Accessibility Skip to Top Navigation Skip to Main Content Home  |  Change Text Size  |  Contact IRS  |  About IRS  |  Site Map  |  Español  |  Help  

Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 14. Income Tax Returns for Estates and Trusts (Forms 1041, 1041-QFT, and 1041-N) (Cont. 4)

3.11.14  Income Tax Returns for Estates and Trusts (Forms 1041, 1041-QFT, and 1041-N) (Cont. 4)

3.11.14.30  (01-01-2012)
Schedule G (Form 1041), Line 6 – Schedule H, Form 1040 (Household Employment Taxes)

  1. Schedule H ( Form 1040), Household Employment Taxes, must be attached to Form 1041 if an entry is present on Line 6 of Schedule G. ( Figure 3.11.14-55 )

  2. Per the Social Security Domestic Employee Reform Act of 1994 (SSDERA), certain taxpayers may legally file Schedule H (Form 1040) without a corresponding Form 1040 or Form 1041. For procedures for processing loose-filed Schedule H's, see IRM 3.11.14.36.18 .

    Figure 3.11.14-55

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

    Schedule H (Reported on Line 6 of Schedule G)

3.11.14.31  (01-01-2012)
Schedule G (Form 1041), Line 7 (Total Tax)

  1. Line 7 of Schedule G is the total of Lines 4 through 6 of Schedule G. The taxpayer is instructed to carry the amount from Line 7 to Line 23 of Form 1041 (Page 1). Line 7 may include the following "write-in" notations and the amount of tax (on the dotted portion of line):

    • "Section 641(c)" (Tax on electing small business trusts (ESBTs))

    • "Section 453(l) interest" or "Section 453A(c) interest" (Interest on deferred tax attributable to installment sales of certain timeshares and residential lots and certain nondealer real property installment obligations)

    • "From Form 4970" (Tax on Accumulation Distribution of Trusts)

    • "From Form 8697" (Interest Computation Under the Look-Back Method for Completed Long-Term Contracts)

    • "From Form 8866" (Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method)

    • "1260(b)" (Interest on deferral of gain from certain constructive ownership transactions)

    • "From Form 5329" (Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts)

  2. If the taxpayer writes one of the above "notations" on the dotted portion of Line 7 edit as follows:

    If ... Then ...
    The notated amount is included on Line 7 (Schedule G) and Line 23 ( Form 1041), Continue editing the return.
    The notated amount was not included on Line 23 (Form 1041), Increase Line 23 (Form 1041) by the amount written in on Line 7 (Schedule G).
    The notated amount is written separate from the Line 7 amount, Increase Line 23 (Form 1041) by the amount written in separately from the Line 7 amount (if the taxpayer has not already done so).

  3. Effective for TY 2002, the taxpayer should check the "ESBT" box in Section "A" (Type of Entity) of Form 1041 OR they may notate "ELECTING SMALL BUSINESS TRUST" , "ESBT" , or "IRC Section 641(c)" on the dotted portion of Line 7 and include the ESBT amount in the Line 7 (Total Tax) calculation.

    Reminder:

    Edit ESBT Indicator "1" in the left margin next to Line 10 on Form 1041 in "2 - 1 " format. See IRM 3.11.14.9.2 .

3.11.14.32  (01-01-2012)
Other Information Section (Page 2)

  1. The "Other Information" Section of Form 1041 is located at the bottom of Page 2 of Form 1041.

3.11.14.32.1  (01-01-2012)
Line 3 - Interest From Foreign Country

  1. Filers are required to report if they had activity in a foreign country at any time during the tax year on Line 3 of the "Other Information" Section (Page 2 of Form 1041).

  2. If the "Yes" box is checked and/or a foreign country is listed on Line 3 in the "Other Information" Section, edit Audit Code "2" in the left margin next to Line 10 on Form 1041 in " 1 - 2" format.

3.11.14.32.2  (01-01-2012)
Line 4 - Distribution From Foreign Country

  1. Filers are required to report if they received a distribution from, were a grantor of, or transferor to a foreign trust on Line 4 in the "Other Information" Section (Page 2 of Form 1041).

  2. If the "Yes" box is checked and Line 18 (Income Distribution) or Line 22 (Taxable Income) of Form 1041≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ edit Audit Code "1" .

3.11.14.32.3  (01-01-2012)
Line 9 - Generation Skipping Trust

  1. Filers are required to report that they are a Generation Skipping Trust on Line 9 in the "Other Information" Section (Page 2 of Form 1041).

    If... And... Then...
    One box is checked in Section A of Form 1041,   Edit as instructed in IRM 3.11.14.12.3 , regardless of the entry on Line 9 in the Other Information Section (Page 2 of Form 1041)
    No boxes are checked or multiple boxes are checked in Section A, The "Yes" box is checked on Line 9 in the "Other Information" Section (Page 2 of Form 1041) Edit Fiduciary Code "3" and Trust Code "1" .
    No boxes are checked or multiple boxes are checked in Section A, The "Yes" box is not checked on Line 9 in the "Other Information" Section (Page 2 of Form 1041) Determine if Form 1041 contains an indication that the return is for a "GENERATION SKIPPING TRUST" . See IRM 3.11.14.12.3 .
    If Form 1041 contains an indication that the return is for a Generation Skipping Trust (GST),   Edit Fiduciary Code "3" and Trust Code "1" .

3.11.14.33  (01-01-2012)
Schedule I (Form 1041) – Alternative Minimum Tax

  1. Alternative minimum tax (AMT) is reported on Schedule I (Form 1041).

  2. Only one Schedule I can be processed. If more than one Schedule I is attached, determine the correct Schedule I and "X" those schedules not used.

  3. Schedule I (Form 1041) must be attached to Form 1041 if an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 1c Schedule G, Form 1041.

