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Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 154. Unemployment Tax Returns (Cont. 3)

3.11.154  Unemployment Tax Returns (Cont. 3)

3.11.154.7 
Form 940-EZ - General Guidelines for Editing Returns (Revision 2005 and Prior)

3.11.154.7.5 
Form 940-EZ - Part I - Taxable Wages and FUTA Tax (Revision 2005 and Prior)

3.11.154.7.5.7  (01-01-2009)
Form 940-EZ - Line 7, Total FUTA Tax Deposits (Revision 2005 and Prior)

  1. Form 940-EZ - Line 7, Total FUTA Tax Deposits

    1. If this item is blank, the taxpayer may have the FTD amount erroneously entered in the amount line of question "A" or on an attachment.

    2. If you can determine the correct FTD amount from this area or an attachment, enter it on Line 7, Part I.

    3. If you cannot perfect this line from the return or attachments, leave it blank.

3.11.154.7.5.8  (01-01-2009)
Form 940-EZ - Line 8, Balance Due/Line 9, Overpayment (Revision 2005 and Prior)

  1. Form 940-EZ - Line 8, Balance Due/Line 9, Overpayment

    1. If these lines are blank or illegible, perfect from the return or attachments if possible.

    2. Perfect the balance due/overpayment by subtracting Line 7 from Line 6.

      IF THEN
      The Balance Due amount on Line 8 contains Failure to Deposit (FTD), Failure to File (FTF) or Failure to Pay (TP) penalty and/or interest, 1. Edit an asterisk (*) to the left of the Line 8 amount.
      2. Subtract the FTD, FTF, FTP penalty and interest from the Balance Due amount.
      3. Edit the Balance Due to the left of the original entry.
      4. Edit a received date if one is not present.
      The Overpayment amount on Line 9 is reduced by FTD, FTF, FTP penalty and/or interest, 1. Edit an asterisk (*) to the left of the line 9 amount.
      2. Add the FTD, FTF, FTP penalty and interest to the Overpayment amount.
      3. Edit the Overpayment amount to the left of the original entry.
      4. Edit a Received Date, if necessary.

    3. If the taxpayer has entered the same amount on Form 940-EZ in Part I, Lines 6, 7, and 8, and the amount equals the total of the ROFTL in Part II, or the ROFTL is blank, asterisk (*) to the left of the entry on Line 7.

    4. Do not edit if the computation on Line 8 or 9 is less than ≡ ≡ ≡ .

3.11.154.7.6  (01-01-2009)
Form 940-EZ - Part II - Record of Quarterly Federal Unemployment Tax Liability (ROFTL) (Revision 2005 and Prior)

  1. Form 940-EZ Part II - Liability for Quarter

    IF AND THEN
    Blank,   Edit from attachments.
    Otherwise, edit a Schedule Indicator Code (SIC) "1" to the right of the line that separates the entity information from the AB questions.
    Only the fourth quarter is blank, Line 6 is larger than the sum of the first three quarters, Edit the difference between Line 6 and the sum of the three quarters to the fourth quarter.

    Note:

    This will prevent an erroneous deposit penalty from being charged.
    The taxpayer may have entered wages instead of tax in Part II, Line 5 is the same as the Total for Year, Part II, and Line 6 is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Multiply the wage amount shown for each quarter by .008 and edit the correct entries to Part II. See Figure 3.11.154-22.
    The taxpayer entered a negative figure in any quarter of the liability fields,   Edit the SIC "1" to the right of the line that separates the entity information from the AB questions. See Exhibit 3.11.154-4.

    Figure 3.11.154-22

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3.11.154.7.6.1  (01-01-2009)
Form 940-EZ - Schedule Indicator Code (SIC) (Revision 2005 and Prior)

  1. The Schedule Indicator Code (SIC) is used to notify the computer that the Quarterly Federal Tax Liability for Unemployment Tax (ROFTL), Part II is incomplete or unnecessary. When the SIC "1" is edited, the computer will determine if a Federal Tax Deposit penalty should be assessed based on a quarterly average of the total liability for the year.

