3.0.101  Schedule K-1 Processing

Manual Transmittal

November 08, 2013

Purpose

(1) This transmits revised IRM 3.0.101, General, Schedule K-1 Processing.

Material Changes

(1) Editorial changes have been made throughout this IRM.

(2) IRM 3.0.101.4(4) The example of editing Schedule K-1 to mirror the parent return was placed in example format and removed from a bullet listing.

(3) IRM 3.0.101.7.2(2) Dates updated for years processed on SCRIPS.

(4) IRM 3.0.101.12.3.4(1) Reference to IMF IRM 3.24.8, Information Return Processing, on ISRP was removed.

(5) IRM 3.0.101.12.6.1 Reference to IMF ISRP IRM 3.24.37 in element one instructions was removed.

(6) IRM 3.0.101.13(2) Year updated in instruction.

(7) IRM 3.0.101.14.4(2) The title for referenced IRM 3.41.274 was added to the instruction.

(8) IRM 3.0.101.14.5.2 Added a note under the table to address unrecognized Form 1332. IPU 13U1204 issued 07-09-2013

(9) IRM 3.0.101.14.8(1) Wording was changed to make instruction clearer. Technical instruction and meaning were not changed.

(10) IRM 3.0.101.14.9(2) SSN was added for exclusion from a name line entry if present in the entity area of the schedule.

(11) IRM 3.0.101.14.9(3) Enter as instruction previously present in paragraph (4) was merged with paragraph (3) and the remaining section was renumbered.

(12) IRM 3.0.101.14.9(20) Instruction was added to leave blank illegible or blank second name lines.

(13) IRM 3.0.101.14.11(1) bullet 7 Key entry was corrected from <F#> to <F3>.

(14) IRM 3.0.101.14.11(1) Percentage Field Entry Chart was given a title row.

(15) IRM 3.0.101.14.16.1

  • Corrected instruction for [F] Beneficiary ID.

  • Corrected the foreign address reference from IRM 3.0.101.14.10.1.1 to IRM 3.0.101.14.9.1.1 for all fields.

(16) IRM 3.0.101.14.16.2

  • Corrected instruction for [E] Partner TIN.

  • Corrected the foreign address reference from IRM 3.0.101.14.10.1.1 to IRM 3.0.101.14.9.1.1 for all fields. IPU 13U1008 issued 05-30-2013

(17) IRM 3.0.101.14.16.3

  • Corrected instruction for [D] Shareholder TIN.

  • Corrected the foreign address reference from IRM 3.0.101.14.10.1.1 to IRM 3.0.101.14.9.1.1 for all fields. IPU 13U1008 issued 05-30-2013

  • Corrected instruction numbered two for [E] Address (Shareholder).

(18) IRM 3.0.101.14.16.5(1) First input prompt corrected to "If this partner is a retirement plan" and corresponding instruction wording.

(19) IRM 3.0.101.14.16.7.1 Corrected the foreign address reference from IRM 3.0.101.14.10.1 to IRM 3.0.101.14.9.1.1. IPU 13U1008 issued 05-30-2013

(20) IRM 3.0.101.14.16.7.2

  • Corrected the foreign address reference from IRM 3.0.101.14.10.1 to IRM 3.0.101.14.9.1.1. IPU 13U1008 issued 05-30-2013

  • Removed ) from the instruction for screen prompt [A] Partnership EIN.

(21) IRM 3.0.101.14.16.7.3 Corrected the foreign address reference from IRM 3.0.101.14.10.1 to IRM 3.0.101.14.9.1.1. IPU 13U1008 issued 05-30-2013.

(22) Figure 3.0.101-3 A caption was added to the existing figure to label the Forms Identification Selection Menu.

(23) Figure 3.0.101-4 A caption was added to the existing figure labeling Num Field Location.

(24) Exhibit 3.0.101-6 Moved instruction on use of Exhibit 3.0.101-6 out of the table.

(25) Exhibit 3.0.101-7 Added a title row for the exhibit.

Effect on Other Documents

IRM 3.0.101 dated October 23, 2012 (effective January 01, 2013) is superseded. The following Interim Procedural Updates(IPUs) are incorporated into this IRM: 13U1204 and 13U1008.

Audience

Wage and Investment, Submission Processing Employees

Effective Date

(01-01-2014)

Paul J. Mamo
Director, Submission Processing
Wage and Investment Division

3.0.101.1  (01-01-2014)
Purpose

  1. The IRM 3.0.101 is intended to provide instructions regarding the processing of Schedule K-1 through Integrated Submission and Remittance Processing (ISRP) and Service Center Recognition/Image Processing System (SCRIPS).

3.0.101.1.1  (01-01-2014)
Scope

  1. These instructions supersede all instructions in other IRMs regarding the processing of Schedule K-1.

3.0.101.2  (01-01-2014)
Program Codes

  1. The program codes listed below should be used when performing the functions involved with processing Schedule K-1 through ISRP, unless otherwise instructed:

    Return Type Program Code Tax Class/Doc Code Parent
    Tax Class/Doc Code
    1041 Schedule K-1 44380 566 244
    1065 Schedule K-1 44381 565 265
    1120S Schedule K-1 44382 567 316

  2. The program codes listed below should be used when processing Schedule K-1 through SCRIPS, unless otherwise instructed:

    Return Type Program Code Tax Class/Doc Code Parent
    Tax Class/Doc Code
    1041 Schedule K-1 44386 566 244
    1065 Schedule K-1 44387 565 265
    1120S Schedule K-1 44388 567 316

  3. The program codes listed below should be used when processing Schedule K-1 through E-File, unless otherwise instructed.

    Return Type Program Code Tax Class/Doc Code Parent
    Tax Class/Doc Code
    1041 Schedule K-1 44390 566 236
    1065 Schedule K-1 44360 565 265
    1120S Schedule K-1 44370 567 316

    1. Code and Edit: should use the parent return program codes for coding both the parent returns and the Schedule K-1. Do not use a 4438X - program code when coding the Schedule K-1.

    2. Batching/Numbering: should use the Schedule K-1 program codes for time actually spent batching and numbering Schedules K-1.

    3. Data Conversion: should use the parent return program code when transcribing the parent return and the Schedule K-1 program code when transcribing Schedule K-1. (See program codes listed above that should be used)

    4. For transcription of Schedule K-1 BOB Register, program code 44930 should be used.

    5. Error Resolution (ER): should use function/program code 340–44380

    6. BOB Register: should use function/program code 620–44380

3.0.101.3  (01-01-2014)
Extracting and Sorting

  1. Because Schedule K-1 will be attached to the parent returns during the sorting function, no sorts will be performed on the Schedule K-1. However, because of Schedule K-1 processing, parent returns will require additional sorts.

  2. The parent returns will be sorted in the following categories:

    1. Remittance versus Non-remittance

    2. Refund versus Non-refund

    3. Tax period

      • Current timely filed calendar year (current processing year minus 1)

      • Prior Year (current processing year minus 2 or more)

      • Current fiscal and delinquent current year (current processing year minus 1)

      • Future Years (current processing year)

    4. Current forms and future Form 1041 with Schedule K-1 attached versus without Schedule K-1 attached.

    5. Code and Edit will detach current year Schedule K-1 thru November 30th. Always detach future year K-1. DO NOT detach prior year Schedule K-1.

      Note:

      When a future return with Schedule K-1 attached are found in a current year batch, pull the return and re-batch.

3.0.101.4  (01-01-2014)
Code and Edit

  1. This section contains instructions for processing Parent returns with Schedule K-1 through Code and Edit.

  2. Schedule K-1 editing in Cincinnati Submission Processing Center (CSPC) and Ogden Submission Processing Center (OSPC) will be done in Red ink.