    If ... Then ...
    Schedule G, Line 1c contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Schedule I is not attached, Correspond for the missing schedule.
    Schedule I, Line 56 and Schedule G. Line 1c entry does not equal, Edit the lesser amount to Schedule G, Line 1c.
    Schedule I, Line 56 contains a significant entry and Schedule G, Line 1c is blank, Edit the Line 56 amount to Schedule G, Line 1c,

  4. If a current year Schedule I (Form 1041) is attached to Form 1041, perfect Lines 24, 25, 26 and 53 as necessary. See Exhibit 3.11.14-2 for transcription lines.

    Note:

    "X" any prior year Schedule I that supports Form 8801 (Schedule G, Line 2d on a current year Form 1041).

  5. Do not bracket any entries on Schedule I. ISRP will transcribe all fields as positive and the Form 1041 program will convert Line 24 to negative.

  6. To convert prior year Schedule I to the current revision, see editing instructions, see IRM 3.11.14.44 .

3.11.14.34  (01-01-2012)
Schedule D (Form 1041) – Capital Gains and Losses

  1. See IRM 3.11.14.16.5, Line 4, Capital Gain and Losses/Schedule D.

3.11.14.35  (01-01-2012)
Form 4952 – Investment Interest Expense Deduction

  1. Lines 4e and 4g are transcribed from Form 4952 (Investment Interest Expense Deduction), effective 1-1-2004. The amounts transcribed from Form 4952 will be used in the computation of Capital Gains and Losses.

  2. Lines 4e and 4g must be positive on Form 4952 . If the taxpayer has a negative entry on either Line 4e or 4g, "X" the negative entry.

    If ... Then ...
    Form 4952 is present, Place in sequence behind Schedule D (Form 1041).
    Form 4952 is present, but Schedule D is missing, Correspond for Schedule D, only if an amount is present on Line 4g of Form 4952.

    Note:

    Do not "X" Form 4952 when corresponding.

    The taxpayer has written a dollar amount on the dotted portion to the left of Line 4e of Form 4952, Delete the Line 4e entry and arrow the amount from the dotted line to Line 4e.
    "Alternative Minimum Tax" (AMT or Alt. Min. Tax) is notated on Form 4952, "X" through the AMT Form 4952 and leave attached.

3.11.14.36  (01-01-2012)
Schedule H (Form 1040) – Household Employment Taxes

  1. This subsection provides instructions for processing Schedule H (Form 1040).

3.11.14.36.1  (01-01-2012)
Schedule H – General Information

  1. Only one Schedule H (Form 1040) can be processed with Form 1041.

    Reminder:

    Examine return for possible CCC "8" conditions. See IRM 3.11.14.7.20

    If ... Then ...
    More than one Schedule H was submitted for one taxpayer, Combine the Schedule H's.

    1. Combine all data and edit it to Section B.

    2. "X" those schedules not to be transcribed.

  2. If the taxpayer submits only Page 2 of Schedule H, correspond for the missing Page 1.

  3. Taxpayers who are not required to file an income tax return but are liable for Household Employment Taxes may submit a Schedule H by itself.

    Note:

    For instructions for processing loose-filed Schedule H's, see IRM 3.11.14.36.18 .

  4. For a display of Schedule H transcription lines, see Exhibit 3.11.14-4 .

3.11.14.36.2  (01-01-2012)
Line 1 – Total Social Security Wages
Line 3 – Total Medicare Wages

  1. "X" Line 1 and/or 3 on Schedule H if the entry is less than the minimum reportable amount. Refer to chart below: See Figure 3.11.14-56.

    If Tax Year is ... Then "X" Line 1 and 3 when ...
    200912 and subsequent less than $1,700
    200812 through 200911 less than $1,600
    200612 through 200811 less than $1,500
    200312 through 200611 less than $1,400
    200112 through 200311 less than $1,300
    200012 through 200111 less than $1,200
    199812 through 200011 less than $1,100

    Figure 3.11.14-56

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

    Delete Lines 1 or 3 if Less than the Minimum Reportable Amount

3.11.14.36.3  (01-01-2012)
Line 2 - Social Security Taxes

  1. Accept taxpayer's entry.

3.11.14.36.4  (01-01-2012)
Line 4 - Medicare Taxes

  1. Accept taxpayer's entry.

3.11.14.36.5  (01-01-2012)
Line 5 - Federal Income Tax Withheld

  1. Accept taxpayer's entry.

3.11.14.36.6  (01-01-2012)
Line 6 - Total Social Security, Medicare and Federal Income Taxes

  1. Compute Line 6 when it is blank by adding Lines 2, 4, and 5.

3.11.14.36.7  (01-01-2012)
Lines 8 through 10 – FUTA Indicator Code (FIN Code)

  1. Edit the FUTA Indicator (FIN) Code under the "Yes/No" boxes in Part II, on page 2 of Schedule H.

  2. Do not edit a FIN code when Part II has no significant money entries.

  3. Edit the FIN Code based on the taxpayer's answers to questions 8, 9 and 10, in Part II of Schedule H.

  4. Determine the FUTA Yes/No Indicator using the following guidelines:

    If ... Then ...
    All of Questions 8, 9, and 10 are answered "Yes" , Take no action. ( Figure 3.11.14-57 )
    Any of Questions 8, 9, and 10 are answered "No" , Edit a "1" below the "Yes/No" box for Question 10. ( Figure 3.11.14-57 )

    Figure 3.11.14-57

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

    FUTA Yes/No Indicator

  5. If the conditions in (4) above are not met, determine from the information provided in Sections A and B in Part II of Schedule H using the chart below:

    If ... Then ...
    Entries are present in Section A only, Take no action.
    Entries are present in Section B only, Edit a "1" below the "Yes/No" box for Question 10.
    Entries are present in both Section A and Section B,

    1. Delete the entries in Section A .

    2. Edit a "1" below the "Yes/No" box for Question 10. (See Figure 3.11.14-58 )

    Entries are not present in either Section A or Section B, Take no action.

    Figure 3.11.14-58

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

    Entries in Both Sections A and B

3.11.14.36.8  (01-01-2012)
Line 11 – State Code

  1. Circle all states when more than one State Code or state name is present on line 11.

  2. Edit the State Code from the taxpayer's address listed in the entity portion of the return when there are no State Codes or state names present.

