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Part 21. Customer Account Services

Chapter 7. Business Tax Returns and Non-Master File Accounts

Section 4. Income Taxes/Information Returns (Cont. 2)

21.7.4  Income Taxes/Information Returns (Cont. 2)

21.7.4.4 
Income and Information Returns Procedures

21.7.4.4.4 
Form 1120 Series Returns, Corporation Income Tax

21.7.4.4.4.11 
Other Form 1120 Series Returns

21.7.4.4.4.11.2 
Form 1120S, U.S. Income Tax Return for an S Corporation

21.7.4.4.4.11.2.7  (05-30-2008)
Converting Form 1120 Back to Form 1120S

  1. When a taxpayer files a Form 1120S (Document Code 16) and does not have a valid Small Business Election, Form 2553 (TC 090 on ENMOD) on file, the TC 150 goes Unpostable Code 310 RC 4. Per IRM 3.13.222.75, Unpostable Code (UPC) 310 Reason Code 4, Entity searches for a valid election. If a valid election is not found, Entity contacts/corresponds with the taxpayer. At this point, Entity inputs a TC 971 AC 375 to identify that the 1120S has failed to post and that a phone call was made or a letter was issued to the taxpayer. See IRM 3.13.222.76 , Unpostable Code (UPC) 310 Reason Code 4, for the action Entity takes based on the taxpayer’s response.

  2. If the taxpayer does not respond to Entity’s contact, Entity converts the Form 1120S to a Form 1120 (see IRM 3.11.16.4.2). Entity inputs TC 971 AC 376 to identify the conversion from Form 1120S to Form 1120 and that no reply was received. This action freezes the module from refunding or credit electing.

  3. If the taxpayer contacts us after the return has been processed as a Form 1120 and claims that they have a valid election, follow the instructions in IRM 21.7.4.4.4.11.2(6) & (7). If a valid election (TC 090) is found on the account, the freeze is released when the TC 090 posts. If the TC 971 was input to an incorrect EIN or tax module, input TC 972 AC 376 to reverse the TC 971 which will release the credit.

  4. When Entity determines that the taxpayer should have been classified as a small business and the previously converted Form 1120 should be converted back to a Form 1120S, they prepare a Form 3465 and route it to Accounts Management stating: "REMOVE THE TAX FROM POSTED FORM 1120 – TC 150 SHOULD BE A FORM 1120S" . Entity ensures that the filing requirement of "02" is set.

  5. Accounts Management removes the tax from the account as requested. Input the adjustment using blocking series 18 so that it becomes the controlling DLN and has the original return attached to it. Only adjust taxable income if the original return is secured or if the taxpayer sends a copy (fax) of their return. It is not necessary to pull the original return strictly to adjust the taxable income.

  6. If the taxpayer never filed Form 8832, Entity Classification Election, and/or Form 2553, Election by a Small Business Corporation, and intended to be classified as a small business, advise them to see Rev. Proc. 2007–62 in Internal Revenue Bulletin 2007–41, to request relief for a late S corporation election. (See IRM 21.7.4.4.4.11.2.1(8) & (9)). However, if the taxpayer never intended to be classified as a small business, advise them to file a Form 1120.

21.7.4.4.4.11.2.8  (07-09-2009)
Failure to File S Corporation Return Penalty

  1. Section 9, Penalty for Failure to File S Corporation Returns, of H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, amends chapter 68 of the Internal Revenue Code of 1986 by adding the following new section to the code: section 6699, Failure to File S Corporation Return.

  2. A S Corporation required to file a return under IRC 6037 is liable for a penalty for each month or fraction thereof that such failure continues, but not to exceed 12 months, unless it is shown that the failure was due to reasonable cause. The amount per month is $85 multiplied by the number of persons who were shareholders during any part of the taxable year. The S Corporation is liable for the penalty if it:

    • Fails to file such return at the time prescribed with regards to any extension of time to file, or

    • Files a return which fails to show the information required under section 6037

  3. The penalty is effective for returns that are due on or after January 15, 2008. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  4. P.L. 110-458, section 128 of the Workers, Retiree, and Employer Recovery Act of 2008, increased the penalty for failure to file a S corporation return by $4 to $89, and is effective for returns due to be filed after December 31, 2008.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. A CP 162 Notice is sent when there is no tax owed and the taxpayer has been assessed a Failure to File Penalty on the account. A CP 161 is issued if tax is owed and a Failure to File Penalty has been assessed.

21.7.4.4.4.11.3  (05-30-2008)
Form 1120-H, U.S. Income Tax Return for Homeowners Associations

  1. Homeowners associations elect to file Form 1120-H to take advantage of tax benefits provided by Section 528. These benefits allow the association to exclude exempt function income from its gross income.

  2. A homeowners association which is a corporation may elect to file Form 1120 because the tax may be less than that figured on Form 1120-H. The taxable income of a homeowners association that files its tax return on Form 1120-H is taxed at a flat rate of 30-percent for condominium management associations and residential real estate associations. See paragraph (6) below for timeshare associations. These rates apply to both ordinary income and capital gains.

  3. The association makes the election to file Form 1120-H each year.

    1. The election must be made no later than the time, including extensions, for filing an income tax return for the year in which the election is to apply.

    2. Once Form 1120-H is filed, the election cannot be revoked for that year without the consent of the Commissioner.

  4. Form 1120-H is due and payable by the 15th day of the third month after the end of the tax year. Form 7004 is filed to request an extension.

  5. Estimated tax, alternative minimum tax, Investment Credit, Work Opportunity Credit, Welfare-to-Work Credit, Empowerment Zone Employment Credit, and Indian Employment Credit do not apply to Form 1120-H. However, a homeowners association which does not elect to file Form 1120-H may be required to make payments of estimated tax.

  6. The TPRA of 1997 permits timeshare associations to report tax on Form 1120-H. However, the tax rate for these associations is 32-percent rather than 30-percent. The provision is applicable for tax years beginning after December 31, 1996.

21.7.4.4.4.11.4  (01-01-2005)
Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

  1. A political organization is a party, committee, association, fund (including a separate segregated fund described in Section 527(f)(3) set up by a Section 501(c) organization), or other organization organized and operated primarily for the purpose of accepting contributions or making expenditures, or both, to influence the selection, nomination, election, or appointment of any individual to any public office or office in a political organization, or the election of Presidential or Vice Presidential electors.

  2. The taxable income of a political organization is the excess of the gross income for the tax year (excluding exempt function income) over the deductions which are directly connected with that income. Taxable income also includes exempt function income (as defined in (4) below) for any period for which a political organization has not notified IRS that it is to be treated as such.

  3. The net operating loss deduction is not allowed, nor are other special deductions for corporations.

  4. The exempt function income is derived from:

    • Contributions of money or property

    • Membership dues, fees, or assessments paid by members of a political party

    • Proceeds from a political fund-raising or entertainment event (including bingo games) or from the sale of political campaign material, if those amounts are not received in the active conduct of a trade or business

  5. A political organization is required to file Form 1120-POL if it has taxable income in excess of $100 or receives $25,000 or more in gross receipts. Certain 501(c) tax exempt organizations that are permitted to make expenditures for political campaign activity (such as social welfare groups, labor unions, and trade associations) may be taxable on the amount of their political expenditures, pursuant to IRC 527(f)(1). These organizations are required to file Form 1120-POL. They are not required to file Form 8871, Political Organization Notice of Section 527 Status. See IRM 21.7.7 for more information on Form 8871.

  6. The due date, payment dates, and extension requirements are the same as Form 1120. All Forms 1120-POL are processed at Ogden. The filing requirement code is "09" .

21.7.4.4.4.11.5  (01-01-2005)
Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return

  1. Form 1120-PC is filed by domestic non-life insurance companies subject to tax under Section 831 and by foreign corporations carrying on an insurance business within the U.S. which would qualify as a nonlife insurance company subject to tax under Section 831, if they were U.S. corporations.

  2. Most of the rules for filing and paying Form 1120-PC are the same as Form 1120. The filing requirement code is "04" .

21.7.4.4.4.11.5.1  (01-01-2005)
Section 847 Payments and Requirements

  1. Section 847(2) requires the company to make a special estimated tax payment in an amount equal to the tax benefit derived from the additional deduction permitted under Section 847. Section 847(3) requires companies allowed the deduction to establish a special loss discount account.

  2. Form 1120-PC filers claim the credit on a specific line. Other Form 1120 filers (Form 1120-L and consolidated Forms 1120 with insurance companies as subsidiaries) electing the provisions under this section, in the margin near line 32b, write "Form 8816" and the amount. Taxpayers must attach a schedule showing their computation of estimated tax payments.

  3. The area performing the credit transfer (determined by campus management) receives a copy of the return showing the credit, from C&E.