  3. If the return is for prior year, do not research or correspond for incomplete Schedule K-1's.

  4. If the pre-printed year of the Schedule K-1 is different from the tax year ending of the parent return, correct the pre-printed tax year on the first Schedule K-1 by lining through the last two digits of the pre-printed year and editing the correct year digit to the right of the lined through digit.

    Example:

    The parent return is for a calendar year ending in 2011 and the Schedule K-1 year is 2006/2007/2008/2009/2010, line through the last two digits (20//) and edit a 11 to the right of the tax year, or
    The parent return is for a fiscal year ending in 2011 and the Schedule K-1 year is 2005/2006/2007/2008/2009/2010, line through the last two digits (20//) and edit a 12 to the right of the tax year.

    1. When making this correction be sure to edit to the right of the printed tax year in the document locator number (DLN) area.

    2. When future returns with Schedule K-1 attached are found in current year batch, pull the return and re-batch.

    .

  5. If an exact duplicate of a Schedule K-1 has been filed with the parent return, process one Schedule K-1 and cross out the duplicate Schedule K-1 with an X and leave the duplicate attached to the parent return.

  6. If Schedules K-1 are attached to a Reprocessables/Re-entry, current year parent return, and have not been processed, detach Schedule K-1 and treat as "Loose Schedule K-1 " . (See IRM 3.0.101.5 for Loose Schedule K-1 Instructions).

  7. If there are two pages, ensure there is some type of identifier. If no identifier (i.e. Parent/Payee Name and/or Taxpayer Identification Number (TIN) is present, write the last four digits of the payee TIN in the top center margin of page 2).

  8. Do not bracket negative amounts. (See IRM 3.0.101.6 for Money Amount Fields instructions)

  9. If the Individual Master File (IMF) Payee Social Security Number (SSN) or Business Master File (BMF) Payee Employer Identification Number (EIN) is not located in the correct box but it is located in the name and address box, re-write the SSN/EIN in the SSN/EIN box.

  10. A payer TIN must be present on at least the first Schedule K-1. If not present, enter the TIN from the parent return in the Employer Identification Number/ Social Security Number (EIN/SSN) box. If the TIN on the parent return has changed, enter the new parent TIN on the Payer TIN Line.

  11. If the words "amended" or "corrected" are present on the parent return of the Schedule K-1 and the amended box is not checked, edit a check mark or "X " in the box. Detach from parent and continue processing.

  12. When Schedule K-1 is received in continuous formats (e.g. computer listings, and typed listings) correspond requesting separate Schedule K-1. Do not dispose of the listing as it is an attachment to a tax return.
    When correspondence is required for the paragraph above, any one of the following letters should be used:

    • Letter 177C for Form 1041 Schedule K-1.

    • Letter 1355C for Form 1065 Schedule K-1.

    • Letter 118C for Form 1120S Schedule K-1.

    • As of October 29, returns will no longer be sent back to taxpayer for missing information/signature per Chief Counsel opinion issued in September, 2008.

    • Do not correspond for Schedule K-1's

  13. Do not correspond for the missing Schedule K-1 for Form 1065 on the following types of returns:

    • Sec. 6020(b) returns

    • Sec. 501(d) returns, Religious and Apostolic Organizations

    • Returns filed under a Common Trust

    • Sec. 761(a) returns

    • Nominee returns

    • Inactive returns

    • IRC 1.736.1 (Payments to a retiring partner)

    • Final returns

    • If foreign box is checked, then it is accepted as a foreign return

    • Amended ("G" coded) returns

    • Payee is a foreign entity

    • Return is being reprocessed as an original return and has a Form 13596 attached

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

  14. When reviewing Form 1065 Schedule K-1 and the partnership has indicated that the number of Schedule K-1 is "1" and/or the Schedule K-1 attached to the return has 100% interest in the partnership then follow the instructions in IRM 3.11.15.15 (4) Return of Partnership Income when the Schedule K-1 shows two names listed in the partners name and address section.

    • Correspond requesting separate Schedule K-1 using Letter 1355C or approved local correspondence procedures.

    • Notate the letter sent in the lower right margin of Form 1065.

    • Continue editing the return.

  15. Do not correspond for missing Schedule K-1 for Form 1120S on the following types of returns

    • Sec. 6020(b) returns

    • Examination Secured Substitute for Return (SFR) returns

    • Re-entry returns

    • Amended ("G" coded) returns

    • Payee is a foreign entity

    • Return is being reprocessed as an original return and has a Form 13596 attached

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

  16. Do not correspond for missing Schedule K-1 for Form 1041 on the following types of returns:

    • Sec. 6020(b) returns

    • Examination Secured Substitute For Return (SFR) returns

    • Re-entry returns.

    • Amended ("G" coded) returns

    • Electing Small Business Trust (ESBT), Grantor Type Trust, or Bankruptcy Estate.

    • Payee is a foreign entity

    • Return is being reprocessed as an original return and has a Form 13596 attached

    • Section 642(i) Trust (Maintenance of Cemetery Property or Number of Gravesites

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

  17. Form 1041, Non -Taxable Grantor Trust Filers are not required to file Schedule K-1. Do not process or detach any Schedule K-1 attached to a Non-taxable Grantor Trust. These are trusts that will be edited with a Fiduciary Code of 4 and a Trust Code of 3. See IRM 3.11.14.12.4, Grantor Trusts, for updated instructions concerning Grantor Trust returns.

3.0.101.4.1  (01-01-2014)
Unprocessable Schedule K-1

  1. The criteria for unprocessable Schedule K-1 are as follows:

    • The tax period is 201112 or prior.

    • The payer information indicates a different entity than the parent entity.

    • Form 1065B Schedule K-1 or Schedule K-1 is attached to a Form 1065B

    • Schedule K-1 attached to Form 1041 for Non-taxable and Taxable Grantor Trust.

  2. Discontinue processing any Schedule K-1 if income reported is for a different tax year than the form.

3.0.101.4.2  (01-01-2014)
Standard Schedule K--1

  1. In order to be processable, the Schedule K-1 must meet all of the following requirements:

    • Must be for the parent return it is attached to, e.g., if attached to Form 1065 the Schedule K-1 must be a Schedule K-1 (Form 1065).

    • Schedule K-1 must contain the payer and recipient's name, address and SSN/EIN.

    • Each taxpayers information must be on a separate sheet of paper

      Exception:

      Do not correspond if a husband and wife (same last name) are filing a Schedule K-1 as "one Beneficiary, Partner, or Shareholder" in a Trust, Partnership or Corporation.

    • The amount of each partner, shareholder or beneficiary share cannot be combined as one total.

  2. If the Schedule K-1 does not meet the requirements listed above, research the return and attachments, if information is not found, research Integrated Data Retrieval System (IDRS). If unable to locate the missing information, and the Payee is not a foreign entity correspond requesting a valid Schedule K-1, using Form 3696. As of October 29, 2008 returns will no longer be sent back to taxpayer for missing information/signature per Chief Counsel opinion issued in September, 2008.

    Exception:

    Do not correspond if Schedule K-1 is not required per IRM 3.0.101.4, Code and Edit.

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  4. See Exhibit 3.0.101-1 through Exhibit 3.0.101-3 for example of standard Schedule K-1.

3.0.101.4.3  (01-01-2014)
Substitute Schedule K-1

  1. Schedule K-1 can be submitted in substitute format ( e.g., 2D Bar Code).

  2. Edit 16 to tell data transcribers where to put payor information.

  3. In order to be processable, substitute Schedule K-1 must meet all of the following requirements:

    • Schedule K-1 must contain the payer and recipients name, address and SSN/EIN.

