. Each partner's distributive share of the income or loss must be reported on the partner’s individual income tax return.

    4. Each partner must make estimated tax payments if necessary.

  2. Every partnership that engages in a trade or business, or has gross income, must file an information return on Form 1065 showing its income, deductions and other required information. A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenditures treated as deductions or credits for federal income tax purposes.

  3. Form 1065 is used by partnerships to report income.

    1. The return is due on the 15 day of the 4 month following the close of the tax year.

      Note:

      For a partnership that keeps its books and records outside the U.S. and Puerto Rico, the return is due by the 15 day of the 6 month after the close of the taxable year. See IRM 21.8.2.17, Form 1065, U.S. Return of Partnership Income for more information.

    2. One general partner or limited liability company manager must sign the return. See "Who Must Sign " in the Instructions for Form 1065 when the return is made by a receiver, trustee or assignee.

    3. The MFT is 06.

    4. The name control of a partnership is the first four letters of the legal name of the partnership. See IRM 21.7.13.5.3.6, CC ESIGN Input: Partnerships and Document 7071-A, BMF Name Control Job Aid, for more information on name control.

    5. See IRM 21.7.4.4.2.8.1 for information on partnerships with more than 100 partners.

  4. An unincorporated business jointly owned by a married couple is generally classified as a partnership for Federal tax purposes. For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a "qualified joint venture" , whose only members are a husband and a wife filing a joint return, can elect not to be treated as a partnership for Federal tax purposes.

  5. A qualified joint venture is a joint venture that conducts a trade or business where:

    • The only members of the joint venture are a husband and wife who file a joint return.

    • Both spouses materially participate in the trade or business.

    • Both spouses elect not to be treated as a partnership. A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a general or limited partnership or limited liability company). The spouses must share the items of income, gain, loss, deduction, and credit in accordance with each spouse's interest in the business.

    • The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company.

    • The spouses share the items of income, gain, loss, deduction, and credit in accordance with each spouse’s interest in the business.

  6. Beginning with 200712, these taxpayers make the election on a jointly filed Form 1040 by dividing all items of income, gain, loss, deduction, and credit between them in accordance with each spouse’s respective interest in the joint venture. Partnerships who do not file a final (200612) return, may receive a CP 515 Notice, 1 Notice - Return Delinquency. Follow the procedures in IRM 5.19.2.6.5.4.22, BMF Response Form 1065, U.S. Return of Partnership Income, if you receive a call from a taxpayer stating that they are not liable to file Form 1065 due to the IRC 761 provision. For more information, see the Election for Husband and Wife Small Business on the IRS website.

21.7.4.4.2.1  (07-17-2007)
Form 1065-B, U.S. Return of Income for Electing Large Partnerships

  1. The Taxpayer Relief Act (TPRA) of 1997 provides that certain partnerships can elect large partnership status (100 or more partners in the preceding tax year) by filing Form 1065-B, U.S. Return of Income for Electing Large Partnerships, instead of Form 1065.

  2. One of the benefits is being able to file "simplified Schedules K-1."

  3. Complete programming, including assessment of tax liability on original processing, became available in 2002. If a tax adjustment is required:

    1. Input TC 290 or 291 to adjust to correct amount.

    2. It is not necessary to input with a credit reference number.

      Exception:

      TCs 766/767 are valid only. The credit reference number, which posts on the transcript as TC 766 or 767 identifies the type of credit, e.g. fuel tax credit.

    3. Credit transfers can be made if necessary. However, credit elect is not available on these forms.

  4. These returns are processed in Ogden. Beginning in 2007, foreign partnerships returns are also processed in Ogden.

  5. The Filing Requirement Code is (FRC) 2 and Doc Code 68.

  6. Form 1065-B filers were not required to file their return electronically for taxable years beginning before January 1, 2002.

  7. Once the partnership elects large partnership status by filing the 1065-B, the partnership and all its partners are bound by the election. The election applies to the tax year for which it was made and all later years, and cannot be revoked without IRS consent. (However, a partnership may cease to be treated as an electing large partnership for a tax year in which the number of partners is reduced below 100.) IRS consent is obtained through a Private Letter Ruling. (A user fee is required to obtain a letter ruling. See Rev. Proc. 2011-1 or its successor.) Requests for letter rulings must be sent to the following address:

    Sent via US Postal Service Sent via Private Delivery Service (e.g., UPS, FEDEX, etc.)

    Internal Revenue Service
    Attn.: CC:PA:LPD:DRU
    P.O. Box 7604
    Ben Franklin Station
    Washington, D.C. 20044

    Internal Revenue Service
    Attn.: CC:PA:LPD:DRU, Room 5336
    1111 Constitution Avenue N.W.
    Washington, D.C. 20224

21.7.4.4.2.2  (01-01-2005)
Publicly Traded Partnerships

  1. The TPRA of 1997 provides for electing 1987 (year is correct) partnerships to continue exception from treatment of publicly traded partnerships as corporations. A tax of 3.5 percent of such partnership’s gross income receipts, is imposed for the taxable year from the active conduct of trades and businesses of the partnership. Therefore, the TC 150 may be for a significant amount.

  2. The election had to be made in early 1998. If a partnership makes the election and later revokes it, the election cannot be reinstated in the future.

  3. There are less than 10 electing partnerships in the country. These partnerships file returns in Ogden Submission Processing Center (OSPC).

  4. The doc code for these returns is 67.

  5. Programming is available to assess tax on original input in 2002. If adjustments are required, follow same procedures as for Form 1065-B. Credit transfers can be made if necessary. However, credit elect is not available on these forms.

21.7.4.4.2.3  (01-01-2005)
Required Tax Year (Partnerships)

  1. Partnerships are generally required to conform their tax years to the tax years of their partners (usually December 31).

  2. An exception to the rule is made when a partnership either:

    • Establishes a business purpose for having a different tax year (identified by TC 054).

    • Makes a IRC 444 election on Form 8716, Election to Have a Tax Year Other Than a Required Tax Year (identified by TC 055 on ENMOD).

  3. Taxpayers electing Section 444 are required to file Form 8752, Required Payment or Refund Under Section 7519. See IRM 21.7.4.4.7, for more information.

21.7.4.4.2.4  (07-11-2013)
Schedules K and K-1 (Form 1065)

  1. Schedule K (Form 1065, page 3) contains the total amount distributed for each applicable item. Schedules K-1 contain the partner’s share of the total distribution. Schedules K-1 must be attached to Form 1065.

  2. If loose Schedules K-1 are received, determine if they were sent due to possible assertion of a missing information penalty. See IRM 20.1.2.3.3, Penalty Relief, and IRM 21.7.4.4.2.7. Follow the table directly below.

    If Then
    A Missing Information Penalty (TC 246 with no reference number) was assessed Adjust the penalty per IRM 20.1.2.3.3, Penalty Relief.
    No penalty was assessed Associate the Schedule(s) K-1 with the return using Form 9856, Form 10023, or any other locally approved form/procedure. Input a TC 290 for $.00 if the document you are associating with is an electronic return. See IRM 21.5.1.4.4, Processing Loose Forms or Schedules, for CIS images. Do not use blocking series 18 whenever inputting TC 290 $.00 to associate a loose form or schedule with the TC 150.
    TC 150 is not posted Input TC 930 to have document returned to you when the return posts to assure a Missing Information Penalty was not assessed in error. See IRM 21.5.1.5.7, CIS Push Codes, if this is a CIS case.

21.7.4.4.2.5  (08-04-2008)
Extensions of Time to File Form 1065

  1. Beginning January 1, 2006, IRS consolidated Form 2758, Form 7004, Form 8736 and Form 8800. Form 7004, Application for Automatic 6-Month Extension of Time To File Certain Business Income Tax, Information, and Other Returns, is now used to file for an extension on Form 1065. Each partner is required to file the appropriate extension of time to file his/her individual income tax return. However, extension requests for Form 1041, Form 1065, and Form 8804 are shortened from six months to five months beginning with extension requests that are due on or after January 1, 2009 (200809 and subsequent). In addition, the title of the form is now Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. Each partner is required to file the appropriate extension of time to file his/her individual income tax return (Form 1040).

  2. See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, for additional information.

21.7.4.4.2.6  (01-01-2005)
Publication 541, Partnerships

  1. Publication 541, Partnerships, can be used to determine the various forms and schedules required to be filed with Form 1065.

21.7.4.4.2.7  (05-09-2011)
Partnership Penalties

  1. Partnerships may be assessed a penalty under IRC 6698 for failure to timely file a return, including extensions (TC 160/TC 166) or a failure to provide information penalty (TC 240/246), when Form 1065 is lacking the required information such as Schedules K-1 or a balance sheet. However, if the taxpayer supplies the information in a specified time period or states that they are not required to file the form for which the penalty was charged, they may qualify for penalty abatement. See IRM 20.1.2.3.3, Penalty Relief, for more information. The Missing Schedule Codes are as follows (See the exhibit in IRM 3.12.15-11, "No Reply" Procedures, for additional information):

    Missing Schedule Code Code Number
    Schedules K-1 33
    Schedule L (Balance Sheet) 34
    Schedules K-1 and Schedule L 36
    Schedule K 45
    Schedule K and Schedules K-1 46
    Schedule K and Schedule L 47
    Schedule K, Schedules K-1 and Schedule L 49
  2. The penalty is computed by multiplying the rate by the number of months or portions of a month late by the number of persons who were partners in the partnership for that year. Interest is computed from the assessment date of this penalty.