  4. The special estimated tax payment(s) is not subject to estimated tax penalty. The payment(s) is applied over a 15-year period against a portion of the corporation tax liability. In the 16th year, any amounts which remain in a corporation 15th year account are treated as estimated tax payments for that year. Refer to IRM 3.17.243, Miscellaneous Accounting, for processing instructions.

  5. Loose Form 8816 should be associated with the taxpayer's Form 1120, Form 1120-L or Form 1120-PC. Any issues involving Form 8816 should be referred to the Accounting Branch in Ogden Submission Processing.

21.7.4.4.4.11.6  (01-01-2005)
Form 1120-L, U.S. Life Insurance Company Income Tax Return

  1. Form 1120-L is filed by domestic life insurance companies subject to tax under IRC Section 801, and foreign corporations which would qualify as life insurance companies if they were U.S. corporations.

  2. The due date, payment dates, and extension requirements are generally the same as Form 1120. A foreign corporation which does not maintain an office or place of business in the U.S. has until the 15th day of the 6th month after the end of the tax year to file.

  3. The filing requirement code is " 03" . See the Instructions for Form 1120-L for additional information.

21.7.4.4.4.11.7  (01-01-2005)
Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return

  1. Form 1120-IC-DISC is filed by domestic corporations that have elected to be treated as an IC–DISC and have satisfied the requirements under Section 992. It is also filed by a domestic corporation that is a former DISC or former IC-DISC, in addition to any other return required to be filed by such corporation.

  2. Form 1120-IC-DISC is processed as NMF. Beginning July 1, 2002, all new assessments and/or documents, etc., that must be established on NMF must be sent to the Cincinnati campus at the following address (see IRM 21.7.12.4.6, Form 1120-IC-DISC, for more information):

    Cincinnati Submission Processing Center
    201 W. Rivercenter Blvd
    Covington, KY 41019

  3. The MFT is 23 and the tax class is 6.

21.7.4.4.4.11.8  (01-12-2006)
Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons

  1. Form 1120-ND is filed by nuclear decommissioning funds to report contributions received, income earned, the administrative expenses of operating the fund, and the tax on modified gross income. If there are initial taxes on self-dealing with the fund, the return is also used to report and pay the Section 4951 taxes on self-dealing.

  2. Except for self-dealers, the due dates for filing, paying, and requesting extensions are the same as those for Form 1120. The filing requirement code is "11" .

  3. Self-dealer returns must be filed by the 15th day of the 3rd month after the close of the tax year of the self-dealer. Form 7004 must be filed by self-dealers to request an extension of time to file.

21.7.4.4.4.11.9  (07-17-2007)
Form 1120-F, U.S. Income Tax Return of a Foreign Corporation

  1. A foreign corporation must file Form 1120-F if, during the tax year, it:

    • Engaged in a trade or business in the U.S., whether or not it had income from that trade or business

    • Had income, gains, or losses treated as if they were effectively connected with that U.S. trade or business

    • Had income from any U.S. source, only if its tax liability is not fully satisfied by withholding of tax at source

    • Overpaid income tax which it wants refunded

  2. A corporation does not need to file a Form 1120-F if:

    • It did not engage in a U.S. trade or business during the year, and its entire U.S. tax was withheld at the source.

    • Its only income is not subject to U.S. taxation under IRC Section 881(d).

    • It is a beneficiary of an estate or trust engaged in a U.S. trade or business, but would itself, otherwise not need to file.

    • It files Form 1120-L as a foreign life insurance company.

    • It files Form 1120-PC as a foreign property and casualty insurance company.

    • It files Form 1120-FSC, it has filed Form 8279, Election To Be Treated as a FSC or as a Small FSC, and the election is still in effect.

  3. The filing requirement code is "06" .

  4. These returns are filed at Ogden, UT. However, forward all cases and correspondence to:
    Philadelphia's Accounts Management Section
    Attention: Clerical Hub
    Drop Points - N 441, 11601 Roosevelt Blvd.
    Philadelphia, PA 19255

21.7.4.4.4.11.10  (07-17-2007)
Form 1120-FSC, U.S. Income Tax Return of a Foreign States Corporation

  1. Form 1120-FSC is filed to report a foreign sales corporation’s income, deductions, credits, and taxes. The filing requirement code is "15" .

  2. These returns are filed at
    Internal Revenue Service
    P. O. Box 409101
    Ogden, UT 84409

  3. Forward all cases and correspondence to Philadelphia's Accounts Management Section
    Attention: Clerical Hub
    Drop Points - N 441, 11601 Roosevelt Blvd.
    Philadelphia, PA 19255

  4. For information on Form 8873, Extraterritorial Income Exclusion, see IRM 21.7.4.4.14.

21.7.4.4.4.11.11  (07-17-2007)
Form 1120-SF, U.S. Income Tax Return for Settlement Funds

  1. Under IRC section 468B, designated settlement funds (DSFs), qualified settlement funds (QSFs) for which a grantor trust election is not made, and disputed ownership funds (DOFs) taxed as qualified settlement funds must file Form 1120–SF. In general, DSFs are created by taxpayers who elect to be treated as DSFs and are used to pay the present and future claims against the electing taxpayer which arise out of personal injury, death, or property damage.

  2. QFSs generally are a fund, account, or trust that is:

    • Ordered or approved by a governmental authority (including a court of law)

    • Created to resolve or satisfy one or more contested claims that have resulted or may result form an event (or related series of events) that has occurred and that has given rise to at least one claim asserting liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or arising out of a tort, breach of contract, or violation of law, and

    • A trust under applicable state law or segregated from other assets of the transferor. A DOF taxed as a QSF generally is an escrow account, trust, or fund that is established to hold money or property subject to conflicting claims of ownership and consists entirely of passive investment assets.

  3. Form 1120-SF is filed by DSFs and QSFs for which a grantor trust election is not made, and DOFs taxed as qualified settlement funds to report contributions received, income earned, administrative expenses of operating the fund, and the tax on its investment earnings.

  4. The income is taxed at the highest rate applicable to trusts. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the tax rate for tax years beginning after December 31, 2002 to 35-percent. The filing requirement code is "16" .

  5. The return due dates, payment dates, and requests for extensions are generally the same as those for Form 1120. Forms 1120-SF are filed at either Cincinnati or Ogden, based on the table located in the Instructions for Form 1120-SF.

21.7.4.4.4.11.12  (02-11-2009)
Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts

  1. Form 1120-REIT is filed to report the income, gains, losses, deductions, and credits of real estate investment trusts as defined in IRC section 856. See section 3031 and section 3032, P.L. 110–289, of the Housing and Economic Recovery Act of 2008 for revisions to REIT income and asset tests.

  2. The return due dates, payment dates, and requests for extensions are generally the same as those for Form 1120. The filing requirement code is "18" .

  3. For information on Form 8875, Taxable REIT Subsidiary Election, see IRM 21.7.4.4.13.

  4. Route correspondence requests for extension of "foreclosure property" grace period pursuant to IRC section 856(e) by a real estate investment trust (REIT, Form 1120-REIT) to the address below:

    Internal Revenue Service

    Executive Assistant to Industry Director

    LMSB Financial Service

    290 Broadway, 12th Floor

    New York, NY 10007

21.7.4.4.4.11.12.1  (07-31-2009)
Determination UnderSection 860(e)(4) by a Qualified Investment Entity, Form 8927

  1. New Form 8927, Determination Under IRC section 860(e)(4), by a Qualified Investment Entity, is filed by a RIC (Regulated Investment Company, Form 1120-RIC), or a REIT (Real Estate Investment Trust, Form 1120-REIT). Form 8927 is filed when a RIC or REIT seeks to make a determination under section 860(e)(4). Form 8927 will be treated as a statement by the taxpayer for purposes of section 860(e)(4), when properly completed and filed as an attachment to its amendment or supplement to a return of tax for the relevant tax year.

  2. Generally, the date Form 8927 is mailed is the date of determination under section 860(e)(4). See section 4 of Rev. Proc. 2009-28, IRB 2009-20, for details. Also, see the Instructions to Form 8927 for more information.

  3. If a loose Form 8927, or correspondence citing section 860 of the IRC, or deficiency dividend procedures is received in Accounts Management, route to:
    Internal Revenue Service
    Ogden Submission Processing Center
    P.O. Box 9941
    Mail Stop 4912
    Ogden, UT 84409

  4. If an amended return is received with Form 8927 attached or with correspondence described in the paragraph directly above, route the case to the above address.

21.7.4.4.4.11.13  (01-01-2005)
Form 1120-RIC, U.S. Tax Return for Regulated Investment Companies

  1. Form 1120-RIC is filed to report the income, gains, losses, deductions, and credits of regulated investment companies as defined in IRC section 851.

  2. The return due dates, payment dates, and requests for extensions are generally the same as those for Form 1120. The filing requirement code is "17" .