    • Each taxpayer's information must be on a separate sheet of paper.

      Exception:

      Do not correspond if a husband and wife (same last name) are filing a Schedule K-1 as "one Beneficiary, Partner or Shareholder" a Trust, Partnership or Corporation.

    • The amount of each partner, shareholder or beneficiary share cannot be combined as one total.

  4. If the substitute Schedule K-1 does not meet the requirements listed above, research the return and attachments, if information is not found research IDRS. If unable to locate the missing information, and the Payee is not a foreign entity correspond requesting a valid Schedule K-1, using Form 3696. As of October 29, returns will no longer be sent back to taxpayer for missing information/signature per Chief Counsel opinion issued in September, 2008.

    Exception:

    Do not correspond if Schedule K-1 is not required per IRM 3.0.101.4, Code and Edit.

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

3.0.101.4.4  (01-01-2014)
Non- Standard Schedule K-1

  1. Schedule K-1 can be submitted in non-standard format. A non-standard Schedule K-1 will be missing lines.

  2. Edit 16 to tell data transcribers where to put payor information.

  3. For all processable non-standard Schedule K-1, DO NOT black out the Forms Identification Number found in the upper right corner of the Schedule K-1.

  4. In order to be processable, non-standard Schedules K-1 must meet all of the following requirements:

    • Schedule K-1 must contain the payer and recipient's name, address and SSN/EIN.

    • Line items may be missing, however, line items that are present must be in the same order as those on the official form

    • Each taxpayer's information must be on a separate sheet of paper

      Exception:

      Do not correspond if a husband and wife (same last name) are filing a Schedule K-1 as "one Beneficiary, Partner or Shareholder" a Trust, Partnership or Corporation.

    • The amount of each partner, shareholders or beneficiary share cannot be combined as one total.

  5. If the non-standard Schedule K-1 does not meet the requirements listed above, research the return and attachments, if information is not found research IDRS. If unable to locate the missing information, and the Payee is not a foreign entity correspond requesting a valid Schedule K-1, using Form 3696. As of October 29, returns will no longer be sent back to taxpayer for missing information/signature per Chief Counsel opinion issued in September, 2008.

    Exception:

    Do not correspond if Schedule K-1 is not required per IRM 3.0.101.4, Code and Edit.

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3.0.101.5  (01-01-2014)
Loose Schedule K-1

  1. If loose Schedule K-1 are received in Code and Edit, research for the parent return DLN and proceed as follows:

    If parent return DLN And Schedule K-1 Then
    Is found Is for either current or future year
    1. Write the parent DLN in the upper left of the Schedule K-1.

    2. If the DLN is for an electronic filed return File location Code(FLC) of DLN (first two digits) are 14, 16, 22, 35, 38, 41, 43, 52, 64, 65, 72, 75, 76, 92, 93 or 95) route the Schedule K-1 to the local e-file area.

    3. Place the Schedule K-1 in a gusset folder and label the folder "Loose Schedule K-1 " .

    4. Forward the folder, with the Schedule K-1 to Batching/Numbering to continue processing

    Is for a prior year
    1. Prepare an attachment slip requesting the Schedule K-1 be attached to the parent return, if the parent return is not an electronic filed DLN.

    2. If parent return is an electronic filed DLN, destroy the Schedule K-1 as classified waste.

    Is not found Is for either current or future year
    1. Hold in suspense and monitor weekly for parent return DLN.
      - Current Year: Hold until six weeks after parent return Processing Completion Date (PCD).
      - Future Year: Hold for six weeks (research ERS suspense and Master File, weekly, for parent DLN).

    2. If parent DLN is found follow procedures above.

    3. If parent DLN is not found, route to Accounts Management as a loose schedule.

      Note:

      All Schedule K-1 need to be suspended for research of parent DLN for a minimum of six weeks.

    Is for a prior year Destroy the Schedule K-1 in classified waste.

3.0.101.5.1  (01-01-2014)
Loose Schedule K-1 for Electronic File Returns

  1. When a loose Schedule K-1 is received from Code and Edit, research to determine if the Schedule K-1 was filed electronically with the parent return.

    IF AND THEN
    All Schedule K-1 were filed with the parent return. Schedule K-1 are for current, future or prior year. Destroy the Schedule K-1 as classified waste.
    All Schedule K-1 were not filed with the parent return. Schedule K-1 are for current, future or prior year.
    1. Destroy any Schedule K-1, as classified waste, if it is a duplicate of an electronic filed Schedule K-1.

    2. Place all other Schedule K-1 in a gusset folder and label the folder "Loose Schedule K-1 " . Make sure the parent DLN is clearly written in the upper left margin of the first Schedule K-1 for that parent DLN.

    3. Forward the gusset folder, with the Schedules K-1 to Batching/Numbering to continue processing.

    Schedule K-1 is for a prior year. Destroy Schedules K-1 as classified waste.

3.0.101.5.2  (01-01-2014)
Schedule K-1 Received in Suspense/Rejects

  1. Schedule K-1 are form specific and should not be converted to match the parent return (i.e., Form 1065 must have a Form 1065 Schedule K-1, Form 1041 must have a Form 1041 Schedule K-1, or Form 1120S must have a Form 1120S Schedule K-1). If the Schedule do not match the parent form, do not send the Schedule K-1 for processing. Take the necessary steps to have them attached to the parent return.

  2. For all others do the following when correspondence is received in Error Resolution.

    1. Separate the Schedule K-1 from the rest of the correspondence.

    2. Write the parent return DLN in the upper left corner of the first Schedule K-1.

    3. Place the Schedule K-1 in a gusset folder and label the folder "Loose K-1" .

    4. Forward the folder, with the Schedule K-1, to Numbering/Batching to continue processing.

    5. If there are attachments (other than the actual Schedule K-1), attach them to the parent return.

    6. If there are attachments (other than the actual Schedule K-1), and you do not have the parent return, prepare an "attachment slip" requesting the documents be stapled the parent return.

    7. If the Schedules are for other than the above returns (etc., Form 1065B, Form 8865) leave attached to the parent return.

    8. If the Schedules are for other than the above returns (etc., Form 1065B, Form 8865) and you do not have the parent return, prepare an attachment slip requesting the document be attached to the parent return.

3.0.101.6  (01-01-2014)
Money Amounts Fields

  1. Do not bracket negative amounts.

  2. If taxpayer enters a negative amount in a positive only field, "X" the negative amount. See table below for positive only fields for each Schedule K-1.

    Note:

    Lines with multiple entries, edit the first line only

    Form 1065
    Line Number and Title
    Line 4 - Guaranteed Payments
    Line 12 - Section 179 deduction
    Form 1120S
    Line Number and Title
    Line 11 - Section 179 deduction
    Line 13 - Credits and Credit recapture
    Form 1041
    Line Number and Title
    Line 3 - Net Short-Term Capital Gain
    Line 4a - Net Long-Term Capital Gain
    Line 8 - Other Rental Income
    Line 14 - Other Information
  3. Amounts are transcribed in dollars only. If taxpayer enters a positive or negative $.49 or less, "X" the amount. If taxpayer enters a positive or negative $.50 to $.99, edit a $1 or -$1, respectively.

  4. A Schedule K-1 with zeros, blanks or dashes in the entire money amount T-Lines are considered a "Zero Balance Schedule K-1" and are valid, continue processing.

  5. Ogden Campus Only

    • Foreign documents – if a circled "U." is edited to the right of the name on name line 1, enter "U." in the 2nd TIN Notification field in Section 02. The "U " code is valid with File Location Code 60 (Ogden) only.

