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

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

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.

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

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

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

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.

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

Figure 3.11.14-9

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

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.

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:

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:

Figure 3.11.14-10

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.

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

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

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. See Figure 3.11.14-11 .

Figure 3.11.14-11

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

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

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.

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.

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

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

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.

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

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 3.28.3.3.

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.

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

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

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:

Determine the appropriate Audit Code as follows:

Figure 3.11.14-12

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

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 .

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 within the grace period. See IRM 3.11.14.21.4 .

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

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

Only two Missing Schedule Codes are valid per return.

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 3.11.14-17.

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

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.

Code "32" if Form 1041, Line 4 contains an entry, but Schedule D (1041) is not attached.

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.

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

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)

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)

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)

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)

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)

Code "43" if Form 1041, Schedule G, Line 2b* contains an entry , but the Form 3800 is not attached.
*(Line 2c for 2009 and prior)

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)

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.

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

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)

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.

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)

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)

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)

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, )

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

.

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

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

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

Code "76" if Form 3800, Line 4h contains an entry for Small Employer Health Insurance Premiums, but Form 8941 is not attached.

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

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

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 .

Valid codes for Installment Sale Indicator are as follows:

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.

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)

All returns must have a tax period.

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

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:

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

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.

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" .

if the return is a Balance Due.

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

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

Figure 3.11.14-17

Figure 3.11.14-18

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:

Figure 3.11.14-19

If the Received Date is after the short-period due date but on or before the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

Figure 3.11.14-20

Initial returns can be determined by either of the following:

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

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:

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

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

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

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

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 Form 1128 is disapproved, the return is considered unprocessable:

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:

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:

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

Take the following actions when routing these returns to Accounting:

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

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

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

Figure 3.11.14-22

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

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

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

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

When editing the Fiduciary and Trust Codes,

Figure 3.11.14-24

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

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 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:

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.

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.

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.

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

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).

Determine the EIN as follows:

Figure 3.11.14-26

The Name Control consists of four characters or less.

See Job Aid Document 7071A, Name Control Job Aid - For Use Outside of the Entity Area, to determine the Name Control.

Name controls for EINs assigned by the MODI-EIN program are different. If the EIN prefix begins with 20, 26, 27, 45, 46, or 47 and it is a TRUST return (not an estate), then the name control will be the first four characters of the first name in the Primary Name Line. The name control for an estate will be the first four characters of the person's last name.

Edit the Name Control as follows:

A Fiduciary or Fiduciary name change will be indicated by a mark in the "Change in fiduciary or Change in fiduciary name" box in Section "F" of Form 1041.

A Trust name change will be indicated by a mark in the "Change in trust's name" box in Section F of Form 1041.

An "in-care-of" name can be identified by the words "in-care-of" or the symbols "c/o" or "%" (percent). See Figure 3.11.14-27 .

Ensure the "in-care-of" name is located in the proper location (above the street address).

A change in the "in-care-of" name can be determined by any of the following:

Perfection of the address is necessary when the mailing address (Street or P.O. Box) is not easily identified.

The procedures for perfection of addresses for pre-addressed returns and non pre-addressed returns indicating an address change are as follows:

Figure 3.11.14-28

Figure 3.11.14-29

The USPS established new address requirements for APO/DPO/FPO addresses. If the old address appears , convert to the new state code abbreviation based on the Zip Code (e.g., APO New York, NY 091XX would be converted to APO AE 091XX). ( Figure 3.11.14-30 ) APO/DPO/FPO addresses are considered domestic addresses. Refer to APO/DPO/FPO Conversion Chart below:

Figure 3.11.14-30

A foreign (international) address is any address that is not in the 50 states or the District of Columbia.

Returns with APO/DPO/FPO addresses are considered domestic addresses. See IRM 3.11.14.13.4 .

Route returns with a foreign address to Ogden Submission Processing Campus (OSPC) for processing. Prepare Letter 86C to inform the taxpayer that the return has been sent to Ogden.

Returns with addresses in the following U.S. Possessions/Territories are considered to be foreign for processing purposes but are edited in the same way as domestic addresses.

All other foreign addresses are edited the same as a domestic address with the following exceptions:

A ZIP code or state is not required on a foreign address. Foreign addresses use a postal code that is entered before the city or foreign country and is part of the address.

Accept taxpayer's entry.

Accept taxpayer's entry.

Qualified Dividends Allocable to Estate or Trust are reported on Line 2b(2) of Form 1041.

If present, Line 2b(2) must be a positive amount. Never bracket a Line 2b(2) amount as a loss.

If Line 2b(2) is blank or illegible and the Qualified Dividends Allocable to Estate or Trust are reported on attachments to the return, determine the correct amount and perfect Line 2b(2). If the correct amount cannot be determined, do not perfect Line 2b(2) or correspond for Qualified Dividend information.

If an amount is present on Line 19 of Schedule D and Line 2b(2), page 1, of 1041 is blank, edit the amount from Line 19 to Line 2b(2) of 1041.

A Schedule C/C-EZ (Form 1040) or equivalent (computer printouts, written attachments, etc.) must be attached to Form 1041 if an amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 3 of Form 1041. ( Figure 3.11.14-31 )

Edit Line 3 as follows:

The total gain or loss from the sale or exchange of capital assets is reported on Line 4 of Form 1041.

The loss cannot exceed $3,000. Reduce any loss greater than $3,000.

Form 8824 must be attached if Schedule D (Form 1041) or Form 4797 (Sales of Business Property) is attached to Form 1041 and the filer has notated "RELATED PARTY LIKE-KIND EXCHANGE" on Schedule D or Form 4797.

Schedule D must be attached if an amount≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 4 of Form 1041.

Do not edit Line 4 if editing MSC 32.

Only a Schedule D (Form 1041) is acceptable. If the taxpayer substitutes a Schedule D from any other tax return (i.e., Form 1040, Form 1065, Form 1120, etc.), edit MSC 32.

Only one Schedule D can be processed. If more than one is attached, take the following actions:

All income or losses from rents, royalties, partnerships, other estates and trusts (except dividends, certain interest, and capital or ordinary gains and losses and depreciation) are reported on Line 5 of Form 1041.

A Schedule E (Form 1040) or equivalent (e.g., computer printouts, written attachments, etc.) must be attached to Form 1041 if an amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 5 of Form 1041.

Edit Line 5 as follows:

Figure 3.11.14-34

All farm income or losses are reported on Line 6 of Form 1041.

A Schedule F (Form 1040) or equivalent (e.g., computer printouts, written attachments, etc.) must be attached to Form 1041 if an amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 6 of Form 1041.

Edit Line 6 as follows:

Figure 3.11.14-35