  3. Small partnerships, i.e., a partnership that has 10 or fewer partners, may qualify for a statutory exception. See IRM 20.1.2.3.3.1, Revenue Procedure 84-35, for details. Also, see IRM 20.1.1.3, Criteria for Relief from Penalties, for more information on penalty relief, including reasonable cause.

  4. For information on penalties involving the requirement for large partnerships to file electronically, see IRM 21.7.4.4.2.8.1.1.

  5. Section 8, Modification of Penalty for Failure to File Partnership Returns; Limitation on Disclosure, of the Mortgage Forgiveness Debt Relief Act of 2007, P.L. 110-142, increased the failure to file penalty and failure to file a complete return penalty on Form 1065 Partnership returns from $50 a month per partner to $85 per month per partner. The provision also increases the time period for calculating the penalty from five months to 12 months. The changes are effective for returns that are due on or after January 15, 2008.

  6. Section 127 of the Workers, Retiree, and Employer Recovery Act of 2008, P.L. 110-458, increased the penalty for failure to file a timely and/or complete partnership return. For returns due after December 31, 2008 (tax period 200809 and subsequent), the penalty amount is increased by $4 to $89 per partner per month. In addition, the Hokie Spirit Memorial Fund, P.L. 110-141, increased the penalty rate by $1 if the tax year began in 2008.

  7. Section 16 of the Worker, Homeownership, and Business Assistance Act of 2009, P.L. 111-92, increases the penalty rate to $195 per partner per month for returns with a tax year beginning after December 31, 2009. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Follow the chart below:

    For tax periods ending And the tax year began The penalty amount assessed per partner per month is For a maximum of
    200708 and Prior after 12/31/1978 $50 5 Months
    200709 through 200712   $85 12 Months
    200801 through 200808 before 1/1/2008 $85 12 Months
    200801 through 200808 after 12/31/2007 $86 12 Months
    200809 through 200912 before 1/1/2008 $89 12 Months
    200809 through 200912 in 2008 $90 12 Months
    200809 through 200912 after 12/31/2008 $89 12 Months
    201001 and Subsequent before 1/1/2010 $89 12 Months
    201001 and Subsequent after 12/31/2010 $195 12 Months

21.7.4.4.2.8  (03-14-2014)
Modernized e-file (MeF) - Electronic Filing of Partnership Returns

  1. All calendar year Form 1065 filers with 100 partners or less can file on paper or can voluntarily file their returns electronically. Certain partnerships with more than 100 partners must file electronically. See IRM 21.7.4.4.2.8.1 for information on partnerships with more than 100 partners.

  2. Partnerships can file Form 1065, Form 1065-B and Form 7004 via the Modernized e-file (MeF) system. The returns are processed at the Ogden Submission Processing Center (OSPC). For additional information, see IRM 3.42.4.2.1.3, Form 1065 and Form 1065-B MeF Programs. For information involving waivers to the requirement for large partnerships to file their returns electronically, see IRM 21.7.4.4.2.8.1.1(3) and IRM 21.7.4.4.2.8.1.2.

  3. Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns - Tax Returns Processed in 2014, is designed to provide Authorized IRS e-file Providers and Large Taxpayers specific requirements and procedures for electronic filing through the Modernized e-file System.

  4. Effective October 1, 2012, IRS e-file providers and applicants will be required to submit their IRS e-file applications online. The paper application, Form 8633, Application to Participate in the IRS e-file Program, has been discontinued. Providers and applicants must register for e-services in order to submit or update an e-file provider application online and pass a suitability test. This applies to Electronic Returns Originators (ERO), Transmitters, Software Developers and Intermediate Service Providers. Business and individuals can apply to the program on-line on the IRS Web site @ www.irs.gov/efile. Type in e-services as the IRS Keyword and press go. Additionally, a fingerprint card or evidence of professional status must be submitted for each application. Taxpayers may call the e-help desk toll-free at 1-866-255-0654 for assistance. See IRM 3.42.7.1.1, Hours of Operation.

  5. Participating transmitters and software developers MUST successfully pass the Acceptance Assurance Testing System (ATS) iIn order to file Form 1065 electronically, in order to file Form 1065 electronically. Only those entities developing software or transmitting returns directly to the IRS go through the testing process. The ATS process tests hypothetical scenarios to ensure the participants computer program has the correct file specifications to file returns electronically, that required fields will post to Master File correctly and that providers understand the mechanics of IRS e-file. Communication testing is a requirement for reporting Agents and Transmitters.

  6. See Publication 3112, IRS e-file Application and Participation, Publication 5078, Modernized e-file Test Package Business Submissions, Assurance Testing System (ATS), and Rev. Proc 2007-40 for more information on the testing process. Taxpayers may also call the e-help desk toll-free at 1-866-255-0654. Testing for Form 1065/Form 1065B for TY 2013 became available in ATS on November 4, 2013.

  7. Beginning January 13, 2014, the MeF system accepts TY 2011, TY 2012 and TY 2013 partnership returns. MeF also accepts amended returns for TY 2011, TY 2012 and TY 2013 if the original return was filed via MeF. See IRM 21.7.9.4.1.2.2, MeF Filed Amended Returns, for more information. Taxpayers must complete an amended return on paper if they filed their original return on paper.

  8. Electronically filed Form 1065 returns are processed in Ogden. For 2006 and prior, returns filed via the legacy system were assigned file location codes 72 and 64, tax class 2, and document code 65. For 2007 and subsequent, returns filed via the MeF system are assigned the following codes: (See IRM 3.42.4.4.2.1, Researching e-file BMF Identification Codes, for more information.)

    Form Filing Location Codes Tax Class Document Code
    1065 88/93
    (Overflow 92)
    3 69
    1065-B 68
  9. For TY 2013 (filing season 2014), see Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns - Tax Returns Processed in 2014, for a complete listing of the forms and schedules that are/are not accepted electronically. If a form cannot be filed electronically with the partnership return, it can be attached as a PDF document.

  10. All returns filed through the MeF system must be signed. If the return does not have a valid signature, the e-help Desk unit requests a signature. The MeF system requires taxpayers and Providers to use one of the two signature options:

    1. The Practitioner PIN (Personal Identification Number) method.

    2. The scanned Form 8453 method.

  11. The Practitioner PIN (Personal Identification Number) method (Form 8879) can only be used if the taxpayer uses an ERO. A paper copy of the signed Form 8879 is retained by the ERO and provided to the partnership, but should not be mailed to the IRS. Form 8879-PE is for Form 1065 and Form 8879-B is for Form 1065-B.

  12. With the scanned Form 8453 method, Form 8453-PE, U.S. Partnership Declaration and Signature for Electronic Filing, or Form 8453-B, U.S. Electing Large Partnership Declaration for an IRS e-file Return, are scanned and submitted with the e-filed return as a Portable Document Format (PDF) file. Form 8453-PE also should not be mailed to the IRS.

  13. Electronic returns that were not filed through the MeF system (some TY 2006 and all TY 2005 and prior) attached Form 8453-P, U.S. Partnership Declaration and Signature for Electronic Filing. Only Form 8453-P for TY 2004 and subsequent can be retrieved via IDRS and cc ELFRQ.

  14. Use CFOL command codes to research the account. Request the original return only when absolutely necessary. Returns filed through the MeF system are stored immediately after the returns are processed on the Modernized Tax Return Database (MTRDB). The Employee User Portal (EUP) allows access to these returns through the Return Request and Display (RRD) subsystem. For more information on how to gain access to EUP, see IRM 3.42.4.1.1.1, Employee User Portal.

  15. DO NOT attach information (e.g., loose forms, schedules, and correspondence) to an electronically filed return. To identify an electronic DLN, see Document 6209, Section 4, Document Locator Number, Part 3 Campus and Filing Location Codes, or IRM 3.42.4.4.2.1, Researching e-file BMF Identification Codes. Use the following procedures: File the information using TC 290 $.00 with the applicable blocking series for the type of return/situation you are adjusting using the non-refile DLN. DO NOT use an "attachment" or "association form."

    Note:

    These procedures are not needed for documents scanned into Correspondence Imaging System (CIS). CIS serves as the retention area for these documents.

21.7.4.4.2.8.1  (10-01-2011)
Partnerships with More Than 100 Partners

  1. The TPRA of 1997 authorized the issuance of regulations mandating the filing of partnership returns with more than 100 partners (large partnerships) on magnetic media. The regulations also provide that the Commissioner may mandate one form of magnetic media on which the returns must be filed. As a result, the Commissioner determined these returns must be filed electronically. Final regulations were published in Internal Revenue Bulletin 1999-48 and are effective for tax years ending on or after December 31, 2000.

