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 180. Allocated Tips (Cont. 1)

3.11.180  Allocated Tips (Cont. 1)

3.11.180.2 
Code and Edit Instructions

3.11.180.2.6  (01-01-2010)
Late Replies

  1. Late replies may be received in response to Letter 1858C after the 45-day response period has expired. Therefore, the late reply must be worked without the original document.

  2. After the 45-day suspense period, the original return is pulled from the suspense file and, if processable, it is processed without complete information. See IRM 3.11.180.2.3(8).

  3. Check the late reply for a completed Form 8027.

    1. If a complete Form 8027 is attached, follow processing procedures.

    2. If the original Form 8027 contained sufficient information and was processed when purged from the suspense file, mark the " Amended Return" box on the corrected Form 8027.

    3. If no Form 8027 is attached but the letter contains the requested information, prepare a dummy Form 8027 and process.

    4. If there is insufficient information to prepare a dummy Form 8027, route to National Tip Reporting Compliance for special handling.

3.11.180.2.7  (01-01-2010)
Unprocessable Documents

  1. Perfect all documents, if possible. Examine attachments and Form 8027-T, if present, for the information necessary to make a return processable.

  2. If unprocessable, initiate correspondence action when the document cannot be perfected from attachments or Form 8027-T.

    Exception:

    Employer and establishment name and address are missing or are so illegible that correspondence is impossible, or correspondence was sent on the same issue, but the document is still unprocessable.

  3. If correspondence is impossible, follow guidelines for undeliverable or no response after 45 days. See IRM 3.11.180.2.3(8).

  4. Route documents that cannot be perfected and processed to National Tip Reporting Compliance for special handling:
    Internal Revenue Service
    Attn. NTRCP Senior Policy Analyst/iv
    3251 North Evergreen Drive NE
    Grand Rapids, MI 49525.

3.11.180.3  (01-01-2010)
Error Resolution

  1. See IRM 3.11.180.1 , General Information, and IRM 3.11.180.2, Code and Edit Instructions, to become familiar with the Form 8027 and the procedures required to ensure the form is processable.

  2. You are not expected to review or redo the work of a Returns Analysis tax examiner, except in the resolution of an error of omission or commission which forced the return to the Error Register.

3.11.180.3.1  (01-01-2010)
Error Register

  1. Only errors will be printed on the register. More than one field will be printed when one field of data is inconsistent with another field.

  2. Each correction must use either Action Code 2, 6 or 7. Corrections are subject to validity checks. If a correction does not pass these checks, the record will reappear on the Error Register. See IRM 3.11.180.3.1.1 .

  3. Electronic source documents will be identified by the presence of a Transmitter Control Code (TCC) literal and a 5 digit printed number. The source document for electronic returns is a computer generated transcript, which generates with the Error Register.

    Note:

    The computer generated transcript may not help resolve errors that are present. Correspondence may be needed. See IRM 3.11.180.3.3 .

  4. Paper source documents will be identified by the presence of a DLN literal and the 14 digit number. The source document is the actual Form 8027.

3.11.180.3.1.1  (01-01-2010)
Action Codes

  1. The following action codes are valid:

    Action Code Use to:
    2 Delete the record from the Error Register and send the record to the Reject Register.
    6 Programming allows up to three (3) corrections on the register. Change one or more data fields. It is not necessary to change every field on the register when one or more fields are inconsistent, (e.g., an error in gross receipts may cause several other items to be inconsistent). A correction to gross receipts will cause the other inconsistencies to be dropped. An error in the state/ZIP code fields may cause both fields to be inconsistent. A change to the incorrect field will cause the inconsistency check to be corrected.

    Note:

    You can make up to three (3) corrections on the register, so do not make just one (1) correction and wait for it to loop to make the additional corrections.

    7 Indicate the data on the Error Register is to be accepted as is. Action Code 7 cannot be used to force an invalid character within a specific field (e.g., you cannot force bad data).

    Note:

    You can force a "0" for Line 5 with Action Code 7 if the form shows "0" .

  2. Only one Action Code must be entered on the Error Register to the left of the error sequence number to correct an error record.

