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Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 3. Individual Income Tax Returns (Cont. 3)

3.11.3  Individual Income Tax Returns (Cont. 3)

3.11.3.14 
Form 1040

3.11.3.14.3 
Adjustments to Income—Lines 23 Through 37

3.11.3.14.3.5  (01-01-2008)
Line 27—Deduction for Self-Employment Tax

  1. (Reserved).

3.11.3.14.3.6  (01-01-2008)
Line 28—Self-Employed SEP, SIMPLE

  1. "X" the amount on line 28 if none of the following are attached to the return:

    • Schedule C

    • Schedule E (Part II present)

    • Schedule F

3.11.3.14.3.7  (01-01-2008)
Line 29 - Self-Employed Health Insurance Deduction

  1. Edit a misplaced amount from line 29 to line 27 when both of the following conditions are present:

    • Line 27 is blank.

    • Schedule SE is attached to the return.

3.11.3.14.3.8  (01-01-2008)
Line 31a and 31b—Alimony Paid and Alimony Recipient's TIN

  1. Take the following actions:

    If And the amount claimed on line 31a is Then
    A TIN is present, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " (See Figure 3.11.3–88).
    A TIN is present, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    TIN is missing and the taxpayer indicates "unable to obtain" , "NRA" , "SSA-205(c)" , "Unknown" , "applied for" or "NONE," ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ " ≡ ≡ ≡ .
    A TIN is missing, illegible, fewer than 9 digits, the same as the P-TIN/S-TIN or multiple TINs are present, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "" ≡ ≡ .
    Multiple TINs are present, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    If the TIN is missing, illegible, fewer than 9 digits, or the same as the P-TIN/S-TIN, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Circle an illegible or invalid TIN (e.g., fewer than 9 digits, same as the P-TIN/S-TIN) TIN.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ " ≡ ≡ ≡ ≡ ≡ "≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Figure 3.11.3-88

    This image has been removed because it contains Official Use Only.
    Please click here for the text description of the image.

    This image has been removed because it contains Official Use Only.

3.11.3.14.3.9  (01-01-2008)
Line 32 - IRA Deduction

  1. "X" the line 32 amount when the taxpayer writes "rollover" to the left of line 32. Delete the rollover amount where found if it was also included on lines 7, 15a, 15b, 16a, or 16b.

  2. "X" the amount on line 32 when it is other than $4,000 or $5,000 ($8,000, $9,000 or $10,000 for FS 2), and one of the following indicators - and an equal deferred compensation amount - appear on Form W-2. (See Figure 3.11.3-89).

    • "D" or Section 401(k)

    • "E" or Section 403(b)

    • "F" or Section 408(k)(6)

    • "G" or Section 457(b)

    • "Q" or "Housing/Subsistence" or "Combat Pay"

    • "S" or "SIMPLE" plan

    • "T" or employer-paid "qualified adoption expenses"

    • Section 125, Cafeteria Plan (CAF)

    • Section 414(h), Mandatory Salary Deferral ("PERS" Public Employees Retirement System)

    • Thrift Savings Plan or "TSP"

  3. "X" Line 32 when line 32 has a significant entry and both of the following conditions apply:

    • There are no entries present on lines 23 through 31a or lines 33 through the dotted portion of line 36, and

    • Line 36 is blank, dash, or zero.

    Figure 3.11.3-89

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.3.14.3.10  (01-01-2007)
Line 34 - Tuition and Fees Deduction (Form 8917)

  1. Form 8917 must be attached if there is an amount present on line 34. Correspond if missing.

3.11.3.14.3.11  (01-01-2008)
Line 35 - Domestic Production Activities Deduction (Form 8903)

  1. Form 8903 must be attached if there is an entry present on line 35, and significant dollar amounts are present on lines 12, 17 and/or 18. Correspond if missing.

  2. "X" the line 35 amount when the taxpayer has used line 35 as a subtotal line for lines 23 through 34.

3.11.3.14.3.12  (01-01-2008)
Line 36—Dotted Portion (Total Adjustments)

  1. Delete the following adjustments from lines 23 through 35 and edit the amount to the dotted portion of line 36.

    Note:

    Include these amounts in the line 36 total.