  2. Large partnerships filing Common Trust Fund returns are excluded from the mandate to file electronically. If a taxpayer contacts the e-help Desk (see IRM 3.42.7.1.1, Hours of Operation) and states that they are a common trust fund partnership with over 100 partners, grant an automatic waiver from the requirement to e-file. See 21.7.4.4.2.8.1.2 below for more information on waivers.

21.7.4.4.2.8.1.1  (05-28-2014)
Large Partnership Penalty for Failing to File Electronically

  1. Regulations under IRC 6011(e) provide for a penalty to be assessed if large partnerships fail to file their return electronically for tax years ending December 31, 2000 and subsequent.

    • Taxpayers may request a waiver from the requirement to file electronically if the taxpayer can establish hardship. See IRM 21.7.4.4.2.8.1.2, Waiver Requests by Large Partnerships Required to File Electronically , for more information and Treas. Reg. 301.6011-3.

  2. The penalty is $50 per partner over 100. For example, if a partnership has 120 partners and does not file electronically, a penalty of $1,000 is assessed. It is assessed as TC 246 with reference number 688. For returns due on or after January 1, 2011, the penalty was increased to $100 per partner over 100. Therefore, in the above example, the penalty would be $2,000 if the return was due after January 1, 2011.

  3. If, after the penalty is assessed, a taxpayer believes they can establish that the partnership qualified for a waiver of the e-file requirement, they must write to Accounts Management at the Ogden campus at the address in paragraph (4) directly below. Penalty abatement requests CANNOT be worked by phone or correspondence at other sites. Exception: If the module contains an un-reversed TC 971 AC 320 (penalty assessed in error), abate the penalty using PRN 688, with the penalty as a negative amount, using PRC 045.

  4. Erroneous penalty assessments may be abated in any functional area whenever they are identified. If a taxpayer calls or corresponds regarding where to file the request, instruct him to file the request at the address below. If an abatement request is received at another site and it is a CIS case, reassign to 0430455460. Forward all others to OAMC:
    Internal Revenue Service
    1973 N. Rulon White Blvd.
    Mail Stop 6552
    Ogden, UT 84404

  5. Taxpayers should not file returns on paper and wait for a penalty to be assessed before requesting abatement. They should request a waiver (if they meet the criteria) as detailed in IRM 21.7.4.4.2.8.1.2. Requests for abatement of FTF Electronically Penalty only, and/or inquiries requesting both FTF Penalty and FTF Electronically Penalty abatement are worked in Ogden's Accounts Management campus. Requests for FTF Penalty abatement only, are worked in Accounts Management Cincinnati and Ogden.

  6. Taxpayers must establish reasonable cause due to hardship based on economic reasons or reasons out of their control such as equipment breakdown, destruction of magnetic media filing equipment, etc. If reasonable cause due to hardship is established, a TC 241 is generated when a TC 290 $.00 with Reference Number 688 with a minus sign is input on IDRS.

  7. If hardship is established:

    1. Input TC 290 $.00 in blocking series 17 with Reference Number 688 with a minus sign.

    2. Use RC 062 in the first position and the appropriate RC in the fourth position, usually RC 022.

    3. Inform the partnership (by letter) the request for penalty abatement has been accepted. Also, inform the partnership the request is allowed for this tax period only, and if they believe they meet the hardship criteria in future years, they must request a waiver each year. Also, inform them they must attempt to meet the electronic filing requirement in future years. The fact that their reason was accepted this year, does not necessarily mean it will be accepted in future years.

  8. If hardship is not established:

    1. Input TC 290 $.00 in blocking series 98.

    2. Input RC 062 in the first position.

    3. Do not input Reference Number 688.

    4. Send Letter 854C,Penalty Waiver or Abatement Disallowed/ Appeals Procedure Explained.

  9. If a taxpayer's request for penalty abatement is denied (unlike waiver requests), the taxpayer has the option to follow normal penalty appeals procedures.

  10. If a request for penalty abatement is received when the partnership files a paper Form 1065, Code and Edit faxes a copy to OSPC at 877-477-0575. These requests must be worked by OSPC within three working days of receipt. OSPC follows the instructions below.

    If Then
    The partnership establishes hardship 1. Input TC 971 Action Code 320.
    2. Follow the procedures in IRM 21.7.4.4.2.8.1.1(6), Step 3 of the first Then box which reads "Inform the partnership (by letter) the request ...."
    The partnership does not establish hardship 1. Input TC 971 Action Code 321.
    2. Send Letter 854C, Penalty Waiver or Abatement Disallowed/ Appeals Procedure Explained....
  11. If a large partnership files a Form 1065 electronically, but it is systemically rejected and the partnership files the return on paper, the partnership should attach a copy of the rejection notification to the paper Form 1065. If the postmark is within 10 days of notification from the Service that the electronic return was rejected, Code and Edit enters Computer Condition Code (CCC) "R" to suppress the FTF penalty. (See IRM 3.11.15.14, Computer Condition Codes, for additional information on Code and Edit's usage of CCCs.) They also fax a copy of page 1, Form 1065 and a copy of the ELF rejection notification (indicating "rejection notification from ELF" ) to OSPC at 877-477-0575. OSPC must:

    1. Work these cases within three working days of receipt.

    2. Input TC 971 Action Code 320.

  12. If a large partnership is erroneously assessed a penalty for failure to file electronically (TC 246 with Reference Number 688) due to Service error, the penalty must be abated. Examples of this include but are not limited to, returns where the number of partners was transcribed incorrectly (partnership has less than 100 partners but the number transcribed was more than 100) or the penalty was assessed for a tax period prior to period ending December 31, 2000. OSPC must:

    1. Input TC 290 $.00 in blocking series 17 with Reference Number 688 (for the amount of the penalty you are abating) with a minus sign.

    2. Use PRC 045 in the fourth position.

    3. Inform the partnership by letter that the penalty has been abated. An apology for the erroneous assessment must be included.

  13. See IRM 20.1.2.4.1, Penalty Relief, for more information on the criteria for abating the penalty for failure to file a partnership return on electronic media due to reasonable cause.

21.7.4.4.2.8.1.2  (04-26-2013)
Waiver Requests by Large Partnerships Required to File Electronically

  1. Regulations provide for waiver of the requirement to file electronically if the taxpayer can establish hardship. A major factor in the decision is whether the taxpayer will incur undue economic hardship. See Treas. Reg. 301.6011-3(b).

  2. Per Announcement 2002-3, requests must be in writing with the notation on the envelope and at the top of the actual request Form 1065 e-file Waiver Request - IRC section 6011(e)(2). The Tax Matters Partner, as defined in IRC 6231(a)(7), must sign the request and include a statement; "Under penalties of perjury, I declare that the information contained in this waiver request is true, correct, and complete to the best of my knowledge and belief." It must contain a detailed explanation as to why the partnership is unable to file electronically, including:

    1. What steps they took to comply.

    2. Why the steps were unsuccessful.

    3. The hardship that would result, including any incremental costs to the partnership of complying with the electronic filing requirements. Incremental costs are those costs that are above and beyond the costs to file on paper. The incremental costs must be supported by a detailed computation. The detailed computation must include a schedule detailing the cost to file on paper and the costs to file electronically.

    4. An explanation of the steps they will take to comply next year.

  3. In addition to a detailed explanation, the waiver request must also contain:

    • Name of partnership.

    • EIN of partnership.

    • Mailing address of partnership.

    • Tax year for which waiver is being requested.

  4. Taxpayers should see Announcement 2002-3 which was issued to provide information on the waiver request procedures. It can be found on page 305 of Internal Revenue Bulletin 2002-2. Also, see IRM 3.42.4.13.4, Form 1065, MeF Penalties and Waiver Information, for the matrix that is followed to determine when to approve or deny a waiver request for the Form 1065 and Form 1065-B MeF returns.

  5. All waiver requests must be filed with OSPC at the address below. Waiver requests cannot be attached to extensions of time to file requests (Form 7004) or to the partnership's paper tax return. Requests from the partnership's tax advisor/preparer must be accompanied by a valid power of attorney if one is not already on file. Waiver requests must be filed with OSPC during one of the following periods.

    • For returns due April 15, 2013 (Form 7004 not filed): January 15, 2013 - March 1, 2013.

    • For returns due September 15, 2013 (Form 7004 filed): January 15, 2013 - August 15, 2013.

      Sent via United States Postal Service Sent via Private Delivery Service (e.g., UPS, FedEx, etc.)

      Internal Revenue Service
      Ogden Submission Processing Center
      e-file Team, Mail Stop 1057
      Attn.: Form 1065 e-file Waiver Request
      Ogden, UT 84201

      Internal Revenue Service
      1973 Rulon White Blvd.
      e-file Team, Mail Stop 1056
      Attn.: Form 1065 e-file Waiver Request
      Ogden, UT 84404
  6. A waiver can only be requested for a specific tax period. Acceptance of the waiver does not waive the requirement for future tax periods. (See IRM 21.7.4.4.2.8.1.1(3).) Partnerships should receive written notice of the determination of their request within 30 days from the date the request was received. Unlike penalty abatement requests, denial of waiver requests cannot be appealed.

