3.11.14  Income Tax Returns for Estates and Trusts (Forms 1041, 1041-QFT, and 1041-N) (Cont. 1)

3.11.14.8 
Special Conditions/Returns

3.11.14.8.1  (01-01-2015)
♦Amended Returns♦

  1. A return is considered Amended based on the following:

    • The amended box is checked

    • Words such as, "Supplemental" , "Corrected" , or "Additional" are present

    • Any indication from the taxpayer that a previous return was filed

      Note:

      Words such as Copy or Duplicate are not sufficient indicators and must be accompanied by a statement from the taxpayer that a previous return was not filed.

  2. Examine the return for attachments:

    • Do not separate any related attachments submitted to explain the reason for the Amended return (information may be useful to Accounts Management)

    • Detach any unrelated documents and route them to the appropriate function using Form 4227 and edit the Action Trail on the return

      Note:

      Pull any amended Form 1041 that has "Qualified Cellulosic Biofuel Credit refund or CBR" notated and route to Accounts Management.

  3. There is an indication the return is amended and:

    If ... Then ...
    TC 59X or ICS was entered on the return by Compliance Services, Do not edit CCC "G" . Process the return as an original.
    The return is stamped "Delinquent Original Cleared for Processing" by Statutes,
    Do not edit CCC "G" . Process the return as an original.
    Form 3893 or Form 13596 is attached, Do not edit CCC "G" . See IRM 3.11.14.8.6.2.
    None of the above are present, Edit CCC "G" .

    Reminder:

    Do not edit a Fiduciary Code or Trust Code when editing CCC "G" .

    Exception:

    CCC "G" is only compatible with CCC "T" "W" , and/or "3" and/or ERS (Error Resolution System) Action Codes. Only edit CCCs that are needed, for example an amended return that is statute imminent you edit CCC G and W. See IRM 3.11.14.8.10 for amended Statute returns.

  4. Do not edit CCC "G" on returns filed under Section 443(b)(2). See Exhibit 3.11.14-16, IRC Sections and Actions to be taken on Form 1041.

  5. Only the following data is edited by C&E on all amended returns:

    1. Name Control - See IRM 3.11.14.13.2.

    2. EIN - See IRM 3.11.14.13.1

    3. Tax Period - See IRM 3.11.14.11

    4. CCC "G" - See IRM 3.11.14.7.4, unless statute imminent then edit CCC W as well.

      Exception:

      Do not route to Statute Control Unit for clearance, edit CCC "W" and continue processing if any of the following conditions are present:
      Compliance IRC §6020(b) returns.
      Secured by Examination/Collections, Secured by TE/GE, Secured by TE/GE EP Exam
      Returns with "TC 59X" or "ICS" notated on the face of the return.
      Returns that are substitute returns prepared by Examination (SFR) in top margin of the form.
      Returns with a stamp indicating a previous clearance by Statute Control within the last 90 days.

      Note:

      If corresponding for a signature on an amended return, you will still code with CCC G.

    5. IRS Received Date - See IRM 3.11.14.10

    6. Signature - IRM 3.11.14.22

    Note:

    Do not perfect the address on amended returns. see IRM 3.11.14.13.4.

  6. Detach Schedules K-1 for current year only through November 30th. Process according to IRM 3.0.101.

3.11.14.8.2  (01-01-2015)
Bankruptcy Returns

  1. This subsection provides instructions for processing bankruptcy returns.

  2. The bankruptcy trustee or debtor-in possession must file Form 1041 for the estate of an individual involved in bankruptcy proceedings under Chapter 7 or 11 of title 11 of the United States Code if the estate has gross income of $9,500 or more for the tax years beginning in 2011.

  3. Prompt identification should be made of a bankruptcy related "Request for Prompt Assessment" or a "Quick Determination" of tax liability to ensure that the crucial 60 and 180 day deadlines can be met timely by Compliance. See IRM 3.11.14.8.3.

  4. Edit Fiduciary Code "5" on all Chapter 7 Bankruptcy Estate returns or "6" on all Chapter 11 Bankruptcy Estate returns. If neither box is checked, edit Fiduciary Code "5" if the return indicates it is a bankruptcy.

    Reminder:

    Edit CCC "8" for all bankruptcies. See IRM 3.11.14.7.19, Waiver of Estimated Tax Penalty and IRM 20.1.3.1.5.3, Bankruptcy.

  5. All bankruptcy returns must be routed to Entity. Completely edit the return except the "name control" before sending to Entity. See below for additional editing instructions.

    Exception:

    Do not route to Entity if there is an indication Entity has already taken action on the return usually orange/purple editing of the EIN and name control.

  6. If Form 6252 is attached to a nontaxable Grantor Trust or Bankruptcy Estate return, do not edit an Installment Sale Indicator Code. Form 6252 information will be included on the individual tax return.

3.11.14.8.2.1  (01-01-2015)
Identification of Bankruptcy Estate Returns

  1. A Bankruptcy return should have one of the following boxes in "Section A - Type of Entity" checked on Form 1041:

    1. Bankruptcy estate - Ch. 7

    2. Bankruptcy estate - Ch. 11

  2. If no box is checked, determine if the return is for a Bankruptcy Estate from the Name Line, or attachment and/or the applicable exemption is claimed on Line 20.

  3. Bankruptcy estate returns can only be filed for individuals.

    Note:

    If the Name Line indicates Partnership or Corporation, see IRM 3.11.14.8.2.6.

  4. If the determination is made that a Bankruptcy estate return exists, Form 1040 must be attached. Form 1041 is used as a transmittal form for Form 1040. The top margin of Form 1040 should be notated "Attachment to Form 1041. DO NOT DETACH" .

3.11.14.8.2.2  (01-01-2015)
Individual Bankruptcy

  1. If Form 1040 is attached, all income and deductions must be reported and the tax computed on Form 1040. Only the tax liability should be reported on Lines 23 through 29 of Form 1041.

  2. If the taxpayer has entered amounts in any of Lines 1 through 22 of Form 1041, place an "X" across lines 1 through 22.

  3. The amounts on Form 1041 should equal the information provided on Form 1040, 1040-A or 1040EZ.

    1. If Form 1040/Form 1040A/Form 1040EZ is attached, ensure that the amounts reported on Form 1041 equal the amounts reported on Forms 1040/1040A/1040EZ as follows: (See Figure 3.11.14-6)

      Edit to
      Form 1041
      Form 1040 Form 1040A Form 1040EZ Description
      Line 23 Line 63 Line 39 Line 12 Total Tax
      Line 24a Line 65 Line 41   Estimated Tax Payments
      Line 24d Line 70     Amount Paid with Extension
      Line 24e Line 64 Line 40 Line 7 Federal Income Tax Withheld
      Line 24f Line 73     Credit from Form 2439
      Line 24g Line 72     Credit from Form 4136
      Line 25 Line 74 Line 46 Line 9 Total Payments
      Line 27 Line 78 Line 50 Line 14 Tax Due
      Line 28 Line 75 Line 47 Line 13a Overpayment
      Line 29b Line 76a Line 48a Line 13a Refund

      Note:

      For prior year returns, match the Total Tax, Total Payments, Overpayment, and Tax Due to the same line descriptions on Form 1041.

    2. Process deviations to each line compared above as follows:

      If ... Then ...
      Form 1041 equals Form 1040, Continue editing the return.
      Form 1041 contains an entry, but Form 1040 is zero or blank, Continue editing the return.
      Form 1041 entry is zero or blank, and Form 1040 contains an entry, Edit the amount from Form 1040 to the applicable Line on Form 1041.
      Entries are present on both Form 1041 and 1040, but the amounts on each form are different, Correspond via Letter 177C to determine the correct amount.
      Form 1040 is not attached and Lines 1 through 22 of Form 1041 are completed and Line 9 contains Gross Income of less then the applicable tax year Exemption plus the Standard Deduction, see Figure 3.11.14-5
      1. Process as a nontaxable return.

      2. Correspond via Letter 177C to inform the taxpayer there is no need to file Form 1041.

      3. Do not suspend. (Follow local procedures).

      Form 1040 is not attached and Lines 1 through 22 are completed on Form 1041, and Line 9 contains Gross Income of greater than the applicable tax year Exemption plus the Standard Deduction, see Figure 3.11.14-5 Correspond via Letter 177C using the appropriate paragraph to request a copy of Form 1040 for the applicable Tax Period.
      Form 1040 is not attached and lines 23 through 29 of Form 1041 are present, Correspond.

      Figure 3.11.14-5

      Tax Year Exemption Standard Deduction Combined Total
      2014 $3,950 $6,200 $10,150
      2013 $3,900 $6,100 $10,000
      2012 $3,800 $5,950 $9,750
      2011 $3,700 $5,800 $9,500
      2010 - 2009 $3,650 $5,700 $9,350
      2008 $3,500 $5,450 $8,950
      2007 $3,400 $5,350 $8,750
      2006 $3,300 $5,150 $8,450
      2005 $3,200 $5,000 $8,200
      2004 $3,100 $4,850 $7,950

    Figure 3.11.14-6

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3.11.14.8.2.3  (01-01-2015)
Joint Filed Bankruptcy Estate Returns

  1. When a husband and wife file a joint bankruptcy petition, their estates are effectively consolidated for administrative purposes. However, these estates are treated as separate entities for tax purposes and must file separate bankruptcy returns.

  2. Correspond (via Letter 177C) when any of the following conditions exist:

    • One Form 1041 is received with two Forms 1040 attached.

    • One Form 1041 is received with a Form 1040 Joint return (Box "2" is checked in the "Filing Status" section at the top of Form 1040).

      Note:

      Taxpayers claiming "Administrative Consolidation" require correspondence.

    If ... Then ...
    One Form 1041 is received with either two Form 1040 returns (husband and wife) or one "Joint" Form 1040,
    1. Correspond via Letter 177C (using the appropriate paragraph) to inform the taxpayer that they must file two separate Form 1041 returns.

    Two Forms 1041 are received with one "Joint" Form 1040,
    1. Separate the two Form 1041 returns.

    2. Photocopy Form 1040.

    3. Attach the original Form 1040 to one Form 1041 and the photocopy to the other Form 1041.

    4. Process as filed.

3.11.14.8.2.4  (01-01-2015)
Individual Bankruptcy Cases – Special Procedures

  1. Bankruptcy estates are created at the commencement of the bankruptcy case. Under Chapter 7 (LIQUIDATION) and 11 (REORGANIZATION), this estate is a new entity, completely separate from the individual taxpayer(s).