    • When transcribing money amounts, the equivalent U.S. cents amount should not be transcribed. Many Europeans currencies use commas for decimals and decimals for commas. Do not transcribe punctuation. Do not transcribe the last two numerics of a foreign money amount if that amount is preceded by either a decimal or a comma e.g., Deutsche Marks may be written as "DM 2.941,18" ; only 2941 should be transcribed).

3.0.101.7  (01-01-2014)
Converting Schedule K-1 Forms

  1. Schedules K-1 are form specific and should not be converted to match the parent return, (i.e., Form 1065 must have a Schedule K-1 (Form 1065), Form 1041 must have a Schedule K-1 (Form 1041), and Form 1120S must have a Schedule K-1 (Form 1120S).

3.0.101.7.1  (01-01-2014)
Non-Standard or Prior Year Format for Schedules K-1 through ISRP

  1. All current year Schedule K-1 on a prior year form must be reformatted to current year format. See Exhibit 3.0.101-8.

  2. If the Schedule K-1 is on other than current year format (may be either a prior year or non-standard form) and the lines cannot be numbered to agree with the current year Schedule K-1, correspond with the taxpayer.

3.0.101.7.2  (01-01-2014)
Prior Year Format for Schedules K-1 through SCRIPS

  1. All current year Schedule K-1 on a prior year form must be reformatted to current year format. See Exhibit 3.0.101-8.

  2. If there is a bar code present on the prior year revision (2013 and prior for Form 1120S Schedule K-1 and Forms 1065 Schedule K-1 or 2012 and prior for Forms 1041 Schedule K-1) return, using a marker, black out the straight lines on both sides of the bar code. See Figure 3.0.101-1.

    Figure 3.0.101-1

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

    Black Out Bar Code On Prior Year Documents

3.0.101.8  (01-01-2014)
Moving Processable Schedule K-1

  1. Separate processable Schedule K-1 from the parent return.

  2. Staple the parent return, attachments, unprocessables Schedule K-1 and envelope together.

  3. Move the processable Schedule K-1, un-stapled, to the back of the parent return.

3.0.101.9  (01-01-2014)
Numbering Parent Returns

  1. When numbering the parent return, the numbering function will:

    1. Separate Schedule K-1 from the parent return and make sure the first Schedule K-1 reflects the tax year ending of the parent return if other than calendar year.

    2. Assign and stamp a DLN on the parent return on the upper right side of document. On the parent, stamp this same DLN in the upper left corner (at least 2 inches from the edge) on the first Schedule K-1 for that parent. If there is no room in the upper margin stamp DLN in the right side margin. Do Not use the Entity area. See Figure 3.0.101-2.

      Note:

      It is very important that the parent DLN is clearly stamped on the first Schedule K-1 as it is used during SCRIPS processing of the Schedule K-1.

    3. Stamp or write the parent block DLN on the gusset folder, place the parent returns in the folders and put the folders on the batch cart, in DLN order and forward to Data Conversion.

    4. Place the Schedule K-1 into box in parent DLN numbered order.

    5. Place parent transmittal in the same slot holding folder 1 and transfer the numbered parent documents and numbered Schedule K-1 to the final tech's work area.

      Note:

      Although the parent documents are in folders and Schedule K-1 are in a box, they both need to remain with the transmittal.

      Note:

      When your work is left in the final tech area, it is actually picked up by Quality Review (QA), when they complete their review, they transfer it to the final tech area. Then the work is checked, recorded and moved to Data Conversion.

      Figure 3.0.101-2

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

      DLN Stamp Location

3.0.101.10  (01-01-2014)
Batching

  1. Line up Schedule K-1 boxes according to program (Form 1041) with Form 1041 etc.) making sure to keep multiple boxes (1 of 2 and 2 of 2) together.

  2. It is very important to keep current and future year Schedule K-1 in different batches. The year is input once for each batch and it is repeated for each return in the batch.

    • Current = Current processing year minus 1

    • Future = Current processing year (fiscal years)

  3. Input information in Batch Block Tracking System (BBTS) to create the new batch, and then record new batch #" 1" .

  4. On the Schedule K-1 box line through the old parent program and batch, and write the new schedule K-1 program and batch as well as the cycle number of boxes (i.e., 1 of 1, 1 of 2, and 2 of 2).

  5. Document count will be 80 documents for each block. You can allow BBTS to default to the number of blocks or change the count to "1" .

  6. Box is ready for Pre Doc Prep Unit.

3.0.101.10.1  (01-01-2014)
Loose Schedule K-1

  1. Batching will keep loose Schedule K-1 in a colored folder, and notate "Re-file" on the outside, route to Pre Doc Prep Unit.

3.0.101.11  (01-01-2014)
Numbering Schedule K-1

  1. When Numbering the Schedule K-1, the Numbering function will:

    1. Assign and stamp a Schedule K-1 DLN on each processable Schedule K-1.

    2. Edit the two digit year at the top right-hand corner of the Form 1332.

    3. Number the Schedule K-1 from 00–99 in upper right hand margin as normal.

    4. If there are more than 100 Schedules K-1 create a new block and write the parent DLN on the first Schedule K-1 of the new block in the upper left of the Schedule K-1.

    5. Count the number of parent return DLNs cross-referenced in the Schedule K-1 block and annotate the Form 1332 in the transaction code box with PF count.

    6. Place the Schedule K-1 in a separate gusset folder keeping the Schedule K-1 in parent return DLN order.

    Exception:

    Schedule K-1 that will be processed through SCRIPS will be sent to the Doc- Prep -Unit.

    Note:

    Ensure document "00" is blocked correctly, and there is information in Payer Section.

3.0.101.11.1  (01-01-2014)
Schedule K-1 Processed Through SCRIPS

  1. Prepare the Schedule K-1 folders or SCRIPS breaker sheets the same time the parent returns are numbered.

    1. Assign and stamp a DLN on the parent return.

    2. Stamp this same DLN in the upper left of the first Schedule K-1 from that parent return as a cross-reference.

    3. Stamp the parent return gusset folder and the Schedule K-1 gusset/blue folder or SCRIPS breaker sheet with the (FLC), tax class and document code then write the block number on both folders.

      Note:

      If Service Center is not using gusset/blue folders for the Schedule K-1, place a SCRIPS breaker sheet between each parent block DLN.

    4. Place Schedule K-1 (in folders or with SCRIPS breaker sheet) on batch cart or in stat boxes.

    5. If batch of work is for future year (2010), notate on the Form 9382, Batch Transmittal "Future Year 2010."

    6. Forward to the Pre Doc prep Unit.

3.0.101.12  (01-01-2014)
Schedule K-1 Processing Through ISRP

  1. This section provides instructions for entering data using the ISRP.

3.0.101.12.1  (01-01-2014)
Forms/Program Numbers/Tax Classes/Doc. Codes

  1. When transcribing Form 1332, ensure the Tax Class and Doc. Code matches the document type being transcribed.

    Return Type Program Code Tax Class/Doc Codes Parent
    Tax Class/Doc Code
    1041 Schedule K-1 44380 566 244
    1065 Schedule K-1 44381 565 265
    1120S Schedule K-1 44382 567 316

  2. If Tax Class or Document Code is different, contact lead or supervisor.

3.0.101.12.2  (01-01-2014)
Document Blocking

  1. All documents in any given block should be of the same type, (i.e. all 1041 Schedule K-1 present in the same block). If documents are mixed, consult your supervisor.