  7. After considering a waiver request, a TC 971 Action Code 320 is input, if the request is accepted. This prevents the assessment of the penalty for failure to file electronically. If a request is denied, a TC 971 Action Code 321 is input. (If both TC 971 Action Code 320 and 321 appear on the module, the latest TC 971 Action Code 320/321 takes precedence.) Letter 4118C, Request for a Waiver From Filing Partnership Return Electronically, informing the taxpayer of the decision, must be sent.

21.7.4.4.2.8.2  (07-20-2012)
Small Partnership Penalty Abatement

  1. IRC 6031(a), requires a partnership to file a federal tax return (Form 1065). IRC 6698 imposes a penalty against a partnership that fails to file a timely tax return or a complete tax return as required by IRC 6031(a). Rev. Proc. 84-35, provides for a statutory exception to the penalty for small partnerships.

  2. Revenue Procedure 84-35 allows for the reasonable cause abatement of the penalty for filing a late or incomplete return for certain "Small Partnerships." See IRM 20.1.2.3.3.1, Revenue Procedure 84-35, for the definition of a small partnership as defined by Revenue Procedure 84-35, and for the criteria that must be met for an abatement.

21.7.4.4.2.8.3  (07-31-2009)
Known e-file Issues and Solutions - Form 1065

  1. Periodically, problems arise that prevent taxpayers from being able to file electronically through the Modernized e-file (MeF) System. When this occurs, Electronic Tax Administration (ETA), Large Business and International (LB&I), or Submission Processing will issue a workaround to taxpayers by posting information on the IRS Web site. Go to www.irs.gov, click on e-file and look for the header, Business and Self-Employed Taxpayers. Click on the link to Modernized e-file (MeF). Click on this link and it will take you to Modernized e-file (MeF) for Partnerships.

  2. Under the "What's Hot" table of contents, are links to the Known e-file Issues and Solutions web-pages. Currently, there are links to TY 2008, TY 2009, TY 2010 and TY 2011. When taxpayers contact the e-help unit with processing problems, taxpayers are directed to this site. In addition, Accounts Management will issue SERP Alerts or IPUs if the situation warrants. For example, an Alert was issued due to a problem with name control mismatches on Form 1065 and Form 1120 accounts.

  3. If you receive a call from a taxpayer stating that they are having problems e-filing, research the web-page. If you are unable to find any information, refer the caller to the e-help desk unit, toll-free at 1-866-255-0654. See IRM 3.42.7.1.1, Hours of Operation.

21.7.4.4.2.9  (04-03-2014)
Duplicate Filing Conditions on Form 1065 and Form 1065X, Amended Return or Administrative Adjustment Request (AAR)

  1. A duplicate filing condition occurs when more than one return posts to an account which already contains a return (TC 150). A TRNS 193 is generated and the returns are secured and routed to Accounts Management for processing. If the second return is not clearly marked that it is an amended/corrected/superseding return or if the amended return box on line G is not checked, ensure that the return is in fact an amended return and does not belong on a different EIN or tax period. If the duplicate/amended return was not received with the TRNS 193, follow the instructions in IRM 21.7.9.4.1.2, TRNS 193 Received Without Duplicate Return, to secure the return.

  2. Beginning January 1, 2012, Form 1065X, Amended Return or Administrative Adjustment Request (AAR), is available for both Form 1065 and Form 1066 filers to amend their federal tax return. Form 1065X is available for use this year by partnerships and REMICs that file paper returns. Taxpayers may use new Form 1065X to amend prior years where the statute is open.

  3. Form 1065X will not be available in the e-file system for at least a year and possibly much longer. Partnerships that are required to file electronically will use the old Form 1065 in the electronic filing system, mark the amended box, and attach an electronic Form 8082.

  4. The Tax Equity & Fiscal Responsibility Act of 1982 (TEFRA) allows for the filing of an Administrative Adjustment Request (AAR) by a flow-through entity (partnership or LLC). Form 8082, Notice of Inconsistent Treatment or Amended Return (Administrative Adjustment Request (AAR)), was designed to alert IRS to this condition.

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Since Form 8082 is not consistently being attached as required, the amended/corrected/superseding Form 1065 returns that meet any of the criteria below must be routed to Examination as CAT-A criteria:

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. Partnerships and electing large partnerships that file amended returns on new Form 1065X, must be routed to Exam as CAT-A criteria if either of the following conditions below are met:

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  8. Action required on the amended/corrected/superseding returns that meets the criteria in paragraph (6) or paragraph (7) directly above:

    1. Retain an open control in background (B) status on all cases referred to Examination and update the activity code to "CAT-A." If CIS case, the case remains in "A" status and the activity code systemically updates to "TOCATA." See IRM 21.5.3.4.7, Processing Claims and Amended Returns With Examination Involvement, for more information.

    2. If the case is selected, close your base using Activity Code "AAREXAM" , and input TC 971 action code 013 to indicate that the amended return was forwarded to Examination Branch.

    3. Recharge the amended and original return (if received with TRNS 193) to Examination, unless the document is a CIS return.

    4. Exam is responsible for forwarding the returns to Files if not needed for their case.

    5. Do not release the -A freeze, Examination releases the freeze.

  9. Form 1065 claims and/or amended returns involving Ponzi Scheme issues (including language discussing removal of phantom or fraudulent income), may be Examination criteria. Route to Examination as CAT-A ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) - General, for more information.

21.7.4.4.2.9.1  (07-20-2012)
Items to Compare on TRNS 193s (Form 1065)

  1. Compare the items listed below on each return to determine if the TC 976 return is a true duplicate, amended, supplemental, or belongs to another tax period or entity.

    • TIN

    • Tax period

    • Names and number of partners

    • Income and deduction figures

    • Balance sheet

    • Schedules K-1

    • Signature and signature dates

  2. If the amended return was not received with the TRNS 193, "perform a special search." In addition, attempt to contact the taxpayer by telephone for a copy of the return. Wait for a response from the special search. If unable to secure a copy from the taxpayer and if the special search does not provide the return, send Letter 418C to the taxpayer to request a copy (Command code BRTVU cannot be used to compare returns since returns that are "G" coded are not transcribed). Suspend for 40 days and if no reply, close with a TC 290 for $.00.

  3. Action required:

    If Then
    TC 976 return is a true duplicate, amended, or supplemental 1. Input TC 290 $.00 blocking series 00 (with original) or 17 (without original).
    2. Adjust penalties as appropriate. See IRM 20.1.1, Introduction and Penalty Relief.
    Partners’ names are the same, but the percentage of ownership on Schedules K-1 has changed by 50 percent or more It is no longer necessary to route the case to Entity for determination if another partnership exists.
    TC 976 return belongs on another TIN or tax period 1. Input TC 290 $.00 using blocking series 00 or 17.
    2. Correct the information on the TC 976 return.
    3. Prepare, attach, and route Form 13596, Reprocessing Returns, for reprocessing to the correct tax period or TIN. See IRM 21.7.9.4.1.1, TRNS 193s Involving Reprocessing Returns, for more information.
    4. Input TC 971 as appropriate, per instructions in IRM 21.5.1, General Adjustments. (Do not reprocess a TC 976 return to an account which contains a TC 150. Input a TC 290 $.00 to the account and attach the TC 976 return to the adjustment document.)
    One of the returns is a 6020(b) and the taxpayer filed an original return 1. Check the received date on the taxpayer’s return. (If prior to the 6020(b) return, the FTF penalty may need to be adjusted. See IRM 20.1.2.2.10, Substitute for Return - IRC 6651(g), for more information.
    2. Verify the taxpayer’s return is complete and the number of partners involved. (If the information differs, penalties may need to be adjusted.)
    3. Input TC 290 $.00 in blocking series 00 or 17 and adjust penalties as appropriate.

21.7.4.4.2.9.2  (03-29-2013)
Duplicate Filing Conditions - Technical Terminations Under IRC 708(b)(1)(B)

  1. Prior to 1997, Section 708(b)(1)(B) stated that a partnership was considered terminated, if within a 12 month period, there is a sale or exchange of 50 percent or more of the total interest in partnership capital and profits.

  2. Special rule for Section 708(b)(1)(B) terminations. Treasury Decision T.D. 8717, effective May 9, 1997, provided that a partnership that is terminated under IRC 708(b)(1)(B) shall retain the EIN of the terminated partnership. The Instructions for Form 1065 also advises taxpayers, "Do not request a new EIN for a partnership that terminated because of a sale or exchange of at least 50 percent of the total interest in partnership capital and profit."

  3. If multiple returns are filed under the same EIN citing IRC 708(b)(1)(B) or the technical termination box is checked on the Form 1065 tax return (on 2009 and subsequent revisions), do not reprocess returns to the short period. Input TC 290 $.00 to release the -A freeze.

  4. If a return is incorrectly processed to the short period and a penalty is charged, abate the penalty due to service error.

21.7.4.4.2.10  (01-01-2005)
Multiple Filed Form 1065

  1. Banks acting as managers for underwriting syndicates to issue bonds, are permitted to use the same EIN when filing partnership returns on behalf of each syndicate.

  2. TRNS 193s are suppressed on these cases. The first return posts as a TC 150 and subsequent returns as TC 976s. A "Consolidated Transcript" is generated when overflow conditions are reached. Action required:

    1. Input TC 290 $.00 to have the transcript of the TC 976 postings and the original return re-filed under the adjustment DLN.