  3. The above applies to both paper and electronic documents.

3.11.180.3.1.2  (01-01-2010)
Condition Codes

  1. There are two codes that may be used:

    1. Code "4" is entered when Lines 7a-c are blank and Line 7 is greater than zero. See IRM 3.11.180.2.1.19 .

    2. Code "U" is entered when Line 8 is blank or zero. See IRM 3.11.180.2.1.20 .

  2. The above applies to both paper and electronic documents.

3.11.180.3.1.3  (01-01-2010)
Error Reason Codes

  1. An Error Reason Code (ERC) will appear to the left of an element number on the Error Register when a consistency error exists.

  2. If no Error Reason Code is present, the element identified on the Error Register is invalid (e.g., alpha in a money field).

  3. Error Reason Codes:

    Error Reason Code (ERC) Generates when:
    SZ - Address inconsistency

    See IRM 3.11.180.3.2.5 and IRM 3.11.180.3.2.6 for establishment. See IRM 3.11.180.3.2.21 and IRM 3.11.180.3.2.22 for employer.     		Establishment (or employer) state and ZIP code are inconsistent.
    MA - Money amounts in Lines 1 through 5 are inconsistent

    See IRM 3.11.180.3.2.11 .     		Line 2 is not greater than Line 1.
    Line 4c does not equal the sum of Lines 4a and 4b ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    Line 5 is not greater than each of Lines 1, 3, 4a, 4b and 4c.
    Line 5 is less than Line 2.
    AA - Allocation amounts are inconsistent Line 6 does not equal Line 5timesTip Rate≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
    See IRM 3.11.180.3.2.12(1) through (7).
    Line 7 is significant but the allocation method (Line 7a, Line 7b or Line 7c) is not code 1, 2, 3, or 4.
    See IRM 3.11.180.3.2.13 .
    AT - Lines 4c, 6 and 7 are inconsistent

    See IRM 3.11.180.3.2.12 .     		Line 6 is equal to or less than Line 4c, and Line 7 is not equal to zero.
    Line 6 is greater than Line 4c, and Line 7 is not equal to the difference between Line 6 and Line 4c, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    13 - Invalid correction An invalid correction is attempted or a correction did not take.

  4. Error Reason Codes may be combined.

    Example:

    Codes MA and AA may be combined if both are true of the same elements.

  5. See IRM 3.11.180.3.2 for specific field action.

3.11.180.3.1.4  (01-01-2010)
Element Numbers

  1. The chart below provides the element numbers as they appear on the Error Register, their description and Form 8027 line number:

    Element Number Item Description Form 8027 Line Number
    01 BLOCK DLN  
    02 SERIAL NUMBER  
    03 AMENDED DOC CODE  
    04 NAME OF ESTABLISHMENT  
    05 CITY OF ESTABLISHMENT  
    06 STATE - ESTABLISHMENT  
    07 ZIP CODE - ESTABLISHMENT  
    08 NAME OF EMPLOYER  
    09 EIN  
    10 ESTABLISHMENT TYPE CODE  
    11 ESTABLISHMENT NUMBER  
    12 CHARGED TIPS Line 1
    13 CHARGE RECEIPTS Line 2
    14 SERVICE CHARGES Line 3
    15 INDIRECT TIPS Line 4a
    16 DIRECT TIPS Line 4b
    17 TOTAL TIPS Line 4c
    18 GROSS RECEIPTS Line 5
    19 GROSS TIMES TIP RATE AMOUNT Line 6
    20 TIP RATE PERCENTAGE Line 6 (Center)
    21 ALLOCATED TIPS Line 7
    22 ALLOCATION METHOD Line 7a, 7b, or 7c
    23 NUMBER OF EMPLOYEES Line 8
    24 TAX YEAR  
    25 SPECIAL RETURN CODE  
    26 RECEIVED DATE  
    27 STREET - ESTABLISHMENT  
    28 STREET - EMPLOYER  
    29 CITY - EMPLOYER  
    30 STATE - EMPLOYER  
    31 ZIP CODE - EMPLOYER  