  2. Edit SIC Code "1" when:

    1. Line 6, Part I, is $1,000 or less.

    2. The ROFTL Total is $1,000 or less.

    3. There is a negative amount in the ROFTL.

    4. The ROFTL is blank.

    5. There is a total in the ROFTL, but there are no Quarterly Liability Amounts present.

    6. Line 6, Part I is more than $1,000 and the Total in the ROFTL is more than $1,000, and there is a difference of more than ≡ ≡ ≡ ≡ ≡ between the two amounts.

    .

    Note:

    SIC "1" is edited in the margin to the right the line that separates the entity information from the AB Questions.

3.11.154.7.7  (01-01-2009)
Form 940-EZ - FTD Credits (Revision 2005 and Prior)

  1. Form 940-EZ - If the return shows excess credit (remittance or FTD) and the taxpayer requests that credit be transferred to another type of tax, edit CCC "X" to freeze the credit until the transfer is made.

  2. Prepare Form 3465 to Accounts Management.

3.11.154.8  (01-01-2009)
Form 940-PR - General Guidelines for Editing Returns (OSPC -Only) (Revision 2005 and Prior)

  1. Procedures for editing Form 940-PR in the Code & Edit function.

  2. See Publication 850 (Revised December 2003) "English-Spanish Glossary of Words and Phrases" which may be used as a resource tool for processing Form 940-PR returns.

    IF AND THEN
    The taxpayer completes Parte I, Parte II, Parte III, and Parte IV,   1. Examine the return and attachments.
    2. Delete the incorrect used Parte.
    Wages were paid in Puerto Rico only, Unemployment payments were made timely, Only Parte I and Parte II should be completed by the taxpayer.
    It is not necessary for the taxpayer to complete Parte III or Parte IV.
    The taxpayer completed both Parte II and Parte III,   1. Examine the return and attachments.
    2. If only Puerto Rico is shown in both Parte II and Parte III, delete Parte III.
    3. If Puerto Rico and any other possession or state is shown in Parte III, delete Parte II.
    The taxpayer completes Parte I, Parte III , and Parte IV,   Take no action. The taxpayer is indicating that their unemployment tax payments were not made timely or that wages were paid in other states, the District of Columbia or the Virgin Islands.

3.11.154.8.1  (01-01-2009)
Form 940-PR - Procedures for Coding and Editing Returns (Revision 2005 and Prior)

  1. For Code & Editing Form 940-PR, follow instructions below:

    1. For Editing, See IRM 3.11.154.2.1.

    2. For Third Party Designee Returns, See IRM 3.11.154.2.16.

    3. For Signature, See IRM 3.11.154.2.18.

    4. For Tax Period, See IRM 3.11.154.2.19.

    5. For Received Date, See IRM 3.11.154.3.3.

    6. For Indian Tribal Returns, See IRM 3.11.154.3.5.

    7. For Entity Perfection, See IRM 3.11.154.4.1.

3.11.154.8.2  (01-01-2009)
Form 940-PR - Page 1 Editing the"A" "B" "C" Indicator Questions (Revision 2005 and Prior)

  1. Take no action. We will no longer edit the ABC Indicator Code.

3.11.154.8.2.1  (01-01-2009)
Form 940-PR - "A" "B" "C" Indicator Questions - IRC §6020(b) (Revision 2005 and Prior)

  1. If return has 6020 (b) notated on the return, do not edit the ABC Indicator. No action is necessary. Do not correspond with the taxpayer.

3.11.154.8.3  (01-01-2009)
Form 940-PR - Credit Reduction States (Revision 2005 and Prior)

  1. Credit Reduction States are named by the Department of Labor.

  2. For Tax Year 2004 and 2005 tax returns, the taxpayer must use Form 940 to report wages that were paid in a credit reduction state. Form 940-PR should not be used if credit reduction applies. Convert to Form 940. If conversion is not possible, correspond with the taxpayer.