    2. Use blocking series 00 (with original) or 17 (without original).

21.7.4.4.2.11  (10-01-2014)
CP 282 Notice, Notification of Possible Additional Partnership Filing Requirements (Withholding Tax on Foreign Partners)

  1. A CP 282 Notice, is issued to Form 1065/Form 1065-B filers who marked the "YES" checkbox next to question 16, Foreign Partners, on Schedule B, Form 1065, or next to question four on Schedule B, Form 1065-B. This indicates that the partnership had foreign partners (for purposes of IRC 1446) during the tax year. Responses are received and worked in both the Cincinnati and Ogden campuses.

  2. Generally, when a foreign person engages in a trade or business in the United States, all income arising from the activities of that trade or business, is considered to be Effectively Connected Income (ECI). It is the partnership's (CPA, attorney, accountant) responsibility to determine if the partnership has ECI allocable to a foreign partner. Taxpayers can research various articles on ECI @ www.irs.gov/.

  3. The partnership may have to report to the IRS under IRC 1446, on gross income allocable to foreign partners (without regards to distributions) if the partnership had gross income effectively connected with the conduct of a trade or business within the United States that is allocable to a foreign partner. In addition, they must pay a withholding tax on the taxable income effectively connected with the conduct of a trade or business within the United States that is allocable to a foreign partner, and file Form 8804, Form 8805, and Form 8813.

  4. For information on reporting and paying the Section 1446 withholding tax as well as the general reporting obligations, see the Instructions for Form 8804, Annual Return For Partnership Withholding Tax, Form 8805, Foreign Partner’s Information Statement of Section 1446 Withholding Tax, and Form 8813, Partnership Withholding Tax Payment Voucher. Also, see IRM 21.8.2.16.1, CP 282 - Form 1065.

  5. Special rules apply to publicly traded partnerships. Unlike all other partnerships which withhold in the year the effectively connected taxable income is allocated to a foreign partner, publicly traded partnerships withhold in the year there is a distribution to a foreign partner. Also, instead of filing Form 8804, Form 8805, or Form 8813, publicly traded partnerships must file Form 1042 and Form 1042-S.

  6. If the taxpayer contacts IRS and states:

    IF AND THEN
    Not liable Taxpayer incorrectly checked the yes box or if an input error was made by IRS
    • Acknowledge receipt of the issue.

    • Apologize, if our error.

    • Advise TP you will notate their file. (Use correspondence or prepare Form 4442/Form 4442 DI/AMS, as source document.)

    • Associate the above document to Files using local procedures.

    Liable Needs forms
    • Send necessary forms to TP or give toll-free forms number.

    • Instruct TP to file at
      OIRSC
      Ogden, UT, 84201

    Liable Original return(s) attached
    • Route to Ogden

    • If payment is received with Form 8804, transfer to Ogden on Form 2158 for processing to ANMF system.

    Liable TP states that they have already filed and sends clearly marked copy of return(s)
    • Destroy as classified waste, respond only if TP asks question.

    Note:

    If the taxpayer states that they had no taxable income, it is not a valid response. Advise the taxpayer that they either marked the checkbox next to question 16, Foreign Partners, on Schedule B, Form 1065, or next to question four on Schedule B, Form 1065-B, indicating that the partnership had foreign partners (for purposes of IRC 1446). Ask the taxpayer if this was correct and are they liable or not liable, follow the chart above based on their response.

21.7.4.4.2.12  (02-03-2006)
Form 1065 Filed under Rev. Proc. 2003-84

  1. Rev. Proc. 2003-84, 2003-48 IRB, page 1159, allows certain partnerships that invest in tax-exempt obligations to make an election that enables the partners to take into account monthly inclusions required under IRC 702 and IRC 707(c) of the IRC and provides rules for partnership income tax reporting. Thus, a partnership that has a monthly closing election in effect for the entire taxable year and meets the other requirements in section 8 of this revenue procedure, is not required to file a Form 1065 or issue Schedules K-1 (Form 1065).

  2. An eligible partnership makes a monthly closing election by providing in the entity’s governing documents that the partnership is making a monthly closing election that is effective as provided under section 5.02 of this revenue procedure and all partners consent to the election.

  3. The monthly closing election is effective on the latter of:

    1. The start-up date of the partnership (as defined by section 4.05(1) of this revenue procedure), or

    2. The first day of the month in which the provisions described in section 5.01 of this revenue procedure is first included in the entities governing documents.

  4. A partnership must file an abbreviated return (considered abbreviated because only certain information is required to be completed on the form) for the first taxable year during which the monthly closing election was in effect. The abbreviated return must be filed by the date the partnership’s income tax return would ordinarily be due and must be signed by a person with the authority to sign the partnership’s Form 1065 return. The words "Filed in Accordance with Rev. Proc. 2003-84" must be typed or written across the top of the form.

  5. See Rev. Proc. 2003-84 for the specific information that must be supplied on the abbreviated return.

  6. Action required: If a taxpayer states they previously filed a Form 1065 under Rev. Proc. 2003-84, check the filing requirements. If filing requirements are still active, delete them by inputting TC 591 closing code 025 via command code FRM49. If a taxpayer is penalized for failing to file Form 1065 for a tax period AFTER they have filed the required abbreviated return, abate the penalty using penalty reason code 045, Service Error. Either contact the taxpayer by phone or send Letter 3012C, Partnership Return Filing Requirements: Form 1065, advising the taxpayer that, based on the information provided they are not required to file future partnership returns. Apologize for any inconvenience.

21.7.4.4.2.13  (01-01-2007)
Schedule M-3 (Form 1065), Net Income (Loss) Reconciliation for Certain Partnerships

  1. Beginning with tax year 2006 returns, any entity that files Form 1065 or Form 1065-B, must complete and file Schedule M-3 in lieu of Schedule M-1, Reconciliation of Income (Loss) per Books With Income (Loss) per Return, if any of the following applies:

    1. The amount of total assets at the end of the tax year reported on Form 1065, Schedule L, line 14, column (d), is equal to $10 million or more.

    2. The amount of adjusted assets for the year is equal to $10 million or more.

    3. The amount of total receipts (as defined on page 20 of the Instructions for Form 1065, Schedule B, question 5), for the taxable year is equal to $35 million.

    4. An entity that is a reportable entity partner with respect to the partnership owns or is deemed to own, directly or indirectly, an interest of 50 percent or more in the partnership's capital, profit, or loss, on any day during the tax year of the partnership.

21.7.4.4.2.14  (10-14-2009)
Payment by Credit or Debit Card (Pay by Phone or Internet)

  1. Form 1041 and Form 1065 filers may pay their taxes by phone or internet using a credit or debit card. Payments can be made using an American Express Card, Discover Card, MasterCard, or VISA Card. The IRS does not determine which credit cards the service providers accept.

  2. Taxpayers have the option to either use an IRS e-pay service provider or an integrated IRS e-file and e-pay service provider. The service providers offer these options to taxpayers who file on paper or electronically. The payment options are available 24 hours a day, 7 days a week. The service providers charge convenience fees for the services. See IRM 21.2.1.48.4, Credit or Debit Card Payments (Pay by Phone or Internet), for more specific information.

  3. Also see IRM 21.2.1.48, Electronic Payment Options for Individuals and e-file Users, for other payment options.

21.7.4.4.3  (01-01-2005)
Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return

  1. Form 1066 is used to report income, deductions, gains and losses from the operation of a REMIC. In addition, the form is used to report and pay the taxes on net income from prohibited transactions, foreclosure property, and contributions after the start-up day.

  2. Form 1066 is filed at the Ogden Submission Processing Center (including International forms). The MFT is 07, Tax Class 3, and Document Code 60.

21.7.4.4.3.1  (03-29-2013)
Form 1066 Due Dates, Payments, and Extensions to File

  1. Form 1066 is a calendar year return and is due the 15 day of the 4 month following the close of the taxable year. If the REMIC ceases to exist before the end of the calendar year, a short period return is due on the 15 day of the 4 month following the date the entity ceased to exist.

  2. Tax due must be paid by the original due date. Payments should be mailed directly to IRS. No ES payments are required.

  3. When tax is reported on a late Form 1066, the return may be subject to the penalty under IRC 6651(a)(1), and the penalty under IRC 6698. See IRM 20.1.2.3.3.4, REMIC Special Considerations for information on working penalty abatement requests.

  4. Beginning January 1, 2006, IRS consolidated Form 2758, Form 7004, Form 8736 and Form 8800. Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, is utilized to file for an automatic 6 month extension to file Form 1066. See IRM 21.7.4.3.5, Revised Form 7004, for additional information.

21.7.4.4.3.2  (02-01-2013)
Amended Form 1066 and Form 1065X, Amended Return or Administrative Adjustment Request (AAR)

  1. Form 1066 can be amended. They are "G" coded and routed to Ogden Accounts Management. Beginning January 1, 2012, new Form 1065X, Amended Return or Administrative Adjustment Request (AAR), is available for both Form 1066 and Form 1065 filers to amend their federal tax return. Form 1065X is available for use by REMICs that file paper returns. The 1065X will not be available in the e-file system for at least a year and possibly much longer. Taxpayers may use Form 1065X to amend prior year Form 1066 returns where the statute is open.