  3. Valid State Codes include the fifty states plus the District of Columbia, the U.S. Virgin Islands and Puerto Rico.

    1. For a complete listing of valid State Codes, see Figure 3.11.14-59

  4. Edit Line 11 as follows:

    If ... Then ...
    The State Code is present, Underline the State Code on Line 11.
    The State Name is spelled out (not abbreviated as a State Code), Edit the appropriate State Code. (See Figure 3.11.14-59 )
    More than one State Code (or State Name) is present, Circle all State Codes and continue editing the return.
    There are no State Codes (or State Names present), Edit the State Code that corresponds with the taxpayer's address listed in the Entity Section of Form 1041.

    Figure 3.11.14-59

    State Code State   State Code State
    AL Alabama   NE Nebraska
    AK Alaska   NV Nevada
    AZ Arizona   NH New Hampshire
    AR Arkansas   NJ New Jersey
    CA California   NM New Mexico
    CO Colorado   NY New York
    CT Connecticut   NC North Carolina
    DC District of Columbia   ND North Dakota
    DE Delaware   OH Ohio
    FL Florida   OK Oklahoma
    GA Georgia   OR Oregon
    HI Hawaii   PA Pennsylvania
    ID Idaho   PR Puerto Rico
    IL Illinois   RI Rhode Island
    IN Indiana   SC South Carolina
    IA Iowa   SD South Dakota
    KS Kansas   TN Tennessee
    KY Kentucky   TX Texas
    LA Louisiana   UT Utah
    ME Maine   VT Vermont
    MD Maryland   VA Virginia
    MA Massachusetts   VI U.S. Virgin Islands
    MI Michigan   WA Washington
    MN Minnesota   WV West Virginia
    MS Mississippi   WI Wisconsin
    MO Missouri   WY Wyoming
    MT Montana      

3.11.14.36.9  (01-01-2012)
Line 12 – FUTA Contributions Paid

  1. "X" Line 12 when the taxpayer has notated "0%" , "0% RATE" , or "ZERO PERCENT RATE" , etc. as the only entry.

3.11.14.36.10  (01-01-2012)
Line 13 – Total FUTA Wages

  1. Accept taxpayer's entry.

3.11.14.36.11  (01-01-2012)
Line 14 – FUTA Tax

  1. Accept taxpayer's entry.

3.11.14.36.12  (01-01-2012)
Line 15 – column (a), FUTA State Code

  1. A valid State Code (two alpha characters) must be present if there are significant entries in Section B of Schedule H.

  2. Valid State Codes include the fifty states plus the District of Columbia, the U.S. Virgin Islands and Puerto Rico. See Figure 3.11.14-59 for a complete listing of valid State Codes.

  3. Edit Line 15(a) as follows:

    If ... Then ...
    One or two State Codes are present, Underline the State Codes.
    More than two State Codes are present or taxpayer notates "SEE ATTACHED" , Delete all State Codes.
    The State Name is spelled out (not abbreviated as a State Code),

    1. Delete the State Name.

    2. Edit the appropriate two character State Code.
    There are no State Codes (or State Names present), Edit the State Code that corresponds with the taxpayer's address listed in the Entity section of Form 1041.

3.11.14.36.13  (01-01-2012)
Line 16- column (h) – FUTA Contributions Paid

  1. "X" Line 16 when the taxpayer has written "0%" , "0% RATE" , or "ZERO PERCENT RATE" as the only entry.

3.11.14.36.14  (01-01-2012)
Line 17 – FUTA Total Tentative Credit

  1. Compute and edit Line 17 when it is blank by adding Lines 16(g) and 16(h).

  2. Edit line 17 of Schedule H as follows:

    If ... Then ...
    Line 17 is blank, but an entry is present on Line 16(g) and 16(h), Compute Line 17 by adding Lines 16(g) and 16(h).
    Lines 17, 16(g), and 16(h) are all blank, but an entry is present on Line 15(g) and 15(h), Compute Line 17 by adding Rows 1 and 2 of Lines 15(g) and 15(h).
    Lines 17, 16g, and 16(h) are all blank and Line 15(g) and 15(h) are also blank,

    1. Take no action.

    2. Continue editing the return.

3.11.14.36.15  (01-01-2012)
Line 18 - Total FUTA Wages

  1. Accept taxpayer's entry.

3.11.14.36.16  (01-01-2012)
Line 22 - FUTA Tax

  1. Accept taxpayer's entry.

3.11.14.36.17  (01-01-2012)
Multiple ID Indicator (MID Code) - Prior Year Only

  1. Edit the Multiple ID Indicator Code in the right-bottom margin of page 2 of the Schedule H for TY 2010 and prior.

  2. Edit the MID as a 1 when Line 15 contains multiple reporting numbers with the same state code present or edited.

3.11.14.36.18  (01-01-2012)
Loose Schedule H's

  1. Taxpayers who are not required to file Form 1041 may still be required to file Schedule H (Form 1040). These taxpayers will file Schedule H alone.

    If a loose Schedule H is received... Then ...
    With a payment, The Deposit function will notate "LOOSE SCHEDULE H" on the form and forward it to Code & Edit.
    Without a payment, Receipt & Control will route the Schedule H directly to Code & Edit.

  2. Route loose Schedules H to Receipt and Control, Media Transport Unit when "TRUST" or "ESTATE" is not noted in the Name Line.

    Note:

    Work leaders will review all forms to insure transshipment is required before forwarding to the Media Transport Unit.

  3. Process all loose-filed Schedule H's with "TRUST" or "ESTATE" notated on the Name Line as BMF. Also process as BMF, any loose-filed Schedule H received with an EIN and a BMF Name Line (e.g., Kennedy Christian Church, Johnson's Home for the Elderly).

  4. Loose-filed Schedule H's received with remittance will have already been researched to determine the Tax Period Ending and to determine whether the taxpayer had a filing requirement for a Form 1041 (MFT 05) or a Form 1040 (MFT 30).