21.7.4.4.4.11.14  (04-02-2008)
Form 1120X, Amended U.S. Corporation Income Tax Return

  1. Form 1120X is filed to correct previously filed Forms 1120 and 1120-A. Other types of Forms 1120 can be corrected by filing an amended form and checking the box for "Amended Return" shown at the top of the form.

  2. An amended or corrected return posts to a taxpayer’s account as a TC 976 and generates a CP 193. Refer to IRM 21.7.9 for information on resolving duplicate filing conditions.

  3. Beginning April 2008, Forms 1120X are no longer worked in Submission Processing. All Forms 1120X are routed directly to Accounts Management. See IRM 21.7.9.4, Duplicate Filing Condition Procedures, for more information.

21.7.4.4.4.11.14.1  (04-02-2008)
Pre-Adjusted Form 1120X Procedures

  1. Prior to April, 2008, many Forms 1120X, were worked in Submission Processing. These adjustments were processed in the 20 through 29 blocking series.

  2. If a TC 150 with math error codes is already on the module, a CP 193 generates and is sent to Accounts Management for review. A CP 193 also generates when an adjustment in BS 29 (disaster claim) posts.

  3. Action required:

    1. Review Form 1120X and CP 193 to verify all adjustments have posted and the refund or offset action was made.

    2. If the adjustment did not post, input the correct adjustment.

    3. Verify the taxable income was adjusted, if necessary.

    4. Math verify Form 1120X≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and:

    If And Then
    An incorrect refund was issued The incorrect refund was due to a math error or erroneous refund 1. Use CFOL command codes to math verify the original return.
    2. Refer to IRM 21.4.5 for information on processing erroneous refunds and IRM 21.5.4 for information on returns involving mathematical and clerical errors.
    An incorrect refund was issued The incorrect refund was not due to a math error or erroneous refund 1. Use CFOL command codes to math verify the original return.
    2. Input TC 29X to correct the account using BS 00 or 15.
    3. Send a letter to the taxpayer explaining the change.
    There is no change   Refile using the 1120X DLN. (If the original return was secured, input TC 290 $.00, BS 00 to refile the return.)

21.7.4.4.4.11.14.2  (01-01-2005)
Line on Form 1120X To Apply Overpayment as Credit Elect

  1. Beginning with processing year 2002, there is a line on Form 1120X where the taxpayer can have his overpayment applied as a credit elect to estimated taxes for the succeeding year.

    Reminder:

    As with all credit elects, the overpayment can only be applied to the succeeding tax period. A TC 830/710 can only be used when applying an overpayment as a credit elect to a succeeding tax period. Interest is never allowed when applying overpayments as credit elects. (This is different than when applying overpayments as other than credit elects.)

  2. See the examples below illustrating instances where credit elects can be performed:

    Example:

    In 2010, taxpayer files Form 1120X correcting a 2009 tax period. Taxpayer requests overpayment be applied to 2010. Use TC 830/710 to apply credit elect.

    Example:

    In 2010, taxpayer files Form 1120X correcting a 2007 tax period. Taxpayer requests overpayment be applied to the 2008 tax period. This can be done, even though the due date has passed for the period to which the taxpayer requests the overpayment be applied. It is still a succeeding tax period. (For example, the taxpayer may have a balance due on the 2008 tax period which he can use the credit elect against.) Use TC 830/710.

  3. See IRM 21.7.4.4.5 and IRM 21.7.4.4.5.1 for more information on credit elects.

21.7.4.4.4.11.15  (07-09-2009)
Form 1120-C, U.S. Income Tax Return for Cooperative Associations

  1. Effective with tax periods ending on or after December 31, 2006 (200612 and subsequent), new Form 1120-C, Farmers' Cooperative Association Income Tax Return, replaces Form 990-C, Farmers' Cooperative Association Income Tax Return. See IRM 21.7.4.4.17 for information regarding Form 990-C.

    Note:

    Due to this change, payments may not have been properly credited to the Form 1120C account or overpayments intended for the Form 1120C account may have refunded to the taxpayer. Follow normal payment tracer procedures in IRM 21.5.7. If the taxpayer requested a credit elect from the 2006 Form 990C (MFT 33) account to the 2007 Form 1120C (MFT 02) account but refunded and was not returned, do not abate or reduce penalties for this reason. Ensure that penalties have been assessed correctly. Ensure that the proper prior year tax is considered when working ES Penalties.

  2. Form 1120-C, Farmers' Cooperative Association Income Tax Return, is filed to report income, gains, losses, deductions, credits and to figure the income tax liability of the cooperative. Every cooperative must file Form 1120-C, whether or not it has taxable income. The MFT is 02, tax class 3, doc code 032.

  3. Generally, a farmer’s cooperative is a farmer, fruit growers, or like association organized and operated on a cooperative basis to:

    • Market the products of members or other producers and return to them the proceeds of sales, less necessary marketing expenses, or

    • Purchase supplies and equipment for the use of members or other persons and turn over the supplies and equipment to them at actual cost, plus necessary expenses

  4. A member is anyone who shares in the profits of the cooperative association and is entitled to participate in the management of the association.

  5. A cooperative may file its income tax return by the 15th day of the 9th month after the end of its tax year provided it meets the requirements of section 6072(d) prior to filing. Any cooperative not meeting the requirements of section 6072(d) must file their income tax return by the 15th day of the third month after the end of its tax year. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Cooperatives may file Form 7004, Application for Automatic 6-Month Extension of Time to File Certain Business Tax, Information, and Other Returns, to request an automatic 6-month extension of time to file see paragraph (7) directly below).

  7. Beginning January 1, 2009, to reduce the burden on recipients of Schedules K-1, the extension of time to file partnership (Form 1065 and Form 8804 filers) returns and estate and trust (Form 1041) returns has been shortened from 6-months to 5-months. This change is effective for extension requests due on or after 1/1/2009. The title of Form 7004 is now Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.

  8. Cooperatives with a SC80 are tax exempt under IRC section 521 (type of Org. code 6) and SC93 (Type of Org. code 7) are non-exempt. If the EO status shown on CC ENMOD is 40, it is treated as SC93, non-exempt.

  9. Cooperatives must make estimated tax payments, like a regular corporation must make.

  10. Form 1120-C is filed at the Ogden Internal Revenue Service, Ogden, UT 84201-0027.

  11. Beginning in January 2007, Form 990-C is obsolete and has been replaced with Form 1120-C, U.S. Income Tax Return for Cooperative Associations. Therefore, the last period that Form 990-C can be filed is tax period 200611. See IRM 21.7.4.4.17 for information on Form 990-C.

  12. Follow normal BMF CAT-A/claim procedures.

21.7.4.4.4.12  (01-01-2005)
Item Reference Number (IRN) 886

  1. Anytime taxable income is changed due to an adjustment (including TC 290 $.00) to an income tax return (Forms 1041, 1120, 1120S, 990-C/1120C, 990-T), IRN 886 must be input to correct the taxable income/ordinary income/unrelated business taxable income on the master file. Action required:

    1. Input TC 29X to adjust tax.

    2. Input IRN 886 to correct taxable income, etc.

    Note:

    When decreasing taxable income, etc., use IRN 886 with a minus (−) behind the money amount.

21.7.4.4.4.13  (01-06-2004)
Insolvent Financial Institutions/Failed Savings and Loans

  1. IRS is authorized to pay refunds to a statutory or court-appointed fiduciary of an insolvent member of an affiliated group filing a consolidated income tax return.

  2. Tax returns can be filed on behalf of failed savings and loans. The returns and claims are generally prepared by large accounting firms. There are various ways to identify these returns/claims:

    • The words "Savings and Loan" or "Savings Bank" in the entity portion

    • PBA codes 6030, 6060, 6090, or 6120

    • Notations that the tax should be abated or refunded based on IRC Sections 7507 or 597, Notice 89-102, or "FIRREA"

    • Large liabilities but no remittance

    • Income but not a tax liability

    • Asterisks on the tax due line

    • "RTC" or "FDIC " in the entity portion

  3. Failed Savings and Loans accounts are coded with the Large Corp. indicator and are worked in the Large Corp Units. See IRM 21.7.1.4.11.10, Failed Savings and Loans, for more information.

21.7.4.4.4.13.1  (01-01-2005)
Resolution Trust Corporation (RTC)/Federal Deposit Insurance Corporation (FDIC) Returns

  1. On January 1, 1996, RTC was taken over by FDIC. FDIC is now filing tax returns for institutions under RTC control. The entity section of the return shows "FDIC," however, the top of the return should be stamped "RTC Return" .

  2. Returns identified by Exam as RTC or FDIC returns are blocked with a BS of 499 or 979.

  3. For those returns which reflect income but no tax liability, the liability is computer generated and a Math Error Notice sent to the taxpayer.

  4. C&E/ERS does not input a Taxpayer Notice Code (TPNC) if the return has a refund. If a notice is inadvertently generated, Notice Review should stop the notice.