  2. The estate is represented by a court appointed trustee or by a debtor in possession who manages the estate for the benefit of any creditor.

  3. The taxes of the individual who filed bankruptcy have nothing to do with the taxes of the estate. However, if the individual chooses to file two short year returns, any balance due for the first short year return will be collected from the estate.

    1. If the Signature section of Form 1041 contains the same name as the name in the Entity section, examine the return for the following:

    If ... Then ...
    Taxpayer notates "DEBTOR IN POSSESSION" (Chapter 11), Continue editing the return.
    Taxpayer notates "CHAPTER 7" or there is no indication of Debtor in Possession on a Numbered Return,
    1. Attach Form 4227 and notate "POSSIBLE FILING DISCREPANCY" .

    2. Edit Action Code 320 (Entity Control).

    3. Leave the return in the batch and continue editing.

    Taxpayer notates "CHAPTER 7" or there is no indication of Debtor in Possession on an Unnumbered Return,
    1. Do not continue editing the return.

    2. Withdraw the document from the batch.

    3. Attach Form 4227 and notate "POSSIBLE FILING DISCREPANCY" .

    4. Route the document to Entity Control.

3.11.14.8.2.5  (01-01-2015)
Chapter 12 Bankruptcy Returns

  1. The Family Farmer Bankruptcy Act of 1986 was designed specifically to address the "debt plight" that farmers found themselves in after the inflationary period of the 1970s.

  2. When returns are received with an indication of "CHAPTER 12" or "FAMILY FARMER" :

    1. Send the return back to the taxpayer.

    2. Inform the taxpayer of their non-filing requirement using the language below:

      "Form 1041 should not be filed. There is no requirement to prepare a federal income tax return on behalf of the bankruptcy estate as there is no separate entity for tax purposes."

3.11.14.8.2.6  (01-01-2015)
Corporation or Partnership Bankruptcy

  1. Filing requirements for corporations and partnerships are as follows:

    • Corporations - Form 1120 (U.S. Corporation Income Tax Return).

    • Partnerships - Form 1065 (U.S. Partnership Return of Income).

  2. If either of the Bankruptcy boxes are checked in Section A (Type of Entity) and there is an indication that a Form 1120 or Form 1065 should have been filed (i.e., the form is attached or the name of the entity includes terms such as "CORPORATION" , "CORP." , "PARTNERSHIP" , etc.), process as follows:

    If ... Then ...
    Numbered Returns,
    1. Continue editing the return.

    2. Attach Form 4227 and notate "POSSIBLE FILING DISCREPANCY" .

    3. Edit Action Code 320 (Entity Control).

    4. Leave the return in the block.

    Unnumbered Returns,
    1. Do not continue editing the return.

    2. Attach a Form 4227 and notate "POSSIBLE FILING DISCREPANCY" .

    3. Withdraw the document from the batch.

    4. Route the document to Entity Control.

  3. Through research or correspondence with the filer, Entity will determine if the filer must file a Form 1041 or if the filer should have filed a Form 1120 or Form 1065.

    If ... Then ...
    Form 1041 is returned from Entity with a new EIN present (determined that Form 1041 should have been filed), Continue editing the return.
    Form 1041 is returned from Entity without an EIN present, Release return for processing. Form 1041 will go UPC529 and be referred to Entity Unpostables.

3.11.14.8.3  (01-01-2015)
Prompt Assessment (Form 4810)/Prompt Determination

  1. Identification should be made for "Prompt Assessment" or "Prompt Determination" of tax liability to ensure that the crucial 60 and 180 day deadlines can be met timely by Compliance.

  2. A Prompt Assessment is requested either in the form of a letter or on Form 4810 (Request for Prompt Assessment Under IRC §6501(d)):

    If ... And ... Then ...
    A Prompt Assessment is not attached to a tax return,   Forward the Prompt Assessment request to Examination.
    A Prompt Assessment request is attached to a tax return, A TC 150 has not posted for that return, Process the return and forward the Prompt Assessment request to Examination with a copy of the tax return.

    Reminder:

    Edit Audit Code "4 and an Action Trail" .

    Figure 3.11.14-7
    A TC 150 has posted for that return,

    Note:

    The "Returns listed above" box should be checked.

    Route the return and the Prompt Assessment request to Examination.

    Figure 3.11.14-7

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  3. If a request for Prompt Determination under Section 505(b) of the U.S. Bankruptcy Code is attached to the return and addressed to the Submission Processing Campus, determine if the request and return has been processed through the Centralized Insolvency Operation (Rev. Proc. 2006-24):

    If ... Then ...
    There is an indication that the request has been processed through the Centralized Insolvency Operation (CIO) (e.g., the return contains a copy of a letter addressed to CIO, Continue editing the return.
    There is no indication that the request has been processed through the CIO,
    1. Photocopy the return and attachments, mark the copy "Photocopy do not process" and forward the copy to CIO at:

      2970 Market St. Stop 5-Q30.133
      Philadelphia, PA 19104-5016

    2. Edit action trail in the left hand margin of the Form 1041 " Copy sent to Insolvency".

    3. Continue processing the original return.

    Figure 3.11.14-8

    Figure 3.11.14-8
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3.11.14.8.4  (01-01-2015)
IRC §663(c) – Separate Share Tax Rule Trust

  1. If Form 1041 is received with the notation "SEPARATE SHARE" and there are supporting returns identified as copies for information purposes:

    1. Research (following local procedures) to determine if TC 150 is present. It is possible that the original return has become detached during batching.

    If ... Then ...
    TC 150 has posted, Route the "Separate Share" Form 1041 to the Research function for association with the original return.
    TC 150 has not posted and entries are present on entire Page 1,
    1. "X" through the supporting documents and leave them attached to the return.

    2. Continue normal processing of the return.

    TC 150 has not posted and entries are present on Lines 20 through 27, Correspond for the original Form 1041.

3.11.14.8.5  (01-01-2015)
Nontaxable Returns (No Line Entries)

  1. Process Form 1041 as an original return if it is received with all of the following:

    • No tax data entries (and no tax data information attached).

    • A notation on the return such as "NOT LIABLE" .

    • A taxpayer signature.

3.11.14.8.6  (01-01-2015)
♦Re-Entry Document Procedures♦

  1. A return posted to the wrong account or module or attempting to post must be reprocessed to post to the proper account or module.

  2. Some re-entry returns may have originally been filed electronically (E-File)or via Modernized E-file (MeF). These returns may be identified by the presence of Mod E-file printouts in lieu of an actual return. Do not correspond for missing signatures on these documents.

  3. Each re-entry return must have a Form 3893, Re-Entry Document Control or Form 13596, Reprocessing Returns, attached.

    • Form 3893 is used to re-input documents that have not posted to an account or module

    • Form 13596 is used to reprocess documents to the correct account or module, that had previously posted to the wrong account or module

  4. Always leave Form 3893 or Form 13596 on the front of the return. It must remain as a permanent part of the document.

  5. Examine Form 3893 or Form 13596 to determine the action needed to make the return processable.

    Caution:

    If the IRS Received Date is 2 years and 9 months or more from the Return Due Date, refer to Statute procedures before re-entering or reprocessing the return. See Statute Returns, IRM 3.11.14.8.10.

  6. If Schedules K-1 is attached to a Reprocessable/Re-Entry, current year return that has not been processed, detach Schedules K-1 and process as "Loose Schedule K-1" using IRM 3.0.101, Schedule K-1 Processing.

3.11.14.8.6.1  (01-01-2015)
♦Form 3893 - Re-Entry Document Control♦

  1. Form 3893, Re-Entry Document Control, is used to re-input a return that has not posted to an account or module.

  2. If more than one return is in the batch and only the top Form 3893 has an entry in Box 1 (Alpha/Numeric block control no.), edit all returns using current processing instructions and keep all returns clipped together.

  3. Circle the CCC "G" if present.

  4. Do not edit CCC "G" on amended returns.

  5. Do not send Letter 1382C if a request for reasonable cause is attached.

  6. If the return was not edited according to current processing instruction, circle any Action Codes, Computer Condition Codes and any other edit marks that are no longer applicable. Re-edit according to current processing instructions.

  7. If the return was edited according to current processing instruction, ensure that the information from Form 3893 is edited on the return.

    Form 3893 Action Taken
    Box 14 (Remarks) Ensure that the information is edited to the return.
    Box 15 (Process as)
    1. Circle any green rocker and edit marks that may indicate a receipt of remittance.

    2. Do not change any tax due amounts.

  8. Examine returns that have any color other than red editing in the tax data section to determine if the corrections are the result of improper perfection or taxpayer error.

    If ... Then ...
    Improper Perfection, Edit the same correction in red/green (per local procedure) to the appropriate area.
    Taxpayer error, Leave the entries as shown on the document.
  9. An IRS Received date must be present on all re-input returns.

    If ... Then ...
    IRS Received Date is not present, Edit an IRS received date to the middle of the return.
    Multiple IRS Received Dates are present, Circle all but the earliest date.
  10. When additional information is still needed to make the return processable, prepare approved Correspondence Action Sheet or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

    Exception:

    Do not correspond for missing Schedules K-1. See IRM 3.11.14.17.4.

  11. When perfection is not possible, edit Action Code 640 on the return and attach Form 4227 noting "PERFECTION NOT POSSIBLE" and leave in batch.

3.11.14.8.6.2  (01-01-2015)
♦Form 13596 - Reprocessing Returns♦

  1. Form 13596, Reprocessing Returns, is used to reprocess a return to the correct account or module that had previously posted to the wrong account or module.

  2. Circle CCC "G" if present.

  3. Do not edit CCC "G" on amended returns.

  4. Do not send Letter 1382C if a request for reasonable cause is attached.

  5. If the return was not edited according to current processing instructions, circle any Action Codes, Computer Condition Codes and any other edit marks that are no longer applicable. Re-edit according to current processing instructions.

  6. If the return was edited according to current processing instructions, ensure that the information from Form 13596 is edited on the return.

    Form 13596 Action Taken
    TIN correction, Edit correct TIN on return.
    Tax Period correction, Edit correct Tax Period ending on return.
    Reasonable cause, Edit appropriate Computer Condition Code:
    1. Edit CCC "R" if the "FTF" box is checked.

    2. Edit CCC "D" if the "FTP" box is checked.

  7. Examine returns that have any color other than red editing in the tax data section to determine if the corrections are the result of improper perfection or taxpayer error.