3.0.101.12.3  (01-01-2014)
Specific Instructions for Entry of Data

  1. This section provides specific instructions for entering data.

3.0.101.12.3.1  (01-01-2014)
Required Sections

  1. Original Entry (OE)– Section 01 and 06 are always required.

  2. Key Verification (KV)– Sections 01 and 06 can be key verified at management's discretion.

3.0.101.12.3.2  (01-01-2014)
Schedule K-1 Name and Address Information

  1. Form 1041 Schedule K-1

    • Payee (Sections 01 and 02)-- Transcribe name(s) and address information from the box labeled "Beneficiary's name, address, and ZIP Code."

    • Payer (Section 16) -- Transcribe Payer Name Line 1 from the box labeled "Name of trust or decedent's estate" . Transcribe Payer Name Line 2 and address information from the box labeled "Fiduciary's name, address, and ZIP Code" .

  2. Form 1065 Schedule K-1

    • Payee (Sections 01 and 02) -- Transcribe name(s) and address information from Part II.

    • Payer (Section 16) -- Transcribe name(s) and address information from Part I.

  3. Form 1120S Schedule K-1

    • Payee (Sections 01 and 02) -- Transcribe name(s) and address information from Part II.

    • Payer (Section 16) -- Transcribe name(s) and address information from Part I

3.0.101.12.3.3  (01-01-2014)
Name Entries - BMF and IMF

  1. Except as noted below, enter the information exactly as shown with as many characters as permitted and then press <ENTER>. Refer to Exhibit 3.0.101-4 for a list of standard abbreviations not enter the # sign.

    Example: Enter as:
    (a) Iris Frank IRIS FRANK
    (b) Estate of Lilly Family ESTATE OF LILLY FAMILY

  2. Space before and after an ampersand (&). In the Payer name line enter "and" or "&" as shown.

    Example: Enter as:
    (1) Jim Lime and Joe Doe, PTRS JIM LIME AND JOE DOE PTRS
    (2) Example: J. Elm & R. Ash, Inc J ELM & R ASH INC

  3. Omit punctuation, except for hyphens (-). The hyphen will be keyed using the MINUS (-) Field Termination key.

    Example: Enter as:
    (a) O'Tulare OTULARE
    (b) Maple-Pecan MAPLE-PECAN

  4. Space within a true last name if shown:

    Example: Enter as:
    De Pine DE PINE

  5. Do not enter the Partner number if present.

    Example: Jon Oak Partner #1 Enter as: JON OAK

  6. If account number is present enter as shown

    Example: Enter as:
    Harry Maple Account # 14675 HARRY MAPLE ACCT 14675

  7. If the % falls in the middle of name line 2 enter as shown

    Example: Enter as:
    John Oak JOHN OAK
    Grandchildren's Trust GRANDCHILDRENS TRUST
    FBO Alexis Maple % Mary FBO ALEXIS MAPLE %
    Oak TREE MARY OAK TREE

  8. In the second name line change "and" to "&" .

    • Roger Banana % Amalgamated Trucking and Moving Corporation

      Entry Name Line Placement
      ROGER BANANA (First Name Line)
      % AMALGAMATED TRUCKING & MOVING CORP (Second Name Line)

  9. IMF Only

    • Do not enter titles such as MR., MRS, CAPT., DR, REV, etc. in any individual's name in Section 01.

      Exception:

      Enter "MRS" or "MR" if it precedes a masculine name, initials or a first name which could be masculine or feminine.

    • If the name appears with the last name first, and the first name last, enter the first name first and the last name last.

    Example: Enter as:
    Birch, John A JOHN A BIRCH

  10. BMF Only

    • Abbreviate name information only when it is abbreviated on the document, except for standard abbreviations: CO for company, CORP. for corporation and INC. for incorporated. (See Exhibit 3.0.101-4 for a list of valid abbreviations)

    • For the "¢" symbol enter "CENT " .

    • For the "+" symbol enter "PLUS"

    • For the "@" symbol enter "AT"

    • For the "$" symbol enter "DOLLAR"

    • For ".com" enter a space instead of the "."

    • If initials are DBA, CPA, LLC, MD, PC, etc. you do not need spaces or periods. The initials must be run together.

    • If a city or state is shown as part of the first name line, enter the complete name of the city or state, no abbreviations.

      Example: Enter as:
      First Bank of GA FIRST BANK OF GEORGIA

    • If the name begins with the word "the" and has more than one word following "the" DO NOT enter "the" .

      Example: Enter as:
      The First National Bank FIRST NATIONAL BANK

    • If the name begins with the word "the" and has only one word following "the" , enter "the" .

      Example: Enter as:
      The Hideaway THE HIDEAWAY

3.0.101.12.3.4  (01-01-2014)
Address Elements

  1. Enter standard abbreviations for street abbreviations as shown in Exhibit 3.0.101-5.

    • If the address begins with "PO BOX" , press <F11> in place of "PO BOX" .

      Note:

      You do not need to space between pressing <F11> and entering the box number.

    • If the address is missing or illegible, enter "Z" and press <ENTER>.

  2. Enter the Major City Code if the city is in the designated district. For a list of the Major City Codes see Exhibit 3.0.101-6.

  3. Enter standard abbreviations for states and territories as shown in Exhibit 3.0.101-6.

  4. Enter all city, state, ZIP Code elements if present. If the city is missing, illegible, enter "ZZZ" and press <ENTER>. If the state or ZIP Code is missing leave the field blank.

  5. For APO, DPO and FPO instructions see IRM 3.24.38, ISRP System, BMF General Instructions..

  6. If address field overflows, enter as many characters as permitted for the field, using the standard abbreviations when possible and then press <ENTER>. DO NOT ENTER THE "#" sign.

  7. If two complete addresses (address, city, state, and zip) are present take the following actions:

    If Then
    1. One of the addresses is a PO Box, Enter the PO Box, city, state, and zip.
    2. Both are street addresses, Enter the first address, city, state and zip.

  8. If two addresses with the same city, state and ZIP are present take the following action:

    If Then
    1. One of the addresses is a PO Box Enter the PO Box, city state, and zip
    2. Both are street addresses Enter the first address, city, state and zip

3.0.101.12.3.4.1  (01-01-2014)
Foreign Address

  1. The foreign street address should be transcribed in the NAME2 field (2nd Name Line, Section 01). (See Exhibit 3.0.101-4 and Exhibit 3.0.101-5 for standard abbreviations)

  2. The IRM 3.24.38, ISRP System, BMF General Instructions, general address rules apply for this field except that the hyphen (-), slash (/) and pound sign (#) are allowed.

  3. This field should NOT be used for "in care of" information. Omit any "In care of" information.

  4. The foreign city, state, territory or province, and mailing code, if present, should be transcribed in the ADDR field (Street Address, Section 02). Spell out the city, state, territory or province, if abbreviated. (See Exhibit 3.0.101-10 through Exhibit 3.0.101-14).

    Note:

    If the city, state, territory or province name exceeds 32 spaces (leave the last three positions for a space and the postal code), input only the first 32 characters.

  5. The foreign country code should be transcribed in the "CITY" field. If it can not be determined enter "XX." Spell out the country, if abbreviated by the taxpayer. (See Exhibit 3.0.101-10 through Exhibit 3.0.101-14)

  6. Always enter a period (.) in the first position of the "ST" field (State).

3.0.101.12.4  (01-01-2014)
Amount Fields

  1. Amount box field numbers correspond to the preprinted number on each document, except when changed by Code and Edit.

  2. On other than standard forms, the amount box field numbers will be edited.

  3. If an amount is illegible, or more than one amount is entered in one amount box, press the "F12" key on the keyboard. It may or may not be necessary to press <ENTER>.

  4. If the taxpayer enters a negative amount in a positive only field, enter "zero" . Negative amounts can be identified by a minus sign or being enclosed in parentheses.