  2. Element numbers appear on the Error Register to the right of the Error Reason Codes (ERC).

3.11.180.3.2  (01-01-2010)
Error Correction - Specific Field Action

  1. Enter the field correction immediately to the right of the field on the Error Register.

  2. Enter the appropriate Action Code to the left of the error sequence number on the Error Register.

  3. All money amount fields (Lines 1 through 7) are numeric or blank except for Line 6, which may contain an alpha "X."

    1. No negative amounts will be allowed.

    2. No commas or decimals should be entered.

    3. All money amounts are in dollars only.

    4. Do not code any leading zeros.

3.11.180.3.2.1  (01-01-2010)
Block Document Locator Number & Serial Number - Elem 01 & 02 (11 & 2 Positions)

  1. Form 8027 will be blocked in groups of 100. However, short blocks are acceptable since forms may be pulled for correspondence during Code and Edit.

  2. A correction on the first document DLN will cause the block DLN to dupe throughout the rest of the block.

  3. The following is a description of each element of the DLN that will print out as Element 01.

    1. Positions 1-2, Service Center Code "17."

    2. Positions 3, Tax Class "5."

    3. Positions 4-5, Document Code "57."

    4. Positions 6-8, Julian Date, valid range is "001" to "366."

    5. Positions 9-11, Block Number "000-499."

  4. Make the necessary corrections to the DLN so it conforms to the above. The Serial Number of the DLN is Element 02 on the Error Register. The Year Digit is computer generated.

  5. Additional corrections may be entered at the same time the DLN correction is made. If a DLN correction is made to the first document of the block, the correction, with Action Code 6, will be duped throughout the block. Only one Action Code per document may be entered for a given pass.

  6. Serial Numbers will not change when the DLN is duped. A separate correction is required to change the Serial Number (Element 02). The Serial Number should be in sequence, but does not have to be consecutive. For example, a sequence of "00," "04" and "07" is acceptable.

3.11.180.3.2.2  (01-01-2010)
Amended Document Code - Elem 03 (1 Position)

  1. The Amended Document Code must be blank or an alpha " G."

  2. Enter "G" if:

    1. The "Amended Return" box is marked, or

    2. The word, "supplemental," "duplicate " or "additional" is written on the return or an attachment, or

    3. There is positive indication that the employer/establishment filed previously.

3.11.180.3.2.3  (01-01-2010)
Name of Establishment - Elem 04 (40 Positions)

  1. The establishment name cannot be all blanks. Only alpha (A-Z) and numeric (0-9) characters are allowed.

  2. The employer name should be entered if no establishment name is given.

  3. The employer’s name may be found on:

    1. Form 8027-T (if present) or on other Form 8027 included in the employer's submission,

    2. The return envelope, if attached to the submission, or

    3. Through IDRS research.

3.11.180.3.2.4  (01-01-2010)
Establishment City - Elem 05 (25 Positions)

  1. The City must be all alphas. Edit out hyphens as blanks.

  2. Do not use major city codes.

  3. Use the employer’s city if blank. Search attachments as instructed under "Name of Establishment" above.

3.11.180.3.2.5  (01-01-2010)
ERC SZ - Establishment State - Elem 06 (2 Positions)

  1. Error Reason Code SZ will appear on the Error Register if the establishment state is inconsistent with the ZIP code.

  2. A valid state is necessary for processing. Do not use Action Code 7.

  3. If the establishment's state is blank, use the employer's state. Search attachments as instructed under "Name of Establishment " above.

  4. If the establishment has a foreign address, reject the document using Action Code 2. Route the Form 8027 to National Tip Reporting Compliance for special handling. Reporting is required only for establishments located in the United States and the District of Columbia.

  5. If necessary, See Exhibit 3.11.180-3 and use the valid two alpha state code.

3.11.180.3.2.6  (01-01-2010)
ERC SZ - Establishment ZIP Code - Elem 07 (5 or 9 Positions)

  1. Error Reason Code SZ will appear on the Error Register if the establishment ZIP code is inconsistent with the state.

  2. The ZIP code must be five or nine numerics. The last four positions must be either all blanks or all numerics.

  3. The first three digits must be in the valid range of ZIP codes for the state. See Exhibit 3.11.180-3 and determine the valid ZIP code range for the state.