21.7.4.4.4.13.2  (08-04-2008)
Adjustment Procedures (RTCs/FDICs)

  1. The CAS:AM employee must have any returns, claims, correspondence, or internally generated notices with a savings and loan, savings bank, or bank type entity as described above, classified by Exam. Failed savings and loans are coded with an LCI.

  2. Any return or correspondence not reflecting an LCI but, nevertheless, has a savings or bank type entity, must be reviewed by Exam before any adjustments or refunds are allowed.

  3. If there is a clear indication the return was reviewed by Exam, do not have the return reclassified.

  4. Please contact the Headquarter's analyst for this IRM if the Large Corp Unit receives a Failed Savings and Loan case.

21.7.4.4.4.14  (01-01-2005)
Form 4466 Transcripts (Form 1120)

  1. Form 4466 transcripts are generated when both a Form 1120 corporation return (TC 150) and a manual refund (TC 840 with BS 30 - 39) posts to MF, resulting in a zero or debit module balance. The manual refund is the result of a Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax. These transcripts indicate the taxpayer may have received an excessive refund of estimated tax (ES) and could be liable for an ES penalty.

  2. Scan the transcript to determine if the taxpayer is subject to an ES penalty. (The related return need not be secured to assess the penalty.) Resolve the transcript by following the table below.

    If And Then
    Module balance is zero No money was paid with the return (TC 610) or no subsequent payment was made after issuance of the original TC 840 Taxpayer is not subject to the penalty and the transcript may be disposed of as classified waste.
    Module balance is zero There is a TC 610 amount and/or a subsequent payment made after issuance of the original TC 840 Taxpayer’s excessive refund of ES is the amount of the payment.
    1. Compute the ES penalty based on the TC 610 subsequent payment amount from the TC 840 date to the due date of the return.
    2. Input TC 170 in BS 15 to assess the penalty.
    Module balance is a debit   Taxpayer’s excessive refund is the amount of the debit (except when the debit is created by previously assessed or accrued penalty and/or interest charges).
    1. Combine the TC 610 payment (and similar credits) with the debit amount to determine the excessive refund.
    2. Compute the ES penalty based on the excessive refund amount from the TC 840 date to the due date of the return.
    3. Input TC 170 in BS 15 to assess the penalty.
    The Form 4466 refund was issued after the return’s original due date   There is no penalty assessed on the excessive refund amount.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.7.4.4.4.15  (07-31-2009)
Modernized e-file Program (MeF) for Corporate and Exempt Organization Returns

  1. Beginning in January 2004, IRS began accepting certain tax year 2003 electronically filed corporate (Form 1120 and Form 1120S) and exempt organization returns. (See IRM 21.7.7.3.13, Modernized Electronic Filing for MeF for exempt organizations.). This was the first phase of the rollout of the Modernized e-File Project (MeF). MeF allows taxpayers to receive refunds via direct deposit and allows e-filers to e-pay their balance due through an authorized electronic funds withdrawal. Beginning in January 2007, Form 1120-F for TY 2006 were accepted. See IRM 3.42.4.6, e-file Revenue Procedures and Program Publications, for a complete list of e-file program publications and revenue procedures pertaining to the Modernized e-File Program.

  2. The MeF Project is a major modernization initiative which will develop the modernized platform for filing returns electronically. The MeF Project provides for the filing of tax and information returns electronically through the internet via registered electronic originators, Electronic Management System (EMS), or web Services. Eventually all forms, including Form 1040 series, will be included in the project. Electronic transmissions for these returns will be directed to the Ogden Submission Processing Center.

  3. Business taxpayers can get information electronically concerning the MeF project by going to http:/www.irs.gov/efile and clicking on the e-file logo in the bottom right hand corner and then clicking on business.

  4. The retrieval, display, printing and archiving of the electronic return is quite different from the current electronic filing of Form 1040 and Form 1041. Employees access return information through IDRS. Documents are in HTML format and are accessed through the employee user portal on their NT workstation. The viewing of the tax return and up to (eventually) 700 different schedules and attachments is through Microsoft Internet Explorer.

  5. Electronically filed Form 1120 and Form 1120S returns are processed in Ogden. For 2003 and subsequent, returns filed via the MeF system are assigned the following codes (See IRM 3.42.4.4.1.1 , BMF Identification Codes, for more information.):

    Form Filing Location Code Tax Class Document Code
    1120 88/93
    (OVFL 92)     		3 10 & 11
    1120S 16
    1120-F 93 (92 overflow)
    60 (ECI Foreign Address)
    78 (ECI US Possession Address)     		3 66 & 67

  6. Taxpayers may now apply to participate in all IRS e-file programs by filing an e-file application via e-services or by filing Form 8633, Application to Participate in the IRS e-file Program. This applies to Electronic Returns Originators (ERO), transmitters, software developers, intermediate service providers and reporting agents. Applicants must submit the application 60 days prior to participation when filing a paper return. See IRM 3.42.4.5, IRS e-file Application Information, and IRM 21.7.4.4.1.9(11) for more information on Form 8633.

  7. However, applicants and participants of IRS e-file are encouraged to use the new electronic IRS e-file Application which is available through the Internet-based business tools called "e-services " . By using the electronic application, processing time is reduced from 60 days, to 30 to 45 days. For more information on IRS e-file Application, visit the IRS website @ http:/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 are required to pass a suitability background check. For more information, see Publication 3112, The IRS e-file Application Package, and IRM 3.42.4.5, IRS e-file Application Information.

  8. Large taxpayers filing only their own return are not required to pass a suitability background check. IRS only performs the suitability checks discussed in Publication 3112 on applicants that prepare returns for profit. Refer these taxpayers to http:/www.irs.gov, keyword "Large Taxpayer" . Taxpayers may also call the e-Help Desk toll-free at 1-866-255-0654 for assistance. Taxpayers must mail the completed Form 8633 to the following address:

    Daytime Mail Overnight Mail
    Internal Revenue Service
    Andover Campus
    Attn.: EFU Acceptance
    Testing Stop 983
    P.O. Box 4099
    Woburn, MA 01888–4099     		Internal Revenue Service
    Andover Campus
    Attn.: EFU Acceptance
    Testing Stop 983
    310 Lowell Street
    Andover, MA 05501–0001

  9. In order to file Form 1120 electronically, transmitters, and software developers MUST successfully pass the Acceptance or Assurance Testing System (ATS). The ATS process tests hypothetical scenarios to ensure the participant's 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. See Publication 3112, IRS e-file Application and Participation, and Publication 4162, Modernized e-file Test Package for Forms 1120/1120-S/1120-F/7004 for Tax Year 2007, for more information on the testing process.

  10. Beginning January 5, 2009, the MeF system will accept TY 2008 MeF filed corporate returns. Beginning with TY 2006 returns, both amended and superseding returns are required to be e-filed if the taxpayer is required to file electronically unless the taxpayer has received a waiver to file that particular tax return on paper. See IRM 21.7.9.4.1.2.2, MeF Filed Amended Returns, for more information. Only the MeF system accepts amended returns. Taxpayers must complete an amended return on paper and file it with the campus where they normally would file a paper return if they filed through any other system.

  11. There are no paper Forms 8453 (signature documents) sent to the IRS for MeF documents. Preparers scan and attach a Form 8453 to the electronic return.

  12. Form 8879-C, IRS e-file Signature Authorization for Forms 1120, is used in the new Modernized e-file program. Form 8879-C authorizes an officer of a corporation and an ERO to use a Personal Identification Number (PIN) to electronically sign a corporation's electronic income tax return and, if applicable, an Electronic Funds Withdrawal Consent.

21.7.4.4.4.15.1  (07-31-2009)
Modernized e-file (MeF) - Electronic Filing of Corporate and Exempt Organization Returns

  1. Beginning in January 2004, IRS began accepting certain TY 2003 electronically filed corporate returns (Forms 1120, 1120-F, and 1120S). In addition, Forms 990, 990-EZ, 1120-POL and 8868 for exempt organizations (see IRM 21.7.7.3.13, Modernized Electronic Filing) were also accepted.

  2. For 2005, the MeF System was modified to accept Form 990-PF, Return of Private Foundation, and Form 7004, Application for Automatic 6-Month Extension of time to File Certain Business Income Tax, Information, and Other Returns. See IRM 3.42.4.2.8, - MeF Programs, for a complete listing of forms and schedules that can be filed electronically with the corporate or exempt organization return.

  3. Treasury Decision (T.D.) 9175, IRB 2005-10, pg 665, contains temporary regulations relating to the requirements for filing corporate income tax returns and returns of exempt organizations under section 6033 on magnetic media pursuant to IRC section 6011(e) and are effective beginning February 12, 2005. Certain corporations, including electing small business corporations (1120S), exempt organizations, or section 4947(a)(1) trusts are required to file returns electronically. The temporary regulations were made permanent and beginning in January 2009, they also apply to Form 1120-F.