    If ... Then ...
    Improper perfection, Edit the same correction in red/green (per local procedure) to the appropriate area.
    Taxpayer error, Leave the entries as shown on the document.
  8. An IRS Received Date must be present on all reprocessed returns:

    If ... Then ...
    IRS Received date is not present, Edit an IRS Received Date to the middle of the return.
    Multiple Received rates are present, Circle all but the earliest date received by the IRS.
  9. Circle any green rocker and edit marks that may indicate a receipt of remittance.

  10. When additional information is still needed to make the return processable, prepare approved Correspondence Action Sheet or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

    Exception:

    Do not correspond for missing Schedules K-1. See IRM 3.11.14.17.4.

3.11.14.8.7  (01-01-2015)
♦Refund Returns 45 Day Jeopardy and Ten Million Dollar Refunds♦

  1. Document Perfection is responsible for identifying refunds and for initiating requests for manual refunds.

    Note:

    Expeditious processing of refund returns is critical if the 45 day period is about to expire.

    If ... Then ...
    A refund return is batched in a non-refund batch,
    1. Completely edit the return.

    2. Pull the return from the non-refund batch and merge into a refund batch using local procedures.


    Note:

    Follow the instructions below when the processing date is more that 20 days after the received date or the return due date OR the refund is $10,000,000 or more.

    The processing date is more than 20 days after the Received Date or the Return Due Date (whichever is later) and the refund is $25,000 or more,

    Note:

    " Refund" in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods or amount to be credited to the next years tax.

    1. Edit Action Code 341. See Figure 3.11.14-9.

    2. Give the return to the manager.

    The refund is $10,000,000 or more,

    Note:

    "Refund" in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods or amount to be credited to the next years tax.

    1. Do not leave the return in the block.

    2. Edit Action Code 341 for numbered and unnumbered returns.

    3. Give the return to the manager.

    The W&I Submission Processing TAS Liaison walks a return through Code & Edit, In addition to normal editing, edit the following:
    1. CCC "O" to freeze the refund.

    2. CCC "Y" to send the return to ERS.

    Figure 3.11.14-9

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3.11.14.8.8  (01-01-2015)
♦Compliance Secured/Prepared Returns♦

  1. Compliance functions (Collection and Examination) secure returns from the taxpayer and also prepare returns if the taxpayer does not provide them.

    1. Prepared tax returns are notated with 6020(b) or "SFR" (Substitute for Return).

    2. Secured tax returns are notated with "TC 59X" or "ICS" (Integrated Collections System) or notated "Process as Original" with an attached Form 13133, Expedite Processing Cycle. The "Delinquent Return" box on Form 13133 should be checked.

    Note:

    If "RD" is notated on the front of the return and not circled, remove from the batch and route to Collections.

3.11.14.8.8.1  (01-01-2015)
♦IRC §6020(b) - Prepared by Collection♦

  1. When the taxpayer fails to file a required return, IRC §6020(b) is the authority for the IRS to prepare the return.

  2. These returns are identified by the notation: "PREPARED AND SIGNED UNDER AUTHORITY OF SECTION 6020(b) OF THE INTERNAL REVENUE CODE" which is located in the center bottom of Page 1 of the return.

    1. Returns must have an IRS Received Date. If missing, follow the normal procedures for editing the IRS Received Date, (see IRM 3.11.14.10)

    2. Returns must be signed by Compliance Function representatives. If not signed, route to Compliance using Form 4227.

    3. Edit CCC "4" . See IRM 3.11.14.7.18.

      Note:

      CCC "R" should not be used with CCC "4" .

    4. Edit CCC "D" if the Compliance Function representative notates: "DO NOT ASSESS FAILURE TO PAY PENALTY" .

    5. Do not correspond with the taxpayer for unprocessable conditions. If the return is unprocessable, edit CCC "3" and continue processing.

    6. Edit CCC "W" if the IRS Received Date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control. See IRM 3.11.14.8.10, Statute Returns.

3.11.14.8.8.2  (01-01-2015)
♦Collection Secured♦

  1. These returns are identified by the notations "TC 59X" or "ICS" .

    1. Do not edit CCC "G" on these returns.

    2. Use approved Correspondence Action Sheet to correspond for conditions that cannot be processed (e.g., missing signatures, missing schedules, etc.).

    3. Edit CCC "W" if the IRS Received Date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control.

      Reminder:

      If there is indication a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.11.14.7 for additional information.

3.11.14.8.8.3  (01-01-2015)
♦Examination Prepared♦

  1. These returns are identified by the notation "SFR" or "SUBSTITUTE FOR RETURN" on Page 1.

    1. Return must have an IRS Received Date. If no IRS Received Date is present, follow the normal procedures for editing the IRS Received Date. See IRM 3.11.14.10.

    2. Do not correspond with the taxpayer for unprocessable conditions. If the return is unprocessable, edit CCC "3" and continue processing.

    3. If Form 13133 is attached, edit the Computer Condition Codes that are checked on the form.

      Note:

      CCC "R" should not be used with a CCC "4" .

    4. Edit CCC "W" if the IRS Received Date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control. See IRM 3.11.14.8.10, Statute Returns.

3.11.14.8.8.4  (01-01-2015)
♦Examination Secured♦

  1. These returns are identified by the notation "Process as Original" on page 1 of the return and a Form 13133, Expedite Processing Cycle, attached with the "Delinquent Return" box checked.

    1. Do not edit CCC "G" on these returns.

    2. Use approved Correspondence Action Sheet to correspond for conditions that cannot be processed (e.g., missing signatures, missing schedules, etc.).

    3. Edit the Computer Condition Codes that are checked on Form 13133.

    4. Edit CCC "W" if the received date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control. See IRM 3.11.14.7.13.

      Reminder:

      If Form 13133 (or something similar) indicates a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.11.14.7 for additional information.

3.11.14.8.9  (01-01-2015)
Qualified Settlement Fund Tax Returns

  1. The trustee of a Designated or Qualified Settlement Fund (QSF) generally must file Form 1120–SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B), instead of Form 1041.

  2. If a QSF has only one transferor, the transferor may elect to treat the QSF as a grantor type trust. To make the grantor trust election, the transferor must attach an election statement to a timely filed Form 1041. At the top of the election statement, should be the notation Section 1.468B-1(k) Election and include the transferor's:

    • Name,

    • Address,

    • TIN, and

    • A statement that he or she will treat the QSF as a grantor type trust.

  3. If the filer notates that Form 1041 is for a "QUALIFIED SETTLEMENT FUND" or "SETTLEMENT FUND" , but lacks all the information listed in the preceding paragraph, determine if the document is numbered or unnumbered:

    If ... Then ...
    Numbered Returns,
    1. Do not continue editing the return.

    2. Edit Action Code 320 (Entity Control).

    3. Attach Form 4227 and notate "POSSIBLE FILING REQUIREMENT DISCREPANCY" .

    4. Leave the return in the block.

    Unnumbered Returns,
    1. Do not continue editing the return.

    2. Attach Form 4227 and notate "POSSIBLE FILING REQUIREMENT DISCREPANCY" .

    3. Withdraw the document from the batch.

    4. Route the return to Entity. (Figure 3.11.14-10)

    Figure 3.11.14-10

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

3.11.14.8.10  (01-01-2015)
♦Statute Returns♦

  1. Any return with a Received Date that is 2 years and 9 months or more after the Return Due Date is a potential statute control return.

    Note:

    This includes amended returns.

  2. Statute returns must be routed to the Statute Control Unit daily or more often if needed.

    Exception:

    Do not route to Statute Control Unit for clearance, edit CCC "W" and continue processing if any of the following conditions are present:

    • Compliance IRC §6020(b) returns.

    • Secured by Examination/Collections, Secured by TE/GE, Secured by TE/GE EP Exam

    • Returns with "TC 59X" or "ICS" notated on the face of the return.

    • Returns that are substitute returns prepared by Examination (SFR) in top margin of the form.

    • Returns with a stamp indicating a previous clearance by Statute Control within the last 90 days.

  3. If a Form 12412, Operations Assistance Request (OAR) is received from TAS and the return is a potential statute control return but is not stamped cleared by Statute, give the return to your lead. The lead will contact the TAS employee listed on the OAR for rejection of the OAR back to TAS for clearance by the Statute Unit.

    Note:

    If the return is within 90 days of the statute expiration date advise the TAS employee of such and that expedited handling is needed. If requested by the TAS employee route the return directly to statute for clearance.

  4. Statute returns are unprocessable until they are cleared by Statute Control.

    If ... Then ...
    The return is numbered,
    1. Edit Action Code 310 on the return.

    2. Leave the return in the batch and continue processing.

    The return is unnumbered,
    1. Do not continue processing.

    2. Pull the return from the batch.

    3. Attach Form 4227 and route to Statute Control Unit.

  5. Edit CCC "W" if the return has been cleared by the Statue Control Unit. Statutes will stamp or indicate clearance on the front of the return. SeeFigure 3.11.14-11.

    Figure 3.11.14-11

    This image is too large to be displayed in the current screen. Please click the link to view the image.
  6. Statute may stamp a return as "No Statute Issue" . Follow the chart below to determine if a CCC W is needed:

    If... And... Then...
    The return received date is 2 years and 9 months or more after the Return Due Date, The return is stamped "No Statute Issue" , "Statute N/A" , or a similar statement indicating there is no statute issue, Edit a CCC W.
    The return received date is less than 2 years and 9 months from the Return Due Date, The return is stamped "No Statute Issue" , "Statute N/A" , or a similar statement indicating there is no statute issue, Do not edit a CCC W.

3.11.14.8.11  (01-01-2015)
Foreign Address Returns (International)

  1. Ogden Submission Processing Campus (OSPC) will process all foreign address returns.

  2. A foreign address is any address other than the 50 states and the District of Columbia.

  3. An Army Post Office (APO), Diplomatic Post Office (DPO) or Fleet Post Office (FPO) is not considered a foreign address. See IRM 3.11.14.13.4.

  4. The determination of an International foreign address is based only on the address of the estate or trust located on Page 1 of the return. Do not consider a Form 1041 or Form 1041-QFT that has schedules or attachments indicating that the beneficiary, trustee or shareholder has a foreign address.