  5. If the taxpayer enters a positive or negative $.49 or less, enter a zero. If the taxpayer enters a positive or negative $.50 to $.99, enter a $1 or -$1, respectively.

  6. If the taxpayer files a state Schedule K-1, and it has a column with the federal information, transcribe the information form the federal column.

  7. All fields will be dollars only. A space and a dollar sign following the prompt (i.e., LN2 $) denotes dollars only fields.

  8. Ogden Campus Only

    • Foreign documents - if a circled "U" is edited to the right of the name on name line 1, enter U in the 2nd TIN Notification field in Section 02. The "U" code is valid with File Location Code 60 only.

    • When transcribing money amounts, the equivalent U.S. cents amount (e.g. Euro Dollars.) should not be transcribed. Many Europeans currencies use commas for decimals and decimals for commas. Do not transcribe punctuation. Do not transcribe the last two numerics of a foreign money amount if that amount is preceded by either a decimal or a comma. (e.g. Deutsche Marks may be written as "DM 2.941,18" ; only 2941 should be transcribed.

3.0.101.12.5  (01-01-2014)
MUST ENTER Fields

  1. Some fields require entry of data. These fields are referred to as MUST ENTER fields. They are indicated in the Transcription Operation Sheets by the presence of stars (★★★★★★) See IRM 3.24.38 , ISRP System, BMF General Instructions, for procedures related to MUST ENTER fields.

3.0.101.12.6  (01-01-2014)
ISRP Transcription Operation Sheets

  1. The following tables represent specific data entry procedures.

3.0.101.12.6.1  (01-01-2014)
Block Header Data Entry FORM 1332

  1. The following table contains specific data entry procedures for Block Header Data Entry Form 1332.

    Elem No. Data Element Name Prompt Fld Term. Instructions
    (1) SC Block Control ABC <ENTER> The screen displays the ABC that was entered in the End of Phrase (EOP) Dialog box. It cannot be changed.
    (2) Block DLN DLN <ENTER> Enter the first 11 digits as shown:
    (a) Form 1332- from the "Document Locator No" . box.
    (b) The KV EOP will verify the DLN from the first document of the block.
    (3) Batch Number BATCH <ENTER> Enter the batch number as follows:
    (a) Form 1332 - from the Batch Control Number box.
    (b) If not present, secure the number from the batch sheet.
    (4) Document Count COUNT <ENTER> Enter the document count as follows:
    (a) Form 1332- the circled serial number. If a full block (100 documents) or if a number is not circled, enter 100.
    (5) Credit Amount CR <ENTER> No entry required. Press <ENTER> only.
    (6) Debit Amount DB <ENTER> No entry required. Press <ENTER> only.
    (7) Tax Year Indicator TRCODE <ENTER> Enter the last two digits of the tax year as follows:
    (a) Form 1332 - two digits from the upper right corner.
    (b) Always present for Schedules K-1.
    (8) Account Type Code
    Amend Doc Code
    Count Code
    IRPACC <ENTER>
    ★★★★★★
    Enter the alpha-numeric digits from the "Trans. Code" box. Do not enter a hyphen (-), if present.
    (9) MFT Code MFT <ENTER> Press <ENTER> only.
    (10) Secondary Amount SECAMT <ENTER> No entry required. Press <ENTER> only.
    (11) Source Code SOURCE <ENTER> No entry required. Press <ENTER> only.
    (12) Year Digit YEAR <ENTER> No entry required. Press <ENTER> only.

3.0.101.12.6.2  (01-01-2014)
Section 01 ALL DOCUMENTS

  1. The following table contains specific data entry procedures for Section 01 All Documents.

    Elem No. Data Element Name Prompt Fld. Term. Instructions
    (1) Section Number SECT:   Section "01" will always be generated. No entry is required.
    (2) DLN Serial Number SER#   Enter the last two digits of the 13-digit DLN from the upper portion of the form.
    (3) TIN of Payee TIN <ENTER> Enter the nine digit TIN.
    (a) If not present, press <ENTER> only.
    (b) If less than nine digits, enter the digits shown followed by period (s)
    (c) If more than nine digits, enter the first eight followed by a period.
    (d) If two or more TINs are shown, enter 9 periods.
    (4) Delete Indicator DELE <ENTER> Enter a "D" in this field and end the document whenever it is determined that a document is misblocked.
    (a) Example: Form 1099-A mixed with a block of 1041 Schedule K-1.
    (b) DO NOT REMOVE THE DOCUMENT FROM THE BLOCK.
    (5) First Name Line NAME1 <ENTER> Enter the full name as shown from the following area:
    • Form 1041 - Beneficiary name, address and ZIP Code.
    • Form 1065 - Partners name, address and ZIP Code.
    • Form 1120S - Shareholders name, address and ZIP Code.
    (6) Second Name Line NAME2 <ENTER> Enter Second Name Line items as follows:
    (a) For in care of names, enter the percent sign (%), space, and the name.
    (b) See special instructions in IRM 3.0.101.12.3.3.
    (c) Use this field for a foreign street address.
    (d) See IRM 3.0.101.12.3.4.1 for Foreign Address procedures.

3.0.101.12.6.3  (01-01-2014)
Section 02 ALL DOCUMENTS

  1. The following table contains specific data entry procedures for Section 02 all documents.

    Elem. No. Data Element Name Prompt Fld. Term. Instructions
    (1) Section Number SECT: <ENTER> <ENTER> If already present on the screen; otherwise enter "02" always.

    Note:

    See IRM 3.0.101.12.3.4 for address and foreign address procedures

    (2) Street Address ADDR <ENTER> Enter the street from the following area:
    • Form 1041 - Beneficiary name, address and ZIP Code.
    • Form 1065 - Partners name, address and ZIP Code.
    • Form 1120S - Shareholders name, address and ZIP Code.
    ( a) If the address is missing or illegible enter "Z."
    (b) Use this field for foreign city, state or province, and mailing code.
    (3) City CITY <ENTER> Enter the city from the appropriate entity area.
    (a) Use Major City Codes if appropriate.
    (b) If the city is missing, illegible, enter "ZZZ" and Press <ENTER>.
    For foreign addresses see IRM 3.0.101.12.3.4.1.
    (4) State Code ST <ENTER> Enter the state code.
    (a) Press <ENTER> only if a Major City Code was used.
    (b) If foreign address, use the first position of this field for the period (.).
    (5) ZIP Code ZIP <ENTER> Enter the ZIP Code.
    (6) Payer Account Number Payee PACCT# <ENTER> Press <ENTER> only.
    (7) 2nd TIN Notification 2NDTIN <ENTER> OSPC only. If a circled "U" is edited to the right of the name on name line 1, enter "U" in the 2nd TIN Notification field in Section 02. Enter a "1" if the 2nd TIN Not. box is checked at the bottom of the form. Otherwise, leave blank.
    (8) Amended Doc. Code ADC <ENTER> Enter a "G" if the "Amended K-1" box is marked. The box is located above Part III.