    • Calendar Year Schedule H With Remittance – Identified by the notation "LOOSE BMF SCHEDULE H" or "LOOSE BMF SCHEDULE H, 200X12" on Schedule H.

    • Fiscal Year Schedule H With Remittance – Identified by the same notation as calendar year filers, except the Tax Period Ending will be other than blank or "12" .

      Example:

      The notation might read "LOOSE BMF SCHEDULE H, 200X06" .

    • Calendar or Fiscal Year Schedule H With No Remittance – Schedule will not contain any notation.

3.11.14.36.18.1  (01-01-2012)
Loose-Filed Calendar Year Schedule H (With Remittance)

  1. Loose-filed Calendar Year Schedule H's received with remittance will contain the notation "LOOSE BMF SCHEDULE H" or "LOOSE BMF SCHEDULE H, 200X12" . Determine the tax year of the loose filed Schedule H:

    If ... Then ...
    TY 2011 or Subsequent,

    1. Prepare a Dummy Form 1041 (see (2) below).

    2. Edit Action Code 480 (Early Filed – Suspense).
    TYs 2010 through 1995,

    1. Prepare a "Dummy" Form 1041 (see Item (2), below).

    2. Edit CCC "8" .

    3. Continue processing the "Dummy" Form 1041 and Schedule H.

    TY 1994 and Prior, Send Schedule H back to the taxpayer.

  2. "Dummy" Form 1041 Procedures – When preparing a "Dummy" Form 1041, ensure that all of the following information is included:

    1. Complete the Entity portion of the return using information provided from the Name Line (top of Page 1) and the Signature and Address Sections (bottom of Page 2).

    2. Edit Fiduciary Code "4" and Trust Code "3" (Family Estate Trust).

    3. Edit line 7, Schedule G and Lines 23, and 27 from Schedule H tax total:

      If ... Then ...
      Part II was not completed, Edit the amount from Line 6 of Schedule H.
      Part II was completed, Edit the amount from Line 24* of Schedule H.
      *(Line 26 for 201, Line 27 for 2009 and prior)

3.11.14.36.18.2  (01-01-2012)
Loose-Filed Calendar Year Schedule H (Without Remittance)

  1. Loose-filed Calendar Year Schedule H's received without remittance will not have any indication of the Tax Period Ending or the Filing Requirement notated on the document.

  2. Assume that the Schedule H has been filed for an IMF (Form 1040) account unless the taxpayer has notated "TRUST" or "ESTATE" on Schedule H. If this is notated, process as a BMF (Form 1041) return:

    1. Follow local procedures for researching the BMF to determine the Tax Period Ending and Filing Requirement:

    If ... Then ...
    Calendar Year Return,

    1. Prepare a "Dummy" Form 1041.

    2. Continue processing the "Dummy" Form 1041 and Schedule H.

    Fiscal Year Return, Process as instructed in IRM 3.11.14.36.18.3 .

3.11.14.36.18.3  (01-01-2012)
Loose-Filed Fiscal Year Schedule H (With or Without Remittance)

  1. Federal employment taxes for household employees must be reported on a calendar year basis on Schedule H (Form 1040) for Tax Year ending 1995 or later.

  2. Process all loose-filed Fiscal Year Schedule H's as follows:

    1. Issue Letter 177C to the taxpayer using an approved Correspondence Action Sheet. Enter the following in the "Fill–Ins" Section of the approved Correspondence Action Sheet:

      "We cannot process your Schedule H (Form 1040) as filed without a completed Form 1041 (U.S. Income Tax Return for Estates and Trusts). The information reported on Line 6 of your Form 1041, Schedule G, must be supported by the information on your Schedule H."

      "Effective TY 1995, Federal employment taxes for household employees must be reported on a calendar year basis on Schedule H (Form 1040). If you filed your Schedule H to report Household Employment Tax (HET) for a Fiscal Year ending in 2011, your Schedule H should include HET for the period January 1, 2010 through December 31, 2010. Returns filed with a Fiscal Year ending in 2010 should include HET for the period January 1, 2009 through December 31, 2009."

      "We will apply the payment you sent as an estimated payment to your Form 1041 account for the fiscal period ending in 2010. The payment will be applied under Employee Identification Number (EIN) ________. If this is not the correct EIN, please let us know."

      Note:

      Use this paragraph for Remittance returns only.

      "If the taxes were erroneously reported and you do not want your payment applied but instead want either a refund or the payment needs to be applied to another Tax Period, please write to us at the address at the top of this letter. If you prefer, you may call the IRS telephone number listed in the local directory. An employee there should be able to help you, but the office at the address shown on this letter is the most familiar with your case."

      Note:

      Use this paragraph for Remittance returns only.

3.11.14.36.18.4  (01-01-2012)
Loose-Filed Amended Schedule H

  1. If the taxpayer has filed a Schedule H (Form 1040) with the notation "AMENDED" , "SUPPLEMENTAL" , "CORRECTION" or any other phrase signifying that the filing is for other than the original filing of the Schedule H:

    1. Edit CCC "G" (Amended Return) on the "Dummy" Form 1041.

    2. Continue editing the return.

3.11.14.37  (01-01-2012)
Form 3800 - General Business Credit

  1. Form 3800, General Business Credit, is required to be filed with estate and trust returns when an amount is present on Schedule G, Line 2b - General Business Credit.

  2. Place Form 3800 in sequence order if significant entries are present.

  3. If an amount is present on Form 3800, Part III, Line 1a Column (c) through Line 4z Column (c) follow the instructions below:

    If ... And ... Then ...
    Credit claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the corresponding form is not attached,   Assign the appropriate Missing Schedule Code (MSC) according to IRM 3.11.14.9.5.
    Credit claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the corresponding form is not attached, No MSC is available or more than 2 MSCs apply, Correspond for the missing forms(s).