    • "403(b) - Contributions by certain chaplains to section 403(b) plans"

    • "501(c)(18)"

    • "Jury Pay"

    • "UDC"

    • "WBF"

    • "Desert Storm" or "Combat Pay"

    • Deduction for Clean Fuel Vehicles

    • "PPR" – Personal Property Rental

    • "Reforestation," "RFST" – Forestation/reforestation amortization

    • "Sub-Pay TRA" – Repayment of Supplemental Unemployment Benefit (SUB) payments received in a prior year under the Trade Act of 1974 (TRA).

      Exception:

      "X" the SUB pay amount where found and subtract the amount from line 7 when there is no indication that the adjustment is for benefits received in a prior year.

  2. Delete these adjustments where found and edit the amount to the dotted portion of line 36 when any of the adjustments in (1) are claimed elsewhere on the return.

  3. "X" the amount if a taxpayer claims an adjustment to income on the dotted portion of line 36 for anything other than the items listed in (1) above.

  4. "X" the amount when there is no explanation present for an adjustment amount.

  5. Edit Unallowable Code "99" when there is an indication of "Clean Air Fuel" and the taxpayer is claiming ≡ ≡ ≡ ≡ ≡ or more.

  6. Edit any amount claimed on lines 23 through 36 and identified as "MSA" or an "Archer MSA Deduction" to the blank area between lines 22 and 36. This amount must be deleted from lines 23 through the dotted portion of line 36 and edited in dollars only with the label "MSA" to the left of the amount. (See Figure 3.11.3-90).

    Figure 3.11.3-90

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.3.14.3.13  (01-01-2008)
Line 36—Total Adjustments

  1. Compute and enter line 36 when it is blank and there are entries leading to a total unless the amount to be added is only on line 32.

  2. When an amount is present on line 36 and lines 23 through the dotted portion of line 36 are blank, perfect line 36 in the following priority:

    1. If line 36 is one-half of the line 58 amount on page 2 of Form 1040, edit the line 36 amount on line 27 as an SE tax deduction.

    2. Perfect lines 23 through 31a and lines 34 and 35 from attachments if necessary.

    3. If lines 23 through 31a and lines 34 and 35 are still blank after steps a and b above, follow the instructions for perfecting the dotted portion of line 36 in IRM 3.11.3.14.3.12. (See Figure 3.11.3–91).

    4. Correspond for an explanation of the line 36 amount if unable to perfect lines 23 through the dotted portion of line 36, using the steps above, and no explanation is present.

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Figure 3.11.3-91

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.3.14.3.14  (01-01-2008)
Line 37—Adjusted Gross Income (AGI)

  1. Perfect line 37 in the following priority when it is blank or illegible:

    1. Edit the amount from line 22 when there are no amounts on lines 23 through 36.

    2. Compute by subtracting line 36 from line 22.

    3. Edit the amount from line 38 on page 2 of Form 1040.

3.11.3.14.4  (01-01-2008)
Tax Computation—Lines 38 Through 46

  1. Enter amounts on lines 43 and 44 in dollars only.

    Note:

    The only T–lines on lines 38–42 are the Age/Blind Indicator boxes on line 39.

3.11.3.14.4.1  (01-01-2008)
Line 39a—Age/Blind Indicator (ABI)

  1. (Reserved.)

3.11.3.14.4.2  (01-01-2008)
Line 39b—Married Filing Separate (MFS) (Not Transcribed)

  1. (Reserved.)

3.11.3.14.4.3  (01-01-2008)
Line 40—Standard or Itemized Deductions (Not Transcribed)

  1. Schedule A must be attached if any of the following conditions exist. Correspond, if missing.

    1. "IE" is noted to the left of line 40, and the amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. The amount on line 40 is not ANY of the standard deduction amounts listed below AND a DSI "1" condition is not present. (See Figure 3.11.3–92.)