3.0.101.12.6.4  (01-01-2014)
Section 06 FORM 1041 Schedule K-1 (Program 44380)

  1. The following table contains specific data entry procedures for Section 06 for Forms 1041 Schedule K-1.

    Elem. No. Data Element Name Prompt Fld. Term. Instructions
    (1) Section Number SECT: <ENTER> Press <ENTER> if already present on the screen; otherwise enter "06" always.
    (2) Interest Income LN1 $ <ENTER>
    MINUS (-)★★★★★★
    Enter the amount from line 1.
    (3) Ordinary Dividends LN2A $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 2a.
    (4) Net Short-Term Capital Gain LN3 $ <ENTER>
    ★★★★★★
    Enter the amount from line 3.
    (5) Long Term Capital Gain LN 4A $ <ENTER>
    ☆☆☆☆☆
    Enter the amount from line 4a
    (6) Other Portfolio Income and nonbusiness income LN5 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 5.
    (7) Ordinary Business Income LN6 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 6.
    (8) Net Rental Real Estate Income LN7 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 7.
    (9) Other Rental Income LN8 $ <ENTER>
    ★★★★★★
    Enter the amount from line 8
    (10) Line 14 Alpha Designated 14 ALPHA <ENTER>
    ★★★★★★
    Enter valid character to the left of line 14. Valid characters are (A-Z),(*) or blank
    (11) Other Information LN14 $ <ENTER>
    ★★★★★★
    Enter the amount from line 14. (First Line)

3.0.101.12.6.5  (01-01-2014)
Section 06 FORM 1065 Schedule K-1 (Program 44381)

  1. The following table contains specific data entry procedures for Section 06 for Forms 1065 Schedule K–1.

    Elem. No. Data Element Name Prompt Fld. Term. Instructions
    (1) Section Number SECT: <ENTER> Press <ENTER> if already present on the screen; otherwise enter "06" always.
    (2) Line I2 Checkbox I2 CKBX <ENTER> if the box is checked, enter an X, otherwise leave blank
    (3) Part II Line J Capital Beginning % LJ BEG <ENTER>
    ★★★★★★
    Enter the percentage from Line J, Beginning.
    (4) Line J Capital Ending % LJ END <ENTER>
    ★★★★★★
    Enter the percentage from Line J, Ending.
    (5) Ordinary Business Income(Loss) LN1 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 1.
    (6) Net Rental Real Estate Income(Loss) LN2 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from Line 2.
    (7) from Other Rental Activities Income(Loss) LN3 $ <ENTER>
    MINUS(-)
    ★★★★★★
    Enter the amount from line 3.
    (8) Guaranteed Payments LN4 $ <ENTER>
    ★★★★★★
    Enter the amount from line 4.
    (9) Interest Income LN5 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 5.
    (10) Ordinary Dividends LN6A <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 6a
    (11) Royalties. LN7 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 7.
    (12) Net Short-Term Capital Gain(Loss) LN8 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 8.
    (13) Net Long-Term Capital Gain(Loss) LN9A $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 9a.
    (14) Section 179 Deduction LN12 $ <ENTER>
    ★★★★★★
    Enter the amount from line 12.

3.0.101.12.6.6  (01-01-2014)
Section 06 FORM 1120S Schedule K-1 (Program 44382)

  1. The following table contains specific data entry procedures for Section 06 for Forms 1120S Schedule K-1.

    Elem. No. Data Element Name Prompt Fld. Term. Instructions
    (1) Section Number SECT: <ENTER> Press <ENTER> if already present on the screen; otherwise enter "06" always.
    (2) Part II Line F % of stock Ownership LF % <ENTER>
    ★★★★★★
    Enter the percentage from line F, Part II
    (3) Ordinary Business Income(Loss) LN1 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 1.
    (4) Net Rental Real Estate Income (Loss) LN2 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 2.
    (5) Other Net Rental Income (Loss) LN3 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 3.
    (6) Interest Income LN4 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 4.
    (7) Ordinary Dividends LN5A $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 5a.
    (8) Royalties LN6 $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 6.
    (9) Net Short-Term Capital Gain(Loss) LN7$ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 7.
    (10) Net Long-Term Capital Gain(Loss) LN8A $ <ENTER>
    MINUS (-)
    ★★★★★★
    Enter the amount from line 8a.
    (11) Section 179 Deduction LN11 $ <ENTER>
    ★★★★★★
    Enter the amount from line 11.
    (12) Line 13 Alpha Designator 13 ALPHA <ENTER>
    ☆☆☆☆☆
    Enter the character from the left of line 13, if shown.
    (13) Credits LN13 $ <ENTER>
    ★★★★★★
    Enter the amount from line 13.( First Line)

3.0.101.12.6.7  (01-01-2014)
Section 16 ALL DOCUMENTS

  1. Only enter section 16 on documents with a new parent DLN present.

    Elem. No. Data Element Name Prompt Fld. Term. Instructions
    (1) Section Number SECT: <ENTER> Press <ENTER> if already present on the screen; otherwise enter "16" always.
    (2) Payer Name Line 1 NAME1 <ENTER> Enter the Payer Name Line 1 from the following area:
    • Form 1041 - Name of trust or decedent's estate.
    • Form 1065 - Partnership's name, address and ZIP Code.
    • Form 1120S - Corporation's name, address and ZIP Code.
    (a) If illegible or not present, press <ENTER>.
    (3) Payer Name Line 2 NAME2 <ENTER> Enter the Payer Name Line 2 shown on the form.
    (a) If illegible or not present, press <ENTER>.(b) NOTE: Foreign addresses should NOT be entered in this section. If foreign address is present, enter "Z" and press <ENTER>.
    (4) Payer Street Address ADDR <ENTER> Enter the Payer Street Address shown on the form.
    (a) See IRM 3.0.101.12.3.4 for address procedures.
    (b) If the address is missing or illegible enter "Z" and press <ENTER>.
    (5) Payer City CITY <ENTER> Enter the Payer City shown on the form.
    (a) Use Major City Code if appropriate.
    (b) If the city is missing or illegible enter "ZZZ" and press <ENTER>.
    (6) Payer State ST <ENTER> Enter the Payer State shown on the form.
    (a) Press <ENTER> only if a Major City Code was used.
    (b) If illegible or not present, press <ENTER>.
    (7) Payer ZIP ZIP <ENTER> Enter the Payer ZIP Code shown on the form.
    (a) If illegible or not present, press <ENTER>.
    (8) TIN Group TIN <ENTER> Enter the 9 digit Payer Identifier TIN shown on the form as follows:
    (a) If not, present, press <ENTER> only.
    (b) If less than nine digits, enter the digits shown followed by enough period (s) to fill the field.
    (c) If more than nine digits, enter the first eight followed by a period.
    (d) If two are more TINs are shown, enter 9 periods.
    (e) For all foreign documents, where the TIN is missing, illegible, or incomplete, enter nine "9s " .
    (9) Payer DLN PDLN <ENTER> Press <Enter> only.
    (10) Foreign Country Code FORE <ENTER> The two character alpha code will be located immediately below the Payer Name.

3.0.101.13  (01-01-2014)
Schedule K-1 Pre-Document Preparation

  1. When preparing Schedule K-1 for the scanner, the most critical area for repair is the right side of the Schedule K-1.

  2. The Pre Doc Prep function is responsible for the following:

    1. Removing staples from the Schedule K-1, if present

    2. Ensure all pages are oriented in the correct direction to be scanned.

    3. Remove all Schedule K-1, with tax period 2012 or prior, write the parent DLN on the top left corner if not already present, and return back to the Code and Edit function.

    4. Remove all attachments, write the parent DLN on the upper left corner, and give to lead or manager

    5. ALL damage on the right side must be repaired prior to sending to the scanner function.

    6. Repair any rips, tears or holes prior to sending to the scanner function and make sure document is laid out flat for scanning

    7. If two pages are present, ensure they are in the correct order. (Page 1, then page 2)

    8. If there are two consecutive Page 2s, continue processing.

    9. If Code and Edit has put a slash (/) or "X" through the entire form, pull the form, write the parent DLN on the top left corner if not already present, and return back to the Code and Edit function.