  5. U.S. Possessions/Territories - The following U.S. Possessions/Territories are considered foreign addresses and must be shipped to OSPC for processing:

    • American Samoa

    • Federal States of Micronesia

    • Guam

    • Marshall Islands

    • Northern Mariana Islands

    • Palau

    • Puerto Rico

    • Virgin Islands (U.S.)

  6. Consider a Form 1041 with any of the following attachments or indications to be an International return:

    • Form 1040 W/2555 or 2555EZ (Foreign Earned Income)

    • Form 1040 W/4563 (Exclusion of Income for Bona Fide Residents of American Samoa)

    • Form 1040 W/5074 (Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands)

    • Form 8288A (Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests )

    • Form 8288B (Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests)

    • Form 1040GUAM

    • Form 1040PR

    • Form 1040SS or 1040SS (NMI)

    • Exemption or exclusion of the Tax or Income due to an International treaty (not an American Indian Treaty)

      Note:

      An American Indian Treaty is not considered International.

    • Section 911, 913, 931, or 933 of the Internal Revenue Code

    • Treaty Trader or Fulbright Grantee

  7. Route all returns with a foreign address to OSPC for processing. Prepare Letter 86C to inform the fiduciary or trustee that the return has been sent.

    1. When an International return is identified, discontinue perfection.

    2. Prepare Form 4227 and notate "PREPARE LETTER 86C IN DUPLICATE" . If there is a credit on the return, also notate "CREDIT TRANSFER" on Form 4227.

    If ... Then ...
    Numbered Returns,
    1. Edit the Name Control.

    2. Edit Action Code 650 (International).

    3. Leave the return in the block.

    Unnumbered Returns, Withdraw the return from the batch and forward for transshipment.

    Reminder:

    If the return is not date stamped, edit the Received Date.

3.11.14.8.12  (01-01-2015)
Blind Trust Returns

  1. Taxpayers who are presidential appointees are permitted to file their individual tax returns through a trustee of a blind trust.

  2. If there is any indication on the return or attachment, a General Power of Attorney, or Form 2848 attached that indicates "Blind Trust" , see IRM 3.28.3., Individual Income Tax Returns.

  3. The POA, Form 2848 must be processed to the CAF to reflect the Blind Trust Indicator on Master File to ensure that no correspondence is generated to the taxpayer.

3.11.14.8.13  (01-01-2015)
Streamlined Filing Compliance Process

  1. Effective July 1, 2014, the IRS started a new enhanced Streamlined Program for taxpayers that are voluntarily disclosing offshore accounts. Returns postmarked on or after July 1, 2014 will follow these Streamlined processing instructions.

  2. To be considered for the Streamlined Program, the package of returns must contain any or all of the following characteristics:

    • Package of returns addressed to Mail Stop 6063 AUSC

      Note:

      Austin will transship Form 1041 returns to Ogden.

    • "Streamlined" is written on return,

    • Streamlined Filing Compliance Procedures Questionnaire is attached,

    • Taxpayer specifically mentions the "Streamlined" process in a letter.

      Note:

      If multiple tax years are batched together and do not contain one of the above criteria, do not treat as Streamlined. Re-batch if necessary.

  3. If the items below are not submitted, correspond:

    • The taxpayer is required to submit delinquent tax returns for the last three years when a U.S. tax return is due. They can submit more than 3 years returns.

      Exception:

      It the taxpayer submits less than 3 years returns but attaches copies of returns or a statement indicating that the other years were already filed, do not correspond.

    • A completed Streamlined questionnaire (Form 14654) signed under penalty of perjury.

    • Signed and dated delinquent Forms TDF 90-22.1, FBAR - Report of Foreign Bank & Financial Accounts, for the past 6 years. This only applies to FBARs submitted with returns dated before July 1, 2013. Do not correspond if the return was submitted after July 1, 2013 as the FBARs were required electronically.

      Note:

      If the taxpayer indicates that they were not required to file FBARs because their total value of the foreign financial accounts did not exceed $10,000 or the taxpayer states they already mailed their FBARs, do not correspond.

  4. The completed self-certification (Form 14654) must contain the following:

    • Check a box certifying that taxpayer meets the eligibility requirements for the Streamlined Filing Compliance.

    • Information related to the taxpayer's financial interests in foreign financial accounts.

    • Explanation of the specific reasons for the failure to comply with tax and financial account reporting obligations.

  5. If the items are not submitted with a Streamlined package, correspond using Form 13459, Correspondence Action Sheet:

    • Attach Form 13459 below the entity area.

    • Check all appropriate boxes

    • Edit appropriate action code; ie. AC 211 or AC 215.

  6. If one return needs to be cleared by Statute, send all Streamline returns received from the taxpayer, do not separate.

  7. Follow normal coding instructions and normal Attachment Guide procedures.

    Caution:

    : If the first page of each FBAR, Form TDF 90-22.1, does not have a received date, edit in MMDDYYYY format. Do not detach FBARs from the tax return.

  8. If correspondence is necessary for any return submitted as part of the “Streamlined” process, it is important to ensure that all returns submitted by each taxpayer be kept together. This means that if one return needs correspondence, that all returns in the submission must be kept with the suspended return and held together in the Suspense area.

  9. ) Once it has been determined that a Streamlined Package is complete, the package can be separated.

    Note:

    Each tax year must contain a copy of the certification. If only the original certification is in the package, photocopies must be made to place with each return. Once all returns have a photocopy of the certification, detach the original certification with original signature. The original will be routed to LB&I

  10. When a completed Streamlined filing is received, edit the following Computer Condition Codes (CCC):

    • P,

    • D, and

    • R

      Caution:

      Do not edit CCC D and R if corresponding for a Streamline issue.

3.11.14.9  (01-01-2015)
Additional Form 1041 Perfection

  1. This section provides instructions for coding additional entries.

  2. These entries are edited in the left margin next to Line 10 of Form 1041.

  3. Each entry will be preceded by the numeric for the applicable line.

  4. Edit entries in numeric order, such as " 1 - 4" , "5 - 38" , and "7 - 3" .

    If ... Then ...
    Audit Code, Edit "1" followed by the appropriate Audit Code, (e.g., "1 - 6" ). See Audit Codes, IRM 3.11.14.9.1.
    Electing Small Business Trust Indicator (ESBT), Edit "2" followed by the ESBT Indicator "1" , (e.g., "2 - 1" ). See IRM 3.11.14.9.2.
    Pooled Income Fund, Edit "3" followed by the Pooled Income Code "1" , (i.e., "3 - 1" ). See IRM 3.11.14.9.3.
    Penalty and Interest Code, Edit "4" followed by the Penalty and Interest Code "1" , (i.e., "4 - 1" ). IRM 3.11.14.9.4.
    Missing Schedule Code, Edit "5" followed by the appropriate Missing Schedule Code, (e.g., "5 - 50" ). IRM 3.11.14.9.5.
    Installment Sale Indicator, Edit "6" followed by the appropriate Installment Sale Indicator, (e.g., "6 - 2" ). IRM 3.11.14.9.6.
    Historic Structure Code, Edit "7" followed by the Historic Structure Code "3" , (e.g., "7 - 3" ). IRM 3.11.14.9.7.

3.11.14.9.1  (01-01-2015)
Audit Codes

  1. Edit Audit Codes in the left margin next to Line 10 of Form 1041.

  2. Edit a "1 - " followed by the appropriate code(s) in the left margin next to Line 10 of Form 1041 (e.g., "1 - 2" ).

  3. Up to three Audit Codes may be edited. If more than three Audit Codes apply, edit only the first three Audit Codes using the following priority order:

    Priority Order Audit Code Description
    1 8 Form 1041-N
    2 3 Inconsistent Treatment
    3 2 Foreign Interest
    4 1 International
    5 4 Prompt Audit Request
    6 5 Ineligible Fiscal Year Filers
    7 6 Nonexempt Charitable and Split-Interest Trusts
  4. Determine the appropriate Audit Code as follows:

    Audit Code Description
    1 International - Edit Audit Code "1" if any of the following conditions are present:
    1. Line 2a of Schedule G (Form 1116) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Line 18 (Income Distribution Deduction) or Line 22 (Taxable Income) of Form 1041≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and any of the following conditions are present:
      • Form 5471 is attached.
      • Form 8865 is attached.
      • Schedule K-1 (Form 1041) beneficiary has a non-U.S. Address.
      • The "Yes" box is checked on Line 4 (Foreign Trust) of the "Other Information" section.

    2 Foreign Interest - Edit Audit Code "2" if the "Yes" box is checked and/or a foreign country is listed on Line 3 of the "Other Information" Section at the bottom of Page 2 of Form 1041.
    3 Inconsistent Treatment - Edit Audit Code "3" if any of the following conditions are present:
    1. Form 8082 is attached.

    2. Form 8275 is attached.

    3. Form 8275-R is attached.

    4. Form 8886 is attached.

    5. The taxpayer has notated that they are "COMPLYING WITH IR REGULATION 1.442.1(c)" .

    Caution:

    Audit Code "3" takes precedence over all other Audit Codes except Audit Code 8.

    4 Prompt Audit Request - Edit Audit Code "4" if any of the following conditions are present:
    1. Form 4810 is attached.

    2. The return contains an attachment or notation of a "REQUEST FOR PROMPT AUDIT ASSESSMENT" or by citing "INTERNAL REVENUE CODE SECTION 6501(d))" . IRM 3.11.14.8.3

    Note:

    Do not edit Audit Code "4" for "Request for Prompt Determination under Section 505(b)" .

    5 Ineligible Fiscal Year Filers - Edit Audit Code "5" if the taxpayer is filing a Fiscal Year return unless it is the following: Figure 3.11.14-12.
    1. Estate,

    2. Non-Exempt Charitable Trust under IRC §4947(a)(1) or IRC §501(a);

    3. One of the following notations is shown on the return: IRC 671 (trust established in 1906), through IRC §678, and/or IRC §443(b)(2).

    4. Any return that indicates it is a Final.

    5. Any return that indicates it is an Initial return, which has a Tax Period ending date in December (Calendar Year filer).

    Note:

    The only Form 1041 entities that can file fiscal year returns are estates, charitable trusts and IRC 671 through IRC §678.

    6 Nonexempt Charitable and Split-Interest Trusts - Edit Audit Code "6" if either the first or third box is checked in Section E of Form 1041. See IRM 3.11.14.14.
    8 Form 1041-N — Edit Audit Code "8" to all Form 1041-N (Electing Alaska Native Settlement Trusts) returns only.