3.11.154.8.4  (01-01-2009)
Form 940-PR - Parte I - Computation of Taxable Wages (Revision 2005 and Prior)

  1. Form 940-PR, Parte I, should be completed by all filers.

    1. If Parte I does not contain sufficient information to determine Line 5, Total Taxable Wages, correspond.

      Exception:

      It is not necessary to correspond to obtain Part I information from the taxpayer when they indicate "not liable" , zero, dash, all blank entries or "final return" and the return has been signed. We should consider taxpayer intent.

3.11.154.8.4.1  (01-01-2009)
Form 940-PR - Parte I, Line 1 (Revision 2005 and Prior)

  1. Parte I, Line 1 - Total Compensation Paid to Employees:

    1. On some Form 940-PR returns, the taxpayer may enter the same amount on Line(s) 1 and 3. (Line 1 entry cannot be the same as Line 3 entry)

    2. If Parte I, Line 1 and Line 3 have the same line entries, then correspond with the taxpayer using 142C Letter for the correct Line 3 entry.

    3. If the taxpayer does not respond (NO REPLY), then disallow the entry on Line 3 and bring the amount of the Line 1 entry to Line 5 making a Balance Due Return (TAXABLE).

3.11.154.8.4.2  (01-01-2009)
Form 940-PR - Parte I, Line 2, Exempt Payments (Revision 2005 and Prior)

  1. Parte 1, Line 2, Exempt Payments No action is necessary.

3.11.154.8.4.3  (01-01-2009)
Form 940-PR - Parte I, Line 3, Excess Payment (Revision 2005 and Prior)

  1. Parte 1, Line 3, Excess Payment.

    1. Taxpayer shows an amount based on other than federal wage limit, correspond to determine correct federal wage amount.

    2. If Line 3 is an even multiple of $7,000 (i.e., 14,000, 21,000, etc.) the taxpayer may be exempting the first $7,000 and paying taxes based on wages over $7,000 rather than paying taxes on the first $7,000.

      Note:

      If it appears that the taxpayer has "flipped" these amounts, correct Lines 3, 4 and 5, if applicable.

    3. If Line 3 equals Line 1, correspond using 142C Letter to the taxpayer.

3.11.154.8.4.4  (01-01-2009)
Form 940-PR - Parte I, Line 4, Total Exempt Payments (Revision 2005 and Prior)

  1. Parte I, Line 4 - Total Exempt Payments:

    1. If there is no entry in Parte I, Line 2 and Line 3, accept the taxpayer's entry on Line 4. Do not correspond.

    2. If Line 4 is greater than Parte I, Line 1, correspond. (Total exempt payments cannot exceed total payments.)

    3. If no reply, asterisk (*) to the left of the entries on Lines 4 and 5 and edit the amount from Line 1 to Line 5 (making the return Taxable).

3.11.154.8.4.5  (01-01-2009)
Form 940-PR - Parte I, Line 5, Total Taxable Wages (Revision 2005 and Prior)

  1. Line 5, Total Taxable Wages:

    1. If there is an entry on Line 1 (Total Payments) and Lines 2 through Line 5 shows a significant entry such as a "0" (zero), blank , dash "-" , or the word "NONE" written on the line, edit the amount on Line 1 to Line 5 or compute and enter Line 1 less Line 4.

    2. If Parte I, Line 1 and 5 have no entries, correspond to obtain the total taxable wages, except:

      IF THEN
      Line 1, Parte II has an entry, Determine the wages by dividing this amount by .008
      The state in Parte III, Line 3, Column (a) has a taxable state wage base of $7,000 and there are no exempt payments, Edit the amount from Parte II, Line 3, Column (c) - Taxable payroll to Line 5.