  4. If multiple copies of page 3, Form 3800 are attached follow the instructions below:

    If ... And ... Then ...
    More than one copy of Page 3, Form 3800 is attached, Box I is checked on one copy of Page 3,

    1. Place copy with Box I checked behind Page 2, Form 3800.

    2. Staple all copies of Page 3 together.
    More than one copy of Page 3, Form 3800 is attached, Box I is checked on more than one copy of Page 3,

    1. Place first copy of Page 3 with Box I checked behind Page 2, Form 3800.

    2. Staple all copies of Page 3 together.
    More than one copy of Page 3 , Form 3800 is attached, Box I is not checked on any copy of Page 3, Staple all copies of page 3 together.

3.11.14.38  (01-01-2012)
Form 5884-B - New Hire Retention Credit

  1. Place Form 5884-B in sequence order if a significant entry is present on Lines 10 or 11.

3.11.14.39  (01-01-2012)
Form 8941 - Credit for Small Employer Health Insurance Premiums

  1. Place Form 8941 in sequence order if significant entries are present.

3.11.14.40  (01-01-2012)
Form 4136 – Credit for Federal Tax Paid on Fuels

  1. Form 4136 (Credit for Federal Tax Paid on Fuels) must be attached to Form 1041 if a significant entry is present on Line 24g of Form 1041. Correspond if Form 4136 is missing.

  2. Form 4136 should be placed in sequence order.

  3. If Fuel Tax Credit is claimed on Form 1041, Page 1, Line 24g and Form 4136 is attached, perfect column (d) if blank and there is an entry in Column 9c). Column (d) should equal Line 17* of Form 4136. If perfection is not possible, correspond. *(Line 18 for 2007, Line 20 for 2006, Line 15 for 2005, Line 10 for 2004-2001, Line 9 for 2000-1997).

  4. Code & Edit is no longer required to renumber the lines on prior year Form 4136 to current year format. Column (d) credit amounts are transcribed using the corresponding Credit Reference Number (CRN) in Column (e). CRNs for prior years 2008 - 1997 must be renumbered when a significant amount is present. See Form 4136 — Prior Year Conversion Chart, Exhibit 3.11.14-19 .

  5. See Exhibit 3.11.14-6., for a display of transcription lines for Form 4136.

3.11.14.41  (01-01-2012)
Decedent Returns - Form 1040, 1040A and 1040EZ

  1. This subsection provides instructions for identifying and processing Form 1040, 1040A, and 1040EZ Decedent returns.

  2. If a Form 1040, 1040A, or 1040EZ return is filed for a deceased taxpayer (or two deceased taxpayers on a joint return) and the return covers a tax period after the one in which the taxpayer died, Form 1041 must be filed.

  3. When an IMF processing campus determines Form 1040, 1040A, or 1040EZ was filed in error and Form 1041 is required, IMF will forward the return to the BMF processing campus.

    Note:

    If Form 1040 was previously assigned a DLN at the IMF processing campus, the IMF site will void the DLN using Action Code 640 before shipping the return to the BMF site.

  4. The BMF processing campus will verify that Form 1040, 1040A, or 1040EZ (Form 1040/A/EZ) has been filed for a deceased taxpayer. When there is an indication a Form 1040/A/EZ was filed for a deceased taxpayer, (Form 1310 attached or "Dec'd" , "Deceased" , Date of Death, etc., appears on Form 1040/A/EZ or attachments), research IDRS for date of death.

    Note:

    If instructed to process return as an IMF return, follow local procedures for transshipping to the designated IMF processing site. Attach IDRS research and Form 13675 indicating the reason for transshipping.

    If ... And ... Then ...
    The filing status box Single is checked, or one taxpayer is shown in the Entity of Form 1040/A/EZ, Date of death is during or after the filing year, Process as an IMF return.

    • OSPC - Route return to Kansas City Submission Processing Campus (KCSPC).

    • CSPC - Route return to Fresno Submission Processing Campus (FSPC).
    Date of death is prior to the tax period beginning date Convert to Form 1041 or correspond for completed Form 1041 per criteria shown in (6) below.
    The filing status box Married filing joint return box is checked, or there are two taxpayers (not personal rep, exec, etc.) in the Entity area of Form 1040/A/EZ,

    Note:

    Research both SSN's.

    		 Date of death for at least one of the taxpayers is during or after the filing year, Process as an IMF return.

    • OSPC - Route return to KCSPC.

    • CSPC - Route return to FSPC.
    Date of death is for both taxpayers is during or after the filing year, Process as an IMF return.

    • OSPC - Route return to KCSPC.

    • CSPC - Route return to FSPC.
    Date of death is for both taxpayers is during or after the filing year, Convert to Form 1041 or correspond for completed Form 1041 per criteria shown in (6) below.

    Note:

    If Form 1040/A/EZ appears to be a detached bankruptcy return, refer to work leader.

  5. Determine if Form 1040/A/EZ meets the criteria for Form 1041 conversion or correspondence as follows:

    If ... Then ...
    Line 22, Form 1040 (Total Income),
    Line 15, Form 1040 A (Total Income), or
    Line 4, Form 1040 EZ (Adjusted Gross Income), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡     		Convert the Form 1040/A/EZ to Form 1041. IRM 3.11.14.41.2 .
    Line 22, Form 1040 (Total Income),
    Line 15, Form 1040 A (Total Income), or
    Line 4, Form 1040 EZ (Adjusted Gross Income), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡     		Correspond with the taxpayer for a completed Form 1041 using Letter 3801C. IRM 3.11.14.41.1
    Any unprocessable conditions exist that require correspondence with the taxpayer, ie, Form 1040/A/EZ not signed, etc., Do not convert to Form 1041. Correspond with the taxpayer for a completed Form 1041 using Letter 3801C. Include all correspondence issues. IRM 3.11.14.41.1 .
    A "dummied" Form 1041 has a decedent Form 1040/A/EZ attached and there is an indication of no reply to a correspondence request. Convert Form 1040/A/EZ using the dummy Form 1041. IRM 3.11.14.41.2

3.11.14.41.1  (01-01-2012)
Correspondence Procedures for Decedent's Form 1040, 1040A and 1040EZ

  1. Correspond with the taxpayer for a completed Form 1041 when the return meets the criteria for Form 1041 Decedent Conversion and one of the following conditions exist.