  2. Route all amended returns and correspondence by a real estate mortgage investment conduit (REMIC, Form 1066) to Ogden Accounts Management Campus, Mail Stop 6276. If the amended return or correspondence involves "foreclosure property," see IRM 21.7.4.4.3.4 below.

  3. Action required:

    • Use blocking series 15 when adjusting

    • Amended Form 1066 are not Cat-A criteria

21.7.4.4.3.3  (01-01-2005)
Schedule Q (Form 1066), Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation

  1. A copy of Schedule Q is sent to each residual interest holder by the last day of the month following the end of the calendar quarter. Schedule Q notifies the taxpayer of their share of the REMIC's quarterly taxable income (or net loss), the excess inclusion with respect to their interest, and their share of the REMIC's IRC 212 expenses for the quarter.

  2. The original Schedules Q (Copy A) for all quarters are attached and filed with Form 1066.

21.7.4.4.3.4  (12-23-2013)
Foreclosure Property Extension Requests

  1. Route all amended returns and correspondence by a real estate mortgage investment conduit (REMIC, Form 1066) to Ogden Accounts Management Campus, Mail Stop 6276. Also, route all requests for extension of "foreclosure property" grace period pursuant to IRC 856(e) to Ogden Accounts Management, Mail Stop 6276. If CIS case re-control to 0438607158.

  2. If the correspondence includes a Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, the form must be signed by the taxpayer (Typically by the trustee of the account.). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. An extension request is timely if it is filed more than 60 days before the grace period would expire.

    • The grace period expires as of the close of the third table year following the taxable year in which the REMIC acquired the foreclosure property (the second taxable year for qualified health care properties).

    • Accordingly, if the grace period would expire on December 31 of a particular year, the extension request must be dated and filed by October 31 of that year to be timely. See IRM 3.11.212.1.7, Determination of Timely Filing – General, for more information.

  4. If the request is timely filed, Ogden Accounts Management will send the taxpayer a Letter 96C , Acknowledgment Letter for General Use/Inquiry. In addition, Ogden will input a CIS history statement that an extension request was received and that a Letter 96C was issued. Capture the screen of the 96C letter for a record of the paragraphs used.

  5. In the 96C letter, use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the first two of the following bullets and follow the instructions in the third bullet:

    • If your extension request for foreclosure property described in IRC 856(e) or IRC 860G(a)(8) is timely filed (i.e., more than 60 days before the grace period expires), then the grace period shall be automatically extended: (1) in the case of qualified health care property, for 4 years less the term of any prior grace period extension, and (2) in other cases, for three years.

    • However, if your extension request is timely filed and the Service subsequently reviews your request and determines that it shall not be granted, then the automatic extension of the grace period set out in the preceding paragraph shall end after the 30th day after you are notified by certified mail that the request was not granted. (See Treas. Reg. Section 1.856-6(g)(5).)

    • Attach a copy of the extension request that contains the taxpayers name, their EIN, date of request, and property description (the address) of each property that the taxpayer is requesting a foreclosure extension for.

  6. If the request is not timely filed, Ogden Accounts Management will send the taxpayer a Letter 3064C, IDRS Special Letter. In addition, Ogden will input a CIS history statement that an extension request was received and that a 3064C letter was issued. Capture the screen of the Letter 3064C, for a record of the paragraphs used.

  7. In the Letter 3064C, use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the first two of the following bullets and follow the instructions in the third bullet

    • An extension request for foreclosure property described in IRC 856(e) or IRC 860g(a)(8) must be filed more than 60 days before the grace period would otherwise expire. Your request is untimely, since it was filed after this deadline. The property is also ineligible for the automatic extension provided for a timely filed request. See Treas. Reg. Sections 1.856-6(g) (3), (5).

    • While your extension request was untimely filed, you may make a separate request for the Service to treat it as timely filed, pursuant to Treas. Reg. Section 1.856-6(g) (6), by establishing that (1) there was reasonable cause for failure to file the extension request within the prescribed time and (2) you filed the separate request within a reasonable time under the circumstances.

    • Attach a copy of the extension request that contains the taxpayer’s name, its EIN, date of request, and property description (the address) of each property that the taxpayer is requesting a foreclosure extension for.

    :

  8. If a subsequent inquiry is received "AFTER" a Letter 96C or Letter 3064C has been sent (check ENMOD), advise the taxpayer that they may call the non toll-free numbers below if they have any questions and may speak to one of the:
    Senior Program Specialists (Technical Tax Analysts)
    Internal Revenue Service
    LB&I, Financial Services
    @ 212-298-2171 and/or 212-298-2250
    Between 8:00 AM and 4:30 PM (EST)

21.7.4.4.4  (02-23-2009)
Form 1120 Series Returns, Corporation Income Tax

  1. Form 1120 series returns are used to report income, gains, losses, deductions, and credits of U.S. corporations. Corporations must file an income tax return regardless of the amount of their income.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. For federal income tax purposes, the term "corporation" includes associations, joint stock companies, and partnerships which operate as corporations. Form 1120 must be signed by an officer of the corporation.

  4. The MFT is 02 and the tax class is 3. Document codes and filing requirement codes can be found in Document 6209.

  5. IRS began to accept some electronically filed TY 2003 Form 1120 and Form 1120S in 2004, along with 49 various forms and schedules. See IRM 21.7.4.4.4.15, Modernized e-file Program (MeF) for Corporate and Exempt Organization Returns, for more information.

21.7.4.4.4.1  (03-18-2008)
Types of Form 1120

  1. There are several types of Form 1120 which can be filed by a corporation depending on its business. Listed below are the types in the sequence they appear in this section:

    • Form 1120, U.S. Corporation Income Tax Return

    • Form 1120-A, U.S. Corporation Short-Form Income Tax Return (Obsolete for tax years beginning after December 31, 2006)

    • Form 1120S, U.S. Income Tax Return for an S Corporation

    • Form 1120-H, U.S. Income Tax Return for Homeowners Associations

    • Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

    • Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return

    • Form 1120-L, U.S. Life Insurance Company Income Tax Return

    • Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return (processed as NMF)

    • Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons

    • Form 1120-F, U.S. Income Tax Return of a Foreign Corporation

    • Form 1120-FSC, U.S. Income Tax Return for Foreign Sales Corporation

    • Form 1120-SF, U.S. Income Tax Return for Settlement Funds

    • Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts

    • Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies

    • Form 1120X, Amended U.S. Corporation Income Tax Return

    • Form 1120-C, Income Tax Return for Cooperative Association

21.7.4.4.4.2  (01-01-2005)
Form 1120 Series Due Dates

  1. In general, corporation returns are due by the 15 day of the third month after the end of the tax year.

  2. A corporation filing a short period return must file by the 15 day of the 3rd month following the end of the short tax year. If a Subchapter S or personal service corporation previously elected to be a Section 444 filer and is now terminating that election and, as a result has a short tax year, the corporation should notate "Section 444 Election Terminated" at the top of Form 1120/1120S.

  3. A newly organized corporation, except a Subchapter S or personal service corporation, can elect any accounting period. The return is due the 15 day of the 3rd month following the end of the tax year.

  4. A dissolving corporation is required to file a return for the short period from the first day of its normal accounting period to the date of dissolution. The return is due the 15 day of the 3rd month following the close of the short tax year.

21.7.4.4.4.3  (01-01-2005)
Personal Service Corporations

  1. A personal service corporation, as defined in Temporary Regulations Section 1.441-3T(b)(1), must use the calendar year, unless it meets one of the criteria below:

    1. The corporation can establish to the satisfaction of the Commissioner, there is a substantial business purpose for having a different tax year. (TC 054 identifies approved business purpose.)

    2. The corporation elects under Section 444 to have a tax year other than their required tax year. (These corporations must file Form 8716, Election to Have a Tax Year Other Than a Required Tax Year. An approved election can be identified by TC 055.)

  2. A corporation is a qualified personal service corporation as defined in Temporary Regulations Section 1.448-1T (and, thus, generally permitted to use the cash method of accounting) if it meets both of the tests below:

    1. Substantially all of the corporation’s activities involve the performance of services in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law or performing arts, and

    2. At least 95 percent of the corporation's stock, by value, is owned directly or indirectly by; employees performing the services, retired employees who had performed the services listed above, any estate of the employee or retiree described above, or any person who acquired the stock of the corporation as a result of the death of an employee (but only for the 2-year period beginning on the date of the employee or retiree's death). (See IRC 448(d)(2)(B).)

  3. A qualified personal service corporation is taxed at a flat rate of 35 percent on taxable income.

21.7.4.4.4.3.1  (01-06-2004)
CP 224 Notice, Notice of Potential Qualification as a Personal Service Corporation

  1. CP 224 Notice, Notice of Potential Qualification as a Personal Service Corporation, is issued to businesses who, based on the business activity described on the Form 1120 they filed, may qualify as a personal service corporation. The notice is an informational notice to alert them to a potential issue that may affect their tax return. It further states that a corporation is a qualified personal service corporation if it meets both of the tests described in IRM 21.7.4.4.4.3(2) a) and b) above.