    Caution:

    No other Audit Codes are valid with Audit Code "8" .

    Reminder:

    If Form 1041-N is received at any campus other than OSPC, transship the return to OSPC for processing.

    Figure 3.11.14-12

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

3.11.14.9.2  (01-01-2015)
Electing Small Business Trusts (ESBT)

  1. Edit "2 - 1" in the left margin next to Line 10 of Form 1041 for the Electing Small Business Trust (ESBT) Indicator if the "ESBT" box (in Section A) on page 1 of Form 1041 is checked or there is an indication of ESBT. See Figure 3.11.14-13.

    Figure 3.11.14-13

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

3.11.14.9.3  (01-01-2015)
Pooled Income Fund

  1. Edit "3 - 1" in the left margin next to Line 10 of Form 1041 if the "Pooled Income Fund" box (in Section "A" ) on page 1 of Form 1041 is checked. See IRM 3.11.14.12.3.

    Exception:

    Code return with Fiduciary Code "9" and do not edit "3 - 1" in the left margin if the "Pooled Income Fund" box in (Section A) and "the Described in Section 4947(a)(2)" box in Section E are both checked.

3.11.14.9.4  (01-01-2015)
Penalty/Interest Code

  1. Edit "4 - 1" in the left margin next to Line 10 of Form 1041, when precomputed delinquency penalty and/or interest is shown on a return with a Received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . See IRM 3.11.14.21.4.

3.11.14.9.5  (01-01-2015)
Missing Schedule Codes

  1. Conditions for Missing Schedule Codes (MSCs) are described within this section.

  2. Edit a MSC if the entry requiring support is≡ ≡ ≡ ≡ ≡ ≡ (either negative or positive).

  3. Only two Missing Schedule Codes are valid per return.

    If ... Then ...
    More than two Missing Schedule Codes apply or there is a need to correspond for other types of information (other than for Missing Schedule Codes), Correspond with the taxpayer. Indicate all missing or incomplete information, forms and schedules required.
  4. Edit a "5 - NN" followed by the appropriate Missing Schedule Code (MSC) in the left margin next to Line 10 of Form 1041 when the applicable required form or schedule is not attached (see Figure 3.11.14-14). For additional information, see Missing Schedule Codes, Exhibit 3.11.14-20.

  5. Code "30" if Form 1041, Schedule G, Line 2a contains an entry, but Form 1116 is not attached.

  6. Code "31" if Form 3800, Part III, Lines 1a or 4a contains an entry, but Form 3468 is not attached.
    (Line 1a, Part I for 2010 or earlier revisions.)

  7. Code "33" if Form 1041, Schedule G, Line 5 contains an entry and the box for Form 4255 is checked, but Form 4255 is not attached.

  8. Code "35" if Form 1041, Page 1, Line 7 contains an entry, but Form 4797 or similar schedule is not attached.

  9. Code "37" if Form 1041, Schedule 2b* contains and entry and Form 5735, American Samoa Economic Development Credit is indicated, but Form 5735 is not attached.
    *(Line 2c write in for 2008 and subsequent years, Line 2c write in for 2006, Line 2c for 2005-2000, Line 2c for 1999-1995)

  10. Code "38" if Form 3800, Line 4b* contains an entry for Form 5884, Work Opportunity Credit, but Form 5884, is not attached.
    *(Line 29b for 2010-2008, Line 1b for 2006 and prior)

  11. Code "39" if Form 3800, Line 4c* contains an entry or Form 1041, Schedule G, Line 2b** contains an entry and Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit (Credit for Alcohol Used as Fuel for 2007 and prior), is indicated, but Form 6478 is not attached.
    *(Line 29c for 2010-2008, Line 1o for 2007) **(Line 6d for 2005-2000, Line 4d for 1999-1995)

  12. Code "40" if Form 3800, Line 1c* contains an entry for Form 6765, Credit for Research Activities, but Form 6765 is not attached.
    *(Line 1d for 2006-2005), Line 1e for 2004 and prior)

  13. Code "42" if Form 3800, Line 1h* contains an entry for Form 8820, Credit for Orphan Drug, but Form 8820 is not attached.
    *(Line 1k for 2006-2005, Line 1l for 2004 and prior)

  14. Code "44" if Form 3800, Line 1d* or 4d** contains an entry for Form 8586, Low Income Housing Credit or Form 8609, Low-Income Housing Credit/Allocation Certification, but Form 8586 or Form 8609 is not attached.
    *(Line 1e for 2006-2005, Line 1f for 2004 and prior) **(Line 29d for 2010 and prior)

  15. Code "45" if Form 1041, Schedule G, Line 5 contains an entry and the box for Form 8611 is checked, but Form 8611 is not attached.

  16. Code "46" if Form 1041, Schedule G, Line 2c* contains an entry and Form 8801 is not attached. *(Line 2d for 2009 and prior)

  17. Code "47" if Form 3800, Line 1e* contains an entry for Form 8826, Disabled Access Credit, but Form 8826 is not attached.
    *(Line 1g for 2006-2005, Line 1h for 2004 and prior)

  18. Code "49" if Form 3800, Line 1z has an entry or Form 1041, Schedule G, Line 2b contains an entry and Form 8834 is indicated, but Form 8834 is not attached.

  19. Code "50" if Form 3800, Line 1f* or Line 4e** contains an entry or Form 1041, Schedule G, Line 2b*** contains an entry and Form 8835, Section B, Renewable Electricity, Refined Coal, and Indian Coal Production Credit is indicated, but Form 8835 is not attached.
    *(Line 1h for 2006-2005, Line 1i for 2004 and prior) **(Line 29e for 2010-2008) ***(Line 2c for 2009 and prior)

  20. Code "51" if Form 3800, Line 1g* contains an entry for Form 8845, Indian Employment Credit, but Form 8845 is not attached.
    *(Line 1i for 2006-2005), (Line 1j for 2004 and prior)

  21. Code "52" if Form 3800, Line 4f* contains an entry for Form 8846, Credit for Employer Paid Social Security, but Form 8846 is not attached.
    *(Line 29f for 2010-2008, Line 1j for 2006-2005), (Line 1k for 2004 and prior)

  22. Code "53" if Form 3800, Line 1y* (2008 revision) contains an entry for Form 8847, Credit for Contributions to Certain Community Development Corporations, but Form 8847 is not attached.
    *(Line 1w for 2007, Line 1x for 2006, Line 1w for 2005, Line 1r for 2004, Line 1p for 2003-2002)

  23. Code "54" if Form 3800, Line 3* has an entry or Form 1041, Schedule G, Line 2b** contains an entry and Form 8844, Empowerment Zone and Renewal Community Employment Credit is indicated, but Form 8844 is not attached.
    *(Line 24 for 2010 and prior) **(Line 2c for 2009 and prior)

  24. Code "55" if Form 3800, Line 1b* (2008 - 2001) contains an entry for Form 8861, Welfare to Work Credit, but Form 8861 is not attached.
    *(Line 1c for 2006 and prior)

    Note:

    The last valid tax period for claiming this credit was 200911.

  25. Code "57" if Form 3800, Line 1i* contains an entry for Form 8874, New Markets Credit, but Form 8874 is not attached.
    *(Line 1l for 2006-2005), (line 1r for 2004, line 1m for 2003-2000)

  26. Code "58" if Form 3800, Line 1j* (2010-2007) contains an entry for Form 8881, Credit for Small Employer Pension Plan Start-up Costs, but Form 8881 is not attached.
    *(Line 1j for 2008-2007, Line 1m for 2006-2005, Line 1n for 2004-2002)

  27. Code "59" if Form 3800, Line 1k* contains an entry for Form 8882, Credit for Employer Provided Child Care Facilities and Services, but Form 8882 is not attached.
    *(Line 1n for 2006-2005, Line 1o for 2004-2002)

  28. Code "61" if Form 3800, Line 1l* contains an entry for Form 8864, Biodiesel Fuels Credit, but Form 8864 is not attached.
    *(Line 1m for 2007, Line 1p for 2006-2004)

  29. Code "62" if Form 3800, Line 1m* contains an entry for Form 8896, Low Sulfur Diesel Fuel Production Credit, but Form 8896 is not attached.
    *(Line 1n for 2007, Line 1q for 2006-2004)

  30. Code "63" if Form 3800, Line 4g* contains an entry for Form 8900, Qualified Railroad Maintenance Credit, but Form 8900 is not attached.
    *(Line 29g for 2010-2008), (Line 1l for 2007, Line 1o for 2006-2005)

  31. Code "65" if Form 3800, Line 1n* contains an entry for Form 8906, Distilled Spirits Credit, but Form 8906 is not attached.
    *(Line 1o for 2007, Line 1r for 2006-2005)

  32. Code "66" if Form 3800, Line 1o* contains an entry for Form 8907, Nonconventional Source Fuel Credit, but Form 8907 is not attached.
    *(Line 1p for 2007, Line 1s for 2006-2005)

  33. Code "67" if Form 3800, Line 1p* contains an entry for Form 8908, Energy Efficient Home Credit, but Form 8908 is not attached.
    *(Line 1q for 2007, Line 1t for 2006-2005)

  34. Code "68" if Form 3800, Line 1r* or Form 1041, Schedule G, Line 2b** indicates a Form 8910, Alternative Motor Vehicle Credit, but Form 8910 is not attached.
    *(Line 1s for 2007, Line 1v for 2006, Line 1u for 2005) **(Line 2c for 2009 and prior)

  35. Code "69" if Form 3800, Line 1s* contains an entry for Form 8911, Alternative Fuel Vehicle Refueling Property Credit, but Form 8911 is not attached.
    *(Line 1t for 2007, Line 1w for 2006, Line 1v for 2005)

  36. Code "71" if Form 3800, Line 1q* contains an entry for Form 8909, Energy Efficient Appliance Credit, but Form 8909 is not attached.
    *(Line 1r for 2007, Line 1u for 2006)

  37. Code "72" if Form 1041, Schedule G, Line 2d contains an entry and Form 8912, Credit to Holders of Tax Credit Bonds (2007 and prior Credit for Clean Renewable Energy and Gulf Tax Credit Bonds is indicated, but Form 8912 is not attached.
    (Valid for periods after December 31, 2005 and subsequent)

    Note:

    Bond credits were notated on Line 3 of Schedule G for TY 2009 and prior.

  38. Code "73" if Form 3800, Line 1v contains an entry for Agricultural Chemicals Security Credit, but Form 8931 is not attached.