  4. If the ZIP code is missing, use the State Codes and ZIP Codes Perfection Chart ( See Exhibit 3.11.180-4 ).

  5. If both the city and state are valid, but the ZIP code is missing and cannot be determined, use Action Code 7.

3.11.180.3.2.7  (01-01-2010)
Name of Employer - Elem 08 (40 Positions)

  1. The employer name cannot be all blanks. Only alpha (A-Z) and numeric (0-9) characters are allowed.

  2. The name must have at least one alpha or one numeric character.

  3. If missing, search for the employer’s name on:

    1. Form 8027-T (if present) or on other Form 8027 included in the employer's submission,

    2. The return envelope, if attached to the submission, or

    3. If not found, research IDRS using EIN.

3.11.180.3.2.8  (01-01-2010)
Employer Identification Number (EIN) - Elem 09 (9 Positions)

  1. This field must be nine numerics, or it may have a valid EIN prefix in the first 2 positions followed by seven (7) periods.

    Note:

    Valid EIN prefixes are 01-06, 10-16, 20-27, 30-48, 50-68, 71-77, 80-88, 90-99.

  2. Research attachments and/or IDRS to correct an invalid EIN (containing alphas, spaces, invalid EIN prefix, etc.).

  3. If EIN cannot be determined, correspond with the employer using Letter 1858C. If undeliverable or no response is received after 45 days :

    1. Write "Failure to Provide TIN" in the upper left margin/side of the return.

    2. Penalty Assessment - Failure to Provide a TIN. The penalty for Failure to Provide a Taxpayer Identification Number (TIN) must be assessed. See IRM 3.11.180.2.5.

    3. See Exhibit 3.11.180-3. Determine the correct EIN prefix.

    4. Enter the 2-digit code followed by seven (7) periods and continue processing.

3.11.180.3.2.9  (01-01-2010)
Establishment Type Code - Elem 10 (1 Position)

  1. One box should be checked to describe the type of service the establishment provides.

  2. Use the following chart to determine correct code:

    Box(es) checked Code
    1 1
    2 2
    3 3
    4 4
    None 2
    1 and 4 1
    3 and 4 3
    1, 2, and 3 2
    1 and 2 2
    1 and 3 2
    2 and 3 2
    2 and 4 2

3.11.180.3.2.10  (01-01-2010)
Establishment Number - Elem 11 (5 Positions)

  1. The establishment number must contain 5 numerics. Each establishment number must be unique for each establishment. Breaks in the sequence numbers are allowed.

  2. If blank or a duplicate, sequentially number or renumber. Do not use leading zeros.

3.11.180.3.2.11  (01-01-2010)
ERCs AA/AT/MA - Money Amounts Lines 1 through 5 - Elem 12 through 18 (10 Positions)

  1. Error Reason Code MA will appear on the Error Register if:

    1. Line 2 is not greater than Line 1.

    2. Line 4c does not equal the total of Lines 4a and 4b ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    3. Line 5 is not greater than each of Lines 1, 3, 4a, 4b and 4c.

    4. Line 5 is less than Line 2.

    Note:

    Refer to IRM 3.11.180.2.1.14 for additional information.

  2. Establishments report amounts on Lines 1 through 5.

  3. An amount is required for Line 5. Lines 1 through 4c may be blank.

  4. Line 2 must be greater than the amount reported on Line 1.

    If Then
    Line 2 is not greater than Line 1 Use Letter 1858C to correspond with the employer. See IRM 3.11.180.2.3 , Correspondence Preparation.
    No reply or undeliverable 1. Penalty Assessment - Inconsistent Return. Write "No Response - Inconsistent Return" in the upper left margin/side of the return. Assess the Failure to File penalty. See IRM 3.11.180.2.5 .

    2. Enter a "1" in Element 13 (Line 2) if there is no amount present.

    3. Use Action Code 7 to clear the register.

  5. Line 3 may be zero or blank.

  6. If amounts are present for Lines 4a or 4b and Line 4c is blank, correct as follows:

    1. Add Lines 4a and 4b. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Use Letter 1858C to inform the employer of any change that is made to Line 4c.