  2. Taxpayers are instructed to consider the information in the notice and review their income tax return. If they had a practitioner or other third-party prepare their return, they may want to contact them for assistance. The notice also states that no further action is necessary if their return is correct as filed, or to File Form 1120X, Amended U.S. Corporation Income Tax Return, if necessary.

21.7.4.4.4.4  (01-28-2008)
Consolidated Returns

  1. An affiliated group of corporations can elect to file a consolidated income tax return.

  2. The consolidated return must be filed on the basis of the common parent’s annual accounting period.

  3. The consolidated return must include all the income of the parent plus the income of each subsidiary for the portion of such taxable year during which it was a member of the group.

  4. Form 851, Affiliations Schedule, is filed to identify the common parent corporation and each member of the affiliated group, and for making the determination that each subsidiary corporation qualifies as a member of the affiliated group. See the General Instructions for Form 851, for the requirements that must be met to qualify as an affiliated group. An affiliated group is one or more chains of includible corporations connected through stock ownership with a common parent corporation. See IRC 1504(a) and (b) for more information. Form 851 is filed with the consolidated tax return for the group. See IRM 21.3.3.5.2, Loose Schedules, for procedures for working loose Form 851.

  5. Income not included in the consolidated return by a corporation, because it was not in the group for its complete taxable year, must be reported on a separate return. See the table below.

    If Then
    The group has filed a consolidated return by the due date for filing of a subsidiary’s separate return (including extensions of time) The separate return must be filed no later than the due date of such consolidated return (including extensions of time). See the Example below this table.
    The group has not filed a consolidated return by the due date for filing of a subsidiary’s separate return (including extensions of time) Such subsidiary must file a separate return no later than the due date of such subsidiary return (including extensions of time). See Reg 1.1502-76(c).

    Example:

    The scenario below describes the situation when a group has filed a consolidated return by the due date for filing of a subsidiary’s separate return (including extensions of time).

    1. Corporation A has a FY 03.

    2. Corporation Z has a FY 12.

    3. Corporation Z acquires all of the stock for Corporation A at the close of September 30, 2012.

    4. Corporation Z files a consolidated return for the group for calendar year 2012 on March 15, 2013.

    5. Since Corporation Z filed a consolidated return by the due date for Corporation A (June 15, 2013), the return of Corporation A for the short taxable year beginning April 1, 2012 and ending September 30, 2012 must be filed no later than March 15, 2013 (the due date for Corporation Z’s return).

    6. No penalty or interest would be due for the period December 15, 2012 (normal due date for a return with period ending September 30, 2012) through March 15, 2013.

    Note:

    C&E has procedures for identifying and coding this type of return. However, sometimes these returns are not coded properly, especially if e-filed. In order to correct the account, a manual adjustment to interest and/or penalties may need to be done.

21.7.4.4.4.5  (08-09-2010)
Extensions to File Form 1120 Series Returns

  1. Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, is used to request a six month extension of time to file Form 1120 series returns. It must be filed by the due date of the return.

  2. The extension is allowed upon the timely and proper filing of Form 7004 and full payment of the tentative tax. If these requirements are not met, the corporation may be subject to a late filing penalty from the prescribed due date until the date the return is received.

  3. Timely filed calendar year Form 7004 are no longer date stamped and the envelope is no longer retained. However, the first document within a block of these forms will contain a received date. If the form is delinquent but the postmark on the envelope is timely, Code and Edit circles the received date. Consider timely any calendar year (200312 and subsequent) Form 7004 that are not date stamped. Follow IRM 20.1.2.1.3, Extension of Time to File and Pay, for penalty abatement procedures.

  4. The taxpayer indicates on line 3, Form 7004, the tentative amount of tax for the taxable year. The amount is identified by TC 620 and is for reference purposes only.

  5. Even though a corporation has an extension of time to file, a failure to pay penalty may be assessed if the amount paid on or before the unextended due date of the return, is not at least 90 percent of the tax shown on line 31, Form 1120. See IRM 20.1.2.1.3, Extension of Time to File and Pay, for more information.

  6. The filing of Form 7004 does not affect the amount of interest assessed. Interest is generally assessed on any unpaid liability from the original due date of the return until the balance is paid in full.

  7. When correspondence is received requesting an explanation of the interest and/or penalties:

    1. Phone or send Letter 219C, Corporate Penalty and Interest Explained (Form 7004).

    2. If the taxpayer states Form 7004 was timely filed, research to locate the form. Follow IRM 20.1.2.1.3, Extension of Time to File and Pay, for penalty abatement procedures.

    3. If Form 7004 posted to an incorrect period or TIN, make any necessary credit transfers and re-input Form 7004 using REQ77 to input TC460/462.

  8. See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, for additional information.

21.7.4.4.4.6  (10-25-2007)
Change in Accounting Period (Corporations)

  1. Generally, a corporation must get the consent of IRS prior to changing its tax year. Form 1128, Application to Adopt, Change, or Retain a Tax Year, must be filed no later than the due date (not including extensions) of the federal income tax return for the first effective year (March 15) to change to a calendar year return.

  2. Under certain conditions, corporations (other than Subchapter S or personal service corporations and as defined in Revenue Procedure 2006-45) may obtain automatic approval to adopt, change, or retain its annual accounting period under IRC 442 of the Internal Revenue Code. See Rev. Proc. 2006-45, 2006-45 IRB In addition, see Rev. Proc. 2007-64, 2007-42 IRB, which modifies a scope provision and one of the terms and conditions under with IRS grants approval under Rev. Proc. 2006-45 2006-45 IRB Entities other than corporations may also obtain automatic approval to adopt, change, or retain its annual accounting period under IRC 442 of the Internal Revenue Code. See Rev. Proc. 2006-46, 2006-45 IRB

  3. See Publication 538, Accounting Periods and Methods, for more information on accounting periods and the Instruction to Form 1128.

  4. A change in accounting period can be identified by TC 053 or 054 on cc ENMOD.

21.7.4.4.4.6.1  (01-01-2005)
Taxpayer Requests Ruling on Accounting Period

  1. IRS charges a user fee when the taxpayer requests a ruling from the National Office on an accounting period.

  2. If the taxpayer does not qualify for the automatic approval provisions, they are instructed to file Form 1128 with the Commissioner of IRS in Washington D.C.

  3. In the event the taxpayer sends Form 1128 to a campus with the payment:

    1. Receipt and Control returns the payment to the taxpayer with a Letter 2340C , letter of explanation.

    2. Form 1128 is sent to Entity annotated "UFR" (User Fee Returned).

    3. If the taxpayer’s check also included a tax payment, the full amount is applied to his account and the taxpayer notified via Letter 2340C, Accounting Period User Fee (F1128, F2553) Received.

  4. Any correspondence received from the taxpayer requesting a refund of the user fees is sent to CAS:AM on Form 3465. Action required:

    1. If unable to locate the payment, contact the taxpayer via phone or correspondence.

    2. Once the payment is located, issue a manual refund for the portion of the payment applicable to the user fee.

  5. If correspondence is received from the taxpayer as a result of Form 1128 being denied because it was filed late and the taxpayer requests relief under Section 301.9100, quotes Rev. Proc. 79-63 or Rev. Proc. 92-85, or otherwise requests an extension be granted:

    1. Forward the request to Associate Chief Counsel (Procedures and Administration):

      Sent via US Postal Service Sent via Private Delivery Service (e.g., UPS, FedEx, etc.)

      Internal Revenue Service
      Attn.: CC:PA:LPD:DRU, Room 5336
      P.O. Box 7604
      Ben Franklin Station
      Washington, D.C. 20044

      Internal Revenue Service
      Attn.: CC:PA:LPD:DRU, Room 5336
      1111 Constitution Avenue N.W.
      Washington, D.C. 20224
    2. Advise the taxpayer of the referral via Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office.

    Note:

    Such requests are considered requests for letter rulings under Rev. Proc. 2013-1, 2013-1 IRB, and must be considered in the National Office. The taxpayer is charged a user fee for these types of requests. The amount of the user fee is listed in Appendix A of Rev. Proc. 2013-1, 2011-1 IRB (and on any succeeding revenue procedure).

21.7.4.4.4.7  (08-04-2008)
Tax Computation (Corporations)

  1. Form 1120 filers compute tax on Schedule J using the Instructions for Form 1120. Most corporations figure their tax by using the tax rate schedule below. These rates are effective for tax periods beginning January 1,1993 and subsequent. Be sure to follow the Schedule J submitted by the taxpayer, as there can be other credits or taxes applicable. The total tax on Schedule J is entered on the "Total tax" line on Form 1120.

    If taxable
    income is over
    But not over Tax is Of the
    amount over
    $0 $50,000 15% $0
    50,000 75,000 $7,500 + 25% 50,000
    75,000 100,000 13,750 + 34% 75,000
    100,000 335,000 22,250 + 39% 100,000
    335,000 10,000,000 113,900 + 34% 335,000
    10,000,000 15,000,000 3,400,000 + 35% 10,000,000
    15,000,000 18,333,333 5,150,000 + 38% 15,000,000
    18,333,333 ---------- 35% 0
  2. For computing tax on short period returns (annualizing tax), see Publication 538, Accounting Periods and Methods. Do not annualize tax on short period initial or final returns.