  39. Code "74" if Form 3800, Line 1w contains an entry for Employer Differential Wage Payments, but Form 8932 is not attached.

  40. Code "75" if Form 3800, Line 1aa contains an entry for New Hire Retention Credit, but Form 5884-B is not attached.

    Caution:

    This credit was valid for 2011 tax year and fiscal year filers and cannot be used on returns filed for tax periods 201212 and later.

    Figure 3.11.14-14
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3.11.14.9.6  (01-01-2015)
♦Installment Sale Indicator♦

  1. Form 6252, Installment Sale Income, is used to report the sale of property on the Installment plan.

  2. Codes are based solely on the taxpayer response to Question "3" on Form 6252.

  3. Edit the Installment Sale Indicator in the left margin next to Line 10 of Form 1041 in " 6 - N" format. Figure 3.11.14-15.

  4. Valid codes for Installment Sale Indicator are as follows:

    Code One Form 6252 Multiple Forms 6252
    1 "YES" response to Question 3. At least one form has a "YES" response.
    2 "NO" response to Question 3. All "NO" responses or a combination of "No" and/or blank responses.
    3 "YES" and "NO" are both checked or Question 3 is blank. Question 3 is blank on all forms.
  5. Do not edit an Installment Sale Indicator Code if Form 6252 is attached to a nontaxable Grantor Trust or Bankruptcy Estate return. The Form 6252 information will be included on the individual tax return.

    Figure 3.11.14-15
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.14.9.7  (01-01-2015)
Historic Structure Code

  1. Edit Code "7 - 3" in the left margin next to Line 10 of Form 1041 if Form 3468, Investment Credit, is attached, and there are entries present on any of the following lines that are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ : (Figure # 3.11.14-16 #)

    1. TY 2010 and subsequent: If there are entries under Part III, Line 11; specifically Lines e, f, g, h, i or j.

    2. TY 2008 and 2009: If there are entries under Part III, Line 10; specifically Lines e, f, g, h, i or j.

    3. TY 2006 and 2007: If there are entries on Line 1; specifically Lines e, f, g, or h.

    4. TY 1996 - 2005: If there are entries on Line 1, specifically, Lines b or c.

    Figure 3.11.14-16

3.11.14.10  (01-01-2015)
♦Received Date♦

  1. The date a document is received in the Campus or IRS Office is the date stamped as the "IRS Received Date" .

  2. An IRS Received Date is required on all Form 1041, Form 1041-QFT, and Form 1041-N.

    If ... Then ...
    The return is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or extended due date (≡ ≡ ≡ ≡ ≡ ≡ ≡ ), Exhibit 3.11.14-15 The return is considered timely.
    The due date falls on a weekend or legal holiday, The return is timely if postmarked by the first business day following the weekend or legal holiday.
    The IRS Received Date stamp is after ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the legal or extended due date and the postmark or shipment date is on or before the legal or extended due date, Edit the IRS Received Date to agree with the postmark date.

    Caution:

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

    Note:

    For certified mail only- If a postmark is not present, look for a "USPS.com Track & Confirm" record that has been attached to the return (should be before the envelope). Use the "Acceptance" date on the record to determine timeliness and follow normal editing procedures. See Exhibit 3.11.14-23.
    If the "USPS.com Track & Confirm" record is not attached, no action is required.

  3. Paper returns received with proof of a failed attempt to file electronically should be considered timely filed if received within 10 calendar days of the denial of the electronic filing.

  4. The IRS Received Date may or may not be stamped on the face of the return.

  5. A valid IRS Received Date Stamp may consist of the following:

    • The word "Received"

    • Month (alpha or numeric)

    • Day (for example "1" or "01"

    • Year - four digits

    • "Area Office" , Campus, "Field Office" , "Taxpayer Assistance Center (TAC)" plus the City location or a functional area within one of these sites (e.g., CSCO, EXAM, ICT, CIS, AM, etc.)

      Exception:

      Not all IRS offices are designated places for filing, and not all IRS employees are authorized to accept a tax return for processing. If a return contains a received date stamp from an office that is not a proper place for filing, that date stamp is not the "IRS Received Date" , and you must circle out the invalid received date and edit the correct received date according to instructions below. For example, returns received by the Taxpayer Advocate Service (TAS) or the IRS Office of Chief Counsel are not properly filed and a received date by that office is not the "IRS Received Date" .

  6. If the IRS Received Date stamp is not present or the date is illegible or invalid, edit the IRS Received Date in MMDDYY format in the middle of page 1 of the return. Edit the IRS Received Date according to the following priority:

    1. The earliest legible Postmark Date (U.S. Postal Service, Foreign Postmark, or Private Delivery Service) on the envelope. Rules for using the U.S. Postal Service Postmark (USPS) or Foreign Postmark date are as follows:

      If ... Then ...
      An envelope is not attached, Use the postmark date stamped on the face of the return.
      The postmark is missing and the envelope is certified, Look for the "USPS.com Track & Confirm" record that has been attached to the return (should be before the envelope). Use the "Acceptance" date on the record to determine timeliness and follow normal editing procedures. See Exhibit 3.11.14-23.
      If the "USPS.com Track & Confirm" record is not attached, no action is required.
      An envelope has a USPS and private metered postmark, Always use the USPS postmark.
      An envelope has a foreign and private metered postmark, Always use the foreign postmark.
      An envelope has two private metered postmarks, Always use the latest private metered postmark.
      An envelope has only one private metered postmark, Use the private metered postmark.
    2. Service Center Automated Mail Processing System (SCAMPS) digital date.

    3. Revenue Officer's Signature date.

    4. Signature date only if within current year.

    5. Julian control date minus 10 days.

    6. Current date minus 10 days.

  7. Edit the IRS Received Date as follows:

    If ... Then ...
    A timely IRS Received Date is the only received date stamped on the return, No editing is required.
    Two or more dates are stamped on the return,
    1. Use the earliest IRS Received Date stamped on the return.

    2. Circle all other dates (handwritten or stamped) not needed for transcription.

    Note:

    Received dates that have been circled out by another function should be treated as if they are not present.

    A Federal return is addressed to the IRS, but delivered to a State agency, Use the postmark date as the IRS Received Date.
    A Federal return is addressed to a State agency, Use the IRS Received Date stamp as the Received Date.
    The only Received Date on the return is a TAS or Chief Counsel Received Date, Circle out the TAS or Chief Counsel received date and edit the IRS Received Date according to instructions.

    Reminder:

    If an envelope is attached to the return, check the envelope for remittance. If found, hand carry remittance to manager.

3.11.14.11  (01-01-2015)
Tax Period

  1. This subsection addresses the editing of the period for which the tax return is being filed.

3.11.14.11.1  (01-01-2015)
Tax Period - General

  1. All returns must have a tax period.

  2. Edit the Tax Period to the right of the preprinted calendar year in YYMM format.

    If ... Then ...
    The return is for the current processing calendar year, (e.g., 201412) No editing is necessary.
    The return is for a prior year, Edit the Tax Period.
    The taxpayers has notated a Tax Period other than the preprinted year on the return, Edit the Tax Period based on the taxpayer's indication, per paragraph (3). See Figure 3.11.14-17
    The tax period is missing, incomplete or illegible,
    1. Review the return or attachments for the correct period.

    2. If found, edit the Tax Period to the right of the preprinted Calendar Year in YYMM format.

    3. If unable to determine the Tax Period after researching, process the return for the year currently being processed.

  3. A Tax Period should end on the last day of a month. Ignore a minor discrepancy such as October 30 instead of October 31. The exceptions are a 52/53 week filer, and final and/or short period returns. The table below identifies examples of tax periods:

    If ... Then ...
    Oct. 3, 2014 (52-53 week return) 1409
    Oct. 3, 2014 (Final short period return) 1410
    Oct. 25, 2014 (52-53 week return) 1410
    Oct. 25, 2014 (Final short period return) 1410
    Nov. 30, 2014 1411
    Dec. 31, 2014 1412 (No editing required for current calendar year returns)
    Feb. 28, 2014 1402
  4. Tax periods reported under the 52-53 week rule may not end more than 6 days before, and not more than 3 days after, the end of a month. In the edit format, use the numeric designation of the month, the last day of which is closest to the actual ending date. See Figure 3.11.14-18

    If ... Then ...
    The Tax Period ending is not more than 3 days after the beginning of the month, Edit the previous month.
    (e.g., October 3, use the numeric designation for September, YY09.)
    The Tax Period ending is not more than 6 days before the end of the month, Edit the month shown on the return.
    (e.g., October 25, use the numeric designation for October, YY10.)
    Tax Period ending is more than 6 days before the end of the month or 3 days after the beginning of the month and is not a Final return,
    1. Correspond to determine the correct Tax Period ending.

    2. If no reply, edit CCC "3" .

  5. If the Tax Period is more than 12 months or 53 weeks, correspond.

  6. On a "Final" return if the Tax Period's month and year is equal to or later than the Received Date's month and year (future return), edit the Tax Period to be one month prior to the Received Date.

    Note:

    If a prepaid credit is claimed on a short-period "Final" return, see Short Period Returns -With Prepaid Credits, IRM 3.11.14.11.9.

  7. On a "Final" return, if the Received Date is after the short period due date but on or before the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , edit CCCs "R" and "F" .

    Note:

    Also, edit CCC "D"

    if the return is a Balance Due.

  8. Check all Tax Periods for the Statute of Limitation (2 years and 9 months from the normal due date of the return). Refer to Statute Returns, IRM 3.11.14.8.10

  9. A taxpayer is qualified to file a fiscal year return when the return is for one of the following filers:

    1. Estate;

    2. Non-Exempt Charitable Trust under IRC §4947(a)(1) or IRC §501(a);

    3. One of the following notations is shown on the return:,
      • IRC §671 through IRC §678,
      • IRC §443(b)(2).

      Note:

      Edit Audit Code "5" if the taxpayer is filing a Fiscal Year return and the return is not for one of the filers which are qualified to file on a Fiscal Year basis: Do not edit Audit Code "5" on any Final Return or on an identified Initial Return that has a Tax Period ending date in December (Calendar Year filer).