  7. If an amount is present on Line 4a only or 4b only and Line 4c is greater than (or less than) Line 4a or Line 4b (whichever is applicable), correct as follows:

    If there is an amount on And Then
    Line 4a only A greater amount on Line 4c, Enter the difference between the two lines on Line 4b.
    Line 4b only A greater amount on Line 4c, Change the Line 4b amount to equal the Line 4c amount.
    Line 4a only A lesser amount on Line 4c, Change the Line 4c amount to equal the Line 4a amount. Use Letter 1858C to inform the employer of any change that is made to Line 4c.
    Line 4b only A lesser amount on Line 4c, Change the Line 4c amount to equal the Line 4b amount. Use Letter 1858C to inform the employer of any change that is made to Line 4c.

  8. If an amount is present on Line 4c only (Lines 4a and 4b are blank), correct as follows:

    If Then
    Line 8 has a number of employees (greater than zero), Enter Line 4c amount on Line 4b.
    Line 8 does not have a number of employees, Enter Line 4c amount on Line 4a.

  9. If an amount is present for Line 1 but no amounts are present on Lines 4a, 4b or 4c, correspond. See IRM 3.11.180.2.3 , Correspondence Preparation

    1. If undeliverable or no response is received after 45 days, enter Action Code 7. Lines 4a, 4b and 4c may all be zero or blank.

  10. Check the amount for Line 5.

    If Then
    The amount for Line 5 is missing, or Line 5 is not greater than each amount on Lines 1, 3, 4a, 4b, and 4c, or Line 5 is less than Line 2. Use Letter 1858C to request the correct information from the employer.
    No reply or undeliverable 1. Penalty Assessment - Inconsistent Return. Write "No Response - Inconsistent Return" in the upper left margin/side of the return. Assess the Failure to File penalty. See IRM 3.11.180.2.5 .

    2. If all receipts including tips are "charged," and Lines 2 and 5 are equal, add ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    3. Otherwise, use Action Code 7 to clear register.

  11. Error Reason Codes AA and AT - See IRM 3.11.180.3.2.12 .

3.11.180.3.2.12  (01-01-2010)
ERCs AA/AT - Money Amounts Lines 6 and 7 - Elem 19 through 21 (10 Positions) Dollars Only

  1. Error Reason Code AA will appear on the Error Register if the IRS computed amount exceeds Line 6≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  2. When there is a discrepancy between the IRS figure and that of the employer, Elements 18, 19, and 20 will print along with Error Reason Code AA. Check for transcription and taxpayer errors. Correct accordingly.

  3. If other than a calendar year, an "X" should be found on Line 6.

  4. Generally, Line 6 will equal Line 5 times 8% or the percentage allowed in the IRS determination letter. The acceptable range is 2% to 8%.

  5. The employer may use a lower percentage only when special permission is received from the IRS. The lower percentage will be entered in the center of Line 6 (Element 20).
    Note: If the Form 8027 has any of the following notations (including 2007 and prior):

    • Under TRDA/Tip Rate Determination Agreement,

    • Under GITCA/Gaming Industry Tip Compliance Agreement,

    • Under TRAC/Tip Reporting Alternative Commitment,

    • Under Revenue Procedure (Rev. Proc.) 2007-32,

    • Under Revenue Procedure (Rev. Proc.) 2003–35; mail to:
      Internal Revenue Service
      Attn. National Tip Reporting Compliance Analyst
      110 City Parkway
      Las Vegas, NV 89106      .

    Note:

    Following receipt of Forms 8027, the National Tip Reporting Compliance Analyst will separate out all Forms 8027 that were submitted by Indian tribal government entities and mail them to the Indian Tribal Government (ITG) Tip Coordinator at the following address:
    Internal Revenue Service
    MS 7200 PHX: ITG Tip Coordinator
    4041 N Central Ave Ste 112
    Phoenix, AZ 85012.

    1. When a rate lower than the 8% allocation rate is used, be sure that an IRS determination letter, allowing the lower percentage rate, is attached.

    2. Failure to have a determination letter attached requires correspondence using Letter 1858C. If undeliverable, no response, or correspondence is unsuccessful, recalculate the allocation amount using the 8% rate. Initiate a non-suspense Letter 1858C to inform the employer that the standard 8% rate has been used.