    STANDARD DEDUCTION CHART
    Filing Status Line 39a Boxes marked Appropriate Amount
    1–Single 0 $5,350
    1 $6,650
    2 $7,950
    2–Married Filing Jointly
    or
    5–Widow(er) with Dependent     		0 $10,700
    1 $11,750
    2 $12,800
    3 $13,850
    4 $14,900
    3 or 6–Married Filing Separately 0 $5,350
    1 $6,400
    2 $7,450
    3 $8,500
    4 $9,550
    4 or 7–Head of Household 0 $7,850
    1 $9,150
    2 $10,450

    Figure 3.11.3-92

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.3.14.4.4  (01-01-2008)
Line 43–Taxable Income

  1. Compute and enter line 43 only when it is blank or illegible, and there are entries leading to a positive total.

  2. "X" line 43 when the entry is a negative amount.

3.11.3.14.4.5  (01-01-2008)
Line 44–Tax

  1. If the box on line 44a or 44b is marked, the indicated form (i.e., Forms 8814 or 4972) must be attached. Correspond, if missing.

3.11.3.14.4.6  (01-01-2008)
Line 45–Alternative Minimum Tax (Form 6251)

  1. Correspond when an amount is present on line 45 and Form 6251 is not attached.

3.11.3.14.5  (01-01-2008)
Credits—Lines 47 Through 56

  1. Enter amounts on lines 47 through 56 in dollars only.

  2. DO NOT correspond for missing schedules or forms to support entries on lines 47 through 55 when line 43 of Form 1040 is (or can be determined to be) zero or a negative amount. Instead, "X" the unsupported credit amount and adjust the total on line 56.

3.11.3.14.5.1  (01-01-2008)
Line 47—Credit for Child and Dependent Care Expenses (Form 2441)

  1. If an amount is claimed, Form 2441 or a statement must be attached.

    1. Prepare a dummy Form 2441 when it is missing and a statement is present.

    2. Correspond when a Form 2441 cannot be dummied.

3.11.3.14.5.2  (01-01-2008)
Line 48—Credit for the Elderly or the Disabled (Schedule R)

  1. If an amount is claimed or "CFE" is noted on line 48, Schedule R must be attached. Correspond if missing.

3.11.3.14.5.3  (01-01-2008)
Line 49—Education Credits (Form 8863)

  1. If an amount is claimed on line 49, Form 8863 must be attached. Correspond if missing.

3.11.3.14.5.4  (01-01-2008)
Line 50–Residential Energy Credit (Form 5695)

  1. If an amount is claimed on line 50, Form 5695 must be attached. Correspond if missing.

3.11.3.14.5.5  (01-01-2008)
Line 51 — Foreign Tax Credit (Form 1116)

  1. If an amount of more than ≡ ≡ ≡ is claimed, Form 1116 or similar statement must be attached. Correspond if missing.

    Note:

    Do not treat Form 1040 as an International Return solely because Form 1116 is attached.

  2. If line 51 is blank, enter the amount from line 29, Form 1116. If line 29 is blank, dash, or zero, enter a significant amount from line 21, Form 1116.

3.11.3.14.5.6  (01-01-2008)
Line 52 --Child Tax Credit (Form 8901)

  1. (Reserved).

3.11.3.14.5.7  (01-01-2008)
Line 53 - Retirement Savings Contribution Credit (Form 8880)

  1. Correspond if an amount is claimed on line 53 and Form 8880 is not present.

  2. "X" an entry on line 53 if the entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the return has been hand-written / hand-prepared.

3.11.3.14.5.8  (01-01-2008)
Line 54—Credits from Form 8396, Form 8859 & Form 8839

  1. If an amount is claimed of ≡ ≡ ≡ ≡ ≡ or more on line 54, Form 8396 (Mortgage Interest Credit), Form 8859 (District of Columbia First-Time Homebuyer Credit), or Form 8839 (Qualified Adoption Expenses) must be attached. Correspond if missing.

  2. If Form 8396 (Mortgage Interest Credit) is present and the amount claimed is ≡ ≡ ≡ or more edit Unallowable Code "60" .

  3. If Form 8859 (District of Columbia First-Time Homebuyer Credit) is present, the amount claimed is ≡ ≡ ≡ or more, and the taxpayer does not have a District of Columbia address, edit Unallowable Code "61" .

3.11.3.14.5.9  (01-01-2008)
Line 55—Other Credits

  1. If an amount of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is claimed on line 55, and the Form 3800 box is marked, the taxpayer must attach the Form 3800. Refer to the table in IRM 3.11.3.14.5.9.(5) for a list of further required supporting documentation. Correspond if the required documentation is not present.