  4. Treasury Decision (T.D.) 9363 extended the requirement to e-file for certain corporations including Form 1120-F. See the table below.

    Threshold for Filing Electronically Date Mandated to File Electronically
    Corporations with Assets of $50 million or more Taxable years ending on or after December 31, 2005 (200512)
    Exempt organizations with assets of $100 million or more Taxable years ending on or after December 31, 2005 (200512)
    Corporations and exempt organizations with assets of $10 million or more Taxable years ending on or after December 31, 2006 (200612).
    Private foundations or section 4947 (a)(1) trusts under section 6033 Taxable years ending on or after December 31, 2006 (200612)

  5. Under these regulations, an entity’s assets are determined based on total assets at the end of the taxable year as reported on the entity’s Form 1120, Form 1120-F, Form 1120S or Form 990.

  6. The electronic filing requirement only applies to entities that file at least 250 returns, including income tax, excise tax, employment tax and information (includes W-2s and Form 1099) over a calendar year. All members of a controlled group of corporations are required to file their Forms 1120 electronically if the total number of returns required to be filed by the controlled group of corporations is at least 250. Under these regulations, corrected or amended returns are not included in determining the 250 return threshold.

  7. However, certain types of these forms cannot be filed electronically, such as a Form 1120 that has changed its accounting period or a Form 1120 final return. The returns that are excluded from electronic filing under these regulations are set forth in Publication 4163, Modernized e-File Information for Authorized IRS e-file Providers and Large Taxpayers (Corporations, Partnerships and Tax Exempt Organizations) and at http:/www.irs.gov website.

  8. IRS e-file Signature Authorizations allow an officer of the entity to enter their Personal Identification Number (PIN) as their signature on the corporation’s or exempt organization’s electronically filed return, and if applicable, consent to electronic funds withdrawal, or authorize their EEO to enter their PIN for them. The following signature authorization forms are filed, however, they are not sent to the IRS. They are retained by the Electronic Return Originator (ERO):

    Form Number Title
    8879-C IRS e-file Signature Authorization for Forms 1120
    8879-I IRS e-file Signature Authorization for Forms 1120-F
    8879-EO IRS e-file Signature Authorization for an Exempt Organization
    8879-S IRS e-file Signature Authorization for Form 1120S

  9. Corporate officers who do not use the Practitioner PIN method for signing the Forms 1120, 1120-F, 1120-POL, 1120S, 990, 990-EZ, 990-PF, 8453-I or 8879-S as outlined in paragraph (8) above, must sign their return using the appropriate form indicated in the list below:

    • Form 8453-C, U.S. Corporation Income Tax Declaration for an IRS e-file return

    • Form 8453-S, U.S. S Corporation Income Tax Declaration for an IRS e-file Return

    • Form 8453-EO, Exempt Organization Declaration and Signature for Electronic Filing

    • Form 8453-I, Foreign Corporation Income Tax Declaration for an IRS e-file Return

    Note:

    These forms are signed, scanned and submitted with the electronic return in PDF format.

  10. 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 3.42.4.4.1.1, 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.

  11. Corporations and organizations who were not required to file a Form 1120, 1120S, 990 or 990-PF for the preceding taxable year, or have not been in existence for at least one calendar year prior to the due date of the return (not including extensions), are excluded from the requirement.

  12. These regulations also allow the Commissioner to waive the requirement to file electronically in case of undue hardship. Because the Treasury Department and IRS believe that electronic filing will not impose significant burdens on taxpayers under these regulations, the Commissioner only grants waivers in exceptional cases.Notice 2005–88, IRB 2005-48, pg 1060, sets out the procedures by which a taxpayer can request a hardship waiver.

21.7.4.4.4.15.2  (07-09-2009)
Corporate and Exempt Organization Penalty for Failure to File Electronically

  1. Per IRS Temporary Regulation T.D. 9175, IRB 2005-10, pg 665, beginning January 1, 2006, certain corporations and exempt organizations are required to file electronically if they meet certain thresholds. Treasury Decision T.D. 9363 extended the requirement to e-file for certain corporations including Form 1120-F, beginning January 2009. See IRM 21.7.4.4.4.15.1 directly above to identify those corporations and exempt organizations mandated to file electronically beginning in 2005.

  2. On November 11, 2005, IRS issued Notice 2005–88 providing guidance on steps large corporations and tax-exempt organizations can take to seek waivers from electronic filing. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.7.4.4.4.15.3  (07-31-2009)
Known e-file Issues and Solutions - Form 1120

  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), LMSB, or Submission Processing will issue a workaround to taxpayers by posting information on irs.gov. Go to irs.gov, click on e-file and click on the link for Large and Mid-Size Corporations and it will take you to e-file for Large and Mid-Size Corporations at the following address: http://www.irs.gov/businesses/corporations/article/0,,id=146959,00.html

  2. Under the table on contents, there will be a link to the Known e-file Issues and Solutions web-page. Currently, there are links to TY 2006, TY 2007 and TY 2008. 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 1120 and Form 1065 MeF returns.

  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.

21.7.4.4.4.16  (02-11-2009)
Failure to File Form 1120 and Form 5471 penalties

  1. Beginning in January 2009, Master File began to systemically assess IRC section 6038 penalties on Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, that are attached to a late filed Form 1120. The penalty is $10,000 per Form 5471 attached to the late filed Form 1120.

  2. The systemically assessed penalty appears on MFT 13 as a TC 240 with Penalty Reference Number (PRN) 623, doc code 54, and 00 as the first two digits of the blocking series. Penalties that are manually assessed by Exam, post as a TC 300 with PRN 623 and doc code 47. Accounts Management (AM) does not consider penalty abatement requests for the penalties assessed by Exam.

  3. A CP 215 Notice generates as a result of the TC 240 penalty assessment on the MFT 13 module. The CP 215 notice instructs the taxpayer to send penalty abatement requests to AM’s International unit in Philadelphia. Philadelphia works the requests using instructions in IRM 21.8.2.21.2, Form 5471 Penalties Systemically Assessed from Late Filed Forms 1120.

  4. Chief Counsel has determined that the same reasonable cause criteria can be used for the systemically assessed Form 5471 penalties and the failure to file penalties assessed on late filed Forms 1120. Since the late filed Form 1120 penalties generate a CP notice from MFT 02, requests for abatement will instruct the taxpayer to reply to either Cincinnati or Ogden. Therefore, Cincinnati and Ogden could receive abatement requests for only the late filed Form 1120 penalties, or the taxpayer may send their request for abatement of both penalties to Cincinnati or Ogden. Follow the table below.

    If Then
    Taxpayer is only requesting abatement of a late filed Form 1120 penalty Consider abatement based on "normal" reasonable cause criteria in IRM 20.1.1.3, Relief from Penalties, for the failure to file penalty.
    Taxpayer requests abatement of both penalties Consider the request for the late filed Form 1120 penalty only. After processing the abatement request, if CIS case, re-assign to 0537200000. Otherwise, route to Philadelphia AM, Stop N-441.

21.7.4.4.5  (01-01-2005)
Estimated Tax Overpayment, Credit Elect - General

  1. TCs 830/710 are used to make a credit elect transfer (TC 836/716 if computer generated).

  2. Credit elects can only be transferred to the immediately succeeding tax period. That is, a credit elect on a Form 1120 for tax period ending 200712 cannot be transferred to Form 1120 for period ending 200912.

  3. No interest is paid/accrued when the taxpayer requests the overpayment be applied as a credit elect.

  4. Once the taxpayer makes the election to have the overpayment applied to his next year's estimated taxes (credit elect), it cannot be revoked.

  5. Balance due accounts are offset before credit elect.

  6. Offsets to any DMF balance due occurs after BMF offset, but before credit elect.

  7. See IRM 21.7.4.4.5.1 below for special computer capabilities on certain income tax and EO returns.

21.7.4.4.5.1  (01-01-2005)
Credit Elect Computer Programming on Certain Income Tax/EO Returns

  1. The computer automatically generates credit elect for subsequent overpayments on accounts where the amount of credit elect posted is less than indicated on the original forms below:

    • Form 1120

    • Form 1041

    • Form 990-C/1120C

    • Form 990-T

    • Form 990-PF

  2. This capability only exists until the end of the year from which the credit elect originated. For instance, the computer generated credit elect capability:

    • For a 200912 return, ends on December 31, 2010

    • For a 200903 return, ends on March 31, 2010

      Example:

      A taxpayer files Form 1120 for 200912 on March 15, 2010.

    • The return reflects a credit elect amount of $1,500 to be applied to 201012.

    • However, for some reason, the amount available for credit elect is only $1,000.

    • The computer stores a figure of $500 as a reference for any subsequent credit which becomes available on the 200912 account.

    • The taxpayer files a claim for a $600 decrease on June 15, 2010.

    • The only action required is input of the appropriate TC(s) to allow the credit.

