The Federal Unemployment Tax Act (FUTA) established the Federal Unemployment Tax and required cooperation between the States, Internal Revenue Service, and the Department of Labor to determine an employer's contribution to the Unemployment System.

Tax revenue collected from the Form 940 and Form 940PR is applied under the FUTA Trust Fund and passed on to the States by the Department of Labor (DOL) to help them administer their unemployment programs.

Credit Reduction States are announced by the Department of Labor each November.

After the return is processed, the FUTA Certification Program verifies the credit claimed and the FUTA wage amount reported by the employer on their Form 940 return. Information is exchanged with the states to certify the amounts.

The Internal Revenue Service Restructuring and Reform Act of 1998, Section 3705, provides identification requirements for all IRS employees working tax related matters.

IRS employees are required to give their name and unique identification number during taxpayer telephone, face to face and written contact. In addition, name of the employee and unique identification number are required on all manually generated taxpayer correspondence. Other correspondence must include a telephone number that the taxpayer may contact. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax related matters.

A referral to a TAS office should be made if the IRS employee receives a taxpayer contact that meets TAS acceptance criteria (IRM 3.11.154.1.3 (5)) and the employee cannot initiate action to resolve the taxpayer's inquiry or provide the relief requested by the taxpayer. A taxpayer should not have to specifically request TAS assistance to be referred to TAS. IRS employees will advise taxpayers of the option to seek TAS assistance when appropriate. TAS will generally accept the taxpayer's problem at a face value, and will not require documentation from the taxpayer unless it is needed by the IRS to provide the requested relief, or required by the IRM for TAS to provide the relief.

A referral to a TAS office is not necessary even if TAS Case Criteria are met if the IRS employee can resolve a taxpayer's inquiry or provide the relief requested, as outlined in IRM 13.1.7.4 Same Day Resolution. The definition of "Same Day Resolution" "is within 24 hours" . However, although you cannot completely resolve the issue within 24 hours, if you have taken steps within 24 hours to resolve the taxpayer's issue, these cases also meet the definition of "same day" . Do not refer these cases to TAS unless the taxpayer asks to be transferred to TAS.

Refer also to IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines, for more information. The National Taxpayer Advocate (NTA) toll-free number, 1-877-777-4778 or TTY/TDD 1-800-829-4059, should be provided to the taxpayer and the taxpayer should be advised that TAS is available if the taxpayer is not satisfied with the service he or she received.

The following types of cases should not be referred to TAS:

TAS Case Acceptance Criteria:

The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage and Investment (W&I) Division, Small Business and Self Employed (SB/SE) Division, Tax Exempt and Government Entities (TE/GE) Division, Criminal Investigation, (CI), Appeals and Large and International(LB&I) Division, that outline the procedures and responsibilities for the processing of Taxpayer Advocate Service (TAS) casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLAs).

The SLAs are located at http://tas.web.irs.gov under the heading "Policy/Procedures/Guidance " .

Some Submission Processing Centers have developed local use Desk Procedures.

Such procedures are only to be used:

Unit managers must have a signed approval on file from the responsible Operations Manager on all Submission Processing Center Desk Procedures.

All existing local information and procedural issuances should be reviewed by the Operations Manager upon receipt of the new IRM revision to ensure conformance with Headquarters procedures.

The purpose of this initiative is to achieve consistency in the Business Master File (BMF) Code and Edit processing IRMs.

Topics for the BMF Consistency have been identified and developed as a coordinated effort between Cincinnati, Ogden, and Wage and Investment Division (Paper Processing Branch, BMF Code and Edit /ERS Section).

BMF Consistency subsections are identified by a diamond (♦) symbol before and after the title.

Text in normal print is the common processes for BMF returns. The text in Bold print is form-specific and applies to this IRM only.

The purpose of Document Perfection is to code and edit returns and other documents for input to the Master File.

The Service Center Recognition Image Processing System (SCRIPS) and the Integrated Submission and Remittance Processing System (ISRP) process Form 940 Series Returns. IRM 3.11.154.2.2 for specific information regarding Form 940 and Form 940PR.