    1. Line 22 (Total income), Form 1040; Line 15 (Total income), Form 1040A; or Line 4 (Adjustment Gross Income), Form 1040EZ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Line 22 (Total income), Form 1040; Line 15 (Total income), Form 1040A; or Line 4 (Adjusted Gross Income), Form 1040EZ≡ ≡ ≡ ≡ ≡ ≡ ≡ but un-processable conditions exist.

    Caution:

    If there is evidence of previous correspondence with the taxpayer, the second correspondence must include a paragraph of apology for any inconvenience.

  2. Research the return to see if any of the following conditions exist:

    If ... Then ...
    An EIN is present on Form 1040/A/EZ, it's attachments, or Form 1310, Research IDRS for TC 150 using MFT "05"

    • TC 150 not found, correspond.

    • TC 150 found, reassociate the Form 1040/A/EZ with the posted Form 1041.
    If an EIN has not been assigned,

    1. Attach a blank Form 1041 to front of the Form 1040/A/EZ and delete page 1 of Form 1040/A/EZ. See (3) below for Form 1041 correspondence requirements.

    2. Attach Letter 3801C to the Form 1041 and edit Action Code 211.

      Note:

      For CSPC only, do not edit Action Code 211.

  3. All Form 1041 prepared for correspondence must have a:

    1. Received Date. The absence of a Received Date is an indication of a timely filed return (most Forms 1040/A/EZ are due April 15, 2012). See IRM 3.11.14.41.2 , Conversion Procedures for Decedent Form 1040/A/EZ, for Received Date editing instructions.

    2. Tax Period. If the Tax Period on Form 1040/A/EZ is other than Current Processing year, edit the Tax Period (in YYMM format) to the right of preprinted calendar year on Form 1041.

    3. TIN. Edit the SSN from Form 1040/A/EZ to the EIN location of Form 1041.

      If ... Then ...
      The SSN is missing, illegible or incomplete and cannot be perfected from attachments, Research the SSN following local procedures.

      • If found, edit to the appropriate location.

      • If not found, refer the return to your work leader.

    4. Name Control. Edit the first four letters of the decedent’s last name as the Name Control. See Document 7071 (Name Control Job Aid for Individual Master File (IMF) Taxpayers) for proper determination of the Name Control.

    5. Address. Edit the address as follows:

      If ... Then ...
      A Form 1310 or Court Certificate is attached, Edit the address found in the caption area(s) to the appropriate location on Form 1041.
      No Form 1310 or Court Certificate is attached, Edit the address from Form 1040/A/EZ to the appropriate location on Form 1041. See IRM 3.11.14.13.4, for general editing instructions.

    Note:

    Do not edit Form 1040/A/EZ line entries to Form 1041.

  4. If there is an indication of no reply to a correspondence request for a completed Form 1041, convert Form 1040/A/EZ to Form 1041. IRM 3.11.14.41.2

3.11.14.41.2  (01-01-2012)
Conversion Procedure for Decedent Form 1040, 1040A and 1040EZ

  1. Convert Form 1040/A/EZ to Form 1041 when all of the following conditions exist:

    • The return is for a single deceased taxpayer (or two deceased taxpayers) on a joint return and the return covers a tax period after the one in which the taxpayer(s) died.

    • Line 22 (Total Income) Form 1040 , Line 15 (Total Income) Form 1040A, or Line 4 (Adjusted Gross Income) Form 1040EZ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • There are no unprocessable conditions present. See IRM 3.11.14.5 .

      Exception:

      If there is an indication of "no reply" to a correspondence request for a completed Form 1041, convert to Form 1040/A/EZ to Form 1041.

  2. If all of the above conditions are met, or there is an indication of a no reply to a correspondence request for a completed Form 1041, prepare the return for conversion by deleting page 1 of Form 1040/A/EZ and attaching a blank Form 1041 to the front of the return.

  3. All Forms 1040/A/EZ prepared for conversion must have a Received Date. The absence of a Received Date is an indication of a timely filed return received at an IMF campus. Received Date editing instructions for Decedent Form 1041 Conversions differ from other instructions found in the Form 1041 IRM.

    Caution:

    If a prior year Form 1040/A/EZ has been cleared by statutes, then after converting return to a 1041, send converted Form 1041 package to Statutes to be cleared.

  4. Convert Form 1040 to Form 1041 as follows:

    1. Edit the received date. All Forms 1040/A/EZ prepared for conversion must have a Received Date. See IRM 3.11.14.10, Received Date, for additional information.

      If ... Then ...
      There is no Received Date present on Form 1040/A/EZ, The return was timely filed. Edit 041512 to Form 1041 as the Received Date.
      There is a single, timely Received Date present on Form 1040/A/EZ, Edit the Received Date from the Form 1040/A/EZ to Form 1041 as the Received Date.
      There is a single, delinquent Received Date from OSPC or CSPC present on Form 1040/A/EZ, The return was timely filed. Edit 041512 to Form 1041 as the Received Date.
      There is a single Received Date from a processing campus other than OSPC or CSPC present on Form 1040/A/EZ, Edit the Received Date from the Form 1040/A/EZ to Form 1041 as the Received Date.
      There are multiple Received Dates present on Form 1040/A/EZ, Edit the earliest IMF Received Date or the earliest, timely BMF Received Date from Form 1040/A/EZ to Form 1041 as the Received Date.

      If all the Received Dates are from OSPC or CSPC and all are delinquent, the return was timely filed, edit 041510 as the Received Date to Form 1041.

    2. Edit the Tax Period (in YYMM format) to the right of the preprinted Calendar Year on Form 1041, if the Tax Period on Form 1040/A/EZ is other than the Current Processing year.

    3. Edit Fiduciary code "1" (Decedent's Estate) in Box "A" .

    4. Edit the EIN as follows:

      If ... Then ...
      An EIN is present on Form 1040/A/EZ, Edit to the appropriate location on Form 1041 .
      An EIN is not present on Form 1040/A/EZ, Route the converted Form 1041 to Entity Control for EIN assignment.