3.0.101.13.1  (01-01-2014)
Loose Schedule K-1

  1. Loose Schedule K-1 will be received from Batching in a colored folder.

  2. After preparing Schedule K-1, place back in folder and route to SCRIPS.

  3. Sort by future, current and document type.

    • Batch

    • Follow all Pre Doc Prep Procedures in IRM 3.0.101.13(2)

    • Place in blue gusset folder and label the box as "refiles "

    • route to scanner

3.0.101.13.2  (01-01-2014)
Duplex Schedules K-1

  1. Duplex (Carbon Copy) Schedule K-1, cannot be processed through the SCRIPS System. When received take the following actions:

    1. Photocopy the duplex Schedule K-1,

    2. Staple the duplex Schedule K-1 together by parent EIN.

    3. Place stapled duplex Schedule K-1 in a folder and place in front of the block.

    4. Place photocopied Schedule K-1 in the block to be processed through SCRIPS.

3.0.101.14  (01-01-2014)
Schedule K-1 Processing Through SCRIPS

  1. This section provides instructions for entering data through the SCRIPS.

  2. Listed below are terms and their definitions related to SCRIPS processing.

    Term Definition
    Alpha Character A character (letter) of the alphabet.
    Alphanumeric Field A field that accepts both alpha and numeric characters.
    Application Refers to the form type being processed (e.g., Schedule K-1 or IRP).
    Bleached Image One of the two images created by the scanner software. The system uses the bleached image for character recognition purposes. Also see "True and Complete Image" .
    Block A group of Schedule K-1 documents identified with consecutive DLNs. The output program creates a block by combining documents from various units of work that share a block DLN.
    Block DLN An 11-digit DLN that consists of a two-digit district code, tax class (always 5 for Schedule K-1), a two-digit document type, a three-digit Julian date and a three-digit block number.
    Block Number Also called "blocking series" . The 9th, 10th and 11th digits in a DLN. Up to 100 sequence numbers may be associated with one block number 00 through 99.
    Capture The process of obtaining images of a document for character recognition and operator use.
    Character Any symbol or alpha (special or numeric), that represents information.
    Character Recognition The process of converting information from payer to digital form.
    Check Digit (CD) Two alpha characters found in the upper left corner of the IRS preprinted label.
    Cursor A vertical line showing the position where the next entry will be keyed.
    Data Fields Those fields that do not include entity fields (e.g. money amounts, dates, etc.,).
    DLN A 14-digit Document Locator Number that consists of a two-digit district code, tax class (always 5 for Schedule K-1), a two-digit document type, a three-digit Julian date and a three-digit block number, two-digit sequence number and a year digit.
    EIN An Employer Identification Number (a nine-digit number) typically identifies an entity such as a corporation, or trust. Usually in nn-nnnnnnn format.
    Entity/Entity Fields That portion of the document that deals with TIN, name and address information.
    Field Specific area provided for data entry.
    Flag A question mark used to "mark" an unrecognizable character, or an error within a field.
    Function Keys The upper row of keys on the keyboard. The function keys are <F1> through <F16>.
    Highlighting A three-dimensional shadowing of a template field used to direct attention to the field. Used in OE to show the current cursor position. Used in DV to show the current field containing an error.
    Image Strip A section of the true and complete image. Each strip corresponds to a particular field.
    Key Combination Keystroke commands that require two or more simultaneous keystrokes. For example, press <CTRL>-<P> for post-to-close means to press and hold the <CTRL> key and then press the <P> key before releasing the <CTRL> key.
    Menu A list of operations/options from which the workstation operator makes a selection.
    Message Window A window that appears within the main window. It usually appears in the center of the screen. The system uses these windows to relay messages to the operator.
    NABR Name and Address Block Reader. NABR compares the address captured from the scanner and the United States Postal Service database of addresses.
    Name Control A code of up to four alphas, numerics, &, –, or blanks derived from a taxpayer's name.
    Non-Conforming Form A form the scanner cannot recognize.
    Numeric Character A number ranging from 0 to 9.
    Payee A recipient of money amounts issued by the payer. A filer may identify a payee on the form as one of the following: Beneficiary, Partner, Shareholder.
    Payer An issuer of money amounts to a payee. A form may identify the payer as one if the following: Parent, Fiduciary, Estate, Partnership, Corporation.
    Prompt A message or statement displayed that requires an operator response.
    Reverse Video A reversed display of the black and white on an image (i.e. black becomes white and white becomes black).
    Sequence Number/Serial Number A two-digit number within the DLN that uniquely identifies the document.
    Sight-Verify Examine a highlighted field in DV. If correct, release the field. If incorrect, correct the field. Also called "verify " .
    Special Characters (symbols) *, &, /, %, #, ?, etc.
    SSN Social Security Number, a nine digit number issued to an individual by the Social Security Administration. Usually in nnn-nn-nnnn format.
    Status Line A strip of information found along the bottom right side of the main working window below the prompt area.
    Template A window that contains fields for data entry. The template mirrors the actual form layout, to the extent possible. The system always displays it in the right side of the monitor screen.
    TIN Taxpayer Identification Number. Either an EIN or an SSN.
    Transmittal A Form 1332SC Block and Selection Record/Breaker Sheet.
    True and Complete Image The image that the system displays for data entry or validation purposes. If available, the system will always display it on the left half of the monitor screen. It is similar to a photocopy.
    Unit-of-Work (UW) A group of Schedule K-1 documents containing one transmittal and the Schedule K-1s.

3.0.101.14.1  (01-01-2014)
Forms/Program Numbers/Tax Classes/Doc. Codes

  1. The program codes listed below should be used when entering Schedule K-1 through SCRIPS.

    Return Type Program Number Tax Class/Doc Code Parent
    Tax Class/Doc Code
    1041 Schedule K-1 44386 566 244
    1065 Schedule K-1 44387 565 265
    1120S Schedule K-1 44388 567 316

  2. The input year will be determined from the tax year ending present on the form. If the tax year ending is blank, input the form year.

3.0.101.14.1.1  (01-01-2014)
Work Prioritization

  1. The system will automatically set the Unit Task Prioritization using the following criteria:

    Program Number Return Type Description based on cycle
    44388 Form 1120S, Schedule K-1 Prior (by cycle, then batch #), then Current Cycle (by batch #)
    44386 Form 1041, Schedule K-1 Prior (by cycle, then batch #), then Current Cycle (by batch #)
    44387 Form 1065, Schedule K-1 Prior (by cycle, then batch #), then Current Cycle (by batch #)
    44388 Form 1120S, Schedule K-1 Future Cycle (by cycle then batch #)
    44386 Form 1041, Schedule K-1 Future Cycle (by cycle then batch #)
    44387 Form 1065, Schedule K-1 Future Cycle (by cycle then batch #)

  2. The system will automatically re-prioritize the work every time the cycle on the system changes.

  3. Forms 1120S, Schedule K-1 must be batched and processed on cycle. They cannot be shelved.

  4. Form 1065, Schedule K-1 and Form 1041, Schedule K-1 can be shelved. However, they must be processed by Program Completion Date (PCD)

3.0.101.14.2  (01-01-2014)
Scanner Reject

  1. The scanner will print a one-character reject code to the left of the DLN area on any form that is routed to the Reject Bin. The rejected form will then be sent back to Batching.

    Note:

    Prior to sending to Batching, write the parent DLN in the upper left margin of the Schedule K-1.

    Form Reject Code Description
    44386 (Form 1041 Schedule K-1)
    44387 (Form 1065 Schedule K-1)
    44388 (Form 1120S Schedule K-1)
    M Mixed document type within a unit-of-work. (e.g. Form 1041 Schedule K-1 within a Form 1065 Schedule K-1 unit-of-work)


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