    Figure 3.11.14-17

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    Figure 3.11.14-18

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3.11.14.11.2  (01-01-2015)
"Final" Returns

  1. If the month of the Tax Period is equal to or later than the month of the Received Date (an early-filed return), process as follows:

    1. Edit the Tax Period using the month preceding the month of the Received Date. See Figure 3.11.14-19, and follow the table below:

      Tax Period
      Ending
      Received
      Date
      Edit As
      5/31/2015 5/8/2015 1504
      6/30/2015 6/3/2015 1505
      9/30/2015 7/21/2015 1506

    Figure 3.11.14-19

    This image is too large to be displayed in the current screen. Please click the link to view the image.
  2. If the Received Date is after the short-period due date but on or before the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    1. Edit CCC "R" and "F" . See Figure 3.11.14-20.

      Note:

      Also edit CCC "D" if the return is a Balance Due.

    Figure 3.11.14-20

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

3.11.14.11.3  (01-01-2015)
"Initial" Short Period Returns

  1. Initial returns can be determined by either of the following:

    • The taxpayer has checked the "Initial Return" box (below the address information of Form 1041).

    • The "Date Entity Created" (Section "D" ) is the same as the "Fiscal Year Beginning" (top of Form 1041).

    If ... Then ...
    The taxpayer is filing an initial short period Fiscal Year return that begins in one year and ends in another, Continue normal editing.
    The taxpayer is filing an initial short period Fiscal Year return which begins and ends in the same year, Continue normal editing.

    Note:

    This action is taken only if it is not a "Final" return.

3.11.14.11.4  (01-01-2015)
Early Filed Returns - Full Year and Short Period

  1. Never send an Early-Filed return back to the taxpayer.

    Note:

    When correspondence issues are present on an Early Filed return (FUT or Future), edit the Correspondence Action Code to the return and edit the Suspense AC 480 on Form 4227.

  2. If the month of the Tax Period Ending (TPE) is the same or after the month of the Received Date, determine how early the return has been filed:

    If ... Then ...
    The received date and the Tax Period Ending (TPE) are the same month (i.e., the Received Date and the TPE are both April), OR

    The Received Date is prior to the TPE by four months or less (i.e., the Received Date is in April but the TPE is May, June, or July),
    1. Edit Action Code 480 (Early Filed - Suspense).

      Note:

      This action is taken only if it is not a "Final" return.

      See IRM 3.11.14.11.2.

    2. Completely edit the return.

    The Received Date is prior to the Tax Period Ending (TPE) by more than four months (i.e., the Received Date is April but the TPE is August or later), and the tax period on BMFOLI agrees with the TPE on the return,
    1. Edit Action Code 211 (First Correspondence),

    2. Attach an approved Correspondence Action Sheet to request confirmation of the Tax Period Ending, and

    3. Completely edit the return. Edit the future tax period indicated by the taxpayer.

3.11.14.11.5  (01-01-2015)
Short Period Returns - Editing Proof of Entitlement

  1. A Short Period Return is one which covers a period of less than 12 months or 52 weeks.

  2. Do not process "Initial" or "Final" returns as a Change of Accounting.

  3. Process all other Short Period Returns as a Change of Accounting Period. In such cases, proof of entitlement to the change is required.

  4. Use the table below to identify and edit proof of entitlement.

    If... And... Then...
    “Approved” Form 1128, Application to Adopt, Change, or Retain a Tax Year, 1. Command Code BMFOLE shows a Transaction Code (TC) 053 or TC 054, (This is an indication that the Form 1128 has been approved.) Continue processing.

    Note:

    No CCC “”Y” is needed.

    2. Command Code BMFOLE shows a Transaction Code (TC) 059, (This is an indication that the Form 1128 has not been approved.) The return is unprocessable. Follow the instructions for “Short Period Returns - Editing a Disapproved Application”. See IRM 3.11.14.11.7
    A statement the trust is changing tax period under IRC §1.442.1(c),  
    1. Edit CCC "Y" .

    2. Edit Audit Code "3" .

    A copy of Form 1128 is attached citing Rev. Proc. 68-41   Edit CCC "Y" .
    Taxpayer has notated that the return was filed in compliance with IRC §1.1502-76,   Edit CCC "Y" .
    Taxpayer has cited one of the following:
    • Rev. Proc. 76-10,

    • Rev. Proc. 85-58,

    • Rev. Proc. 87-32,

    • Rev. Proc. 2003-38, or

    • Rev. Proc. 2006-46.

      Edit CCC "Y" .
    Taxpayer has notated that the return was filed to change to Tax Period Ending month of "12" ,   Edit CCC "Y"
    Proof of entitlement cannot be determined,   See IRM 3.11.14.11.6

    Figure 3.11.14-21
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3.11.14.11.6  (01-01-2015)
Short Period Returns - Missing Proof of Entitlement

  1. If proof of entitlement is missing or the taxpayer states on the return or an attachment that an application was filed, but has not received a response, research IDRS using BMFOLE for approval or disapproval information and proceed as follows:

    If... Then...
    BMFOLE shows a Transaction Code 053 or 054, (This is an indication that the Form 1128 has been approved) Edit CCC "Y"
    BMFOLE shows Transaction Code 059,
    (This is an indication that the Form 1128 has not been approved),
    The return is unprocessable. Follow the instructions for Short Period Returns - Editing a Disapproved Application. See IRM 3.11.14.11.7.
    BMFOLE does not show a Transaction Code:, 053, 054, or 059, Correspond requesting confirmation of the Tax Period Ending.

3.11.14.11.7  (01-01-2015)
Short Period Returns - Editing a Disapproved Application (Form 1128)

  1. If Form 1128 is disapproved, the return is considered unprocessable:

    1. Enter Action Code 211 and Correspond.

    2. In the correspondence, instruct the taxpayer to file a return for the next regular full period due. Request a disposition of any remittance paid with the return or other credits which have posted to the short period module.

3.11.14.11.8  (01-01-2015)
Short Period Returns - Editing Form 1128 With No Indication of Approval or Disapproval

  1. When a Form 1128 with no indication of approval or disapproval is attached and no proof of entitlement is present, research IDRS using BMFOLE for approval or disapproval and proceed as follows:

    If... Then...
    BMFOLE shows a Transaction Code 053 or 054,
    (This is an indication that Form 1128 has been approved)
    Edit CCC "Y"
    BMFOLE shows a Transaction Code 059,
    (This is an indication that Form 1128 has not been approved)
    The return is unprocessable. See Short Period Returns - Editing a Disapproved Application. See IRM 3.11.14.11.7.
    BMFOLE does not show Transaction Code 053, 054, or 059, Take the actions in (2) below.
  2. A Form 1128 with neither approval or disapproval, discontinue processing Form 1041. Route Form 1041 and Form 1128 to Entity as directed in the paragraphs below:

    1. If Form 1128 is attached to a numbered return, enter Action Code 320. Attach Form 4227 and check the box for Entity Control. Edit the Form 1041 Received Date on Form 1128. (Do not detach Form 1128).

    2. If Form 1128 is attached to an unnumbered return, edit the Form 1041 Received Date on Form 1128, attach Form 4227 and route the return to Entity Control. (Do not detach Form 1128).

3.11.14.11.9  (01-01-2015)
Short Period Returns - With Prepaid Credits

  1. Route to Accounting for possible adjustment action any return meeting both conditions below:

    1. A prepaid credit is claimed.

      Form Type Line Number(s)
      Form 1041 Lines 24a, 24b, 24c, or 24d
      Form 1041-QFT Line 14
      Form 1041-N Line 15
    2. The return is a short period (an initial return, a final return or one with a change of accounting period).

  2. Take the following actions when routing these returns to Accounting:

    1. Edit Action Code "342" on Form 1041, Form 1041-QFT or Form 1041-N.

    2. Attach Form 4227, check the "Accounting" box and notate "Short period return with ES Credits" .

    3. Continue editing the return. Leave the return in the block.

    4. If the return shows a refund, see IRM 3.11.14.8.7 (Refund Returns - 45 Day Jeopardy and Million Dollar Refunds).

3.11.14.12  (01-01-2015)
Section A (Type of Entity)

  1. The fiduciary checks the appropriate "Type of Entity" box in "Section A" that describes the entity for the return being filed. In addition, they are instructed to check the ESBT (S-Portion Only) box when ESBT (Electing Small Business Trusts) tax applies. The Fiduciary and Trust Code is to be determined from the box checked, other than the ESBT box.

    Note:

    If the ESBT box is checked, edit "2-1" in the left margin next to Line 10, Form 1041. See IRM 3.11.14.9.2

    .

  2. Every Form 1041 (except amended returns) must be edited with a Fiduciary Code and may be edited with a Trust Code. These codes identify for the Business Masterfile (BMF) the type of return being filed and generates the correct exemption amount to which the taxpayer is entitled.

3.11.14.12.1  (01-01-2015)
Fiduciary Codes

  1. Fiduciary Codes (FID Code) are based on taxpayer entry in any of the following:

    1. Section A of Form 1041 (Type of Entity)

    2. Check mark in Described in Section 4947(a)(2) box (Section E of Form 1041)

    3. Check mark in Yes box on Line 9, Other Information, (page 2 of Form 1041)

    Reminder:

    If the ESBT box is the only one checked in Section A, treat it as blank when determining Fiduciary Code.

  2. The Fiduciary Code consists of a single numeric digit. The valid FID Codes are 1, 2, 3, 4, 5, 6, 8, and 9.

  3. Edit the Fiduciary Code to the right of the Simple Trust box. See Figure 3.11.14-22.

    Figure 3.11.14-22

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3.11.14.12.2  (01-01-2015)
Trust Codes

  1. Trust Codes are based on entries made by taxpayers in Section A of Form 1041 (Type of Entity).

  2. The Trust Code consists of a single numeric digit. The valid Trust Codes are 1 and 3.

  3. Edit the Trust Code to the right of the Pooled Income Fund box. See Figure 3.11.14-23.

    Figure 3.11.14-23
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3.11.14.12.3  (01-01-2015)
Fiduciary and Trust Code Editing

  1. On most returns, the Fiduciary and Trust Codes will be determined from the box checked in Section A (Type of Entity).

  2. When editing the Fiduciary and Trust Codes,

    1. Determine if the filer has notated Bankruptcy or GNMA (Government National Mortgage Association) on Name Line, or

    2. The Described in Section 4947(a)(2) box is checked in Section E of Form 1041.

    If ... Fiduciary Code Trust Code
    Bankruptcy is notated on the Name Line and the bankruptcy boxes are not checked, 5 None
    GNMA is present on the Name Line, 4 3
    The Described in Section 4947(a)(2) box is checked, (see Figure 3.11.14-24)

    Reminder:

    Edit Audit Code "6" .