    5. Edit the first four letters of the decedent’s last name as the Name Control. See Document 7071 (Name Control Job Aid for Individual Master File (IMF) Taxpayers) for proper determination of the Name Control.

    6. Edit the address as follows:

      If ... Then ...
      A Form 1310 or Court Certificate is attached, Edit the address found in the caption area(s) to the appropriate location on Form 1041.
      No Form 1310 or Court Certificate is attached, Edit the address from Form 1040/A/EZ to the appropriate location on Form 1041. See IRM 3.11.14.13.4, for general editing instructions.

    7. Edit the date of death as the "Date Entity Created" in Section "D"

      Note:

      Edit CCC "8" if Section "D" is within two years of the tax year ending date. See IRM 3.11.14.7.20.

    8. The procedures for Decedent Form 1041 Conversions require that the Form 1041 IRM signature instructions be applied to the Form 1040/A/EZ signature area. Therefore, the signature instructions for Decedent Form 1041 Conversions differ from the instructions found in other sections of the Form 1041. See IRM 3.11.14.5.3 for correspondence instructions.

      Check the Form 1040/A/EZ signature area to determine if all of the Form 1041 signature requirements are met. See IRM 3.11.14.22 .
      If ... Then ...
      Signature correspondence is required, Do not convert Form 1040/A/EZ. Correspond with the taxpayer for a completed Form 1041. See IRM 3.11.14.5.3.
      All signature criteria is met, Edit "See Attached" or "S/A" to the signature line of Form 1041.

  5. Transfer specific tax data from Form 1040/A/EZ to Form 1041 using the following instructions:

    • Form 1040 - IRM 3.11.14.41.3

    • Form 1040A - IRM 3.11.14.41.4

    • Form 1040EZ - IRM 3.11.14.41.5

  6. Place the converted Form 1041 and any transcribable forms in sequence order. See IRM 3.11.14.2.2.

  7. Do not detach Form 1040 and its schedules from Form 1041 when the Form 1040 is received attached to Form 1041 on a correspondence reply return.

3.11.14.41.3  (01-01-2012)
Transferring Tax Data for Decedent Form 1040 to Form 1041

  1. If there are no money amounts present on Form 1040 to convert to Form 1041, edit zeros on lines 1, 9, 23 and 25.

  2. If Form 1040 includes any line amounts that cannot be associated with a line on Form 1041, refer to your manager.

  3. The following table contains instructions for transferring tax data from Form 1040, including Schedules A (Itemized Deductions) and Schedule D (Capital Gains and Losses) to Form 1041:

    1. Edit the amounts from "Income" Section of Form 1040 to the applicable Income lines on Form 1041:

      Edit from Form 1040, Line... Edit to Form 1041, Line...
      Taxable Interest 8a 1
      Ordinary Dividends 9a 2a
      Qualified Dividends 9b 2b(2)
      Total the amounts from:
      Wages
      Taxable Refunds
      Alimony
      Taxable IRA Distributions
      Taxable Pensions and Annuities
      Unemployment
      Taxable Social Security
      Other Income

      7
      10
      11
      15b
      16b
      19
      20b
      21

      8
      Business Income 12 3
      Capital Gain 13 4
      Other Gains 14 7
      Schedule E Income 17 5
      Farm Income 18 6
      Alternative Minimum Tax 45 1c, Sch G
      Foreign Tax Credit 47 2a, Sch G
      Other Credits 53 2c, Sch G
      Unreported Social Security and Medicare Tax on Tip Income 57 5, Sch G
      Household Employment Taxes 59a 6, Sch G
      Total Tax) 61 23
      Federal Income Tax Withheld 62 24e
      Estimated Tax Payments 63 24a
      Amount Paid With Extension 68 24d
      Form 2439 Payments 71a 24f
      Form 4136 Payments 70 24g
      Form 8913 prior year TY2006 only   Dotted portion of Line 25
      Overpayment 73 28
      Refund 74a 29b
      Applied to Estimated Tax 75 29a
      Tax Due 76 27
      Estimated Tax Penalty 77 26

      Edit from Schedule A (Form 1040, Line...) Edit to Form 1041, Line...
      Total Taxes Paid 9 11
      Total Interest Paid 15 10
      Total Gifts to Charity 19 13
      Casualty and Theft Losses plus (Other Miscellaneous Deductions) 20 + 28 15a
      Total Job Expenses and Certain Miscellaneous Deductions 27 15b

      Edit from Schedule D (Form 1040, Line...) Edit to Schedule D (Form 1041), Line...
      Net Short-Term Capital Gain or Loss 7, Column (h) 13(2)
      Net Long-Term Capital Gain or Loss 15, Column (h) 14a(2)
      Unrecaptured Section 1250 Gain 19 14b(2)
      28% Rate Gain or Loss 18 14c(2)

  4. After completing the conversion process, refer to IRM 3.11.14 for further coding and editing requirements. Review the newly converted Form 1041 for conditions that may require further action. For example; CCC codes, Audit Codes, support for newly transcribed lines, and routing attachments. Place Forms and Schedules in sequence order.

    Reminder:

    If any conditions exist that require correspondence with the taxpayer to resolve, do not convert Form 1040. Correspond with the taxpayer for a completed Form 1041.