  6. If the return shows a percentage rate that is higher than 8%, disregard it and use the standard 8% rate.

  7. If the IRS computation exceeds Line 6, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the percentage rate has been verified, correct the employer's figure.

  8. Error Reason Code AT will appear on the Error Register if:

    1. Line 6 is equal to or less than Line 4c, and Line 7 is not equal to zero.

    2. Line 6 is greater than Line 4c, and Line 7 is not equal to the difference between Lines 6 and 4c, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. If there is a discrepancy between Lines 4c, 6 and 7, the amounts will print along with Error Reason Code AT. If these fields appear as errors on the Error Register, compare the Form 8027 with the Error Register to be sure all figures were transcribed accurately.

  10. If other than a calendar year, an "X" should be found on Line 6.

  11. If Line 6 has no amount or "zero" and Line 7 has an amount, enter an "X" on Line 6 and the register.

  12. If Line 6 is less than or equal to Line 4c, Line 7 must be zero.

  13. If Line 6 is more than Line 4c, the difference is entered on Line 7. Correct Line 7 or compute the difference if no entry is present.

    Note:

    If you make a correction to Line 4c, 5, or 6, also make any necessary correction to Line 7. Use Letter 1858C to notify the employer of any adjustment.

3.11.180.3.2.13  (01-01-2010)
ERC AA - Method of Allocation, Lines 7a through 7c - Elem 22 (1 Position)

  1. Error Reason Code AA will appear on the Error Register if Line 7 is significant but the allocation method (Line 7a, 7b or 7c) is not code 1, 2, 3, or 4.

  2. If Line 7 is greater than zero, one of three methods of allocation must be checked. Enter:

    1. "1" if Line 7a is checked.

    2. "2" if Line 7b is checked.

    3. "3" if Line 7c is checked and a good-faith agreement is attached.

  3. If Line 7c is checked and a good-faith agreement is not attached:

    1. Use Letter 1858C to request a copy from the employer.

    2. If undeliverable or no response is received , use Condition Code "4." Initiate a non-suspense Letter 1858C to inform the employer that the agreement will not be reflected in the account information.

  4. If the employer made multiple entries, enter a code in Element 22 according to the following priority:

    1. "3" for Line 7c, if a good-faith agreement is attached.

    2. "1" for Line 7a, if checked with another box.

    3. "2" for Line 7b, if checked with other than 7a or 7c with a good-faith agreement attached.

  5. If the employer made no entry in Lines 7a through 7c, use Condition Code "4."

  6. If Line 7 is blank, edit a zero. Circle out any entries in Line 7a, 7b or 7c.

3.11.180.3.2.14  (01-01-2010)
Total Number of Directly Tipped Employees Line 8 - Elem 23 (4 Positions)

  1. A number greater than zero must be entered in Line 8.

  2. If Line 8 is zero or blank, "U" code the register.

3.11.180.3.2.15  (01-01-2010)
Tax Year - Elem 24 (4 Positions)

  1. Valid tax year is 2008 or 2009 .

  2. If the tax year is 2007 or prior, use Action Code 2 to reject the document.

  3. All 2007 and prior Forms 8027 should be sent to the following address; unless the form meets the criteria in IRM 3.11.180.1(13).
    Internal Revenue Service
    Attn. NTRCP Senior Policy Analyst/iv
    3251 North Evergreen Drive NE
    Grand Rapids, MI 49525.

  4. If a Form 8027 is an early (future tax year) filed return, check the return and attachments for the correct tax period. Correct any coding or transcription errors.

    1. For non-final returns, if the tax period is more than three months but less than one year from the current date, correspond for confirmation of the tax year.

    2. If the return is a "Final" , use Action Code 2 to reject the document and hold the return until the next processing year.

3.11.180.3.2.16  (01-01-2010)
Special Return Code - Elem 25 (1 Position)

  1. The Special Return Code must be blank or one alpha character. The alpha character is edited to the right of the "Final Return" box.

  2. The valid alpha codes are:

    1. "T" - Tip Reporting Program participant (box for Rev. Proc. 2006-30 (Internal Revenue Bulletin 2006-31 (dated July 31, 2006), is checked).