    • The computer generates a refund of $100 from the 200912 account and credit elect of $500 to 201012.

  3. HCs do not prevent computer generated credit elect offsets during the year.

  4. Exercise care at the end of the year when adjusting an account. If an additional amount should go to credit elect and the adjustment may not post until after the automatic offset expiration, use the appropriate HC and manually transfer the credit elect using TC 830/710. The credit elect must also be manually transferred if the taxpayer files an amended return or claim (requesting the overpayment be transferred as credit elect) after the computer generated credit elect capability expires.

  5. The computer does not generate a secondary TC 836 if a TC 832 has been input and the mathematical/clerical error indicator is present in the module.

21.7.4.4.6  (10-01-2007)
Form 8716, Election to Have a Tax Year Other Than a Required Tax Year

  1. Eligible partnerships, subchapter S corporations, and personal service corporations (PSC) that do not qualify to retain their FY based on business purposes (See Rev. Proc. 2002–39 and Rev. Proc. 2006–46) can file Form 8716 to use a tax year other than the required tax year. The tax year must be a FY ending in September, October, or November.

  2. Under the election, the taxpayer originally paid the deferred taxes on Form 720 with abstract number 11. Effective January 1, 1991, they were removed from Form 720. The required payment is now reported on Form 8752, Required Payment or Refund Under Section 7519.

  3. The following TCs are used to post the election:

    • 052 - Reversal of posted TC 053, 054, or 055

    • 053 - Change in accounting period (Form 1128)

    • 054 - Retain FY (Rev. Proc. 2002–38)

    • 055 - Adopt or change FY per IRC Section 444 election

    • 057 - Reversal of IRC Section 444 election

    • 058 - Rejection of Form 8716

    • 059 - Rejection of Form 1128

  4. The TCs are displayed on CC ENMOD with the effective date of the election. TC 057 indicates a computer generated termination of a Section 444 election when a calendar year return is filed.

  5. Forward any unprocessed Forms 8716 or requests for accounting period changes to Entity Control. Follow normal procedures for any adjustment requests received.

  6. The Internal Revenue Service no longer mails out blank Forms 8752. Taxpayers are instructed to download the form from the Internet at: http:/www.irs.gov or by calling the forms number at 1-800-829-3676.

21.7.4.4.7  (07-17-2007)
Form 8752, Required Payment or Refund Under Section 7519

  1. Form 8752 is filed by partnerships and S corporations who made the Section 444 election to file their income tax return on a fiscal year rather than a calendar year basis. The Form 8752 is used to remit the required payment. The required payment is intended to represent the value of the tax deferral by the owners of those entities through the use of a taxable year other than the required year. Generally, the tax year must be a FY ending in September, October, or November. The required payment is considered a deposit.

  2. The deferral period cannot exceed three months and cannot increase the deferral period of the taxable year that is being changed. Therefore, a taxpayer with a required taxable year ending December 31st, can only adopt a FY ending in September, October, or November. Taxpayers electing Section 444 are not required to remit a payment until a liability in excess of $500 has been incurred. Thereafter, the taxpayer must continue to make the required payment even when the amount due is below the $500 threshold.

  3. Forms 8752 are MFT 15, document code 23, and tax class 2. See the Instructions for Form 8752 for line by line computation instructions. They are annual returns due by May 15 of each year in which the election is in effect.

  4. Personal service corporations do not file Form 8752 even though they are subject to Section 444 and must file Form 8716.

  5. The required payment module has some of the same characteristics as other tax modules, but caution must be used when adjusting the accounts and performing credit transfers. It is recommended that tax examiner's (TE) specialize in resolving Form 8752 accounts.

21.7.4.4.7.1  (01-01-2005)
Election Year, Base Year, Required Tax Year (Form 8752)

  1. The election year is the taxable year of a partnership or S corporation with respect to which an election is in effect under Section 444.

  2. The base year is the taxable year (the taxable year is not the same thing as the required tax year mentioned in (3) below) of the partnership or S corporation preceding the applicable election year.

  3. The required tax year is a calendar year.

    Example:

    If the taxpayer has decided to continue with a FY ending of October (200910) and previously filed and received approval via the Form 8716 election, the taxpayer’s current election year is November 1, 2008 - October 31, 2009. The base year is November 1, 2007 - October 31, 2008. The required tax year still remains the calendar year (200812, 200912, etc.).

21.7.4.4.7.2  (01-01-2005)
Processing Periods (Form 8752)

  1. Previously, section 7519 liabilities were reported on Form 720 under abstract 11. The last reporting period for the required payment on Form 720, for abstract 11 was March 1990.

  2. The first reporting period on Form 8752 was December 1990.

21.7.4.4.7.3  (01-01-2005)
Penalties (Form 8752)

  1. Failure to File (TC 16X) and Failure to Pay (TC 27X) penalties under IRC section 6651 do not apply to Section 7519 underpayments. If either penalty has been manually assessed on a Form 8752 account, abate the penalties.

  2. Section 7519(f)(4)(a) provides for a 10-percent underpayment penalty on payments made after the payment due date of May 15. They are identified by TC 246, reference code 684. For tax years beginning prior to August 5, 1997, the penalty is not subject to reasonable cause. However, for tax years beginning after August 5, 1997, the TPRA of 1997 provided reasonable cause exception to this penalty. See IRM 20.1.10.26, IRC section 7519, Required Payment for Entities Electing Not to Have Required Taxable Year, for more information.

21.7.4.4.7.4  (01-01-2005)
Posting of the Payment (Form 8752)

  1. The required payment (line 9a) posts as the TC 150 amount. The system credits the payment and automatically rolls that amount forward to the following year’s account. It posts on the following year’s account as a TC 766. (There will not be a corresponding debit for that amount.) When the following year’s return posts, one of three situations occur. See the examples below.

    Example:

    Excess credit:

    1. TC 150 is $5,000.

    2. TC 766 is $8,000.

    3. The system rolls over $5,000 to the following year and issues a refund of $3,000.

    Example:

    Balance due:

    1. TC 150 is $8,000.

    2. TC 766 is $5,000.

    If Then
    Balance due is paid with the return (TC 610 for $3,000) The system rolls over credit of $8,000.
    Balance due is not paid with the return A balance due notice is issued for $3,000 plus penalty and interest. The system rolls over the credit of $5,000 and, when paid, an additional credit of $3,000 rolls over.

    Example:

    Zero balance:

    1. TC 150 is $5,000.

    2. TC 766 is $5,000.

    3. The system rolls over $5,000.

21.7.4.4.7.5  (01-01-2005)
Form 8752 Credit Transfers

  1. The following procedures describe credit transfers on Forms 8752. It is very important to understand how credits are applied and the effect a change in credits has on each account involved before an attempt is made to move payments.

  2. Once a liability is assessed, the credits are frozen on that account up to the TC 150 amount. Do not attempt to adjust the posted credit below the assessment amount. If so, the adjustment unposts because the system has already used the credit in the automatic roll over program. Therefore, it is not available, unless the liability is reduced first.

    Example:

    Form 8752 for 200812 posts with a TC 150 of $2,000. Credits up to the $2,000 assessment are frozen from being transferred out of the account. Attempts to transfer the credit unpost.

  3. Any adjustments to the existing credits affects all subsequent year accounts by amounts corresponding to any credit transfer from a prior year.

    Example:

    TC 291 for $2,000 is input to a 200712 account. The system pulls credits which rolled to subsequent Form 8752 accounts (200812 & 200912) back to the period adjusted to compensate for the tax decrease.

  4. The necessity to move payments from one account to another can occur when working Form 8752 accounts. The most common credit transfer on these types of cases is when a payment was applied to the incorrect period with a return present on the account from which you are moving the credit, and the payment belongs on another account. Action required:

    1. Input TC 291, HC 4, in BS 17 and reduce the tax liability to zero.

    2. Input a credit transfer with the date of your payment and use TC 570 on the debit side to create an "-R" freeze.

    3. Input TC 290, HC 4, in BS 18 with your documentation for the credit transfer. Use a PDC 1 to allow your credit transfer to post.

    Example:

    The accounts involved are Form 8752 accounts for 200712 and 200812.

    1. The 200712 account has a liability of $10,000 and a TC 766 of $5,000. This leaves the account in balance due of $5,000 plus penalty and interest.

    2. The 200812 account has a liability of $10,000, a TC 766 of $5,000, and a TC 670 for $5,000. The timely TC 670 was intended for 200712.

    3. lnput TC 291 on 200812 for $10,000, HC 4, BS 17.

    4. Input a credit transfer for $5,000 to move the TC 670 to 200712 using TC 570 on the debit side to create an -R freeze.

    5. lnput TC 290 for $10,000, HC 4, BS 18, and PDC 1 on 200812 to reassess the liability and allow your credit transfer one cycle to post.