  5. For prior year returns, match the Form 1040 line descriptions to the same line descriptions on Form 1041.

3.11.14.41.4  (01-01-2012)
Transferring Tax Data for Decedent Form 1040A to Form 1041

  1. If there are no money amounts present on Form 1040A to convert to Form 1041, edit zeros on lines 1, 9, 23 and 25.

  2. The following table contains instructions for transferring tax data from Form 1040A to Form 1041.

    Edit from Form 1040A, Line... Edit to Form 1041, Line...
    Taxable Interest 8a 1
    Ordinary Dividends 9a 2a
    Qualified Dividends 9b 2b(2)
    Total the amounts from:
    Wages
    Capital Gain Distributions
    Taxable IRA Distributions
    Taxable Pensions and Annuities
    Unemployment
    Taxable Social Security Benefits

    7
    10
    11b
    12b
    13
    14b

    8
    Total Tax) 35 23
    Federal Income Tax Withheld 36 24e
    Estimated Tax Payments 37 24a
    Overpayment 42 28
    Refund 43a 29b
    Applied to Estimated Tax 44 29a
    Tax Due 45 27
    Estimated Tax Penalty 46 26

  3. After completing the conversion process, refer to the Form 1041 IRM 3.11.14 for further coding and editing requirements. Review the newly converted Form 1041 for conditions that may require further action, for example; CCC codes, Audit Codes, support for newly transcribed lines, and routing attachments.

    Reminder:

    If any conditions exist that require correspondence with the taxpayer to resolve, do not convert Form 1040A. Correspond with the taxpayer for a completed Form 1041 .

  4. For prior year returns, match the Form 1040A line descriptions to the same line descriptions on Form 1041.

3.11.14.41.5  (01-01-2012)
Transferring Tax Data for Decedent Form 1040EZ to Form 1041

  1. If there are no money amounts present on Form 1040EZ to convert to Form 1041, edit Zeros on lines 1, 9, 23 and 25.

  2. The following table contains instructions for transferring tax data from Form 1040A to Form 1041:

    Edit from Form 1040A, Line... Edit to Form 1041, Line...
    Taxable Interest 2 1
    Total the amounts from:
    Wages
    Unemployment

    1
    3

    8
    Federal Income Tax Withheld 7 24e
    Tax 10 23
    Refund 11a 29b
    Tax Due 12 27

  3. Do not detach Form 1040EZ from Form 1041 when the Form 1040EZ is received attached to Form 1041 on a correspondence reply return.

  4. For prior year returns, match the Form 1040EZ line descriptions to the same line descriptions on Form 1041.

3.11.14.42  (01-01-2012)
Form 1041-QFT, Qualified Funeral Trusts

  1. Form 1041-QFT was added to the Internal Revenue Code by the Taxpayer Relief Act of 1997 to permit certain trusts which previously filed Form 1041 as Grantor Trusts to elect Qualified Funeral Trust status.

    If ... Then ...
    An original DomesticForm 1041-QFT is received at any Submission Processing site other than CSPC,

    Exception:

    Domestic Forms 1041-QFT that are erroneously sent to OSPC will be processed in Ogden.

    1. Detach and forward to the following address:
       
      Internal Revenue Service
      Cincinnati Submission Processing Campus
      Cincinnati, OH 45999

    An original InternationalForm 1041-QFT is received at any Submission Processing site other than OSPC,

    1. Detach and forward to the following address:
       
      Internal Revenue Service
      1973 North Rulon White Blvd
      Mail Stop 4091
      Ogden, UT 84404

    2. Prepare Letter 86C to inform the taxpayer that the return has been sent to OSPC.

    Caution:

    Prior to shipping Forms 1041-QFT to CSPC or OSPC, ensure that the Received Date is edited to the return.

  2. A composite Form 1041-QFT is a single return filed by a trustee that includes some or all of the QFTs of which he or she is a trustee. Statements may be attached in lieu of Schedule D. IRM 3.11.14.42.11.4(8).

  3. The due date to file Form 1041-QFT or a composite returns is April 15, 2012. A short year return is due to be filed by the 15th day of the fourth month following the close of the short year. See Exhibit 3.11.14-12, Due Date charts.

  4. Forms 1041-QFT are processed with Document Code "39" , MFT "05" , Tax Class "2" .

  5. For a display of Form 1041-QFT transcription lines, see Exhibit 3.11.14-10 .

3.11.14.42.1  (01-01-2012)
General Editing Guidelines

  1. The following general information can be used when editing Form 1041-QFT returns.

  2. General instructions eliminate repetition of the same instructions for each return. If the general instructions and the specific instructions conflict, follow the specific instructions.

  3. Do not bracket any negative amounts.

  4. Received date is edited in MMDDYY format.

  5. If a current year/prior year return is filed on a tax form other than the appropriate tax year, convert tax return to the current year format.

  6. If a current year return is filed on a prior year tax form, renumber the prior year return to comply with current year line numbers.

  7. If a current year form is used to report prior year tax information, edit the tax period to reflect the prior year.

  8. If the prior year return is filed on the correct/incorrect 1041-QFT tax form, renumber the prior year form to current year format (1998 and subsequent).

3.11.14.42.1.1  (01-01-2012)
♦Edit Marks♦

  1. See IRM 3.11.14.2.1.

3.11.14.42.1.2  (01-01-2012)
Editing Dollar and Cents

  1. Edit all applicable forms and schedules as dollars only, except the following Form 1041-QFT lines which are dollar and cents:

    • Line 13 – Tax

    • Line 14 – Credits

    • Line 15 – Net Tax

    • Line 16 – Total Payments

    • Line 17/18 – Tax Due/Overpayment

    • Line 19a – Credit Elect

    • Line 19b – Refund

  2. C&E is no longer required to edit a vertical line, 00, dash, or decimal point to indicate dollars and cents.

3.11.14.42.2  (01-01-2012)
♦Action Codes♦

  1. See IRM 3.11.14.3.

3.11.14.42.3  (01-01-2012)
Unprocessable Conditions and Correspondence Action

  1. See IRM 3.11.14.5.

3.11.14.42.3.1  (01-01-2012)
Correspondence

  1. See IRM 3.11.14.5.3.

3.11.14.42.3.1.1  (01-01-2012)
Correspondence Imaging System (CIS) Returns

  1. See IRM 3.11.14.5.3.1.

3.11.14.42.3.1.2  (01-01-2012)
Use of Fax for Taxpayer Submissions

  1. See IRM 3.11.14.5.3.2.

3.11.14.42.4  (01-01-2012)
Examination of Attachments

  1. See IRM 3.11.14.6.


Prev Next

More Internal Revenue Manual