      Note:

      The Special Return Code "T" indicates Attributed Tip Income Program or ATIP participation.

    2. "F" - Final return (e.g., "Final Return" box checked) with money amounts.

    3. "N" - Final return with no money amounts or "Not Liable" return with no money amounts.

      Note:

      A Form 8027 that appears to be both "Final" and "Not Liable," should be treated as "Not Liable."

    4. If more than one condition above is reported, enter one code using this priority: T (1st), F (2nd), N (3rd). The "Note" above is the exception to this priority.

  3. Leave blank, if none of the above applies.

3.11.180.3.2.17  (01-01-2010)
Received Date - Elem 26 (8 Positions)

  1. The received date must be present if Form 8027 is delinquent.

  2. When present, the received date must contain eight numerics in MMDDYYYY format. See IRM 3.11.180.2.1.3 for procedures.

    Note:

    Per the programming for the received date format, Integrated Submission and Remittance Processing (ISRP) transcribers enter six (6) numerics (MMDDYY) at initial input. When the ISRP transcriber hits the field release, it displays as eight (8) numerics (MMDDYYYY).

  3. If a received date is present on a timely filed return, Code & Edit is instructed to circle it out. If Code & Edit did not circle out the received date on a timely filed return, delete the register and reinput the return to correct it.

  4. If a received date issue continues to loop, delete the register and reinput the return. If you still have problems, contact the appropriate people (e.g., Planning and Analysis Analyst, Headquarters Analyst, Headquarters Programmer, etc.) for assistance.

3.11.180.3.2.18  (01-01-2010)
Establishment Street - Elem 27 (35 Positions)

  1. The establishment street must contain more than one alpha character.

  2. If the establishment address is blank, use the employer's address.

3.11.180.3.2.19  (01-01-2010)
Employer Street - Elem 28 (35 Positions)

  1. The employer street must contain more than one alpha character.

  2. If the street address is missing, search for the address on:

    1. Form 8027-T (if present) or on other Form 8027 included in the employer's submission,

    2. The return envelope, if attached to the submission, or

    3. If not found, research IDRS using EIN.

3.11.180.3.2.20  (01-01-2010)
Employer City - Elem 29 (25 Positions)

  1. The City must be all alphas.

  2. Do not use major city codes.

  3. If the city is missing, search for the address on:

    1. Form 8027-T (if present) or on other Form 8027 included in the employer's submission,

    2. The return envelope, if attached to the submission, or

    3. If not found, research IDRS using EIN.

3.11.180.3.2.21  (01-01-2010)
ERC SZ - Employer State - Elem 30 (2 Positions)

  1. Error Reason Code SZ will generate if the state is inconsistent with the ZIP code.

  2. A valid state is required for processing. Do not use Action Code 7.

  3. If the state is missing, search for the address on:

    1. Form 8027-T (if present) or on other Form 8027 included in the employer's submission,

    2. The return envelope, if attached to the submission, or

    3. If not found, research IDRS using EIN.

  4. Use the valid two alpha character state code. See Exhibit 3.11.180-3.

3.11.180.3.2.22  (01-01-2010)
ERC SZ - Employer ZIP Code - Elem 31 (5 or 9 Positions)

  1. Error Reason Code SZ will generate if the ZIP code is inconsistent with the state.

  2. The ZIP code must be five or nine numerics. The last four positions must be either all blanks or all numerics.

  3. The first three digits must be in the valid range of ZIP codes for the state. See Exhibit 3.11.180-3 to determine the valid ZIP code range for the state.

  4. If the ZIP code is missing, use the State Codes and ZIP Codes Perfection Chart. See Exhibit 3.11.180-4 .

  5. If both the city and state are valid, but the ZIP code is missing and cannot be determined, use Action Code 7.

3.11.180.3.3  (01-01-2010)
Reject Register

  1. Records will be rejected from the Error Register when errors cannot be resolved from the Form 8027 submission. In some cases, correspondence will be needed. In other cases, the record will be considered unprocessable.

  2. If correspondence is needed, prepare a Correspondence Action Sheet (CAS) to issue Letter 1858C.

  3. Prepare the Correspondence Action Sheet, enter Action Code 2 on the register and route the return and the CAS to the Correspondence Team.