    6. Both the 200712 and 200812 accounts will be in zero balance after the TC 670 for $5,000 posts to 200712. An additional TC 766 will post to 200812, and then another TC 766 for $5,000 will roll (post) to 200912. Creating a total credit balance of $10,000 on 200912.

    Note:

    Never move a TC 766 at any time. Form 8752 accounts are not subject to offset-in/offset-out criteria.

21.7.4.4.7.6  (01-01-2005)
Form 8752 Tax Adjustments

  1. The necessity to adjust tax on Form 8752 can arise due to any of the situations described below. These instructions are intended to cover the most common cases and are not intended to cover every situation.

21.7.4.4.7.6.1  (01-01-2005)
Incorrect Percentage Used (Form 8752)

  1. If the incorrect percentage was used to compute the tax liability and the taxpayer has not terminated the Section 444 election, take the following action:

    1. Analyze the taxpayer’s account to determine the correct tax period and percentage.

    2. Edit the correct percentage onto the Form 8752 and recompute the liability.

    3. Input the necessary adjustment to correct the assessment and send a closing letter to the taxpayer explaining the action taken.

21.7.4.4.7.6.2  (07-09-2009)
Form 8752 Posts To Incorrect Period, Correct Return Unavailable

  1. If a return posts to an incorrect period and you do not have the correct return for that period, contact the taxpayer by phone or C-Letter to secure the necessary return.

  2. If you are unable to secure the return, take the following action:

    1. Prepare the return for re-input by completing Form 13596 and attaching it to the return.

    2. Input TC 291 for the amount of the TC 150, HC 4, and BS 17.

    3. Transfer any credits received with the return or identified by the taxpayer to be applied to this liability.

      Caution:

      Never move TC 766 credits.

    4. lnput TC 290, HC 4, PDC 1, and BS 18 to reassess the posted liability and prevent the TC 766 from refunding.

    5. Open a monitor base and wait for the TC 766 to post.

    6. When the TC 766 posts, input TC 291, HC 4 to reduce the tax liability to zero. (This creates a "-K" freeze to hold the credit until the taxpayer files a return.)

21.7.4.4.7.6.3  (04-23-2009)
Form 8752 Posts to Incorrect Period, Return Available

  1. If you are able to secure the return for the period from which you are reprocessing the TC 150 return, take the following action:

    1. Prepare the TC 150 document for re-input by preparing Form 13596 and attaching it to the return. See IRM 21.7.9.4.1.1 , CP 193s Involving Reprocessing Returns, for more information.

    2. If a payment was received with the return, an adjustment to release the credit transfer freeze must be done before transferring the credit.

    3. Input TC 291 for the original TC 150 amount using HC 4.

    4. Input your credit transfer to move the credit to the prior period. (Since there is no return on the period to which your credit transfer is posting, a TC 570 is not needed on the debit side in this instance.)

    5. Input TC 290 for the correct liability assessment (based on the correct return for the period involved), HC 4, BS 00, and PDC 1.

21.7.4.4.7.7  (10-01-2008)
Form 8752 Refunds

  1. IRC section 7519(c)(3), requires the Service to hold any refund of the required payment until the later of the applicable April 15 date or 90 days after the day on which the claim is filed with the Service. Since this requires extensive programming to detain the taxpayer’s refund until the 90th day, a waiver to the above requirement was approved.

  2. The waiver permits the Service to pay the refund as soon as practical, but not earlier than April 15 and not later than the 90th day after the claim is filed.

  3. A request to obtain a refund of an over-deposit under section 7519 is treated as a return of a deposit general claim against the government (although section 6603 is not applicable). Section 7519 requires a running deposit balance that is adjusted each year. An entity’s required payment may increase, decease or stay the same from any one year to the next, depending on the entity’s base year income and the applicable tax rates.

  4. See IRM 21.7.4.4.7.8.2, regarding any period of limitation for obtaining a refund of an overdeposit of section 7519 payments.

  5. Request that all delinquent Form(s) 8752 be filed for all prior applicable election years before processing a request for a refund of section 7519 payments. If the taxpayer fails to file prior years’ returns or files such returns late and the information cannot be verified, any overpayment shown on the pending claim for refund may be rejected. Issue a disallowance letter as described in IRC section 6532(a), and the taxpayer will have two years to file suit.

    Note:

    The taxpayer’s election may not be terminated for the failure to file Form 8752.

  6. The following is an example of a Partnership electing to file Form 8752 under I.R.C. § 444 election but thereafter failing to file annually. In extreme instances, an entity might fail to file Forms 8752 after making the section 444 election until it liquidates or terminates its section 444 election.

    Example:

    Assume Partnership’s tax year ends on 9/30. On 5/15/2004, Partnership timely files an initial Form 8752 for its tax year ending 9/30/2003, making a required payment of $1,000. Partnership timely files its Forms 1065 each year, but does not file any additional Forms 8752 or make any required payments until 2009. On 5/15/2009, Partnership files a Form 8752 seeking a refund of an over-deposit for 2009 in the amount of $250. Assuming Partnership had an I.R.C. § 444 election in effect for the years 2003 through 2009, Partnership’s claim for refund on the Form 8752 filed on 5/15/2009 is timely because the $1,000 required payment Partnership made in 2004 is, in effect, a deposit, it rolls forward into 2009. In order to determine the proper amount of any refund, the Service generally requires all delinquent Forms 8752 to be filed before processing Partnership’s 2009 Form 8752. Once the Forms 8752 that were due on 5/15 of each intervening year (2004 through 2008) are filed and an entry is made on the module for each period, the Service determines whether the $1,000 required payment made in 2004 (which rolled forward into each of the succeeding years) was sufficient for those years. If the amount that Partnership was required to have on deposit for each of the succeeding years was never more than $1,000, and if in 2009 the amount of the required payment is only $750, then Partnership is entitled to the $250 refund. If the $1,000 was less than the required payment balance for any of the years after 2004, however, appropriate interest and penalties for the underdeposit may be assessed and collected.

21.7.4.4.7.7.1  (01-01-2005)
Refunds Involving Termination of Section 444 Election

  1. In the case of a refund resulting from the termination of the Section 444 election, the term "applicable calendar year" means the calendar year following the calendar year in which the final applicable election year ends.

  2. In order to claim the refund, the taxpayer must:

    1. File a final Form 8752

    2. Check box C on Form 8752 (or write at the top "Termination of Section 444 Election" )

    3. Complete lines 10 - 12

    Example:

    The taxpayer files a Form 8752 for the period January 2008 – December 2008 on May 15, 2009. Form 843 is filed in November 2009 stating the Section 444 election had been terminated and requests a refund of the required payment. To resolve the case, return the claim to the taxpayer with an explanation that a final Form 8752 must be filed. The taxpayer is entitled to a refund not earlier than April 15, 2010, nor later than the 90th day after the date the final return for January - December 2009 is received.

21.7.4.4.7.7.2  (01-01-2005)
Refunds Involving Continuation of Section 444 Election

  1. The steps below illustrate how a refund is issued when the taxpayer continues a Section 444 election.

    1. The taxpayer files a Form 8752 for the period January - December 2008 on May 15, 2009 for $10,000.

    2. The taxpayer files a Form 8752 for the period January - December 2009 on January 15, 2010 for $7,000.

    3. On April 15, 2010, the taxpayer will receive a refund in the amount of $3,000 for the excess credit from the 200812 return over the 200912 return. In other words, if the liability on the 200912 return is less than the liability on the 200812 return, then the taxpayer is entitled to a refund of the difference.

21.7.4.4.7.7.3  (01-01-2005)
No Interest on Section 444 Refunds

  1. The statute does not provide for issuance of credit interest with respect to any refund made under this section under authority of Regulation 1.7519-2T(a)(6)(iii).

21.7.4.4.7.8  (10-01-2008)
Section 7519 Statute of Limitations, Period for Assessment

  1. A required payment is due only for a limited time, e.g., 5/15/YR1 to 5/15/YR2. Once the subsequent election year begins, a new required payment' is computed and due. If a prior required payment was not made, the Service does not attempt to collect it; instead, interest and a possible penalty under IRC section 7519(f)(4) may be assessed.

  2. Required payments are treated as employment taxes for the purpose of the statute of limitations on assessment. Per IRC section 7519(f)(1), the interest and any penalty described in (1) above may be assessed under IRC section 6201 though 6207, subject to the period of limitations in section 6501 (and collected under IRC sections 6301 through 6306, subject to the period of limitations in section 6502). The deficiency procedures do not apply to required payments because they are treated as employment taxes and not as income taxes for assessment purposes.

  3. If a taxpayer filed Form 8752 for a prior period and the three-year assessment period in IRC 6501(a) expires for that period (and there are no exceptions that would extend it), the Service can no longer examine the Form 8752, adjust the payment, and assess interest and penalties on the shortfall for that period. (If the taxpayer has not filed for a prior period, the Service may determine the proper payment and assess interest and penalties at anytime.