    3. If Line 5 is "blank" or "zero" because Line 3 equals Line 1, correspond with taxpayer using 142C Letter.

3.11.154.8.4.6  (01-01-2009)
Form 940-PR - Parte I, Line 6, Credit Reduction (Revision 1992 and Prior)

  1. Parte I, Line 6, Credit Reduction:

    1. Credit reduction only applied to the 940-PR Form for 1974, 1976 through 1987, 1991 and 1992 tax year returns

    2. If you receive a 940-PR return from 1992 or prior, that contains credit reduction information, give the return to your manager.

3.11.154.8.4.7  (01-01-2009)
Form 940-PR - Corporate Officers' Wages (Revision 2005 and Prior)

  1. No action necessary. We will no longer correspond for Corporate Officers' Wages.

3.11.154.8.5  (01-01-2009)
Form 940-PR - Parte II - ABC Indicator (Revision 2005 and Prior)

  1. No action is necessary. We will no longer edit the ABC Indicator.

3.11.154.8.5.1  (01-01-2009)
Form 940-PR - Parte II, Line 3, Balance Due/Line 4, Overpayment (Revision 2005 and Prior)

  1. Form 940-PR - Parte II, Line 3, Balance Due/Line 4, Overpayment:

    1. If these lines are blank or illegible, perfect from the return or attachments if possible.

    2. Perfect the Balance Due/Overpayment by subtracting Line 4 from Line 1.

      IF THEN
      The Balance Due amount on Line 3 contains Failure to Deposit (FTD), Failure to File (FTF), or Failure to pay (FTP) penalty and/or interest, 1. Edit an asterisk (*) to the left of the Line 3 amount.
      2. Subtract the FTD, FTF, FTP penalty and interest from the Balance Due amount.
      3. Edit the Balance Due amount to the left of the asterisk (*).
      4. Edit a Received Date, if necessary.
      The Overpayment amount on Line 4 is reduced by FTD, FTF, FTP penalty and/or interest, 1. Edit an asterisk (*) to the left of the Line 4 amount.
      2. Add the FTD, FTF, FTP penalty and interest to the Overpayment amount.
      3. Edit the Overpayment amount to the left of the asterisk (*).
      4. Edit a Received Date, if necessary.

3.11.154.8.6  (01-01-2009)
Form 940-PR - Parte III - Tax Owed (due) or Refund (Revision 2005 and Prior)

  1. The taxpayer will complete Part III and Parte IV, if applicable.

3.11.154.8.6.1  (01-01-2009)
Form 940-PR - Parte III, Line 3(a), State Codes (Revision 2005 and Prior)

  1. All returns must have at least one State Code.

  2. The only exception is a "G" coded return (amended return).

  3. The word "State" as used here, pursuant to IRC §3306(j)(1), includes the fifty states plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, participating by the Federal Unemployment Tax Act.

  4. The State Code can only be edited in two locations:

    1. On the Form 940-PR, Parte III, Line 3, Column (a), or

    2. On the Form 4975 Edit Sheet.

  5. If there are one or two state codes, ISRP will capture the 2 character state code in Parte III, Line 3, Column (a) of the form.

  6. If there are three or more state Codes, underline the two character State Code on Form 4975 Edit Sheet.

  7. A non-taxable return will be given a "ZZ" State Code when the state is subject to credit reduction.

  8. If a State Code(s) cannot be determined from Parte III or attachments to the return, use the Entity State Code of the taxpayer's mailing address.