Some lines on the return are correctly entered as zero "-0-" , dash "–" "N/A" or "none" and do not need to be edited.

Edit all money amounts in dollars and cents, if the distinction between dollars and cents is not clear.

Edit any misplaced or illegible transcription entry to the proper transcription line. The entry may have to be computed from other figures on the return or attachment.

If the taxpayer submits tax information for any year after 2005 on a Form 940 or Form 940PR with a prior revision year, edit the return, as necessary. IRM 3.11.154.2.2

All Form 940-EZ returns must be converted to the current year Form 940.

Form 940 returns are processed through the Service Center Recognition Image Processing System (SCRIPS), or the Integrated Submission and Remittance Processing System (ISRP).

Form 940 returns which should be processed through SCRIPS are:

The Integrated Submission and Remittance Processing System (ISRP) transcribes information from forms that cannot be input through SCRIPS. ISRP should process the following forms:

Most 940 returns filed on Revision 2006 through current year (2012) forms should be processed through SCRIPS. Exhibit 3.11.154-1 for transcription lines of the Form 940 (Revision 2012).

Form 940PR (all Revisions) are processed through ISRP. Form 940PR has the same transcription lines as Form 940. Exhibit 3.11.154-2 for transcription lines.

Returns processed through SCRIPS are batched and prepared separately as "Perfects" or "Imperfects" .

Form 940 returns (Revisions 2006 and subsequent), which are batched as "Perfects" , must be prepared as follows:

When a SCRIPS 940 return is submitted typed or with blue or black ink and any check box or the signature is in orange, or pink, recheck the boxes in red or place an asterisk (*) in the left most position in the signature box.

When Code and Edit reviews the Form 940, determine:

Code and Edit examiners should ensure that the jurat and authorized signature are shown and are in their proper location on the return, e.g. Form 940 or Form 940PR.

After review and editing, when placing the return in a batch, Form 940 (or Form 940PR and Schedule A or attachments should be in sequential order. This will assist SCRIPS and ISRP during data transcription.

Form 940 Schedule R/Schedule R Continuation Sheet:

Edit marks are edited on the return for transcription through ISRP or SCRIPS.

The editing must be entered in red pen only.

The only items edited on the return are those to be transcribed except where specific instructions require editing of a non-transcribed item. Lines are left blank if the entry would be a zero amount unless otherwise instructed.

The original entry on a return is never obliterated, altered, or erased when deleting or correcting an entry. Always exercise care to ensure that the original entry remains legible. Perfected entries provide a legible "edit trail" for anyone who may work with the return later.

The return line format on returns should correspond to the current year's revision. To convert a return to the current format, you must renumber the lines to the current revision. Exhibit 3.11.154-3 , Form 940/940PR, Revision 2005 and prior table for the conversion lines.

The table below provides a description of edit marks for SCRIPS and ISRP processing:

The following action will be edited on the Unemployment Returns in the Code and Edit program:

Action Codes are used to indicate whether correspondence, research, or some other action is needed. The Action Code will set the suspense period to be assigned to the return and place the return in the workable or unworkable suspense inventory. Exhibit 3.11.154-12 for suspense periods.

When necessary, a three-digit Action Code will be assigned by the tax examiner.

Edit Action Codes for Form 940 and Form 940PR (Revisions 2006 and subsequent) just below the line that states "For Privacy Act....." . Do not extend into the left margin. Edit the Action Code in the bottom left margin of the return (Revision 2005 and prior).

Assign Action Codes in the following priority order:

Attach Form 4227 when more than one Action Code is needed. Edit the Action Code with the shortest suspense period on the form and edit the second Action Code on Form 4227.

Edit the following Action Codes when a return cannot be perfected from the information present:

Continue perfecting the return after editing the Action Codes.

For a list of the valid Action Codes, Exhibit 3.11.154-12.

Editing of CAF codes is no longer required.