  3. Section 15311, Temporary Reduction in the Rate of Tax on Qualified Timber Gain of Corporations, of the Food, Conservation, and Energy Act of 2008, P.L. 110-246, provides that for any taxable year ending after May 22, 2008 and beginning before May 23, 2009, a corporation that has both a net capital gain and qualified timber gain, may be eligible for an alternative tax under section 1201(b)(1). See sections 15311 through 15326 of the Act for special rules on timber provisions.

21.7.4.4.4.7.1  (01-01-2005)
Exceptions to the Standard Tax Rate (Corporations)

  1. Exceptions apply to the use of the standard tax rates for qualified personal service corporations and members of a controlled group.

  2. The corporation should check the appropriate box and complete the lines on Schedule J if the exceptions apply.

21.7.4.4.4.7.1.1  (01-01-2005)
Qualified Personal Service Corporations

  1. A qualified personal service corporation (as defined in IRC 448(d)(2)) is taxed at a flat rate of 35 percent (for taxable years beginning on or after January 1, 1993) on taxable income. See IRM 21.7.4.4.4.3 for more information on personal service corporations.

21.7.4.4.4.7.1.2  (10-01-2011)
Members of a Controlled Group

  1. Members of a controlled group must check the box on line 1 of Schedule J and attach schedule O, Consent Plan and Apportionment Schedule for a Controlled Group, to report the apportionment of taxable income, income tax, and certain benefits between the members of a controlled group.

  2. Schedule O is also used to indicate that all members of the control group:

    • Are not adopting an apportionment plan

    • Are adopting an apportionment plan

    • Already have an apportionment plan

    • Are amending a previously adopted apportionment plan

    • Are terminating the existing apportionment plan

  3. Members of a controlled group are entitled to one of each of the taxable income bracket amounts on Part II, Taxable Income Apportionment, of the Schedule O in the order listed below:

    1. $50,000

    2. $25,000

    3. $9,925,000

  4. When a controlled group adopts or later amends an apportionment plan, each member must attach to its tax return, a copy of its consent plan. The copy (or attached statement) must show the part of the amount in each taxable income bracket apportioned to that member. See Regulations 1.1561-3(b) for additional requirements.

  5. T.D. 9476 contains final regulations that provide guidance to taxpayers for determining which corporations are included in a controlled group of corporations.

  6. Members of a controlled group are treated as one corporation for purposes of figuring the applicability of the additional five percent and three percent tax which must be paid by corporations with taxable income in excess of $100,000 and $15,000,000, respectively. If the additional tax applies:

    1. Each member of the controlled group pays that tax based on the part of the amount used in each taxable income bracket to reduce that member’s tax.

    2. Each member of the group must enter its share of the additional tax in Part III, Income Tax Apportionment on column (f) and (g) and attach to its tax return, a schedule showing the taxable income of the entire group and how the corporation figured its share of the additional tax.

  7. Below is the tax computation worksheet for members of a controlled group.

    Worksheet for Members of a Controlled Group
    (keep for your records)
    Note: Each member of a controlled group (except a qualified personal service corporation) must compute the tax using the worksheet below.
    1. Enter taxable income (line 30, page 1, Form 1120) 1. ________
    2. Enter line 1 or the corporation’s share of the $50,000 taxable income bracket, whichever is less in Part II, Column C 2. ________
    3. Subtract line 2 from line 1 3. ________
    4. Enter line 3 or the corporation’s share of the $25,000 taxable income bracket, whichever is less in Part II, Column D 4 .________
    5. Subtract line 4 from line 3 5. ________
    6. Enter line 5 or the corporation’s share of the $9,925,000 whichever is less in Part II, Column E 6. ________
    7. Subtract line 6 from line 5 7. ________
    8. Multiply line 2 by 15% 8. ________
    9. Multiply line 4 by 25% 9. ________
    10. Multiply line 6 by 34% 10. ________
    11. Multiply line 7 by 35% 11. ________
    12. If the taxable income of the controlled group exceeds $100,000, enter this member’s share of the smaller of 5% of the taxable income in excess of $100,000 or $11,750 in Part III, Column F 12. ________
    13. If the taxable income of the controlled group exceeds $15,000,000 enter this member’s share of the smaller of 3% of the taxable income in excess of $15,000,000, or $100,000 in Part III, Column G 13.________
    14. Add lines 8 through 13. Enter here and on line 2, Schedule J, Form 1120 14. ________
    Members of controlled groups should attach a statement to their tax return (or amended return), showing their tax computation.

21.7.4.4.4.7.2  (01-01-2006)
Form 4626, Alternative Minimum Tax (Corporations)

  1. The Alternative Minimum Tax (AMT) helps ensure all corporations with economic income pay some amount of tax despite their allowable use of exclusions, deductions, and credits.

  2. The alternative minimum tax provides a formula for tax computation which, in effect, ignores certain preferential tax treatments allowed under law. By eliminating these preferential deductions and credits, a tax liability is created for a corporation which would otherwise pay little or nothing.

  3. Alternative minimum tax is computed on Form 4626, Alternative Minimum Tax - Corporations. A corporation may have alternative minimum tax if either of the following apply:

    • The corporation is not a "small corporation" exempt from the AMT (as explained in (4) below).

    • The corporation's taxable income or (loss) before the net operating loss (NOL) deduction plus its adjustments and tax preference items totals more than $40,000, or if smaller, its allowable exemption amount (as computed on Form 4626).

    • The corporation claims any general business credit, any qualified electric vehicle passive activity credit from prior years, or the credit for prior year minimum tax.

  4. The TPRA of 1997 provided an exemption from alternative minimum tax for small corporations (as defined in IRC 55(e)) applicable to tax years beginning after December 31, 1997. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Generally, a corporation qualifies as a small corporation exempt from alternative minimum tax for its tax year beginning in 2012 if that year is the corporation's first year in existence (regardless of its gross receipts for the year) or, both of the following apply:

    • It was treated as a small corporation exempt from the alternative minimum tax for all prior tax years beginning after 1997, and

    • Its average annual gross receipts for the 3-year tax period (or portion thereof during which the corporation was in existence) ending before its tax year beginning in 2012 did not exceed $7.5 million. ($5 million if the corporation had only one prior tax year.)

      Note:

      Taxpayers can refer to Temporary Regulations 1.448-1(f)(2)(iv) to determine gross receipts. See Instructions for Form 4626 for more information on figuring gross receipts.

21.7.4.4.4.7.3  (01-01-2005)
CP 130 Notice, Potential Exemption from AMT

  1. CP 130 Notice, Potential Exemption from AMT, generates when taxpayer completes Form 4626, Alternative Minimum Tax-Corporation, and it appears that they are not liable for the tax.

  2. The Taxpayer Relief Act of 1997 provided an exemption from AMT for certain small corporations. See IRM 21.7.4.4.4.7.2(4) for criteria.

  3. Taxpayers are instructed to check their records to see if they meet the requirements to be deemed a small corporation, and therefore, exempt from AMT. For aggregation rules and other special rules that may apply in figuring gross receipts, see IRC 448(c)(2) and (3). Taxpayer should also check prior years to determine if they were truly liable.

  4. If it is determined (by taxpayer) that they are exempt from the AMT, they should prepare a Form 1120X to delete the AMT reported on their original return. The Form 1120X should be marked "AMT - EXEMPT" at the top of the form and mailed to:
    Internal Revenue Service
    1160 West 1200 South
    Mail Stop 6552
    Ogden, UT 84201

21.7.4.4.4.8  (01-01-2006)
Schedules, Form 1120 Series

  1. Form 1120 consists of many schedules which must be completed by the taxpayer. They are all part of the 1120 tax package and are self-explanatory. The taxpayer is also required to submit various forms to substantiate credits or tax items applicable to the return. The schedules and forms are listed below:

    • Schedule A, Cost of Goods Sold

    • Schedule C, Dividends and Special Deductions

    • Schedule D, Capital Gains and Losses

    • Schedule E, Compensation of Officers

    • Schedule H, Section 280H Limitations for a Personal Service Corporation (PSC)

    • Schedule J, Tax Computation

    • Schedule K, Other Information

    • Schedule K-1, Shareholder’s Share of Income, Credits, Deductions, etc. (Form 1120S)

    • Schedule L, Balance Sheets per Books

    • Schedule M-1 and M-2, pertain to Schedule L

    • Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More

    • Schedule N, Foreign Operations of U.S. Corporations

    • Schedule PH, Computation of U.S. Personal Holding Company (PHC) Tax (Every PHC must attach this schedule to its income tax return.)

    • Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group

    • Schedule UTP, Uncertain Tax Positions

21.7.4.4.4.9  (10-01-2009)
Credits, Form 1120 Series Returns

  1. Credits can be claimed by submitting the required forms for substantiation. See IRM 21.7.4.4.8, Non-refundable Credits, Income Tax Returns, and IRM 21.7.4.4.9, Refundable Credits, Income Tax Returns, for more information on non–refundable and refundable credits.


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