    9 None

    Note:

    If the choice of multiple entities includes the box for Section 4947(a)(2) Trusts, Fiduciary Code "9" takes priority.

    Figure 3.11.14-24

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  3. Edit the following Fiduciary and Trust Codes when there is a single entry other than the ESBT box in Section A:

    Reminder:

    If the ESBT box is checked, edit the ESBT indicator as "2-1" in the left margin next to Line 10, Form 1041.

    Type of Entity Fiduciary
    Code
    Trust
    Code
    Decedent's Estate 1 None
    Simple Trust 2 None
    Complex Trust 3 None
    Grantor Trust (taxable)

    Note:

    Entries other than 0 (zero) present on any of Lines 1 - 22

    Reminder:

    Detach and process Schedules K-1.

    2 3
    Grantor Trust (nontaxable)

    Note:

    No entries present on any of Lines 1 - 22

    Caution:

    DO NOT detach Schedules K-1.

    4 3
    Bankruptcy Estate - Chapter 7 5 None
    Bankruptcy Estate - Chapter 11 6 None
    Qualified Disability Trust

    Note:

    If "Section 642(b)(2)(C)" is notated on Line 20 of a TY 2001 Form 1041, edit Fiduciary Code "8" .

    8 None
    Pooled Income Funds

    Note:

    Also edit "3 - 1" in the left margin next to Line 10 of Form 1041. See IRM 3.11.14.9.3.

    3 None
    The Pooled Income Fund and the "Described in Section 4947(a)(2)" (Section E) boxes are both checked

    Note:

    Edit Audit Code "6" but DO NOT edit a Pooled Income Fund Indicator.

    9 None
    The Pooled Income Fund box and GNMA is present on the name line. 4 3
  4. If no boxes or multiple boxes are checked in Section A, examine the return and attachments to determine if the Described in Section 4947(a)(2) box is checked in Section E of Form 1041 or if there is an indication the return is for either a Generation Skipping Trust or Grantor Trust. Determine the Fiduciary and/or Trust Code:

    If no boxes or multiple boxes are checked in Section A ... And ... Edit FID Code Edit Trust Code
    The Described in Section 4947(a)(2) box is checked in Section E,

    Reminder:

    Edit Audit Code "6" in "1-6" format to the left of Line 10, Form 1041.

      9  
    There is an indication of a Generation Skipping Trust,

    Note:

    Indications of a Generation Skipping Trust include:

    • The Yes box is checked on Line 9 of the Other Information Section (Page 2 of Form 1041), or

    • Hand-drawn check box indicating the return is for a GENERATION SKIPPING TRUST, or

    • Notations on the Name Line such as Generation Skipping Trust, GST, Gen Skip, or similar statement. See Figure 3.11.14-25

      3 1
    The Grantor Trust and Simple Trust boxes are both checked,   2  
    The Grantor Trust and Complex Trust boxes are both checked,   3  
    No box is checked and there is an indication of a Grantor Trust, No entry present on any Lines 1 - 22

    Note:

    Delete Sch I and/or D when transcription line entries are present on those Schedules.

    4 3
    Entry is present on any of Lines 1 - 22 and taxpayer has noted IRC 671 - 678 on the return

    Note:

    "X" an amounts shown on Lines 1 - 22. Delete Sch I and/or Sch D when transcription lines are present on those Schedules.

    4 3
    Entry is present on any of Lines 1 - 22 and taxpayer has not noted IRC 671 - 678 on the return. 2 3

    Note:

    Indications of a Grantor Trust may also include the following notations on the return: IRC 671 - 678, pre-need Funeral Trusts, Rabbi Trusts, Receivership, Substantial Owner, Revocable Living Trust, Qualified Settlement Fund.

    Figure 3.11.14-25
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  5. If no boxes or multiple boxes are checked in Section A and Form 1041 does not meet any of the conditions listed in paragraph (4) above, determine the proper Fiduciary and/or Trust Code based on the Exemption amount claimed on Line 20 of Form 1041 in the following priority order:

    If Line 20 Equals ... Edit Fiduciary Code
    $3,950 - TY 2014
    $3,900 - TY 2013
    $3,800 - TY 2012
    $3,700 -TY 2011
    $3,650 - TY 2009 - 2010
    $3,500 - TY 2008
    $3,400 - TY 2007
    $3,300 - TY 2006
    $3,200 - TY 2005
    $3,100 - TY 2004
    8
    $600 1
    $300 2
    $100 3
    $0, blank, or any entry that does not equal one of the allowable exemption amounts (listed above)

    Reminder:

    See paragraph (4) above, when the Described in Section 4947(a)(2) box is checked in Section E or of there is an indication the return is for a Generation Skipping Trust.

    3

3.11.14.12.4  (01-01-2015)
Grantor Trusts

  1. In addition to the Grantor Trust box checked in Section "A" of Form 1041, other indications that the trust is a grantor trust would be if the taxpayer has notated "Pre-Need Funeral Trust, Receivership, Substantial Owner, Revocable Trust, Revocable Living Trust, Rabbi Trust, or IRC Section 671 - 678" in the Entity Section.

  2. Taxable Grantor Trust - Only part of the trust is treated as a Grantor Trust. The income, deductions, etc., that are taxable to the trust are reported on Form 1041. The amounts that are taxable directly to the grantor are shown on an attachment to the return.

    Note:

    The attachment should state the name, taxpayer identification number and the address of the person to whom the income is taxable, and setting forth the income, deductions and credits.

    1. Edit amounts from attached schedules or attachments to Lines 1 through 9, Form 1041 if necessary.

    2. Do not delete or X, Schedules I of and/or D.

    3. Edit Installment Sale Indicator code if Form 6252 is attached.

    4. Edit any applicable CCC, Audit, Missing Schedule Codes, etc., as indicated by attachments to Form 1041.

    5. Edit E-File Waiver Indicator Code if Form 8948 is attached.

    6. Detach and process Schedules K-1 if attached to a Taxable Grantor Trust ("2-3" ). Correspond if missing and required. See IRM 3.11.14.17.4

  3. Nontaxable Grantor Trust - The entire trust is a Grantor Trust. Only the entity portion of Form 1041 will be completed. Lines 1 through 21 should be blank or zero. The amounts that are taxable to the grantor are shown on an attachment to the form.

    Note:

    The attachment should state the name, taxpayer identification number and the address of the person to whom the income is taxable, and setting forth the income, deductions and credits.

    1. Do not edit amounts from attached schedules or attachments to Lines 1 through 9, Form 1041.

    2. "X" Schedules I and/or D if transcription line entries are present.

    3. Do not edit Installment Sale Indicator code if Form 6252 is attached.

    4. Do not detach, process or correspond for Schedules K-1 that may be attached to a Nontaxable Grantor Trust ("4-3" ).

    5. Edit E-File Waiver Indicator Code if Form 8948 is attached.

    6. Edit any applicable CCC and Audit codes as indicated by attachments to Form 1041.

3.11.14.12.4.1  (01-01-2015)
Determining Taxable vs. Nontaxable Grantor Trusts

  1. Filers should report only the part of the income, deductions, and credits which are taxable to the trust on Form 1041.

  2. If the taxpayer has filed a Form 1041 claiming to be a Grantor Trust, determine if part of the trust is taxable or nontaxable.

    1. Taxable Grantor Trust - Code as a taxable Grantor Trust if entries are reported on any of Lines 1 through 22 of Form 1041, even if Line 23 (Total Tax) is a zero or negative amount.

    2. Nontaxable Grantor Trust - If the entire trust is a grantor trust, only the entity portion of the return should be filled out. No entries should be present on any of Lines 1 through 22.

    If ... Edit ...
    Entries are present on any of Lines 1 - 22 Fiduciary Code 2 and Trust Code 3
    No entries are present on any of Lines 1 - 22 Fiduciary Code 4 and Trust Code 3

    Exception:

    Edit the return as a nontaxable Grantor Trust if the taxpayer has filed a GNMA Pool return but has erroneously entered Income and Deduction amounts that result in a zero or negative amount on Line 22. X Lines 1 through 22 and attachments to the return that support the line items (i.e., Schedule I and D).

3.11.14.13  (01-01-2015)
♦Entity Perfection – General♦

  1. The entity of a tax return identifies the taxpayer on the Business Master File. The entity area of the return contains the following:

    1. Employer Identification Number (EIN)

    2. Name

    3. "In-care-of" Name

    4. Address

3.11.14.13.1  (01-01-2015)
♦Entity Perfection – Employer Identification Number (EIN)♦

  1. The EIN is a nine-digit number (XX-XXXXXXX) assigned to identify the estate or trust.

  2. The EIN is located in the upper right of the return (Box "C" of Form 1041. Box "2" of Form 1041-QFT and Form 1041-N).

  3. Determine the EIN as follows:

    If ... And ... Then ...
    EIN is missing, You can determine the correct EIN from the attachments and schedules, Edit the EIN to the appropriate location. See Figure 3.11.14-26.
    The EIN is either a PTIN or ITIN (Individual Tax Identification Number), Unnumbered,
    1. Remove return from batch.

    2. Route to Entity Control following local procedures for EIN assignment.

    The EIN is either a PTIN or ITIN, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    Multiple EINs are present, Unnumbered,
    1. Remove return from batch.

    2. Route to Entity Control following local procedures for EIN assignment.

    Multiple EINs are present, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    The EIN contains any of the following conditions and cannot be determined from attachments and/or schedules:
    • Illegible;

    • Missing;

    • Other than 9 digits;

    • All zeroes; or,

    • All nines

    Unnumbered,
    1. Research IDRS.

    2. If found, edit to the proper location.

    3. If not found, route to Entity Control following local procedures.

    The EIN contains any of the following conditions and cannot be determined from attachments and/or schedules:
    • Illegible;

    • Missing;

    • Other than 9 digits;

    • All zeroes; or,

    • All nines

    Numbered,
    1. Circle out all illegible EINs, zeroes and/or nines.

    2. Edit Action Code 320.

    3. Leave return in batch.

    "PENDING" , "APPLIED FOR" , etc., is indicated in the EIN area, Unnumbered,
    1. Research IDRS.

    2. If found, edit to the proper location.

    3. If not found, route to Entity Control following local procedures.

    "PENDING" , "APPLIED FOR" , etc., is indicated in the EIN area, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    Figure 3.11.14-26

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