  9. If the State Code cannot be determined, correspond.

  10. Edit a State Code only once, even if the taxpayer has entered it more than once on the return.

  11. OSPC Only - The only countries that should be listed on Form 940-PR, or should be edited will be Puerto Rico and the U.S. Virgin Islands. You may sometimes see the following countries listed in Parte III. They should not be listed on Form 940-PR and should not be edited because they do not participate in our unemployment system. Asterisk (*) to the left of any data listed for foreign countries, including the following:

    • American Samoa

    • Federated States of Micronesia

    • Guam

    • Marshall Islands

    • Northern Mariana Islands

    • Palau

3.11.154.8.6.2  (01-01-2009)
Form 940-PR - Parte III, Line 3, Column b, State Reporting Numbers (Revision 2005 and Prior)

  1. We will no longer transcribe the State Reporting Number. No action is necessary.

3.11.154.8.6.3  (01-01-2009)
Form 940-PR - Parte III, Line 3b, Total Tentative Credit (Revision 2005 and Prior)

  1. Form 940-PR - Parte III, Line 3b, Total Tentative Credit. Take no action. We will no longer edit Parte III, Line 3b, Total Tentative Credit.

3.11.154.8.6.4  (01-01-2009)
Form 940-PR - Parte III, Line 7, Total FUTA Tax (Revision 2005 and Prior)

  1. Form 940-PR - Parte III, Line 7, Total FUTA Tax

    IF THEN
    Line 7 is blank or illegible, 1. Perfect it from the return or attachments if possible.
    2. Do not compute the Gross FUTA Tax, Line 1 of Parte III, or the Maximum Credit, Line 2 of Parte III, in order to perfect Line 7.
    Lines 1 through 3 of Parte III have been completed by the taxpayer or perfected from information on the return, Perfect Line 7 by subtracting Line 3 from the amount on Line 1, Parte III.

3.11.154.8.6.5  (01-01-2009)
Form 940-PR - Parte III, Line 8, Total FUTA Tax Deposits (Revision 2005 and Prior)

  1. If Form 940-PR - Parte III, Line 8, Total FUTA Tax Deposits is blank, perfect it from the following areas on the return:

    1. Enter the amount from Parte II, Line 4, if you can determine it is a misplaced entry.

    2. The taxpayer may have the FTD amount erroneously entered in the amount line of Question A or on an attachment.

    3. If you can determine the correct FTD amount from this area, enter it on Line 8, Parte III.

3.11.154.8.6.6  (01-01-2009)
Form 940-PR - Parte III, Line 9, Balance Due/Line 10, Overpayment (Revision 2005 and Prior)

  1. Form 940-PR - Parte III, Line 9, Balance Due/Line 10, Overpayment

    1. If Line 9 or Line 10 are blank or illegible, perfect from the return or attachments if possible.

    2. Perfect the balance due/overpayment by subtracting Line 8 from Line 7.

      IF THEN
      The Balance Due amount on Line 9 contains Failure to Deposit (FTD), Failure to File (FTF), or Failure to Pay (FTP) penalty and/or interest, 1. Edit an asterisk (*) to the left of the Line 9 amount.
      2. Subtract the FTD, FTF, FTP penalty and interest from the Balance Due amount.
      3. Edit the Balance Due to the left of the asterisk (*).
      4. Edit a received date, if necessary.
      The Overpayment amount on Line 10 is reduced by FTD, FTF, FTP penalty and/or interest, 1. Edit an asterisk (*) to the left of the Line 10 amount.
      2. Add the FTD, FTF, FTP penalty and interest to the Overpayment amount.
      3. Edit the Overpayment amount to the left of the asterisk (*).
      4. Edit a Received Date, if necessary.

    3. If the taxpayer has entered the same amounts in Lines 7, 8, and 9, the amount is equal to total amount of the ROFTL, delete the entry on Line 8.