  2. If Form 3468 is attached with an entry to the left of line 1g or 1h, the first page of NPS Form 10-168a, Historic Preservation Certification Application, must be attached. Correspond if missing unless the taxpayer either:

    1. Provides the number from the NPS certificate on line 1i, Form 3468.

    2. Indicates the credit is derived from a partnership, S-Corporation, estate or trust.

  3. If an amount of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is claimed and the Form 8801 box is marked, Form 8801 must be attached. Correspond if missing.

  4. "X" the line 55 amount when the taxpayer has used line 55 as a subtotal line for lines 47 through 54.

  5. Perfect line 55 when Form 3800 or one of the forms listed in the table below is present and line 55 is blank.

    EDITING LINE 55 WHEN BLANK AND
    FORM 3800 IS NOT ATTACHED
    Form Attached Enter Line 55 from
    Form 3468 (Seq. 52) Line 6
    Form 8861 (Seq. 107) Line 6
    Form 6765 (Seq. 81) Line 61 or 63
    Form 8586 (Seq. 36b) Line 5 or 7
    Form 8826 (Seq. 86) Line 8
    Form 8835 (Seq. 95) Section A, Line 10 or 12
    Section B, Line 43
    Form 8845 (Seq. 113) Line 6 or 8
    Form 8820 (Seq. 103) Line 6
    Form 8874 (Seq. 127) Line 3
    Form 8881 (Seq. 130) Line 5
    Form 8882 (Seq. 131) Line 7 or 9
    Form 8900 (Seq. 144) Line 7
    Form 8864 (Seq. 141) Line 10 or 12
    Form 8896 (Seq. 142) Line 8 or 10
    Form 8906 (Seq. 150) Line 5
    Form 8907 (Seq. 146) Line 14 or 16
    Form 8908 (Seq. 153) Line 4
    Form 8909 (Seq. 159) Line 19 or 21
    Form 8910 (Seq. 152) Line 10 or 18
    Form 8911 (Seq. 151) Line 9 or 19
    Form 8847 (Seq. 100) Line 6
    Form 8923 (Seq. XX) Line 4
    Sch K-1 (Form 1065-B) Box 7

  6. Correspondif an amount of ≡ ≡ ≡ ≡ ≡ or more is present without supporting documentation.

    Note:

    Correspond ONLY for the following forms to support an entry on line 55: Form 3800, Form 3468, Form 8801, Form 8864 and Form 8923.

3.11.3.14.5.10  (01-01-2008)
Line 56—Dotted Portion (Not Transcribed)

  1. Take no action when the taxpayer indicates "FNS" (credit for fuel from a non-conventional source, including "tight sands" ) or "Section 29" .

3.11.3.14.5.11  (01-01-2008)
Line 56—Total Credits

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ lines 47 through 55 are blank, unless the taxpayer has indicated "FNS" .

    Exception:

    Do not correspond and delete the entry on line 56 when line 43 of Form 1040 is (or can be determined to be) zero or a negative amount, or when it can be determined that the taxpayer carried the line 43 or 44 amount forward in error.

  2. Compute and enter line 56 when it is blank, dash, zero, or illegible, and there are entries leading to a total.

    Note:

    Delete the entry on line 56 if it can be determined that the taxpayer carried the line 44 or line 46 amount down in error.

3.11.3.14.6  (01-01-2008)
Other Taxes—Lines 58 through 63

  1. Enter amounts on lines 58 through 62 in dollars only. Line 63 must be edited in dollars and cents when adjusting or computing and entering amounts.

3.11.3.14.6.1  (01-01-2008)
Line 58—Self-Employment Tax (Schedule SE)

  1. A Schedule SE is required if there is an amount on line 58. Dummy Schedule SE from Schedules C/EZ, E (Part II present), or F, or attachments, if possible. Otherwise, correspond.

    Exception:

    Do not dummy Schedule SE if corresponding for other missing attachments. Instead, include the request for Schedule SE in the correspondence to the taxpayer.