21.7.4.4.7.8.1  (10-01-2008)
Section 7519 Statute of Limitations, Period for Claiming a Refund of a Payment.

  1. A request to obtain an over-deposit of the section 7519 amounts is treated as the return of a deposit, and not a tax. See IRM 25.6.1.10.2.12.8, Claim for Section 7519 Payment Made in Connection with a Section 444 Election, regarding the lack, at the present time, of any period of limitations on filing a claim requesting a return of a section 7519 payment.

21.7.4.4.8  (01-01-2005)
Non-refundable Credits, Income Tax Returns

  1. A non-refundable credit is a statutory (regulated) credit claimed to reduce tax liability. These credits, subtracted from the tax amount, are limited to the amount of tax liability. Any excess is non-refundable, but, generally, still available if the tax liability increases at a later date or can be applied against tax liabilities in other periods (carryback/carryforward - see IRM 21.5.9 for more information on carrybacks). Also, see information on the specific credit to determine if it is available for carryback/carryforward.

21.7.4.4.8.1  (01-01-2005)
General Business Credit, Form 3800

  1. See the Instructions for Form 3800 for computing the tax credits. If more than one of these credits is claimed, if there is a carryback or carryforward of any of these credits, or if any of the credits are from a passive activity, the appropriate credit form must be attached and the total credit summarized on Form 3800. If none of the credits in IRM 21.7.4.4.4.9 are applicable, the Form 3800 is not necessary. The taxpayer should only file the appropriate credit form.

  2. See IRM 21.7.4.4.4.9 for a list of the applicable credits.

21.7.4.4.8.1.1  (10-01-2009)
Priority of Credits

  1. The General Business Credits reported on Form 3800 are treated as used on a first-in, first-out basis by offsetting the earliest-earned credits first. Therefore, the order in which the credits are used in any tax year is;

    1. Carryforwards to that year, the earliest ones first, as of the close of the tax year in which the credit is used:

    2. The general business credit earned in that year, and

    3. The carryback to that year.

  2. The components of the general business credits reported on TY 2009, Form 3800, are used in the following order:

    1. Investment Credit, (Form 3468, Part II only) (in the following order: rehabilitation credit, energy credit, qualifying advanced coal project credit, and qualifying gasification project credit) Form 3468

    2. Work Opportunity Credit (Including any jobs credit carryforward), Form 5884 and Welfare-to-Work Credit, Form 8861 The Tax Relief and Health Care Act of 2006, combines the Welfare-to-Work Credit and the Work Opportunity Credit for qualified individuals that begin work for an employer after December 31, 2006 and before January 1, 2008.

    3. Credit for Increasing Research Activities, Form 6765

    4. Low-income Housing Credit, Form 8586

    5. Disabled Access Credit, Form 8826

    6. Renewable Electricity, Refined Coal, and Indian Coal Production Credit, Form 8835

    7. Indian Employment Credit, Form 8845

    8. Orphan Drug Credit, Form 8820 (formerly part of Research Activities Credit until December 31, 1994 when it expired - was reinstated permanently beginning July 1, 1996)

    9. New Markets Credit, Form 8874

    10. Credit for Small Employer Pension Plan Start-up Cost, Form 8881

    11. Credit for Employer Provided Expenses for Child Care Facilities and Services, Form 8882

    12. Biodiesel and Renewable Diesel Fuels Credit, Form 8864

    13. Low Sulfur Diesel Fuel Production Credit, Form 8896

    14. Distilled Spirits Credit, Form 8906

    15. Credit for Producing Fuel from a Non-Conventional Source Fuel Credit, Form 8907

    16. Energy Efficient Home Credit, Form 8908

    17. Energy Efficient Appliance Credit, Form 8909

    18. Alternative Motor Vehicle Credit, Form 8910

    19. Alternative Fuel Vehicle Refueling Property Credit Form 8911

    20. Credit for affected Midwestern Disaster Area Form 5884–A

    21. Mine Rescue Team Training Credit, Form 8923

    22. Agriculture Chemicals Security Credit, Form 8931

    23. Credit for Employer Differential Wages Payments, Form 8932

    24. Carbon Dioxide Sequestration Credit, Form 8933

    25. Qualified Plug-in Electric Drive Motor Vehicle Credit, Form 8936

    26. Qualified Plug-in Electric Vehicle Credit, Form 8834( Part I only)

    27. Credit for Contributions to Selected Community Development Corporations, Form 8847

    28. Current Year General Credits from an Electing Large Partnership (Schedule K-1, Form 1065-B)

  3. See the Instructions to Form 3800 for more specific information.

21.7.4.4.8.1.2  (10-01-2009)
Use of Other Credits Prior to Allowance of General Business Credit

  1. The tax liability must be reduced by the following other credits not taken on Form 3800, before the General Business Credit:

    • Foreign Tax Credit, Form 1116

    • American Samoa Economic Development Credit, Form 5735,
      Forward any case or correspondence relating to Form 5735 to:
      Philadelphia's Accounts Management Section
      Attention: Clerical Hub
      Drop Points - N 441, 11601 Roosevelt Blvd.
      Philadelphia, PA 19255

    • Nonconventional Source Fuel Credit (separate schedule must be attached)

    • Qualified Electric Vehicle Credit, Form 8834

    • Credit for Prior Year Minimum Tax - Corporations, Form 8827

    • Qualified Zone Academy Bond Credit (valid for periods 199901 and subsequent), Form 8860

  2. See the Instructions to Form 3800 for more specific information.

21.7.4.4.8.1.3  (02-05-2007)
Empowerment Zone and Renewal Community Employment Credit, Form 8844

  1. Form 8844 is filed to claim the empowerment zone and renewal community employment (EZRCE) credit. The credit is

    • 20-percent of the employer's qualified wages (up to $15,000) paid or incurred during calendar year 2009 for qualified empowerment zone employees, plus

    • 15-percent of the employer's qualified wages (up to $10,000) paid or incurred during calendar year 2009 for qualified renewal community employees.

  2. A qualified empowerment zone employee is any employee (full-time or part-time) of the employer who:

    1. Performs substantially all of the services for that employer within an empowerment zone in the employer's trade or business, and

    2. Has their principal residence within that empowerment zone while performing those services. (Employees who work in the Washington, DC empowerment zone may live anywhere in the District of Columbia.)

  3. A qualified renewal community employee is any employee (full-time or part-time) of the employer who:

    1. Performs substantially all of the services for that employer within a renewal community in the employer's trade or business, and

    2. Has their principal residence within that renewal community while preforming those services.

  4. The form is a component of the General Business Credit, however, Section 38 provides a special tax liability limitation for the credit. Therefore, it is figured separately and is never carried to Form 3800. The credit is based on designated qualified areas nominated by state and local government. The designations were made in 1994.

  5. Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, is now available. It advises taxpayers of the tax incentives available for businesses located in to-be-designated empowerment zones and enterprise communities.

  6. See the Instructions for Form 8844 for more specific information, and for a listing of the Urban Areas, Rural Areas, and parts of Washington, DC that make up the Empowerment Zones and for a listing of the Renewal Communities. This information can also be found by using the RC/EZ/EC Address Locator at http:/www.hud.gov/crlocator or by calling 1-800-998-9999.

21.7.4.4.8.1.4  (01-01-2005)
Carryback/Carryforward of Excess Credits

  1. Generally, for taxable years beginning prior to 1998, excess business credits can be carried back 3 years beginning with the earliest year. Any unused credit after the carryback, may then be carried forward 15 years. The TPRA of 1997 changed these provisions for taxable years beginning in 1998 and subsequent. Generally, it provides that credits can only be carried back one year. Any unused credit after the carryback can be carried forward 20 years. See IRM 21.5.9 for more information on carrybacks.

  2. The Instructions for Form 3800 direct the taxpayer to attach a detailed computation of their carryforward of the General Business Credit showing for each credit, the tax year the credit originated and how it was applied.

21.7.4.4.8.1.5  (01-01-2005)
Adjusting Non-Refundable Credits

  1. Allow the credit with TC 291.

  2. Decrease the credit with TC 290.

21.7.4.4.8.2  (01-01-2005)
Expiration of Credits

  1. When credits expire, the date they expire does not coincide with the return period ending date for which they are valid.

    Example:

    The Orphan Drug Credit (on Form 6765) expired Dec. 31, 1994. However, the credit is valid on returns through period ending 199511. The taxpayer could have activity during December 1994 (when the credit was still available) which could be included on the return which includes the December 1994 period. The credit was reinstated permanently (on Form 8820) beginning July 1, 1996. Therefore, the credit is not valid on returns covering a full 12 month period for periods ending 199512 – 199606.

21.7.4.4.8.3  (01-01-2005)
Information on Specific Non-Refundable Credits

  1. The sections in this subsection contain information on various non-refundable credits.


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