    4. Do not edit if the computation on Line 9 or 10 is less than ≡ ≡ ≡ ≡ .

3.11.154.8.7  (01-01-2009)
Form 940-PR - Parte IV - Record of Quarterly Federal Unemployment Tax Liability (Revision 2005 and Prior)

  1. Form 940-PR -Liability for the Quarter

    1. IF AND THEN
      Parte II and Parte III are completed and the remittance or ROFTL does not agree, The taxpayer's intent cannot be determined, Correspond with the taxpayer.
      Blank,   Edit from attachments.
      Only the fourth quarter is blank, The taxpayer indicates a larger amount on Line 7, Parte III,
      1. Edit an amount to the fourth quarter that would allow the total of all quarters to equal total FUTA tax.
      2. This will prevent erroneous deposit penalty from being charged.
      The taxpayer entered wages instead of tax in Parte IV,   1. Compare Parte I, Line 5 with the Total for Year, Parte IV.
      2. If the amounts agree, and Parte II, Line 1 or Parte III, Line 7 is ≡ ≡ ≡ ≡ ≡ ≡ ≡ , multiply the wage amount shown for each quarter by .008 and edit the correct entries. See Figure 3.11.154-23.
      The taxpayer has entered a negative figure in any quarter of the ROFTL fields,   Enter SIC "1" to the right of the grey area after Parte 1, Line 5. See Exhibit 3.11.154-6.

    Figure 3.11.154-23

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  2. Form 940-PR - Total for Year - This item is not edited or transcribed.

3.11.154.8.8  (01-01-2009)
Form 940-PR - Schedule Indicator Code - SIC (Revision 2005 and Prior)

  1. The Schedule Indicator Code (SIC) is used to notify the computer that the Quarterly Federal Tax Liability for Unemployment Tax (ROFTL), Parte IV is incomplete or unnecessary. When the SIC "1" is edited, the computer will determine if a Federal Tax Deposit penalty should be assessed based on a quarterly average of the total liability for the year. The SIC code is edited in the right margin next to the line that separates the entity information from the ABC Questions. See Exhibit 3.11.154-5 and See Exhibit 3.11.154-6.

  2. Edit SIC Code "1" when:

    1. Line 7, Parte III, is $1,000 or less.

    2. The ROFTL Total is $1,000 or less.

    3. There is a negative amount in the ROFTL.

    4. The ROFTL is blank.

    5. There is a total in the ROFTL, but there are no Quarterly Liability Amounts present.

    6. Line 7, Parte III is more than $1,000 and the Total in the ROFTL is more than $1,000, and there is a difference of more than ≡ ≡ ≡ ≡ between the two amounts.

3.11.154.8.9  (01-01-2009)
Form 940-PR - Federal Tax Deposit Credits (Revision 2005 and Prior)

  1. Form 940-PR - Federal Tax Deposit Credit:

    IF AND THEN
    A return is subject to FTD requirements and reflects an overpayment or refund, The taxpayer requests that credit be transferred to another type of tax 1. Edit CCC "X" .
    2. Prepare Form 3465 to Accounts Management.

Exhibit 3.11.154-1  (01-01-2009)
Form 940 and Schedule A (Revision 2006, Revision 2007 and Revision 2008) - Road Map

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Exhibit 3.11.154-2  (01-01-2009)
Form 940-PR and Anexo A (Schedule A) (Revision 200, Revision 2007, and Revision 2008) - Road Map

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Exhibit 3.11.154-3  (01-01-2009)
Form 940 (Revision 2005 and Prior) - Road Map

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Exhibit 3.11.154-4  (01-01-2009)
Form 940-EZ (Revision 2005 and Prior) - Road Map

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Exhibit 3.11.154-5  (01-01-2009)
Form 940-PR (Revision 2005 and Prior) (Only Parte I and Parte II are Completed) - Road Map

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Exhibit 3.11.154-6  (01-01-2009)
Form 940-PR (Revision 2005 and Prior) (Only Parte I and Parte III are Completed) - Road Map

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Exhibit 3.11.154-7  (01-01-2009)
Form 940-PR for Tax Year 2005 - English Translation

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Exhibit 3.11.154-8  (01-01-2009)
Conversion of Form 940 When 2006, 2007 or 2008 Tax Year Information is Submitted on a Prior Year Form - Road Map

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