  2. Edit RPC "S" and RPC "B" when there is no significant entry present or edited on line 58 and there is an indication of any of the following:

    1. The taxpayer is not liable for SE tax.

    2. Form 4361 or Form 4029 was filed.

    3. "Exempt-Notary," "Amish," or "Mennonite" is noted in the line 58 area.

    Exception:

    Do not edit RPC "S" if FS 2 and the spouse has self-employment income of $434 or more and is liable for SE tax.

3.11.3.14.6.2  (01-01-2008)
Line 59—Social Security and Medicare Tax on Unreported Tip Income (Forms 4137 / 8919)

  1. Form 4137 or Form 8919 must be attached if an amount is present on line 59. Dummy Form 4137 or Form 8919 from attachments, if present.

    If Form 4137 / Form 8919 is missing, correspond unless Then
    "RRTA" is noted, Take no action.
    "Uncollected SST/Medicare" is noted, 1. "X" the line 59 amount.
    2. Enter the amount to the dotted portion of line 63.

3.11.3.14.6.3  (01-01-2008)
Line 60—Additional Tax on IRAs, Other Qualified Retirement Plans, etc. (Form 5329)

  1. Correspond if an amount is present on line 60 and Form 5329 is not attached unless either of the following conditions apply:

    1. The taxpayer has noted "No" to the left of line 60.

    2. Line 60 has an entry that is 10% of any combination of the following:

    • Line 15b, Form 1040

    • Line 16b, Form 1040

    • Form 1099R

    Example:

    Do not correspond if line 15b and/or line 16b has an amount of $9,805 and the line 60 amount is $980.

  2. Edit RPC "3" if Form 5329 is not present and either of the conditions above apply.

  3. Enter the totals of Parts I through VIII of Form(s) 5329 when line 60 is blank and Form 5329 is attached with entries present.

3.11.3.14.6.4  (01-01-2008)
Line 61—Advance Earned Income Credit Payments (AEIC)

  1. Review Box 9, Form(s) W-2 when line 61 is blank, dash, or zero and the taxpayer has claimed an amount on line 66a. If AEIC amounts are present on the Form(s) W-2, combine the Box 9 amounts and edit to line 61. (See Figure 3.11.3-93)

  2. "X" any amount claimed for AEIC if there are no supporting documents. (i.e., Forms W-2 with amounts present in box 9.)

    Figure 3.11.3-93
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.3.14.6.5  (01-01-2008)
Line 62—Household Employment Taxes

  1. Correspond when an amount is present on line 62 and Schedule H is not attached.

3.11.3.14.6.6  (01-01-2008)
Line 63—Total Tax (Dotted Portion) (Not Transcribed)

  1. The taxpayer is instructed to enter the following taxes here and include the amount on line 63, total tax:

    • "Uncollected Tax on Tips" , "UTOT" or "UT"

    • "EPP"

    • "Section 453A(c) interest"

    • "Section 72(m)(5)"

    • "4531(3)"

    • "Health Savings Account Distributions" or "HSA" , Form 8889

    • "Archer MSA Distributions" or "MSA" , Form 8853

    • "Medicare Advantage MSA Distributions" or "Med MSA" , Form 8853

  2. The dotted portion of line 63 is also used to report taxes from Form 4970 and for "recapture taxes" .

    If the taxpayer indicates And the amount is Then
    "FMSR" (Form 8828), "LIHCR" (Form 8611), "ADT" (Form 4970), or"NMCR" (Form 8874), "HSA" (Form 8889), "MSA" (Form 8853), "Med MSA" (Form 8853), ≡ ≡ ≡ ≡ ≡ ≡ ≡ The form must be attached. Correspond, if missing.
    "FMSR" (Form 8828), "LIHCR" (Form 8611), "ADT" (Form 4970), or"NMCR" (Form 8874) "HSA" (Form 8889), "MSA" (Form 8853), "Med MSA" (Form 8853),
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡     		Take no action.
    "ICR" /Form 4255, "QEVCR" (Qualified Electrical Vehicle Credit Recapture), "IECR" (Indian Employment Credit Recapture), "Form 8693" , or "Form 8697" , Any amount, Take no action.

  3. If the taxpayer has written "Section 1291 Interest" or "Section 1294 Interest" in the:

    1. Line 63 area, and has included the amount in the total on line 63, take no action.<