The Centralized Authorization File (CAF) contains the type of authorization that taxpayers give to representatives regarding the taxpayers' accounts. Representatives may submit Form 2848 or Form 2848-SP, "Power of Attorney (POA) and Declaration of Representative" , or Form 8821, Tax Information Authorization (TIA).

All attachments to the return must be reviewed before the return can be considered processable.

Attachments should only be detached when specifically instructed.

Before detaching an attachment for routing, verify that it contains the Name, EIN (Employer Identification Number) or SSN (Social Security Number). Edit if missing.

When a document is detached, also edit the Received Date in the lower left corner, ( for example Rec'd MM/DD/YY).

For Form 940 and Form 940PR returns Code and Edit must ensure the taxpayer's EIN is on all attachments, in case they are separated from the return during processing. If the EIN is not shown on an attachment, (to be processed with the return), edit the last 4 digits of the taxpayer’s EIN. Routed attachments should show the Name, full EIN, and a Received Date.

Imperfect Form 940 and 940PR (Rev 2006 and subsequent) - After detaching a document from the return, and only page(s) 1, 2, and (if applicable) Schedule A and Schedule R remain, do not pull the return, leave return in “Imperfect” batch.

Edit Action Trail(s) in the lower left corner going vertically up the side of the return.

Follow the general guidelines below for each attachment:

Computer Condition Codes (CCC) are used to identify a special condition or computation to post to the Master File.

For Secured and Prepared Returns, edit the applicable CCC as indicated on the return, attachment, or Form 13133.

Edit Computer Condition Codes in the following locations:

Code and Edit will no longer edit the Penalty and Interest code "1" on the Form 940, or 940PR.

Code and Edit will no longer edit the FTD Penalty on Form 940, or 940PR..

The Internal Revenue Code (IRC) provides for other penalties to be assessed against taxpayers. Those penalties are explained in IRC Sections 6663 and 6674.

Provisions have not been made for assessing these penalties on the original input of the return. Therefore, they should not be included in the penalty and interest box.

Pre-Computed penalties other than Delinquency (Late Filing Penalty), Failure To Deposit Penalty (FTD) or Failure to Pay (FTP) should be handled as follows:

Failure to Deposit - When a pre-computed Failure to Deposit penalty is shown on the return, add the penalty amount to the balance due amount or, subtract the amount of the penalty from the overpayment (refund) amount claimed .

Delinquency, Failure to Pay and Minimum Penalty - When a Delinquency, Failure to Pay, or Minimum Penalty is shown on the return, subtract the penalty from the balance due amount if the taxpayer has computed the penalty and interest, and added it to the balance due amount.

A return must contain specific items before it is considered processable and timely filed. Perfect all documents to the extent possible from schedules and other attachments. The specific items needed are:

Conditions which make a document unprocessable are:

Procedures for Unprocessable Documents

DO NOT send the following unprocessable returns to the Hold File:

Issue correspondence to resolve any conditions causing the return to be unworkable or unprocessable.

.

Examine the return to address all of the conditions in the same correspondence.

Conditions requiring correspondence and the suggested correspondence action: Exhibit 3.11.154-6.

Tax return information can be received via fax as part of return perfection even if a taxpayer signature is required. In circumstances where contact with the taxpayer has been made and documented, fax signatures are acceptable.

Contact with the taxpayer may be by telephone or correspondence. Follow local procedures to determine which method of contact will be used.

Code and Edit examiners will indicate the fax paragraph on the Form 12522, Correspondence Action Sheet, to advise taxpayers of the option to fax their response.

The Third Party Designee election was created to allow a designated individual to discuss and/or disclose information about the taxpayer's Form 940, or Form 940PR, with the IRS. The Third Party Designee election applies only while the return is being processed, and only for the return's tax year.

The Third Party Designee is located in Part 6, Form 940 and Form 940PR (Revisions 2006 and subsequent).

The Paid Preparer information is located in Part 7 of Form 940 and Form 940PR (Revision 2008 and subsequent).

A signature and jurat are required on all returns except the following:

IRM 3.11.154.3.10 for Correspondence Imaging Returns ("CIS" ) signature instructions.

Since tax examiners are not expected to be handwriting experts, Regulations allow us to presume that the signature on a return, statement or other document is the true signature of the person who actually signed the document.

Very often, a tax preparer will mark a signature line with an "X" , to indicate where the taxpayer should sign the return. When this happens:

Accept a signature declaration, (a signature with a jurat obtained through IRS correspondence), if attached to the return.

A signature of an individual, officer, partner, duly authorized agent, etc. can be printed, typed, stamped, computer generated, or affixed by some other type of mechanical device. A "signature" refers to the "name" of the individual who attests that the information on the return is true, correct and complete.

The signature must appear in either the " Sign your name here" box, or on the " Print your name here" box, or the " Signature" line. If the taxpayer's or duly authorized representative's signature does not appear in any one of those areas, follow the procedures in the IF/THEN Table below.

If a signature and/or jurat is not present as required, process as follows:

Facsimile Signature - Rather than a handwritten signature, an owner, partner, corporate officer or duly authorized agent may sign a Form 940 or Form 940PR by facsimile (i.e., by rubber stamp, mechanical device, or computer software program).
If a facsimile is used, the person filing the form must retain a letter, signed by the individual authorized to sign the return(s) declaring under penalties of perjury that the facsimile signature appearing on the form is the signature adopted by the person and that the signature was placed there by their direction.

For SCRIPS processing, if a return is submitted typed with blue or black ink and the signature is in orange, or pink, place an asterisk (*) in the left most position in the signature box to prevent the SCRIPS system from generating a notice to the taxpayer.

All returns must have a Tax Period. Edit the Tax Period to the right of the form title in YY format.

Prepare a dummy return for each Tax Year involved when more than one tax year is shown on a return. Correspond with the taxpayer if a dummy return cannot be prepared.

An Early-Filed return is a return with a Received Date prior to the Tax Period Ending date.

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

"226" on the return. Edit Action Code "480" (Early filed- Suspense) on Form 4227 and forward for correspondence action.

Circle out the received date if one is shown on the return.

Do not edit Credit Reduction information on Early-Filed return

Do not pull from pack if the return is an early filed SCRIPS.

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

A return is normally delinquent if it is not received on or before the return due date. Accept a return as timely ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . A return is not delinquent if the return is timely postmarked and mailed before, or on the due date. If 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. IRM 3.11.154.3.3 for instructions on determining timeliness of returns.

If the return is truly delinquent, check return or attachments for an explanation of late filing. Send the taxpayer Letter 1382C to inform the taxpayer we have received their request. Do not code the return "R" if a pre-computed delinquency penalty is shown.

Forms 940 and 940PR are annual (calendar year) returns.

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

A valid IRS received date is required on the following returns:

The received date may or may not be stamped on the face of the return.

A valid Received Date Stamp consists of the following:

If the received date is not present or the date is illegible/invalid, edit the Received Date in MMDDYYYY format in the middle of page 1 of the return. Edit the Received Date in the following priority:

Edit the Received Date as follows:

Form 940 and Form 940PR returns are non- taxable when they are filed without any tax data entries or with no entries for tax. The taxpayer may also indicate a non-taxable return by checking Box "c" , "No payments to employees" , or box "d" , "Final: Business closed or stopped paying wages" (Revisions 2006 and subsequent).

If there are indications on the return or attachments that the taxpayer is liable, correspond for all missing items necessary to process the return (unless otherwise directed by IRM procedures).

If you determine the return is non-taxable, edit as follows:

Services rendered to a federally-recognized Indian Tribal Government (or its instrumentalities) are exempt from FUTA tax, subject to the tribe's compliance with applicable state law.

For submission processing purposes, Code and Edit employees should accept all FUTA tax returns notated or referenced with the following explanations for ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Perfect the return as "Non Taxable" and "Final." See the following procedures:

A potential statute control return is any return with a received date that is 2 years and 9 months or more after the return due date.

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 Statute Control Unit. Statute will stamp or indicate clearance on the front of the return.

See the reference table below for statute barred dates for timely filed returns for tax year 200612 and subsequent.