  4. After the letter has been issued, the return will be filed in the Correspondence Team to await reply.

  5. Allow 45 days for a reply.

  6. When the reply is received, the Correspondence Team will associate the reply with the return.

  7. Line out the DLN on the return, and prepare for reinput and renumbering.

    1. Electronic source documents will be numbered with a (TCC) Transmitter Control Code.

    2. Prepare a "dummy" Form 8027. Use the Form 8027 transcripts for reinput of electronic documents.

    3. Any correspondence from the employer providing additional information should also be incorporated.

  8. If undeliverable or no response is received after 45 days , examine the return to determine if it is possible to force post the document. See IRM 3.11.180.2.3(8).

  9. If a document is unprocessable and cannot be perfected based on the information provided in the No Reply Chart, route it to National Tip Reporting Compliance for special handling. See IRM 3.11.180.3.5.

3.11.180.3.4  (01-01-2010)
Generated "Unpostable" Listing

  1. The "Unpostable" listing is generated in the same format as the Reject Register, except there is no error sequence number. The "Unpostable" listing is titled, Tip Income Form 8027 Unpostable Register.

  2. An unpostable listing will generate when a return tries to post but it matches a return on either the input file or posted file in the following fields:

    • EIN

    • Type of Establishment

    • Money amounts on Lines 4c and 5.

  3. A transcript will be printed for the posted record to compare data with the unpostable return.

    1. If the transcript and the return have the same establishment name and tax year indicating the establishment filed twice, check the data on both returns. If the data is the same on both returns, annotate the listing as "Duplicate Processing" . Do not reinput return.

    2. If there are different establishment names shown on the transcript and the return, check data on both returns. If it appears that the filer simply split the money amounts between establishments, use Letter 1858C to correspond with the employer. Explain that this is not acceptable. If no reply, or the employer does not comply, assess the $100 penalty for intentional disregard. See IRM 3.11.180.2.5. Reinput the document after ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. If there are duplicate Forms 8027 on the unpostable listing and no transcript is printed, reinput one of the duplicates.

    4. If there are multiple unpostables for the same EIN and no transcripts are generated, check to see if the returns are being filed as "not liable" for different establishments. Since these will match on EIN, Type of Establishment, and money amounts on Lines 4c and 5 (none), they will unpost even though they are not true duplicates. Reinput one of these returns and route the others to National Tip Reporting Compliance for special handling. Notate that duplicate forms were submitted with the same EIN. These documents will not post because they will be duplicates of the reinput return.

  4. There is no difference between the paper and electronic "Unpostable" format. However, an electronic unpostable will generate two transcripts - one for the previously posted record and one for the record attempting to post, in lieu of a paper Form 8027.

  5. For electronic source documents, if an "Unpostable" listing is generated, it is possible that the electronic document was processed twice. Contact the Planning and Analysis (P&A) Staff to research if this situation occurs.

3.11.180.3.5  (01-01-2010)
Uncorrectable Unprocessable Documents

  1. Examine the document to ensure there is no procedure that will force the document through processing without the required field data. See IRM 3.11.180.2.3(10) for guidelines on "No Replies."

  2. Route any uncorrectable unprocessable document to National Tip Reporting Compliance for special handling if:

    1. The document is deemed uncorrectable because the return cannot be perfected from attachments or Form 8027-T,

    2. No response has been received from the employer or establishment, or corresponding is not possible due to incomplete address information, and

    3. Guidelines provided in the No Reply Chart were followed.

Exhibit 3.11.180-1  (01-01-2010)
Form 8027, Transcription Lines

This image is too large to be displayed in the current screen. Please click the link to view the image.
Element Number Item Description Form 8027 Line Number
01 BLOCK DLN  
02 SERIAL NUMBER  
03 AMENDED DOC CODE  
04 NAME OF ESTABLISHMENT  
05 CITY OF ESTABLISHMENT  
06 STATE - ESTABLISHMENT  
07 ZIP CODE - ESTABLISHMENT  
08 NAME OF EMPLOYER  
09 EIN  
10 ESTABLISHMENT TYPE CODE  
11 ESTABLISHMENT NUMBER  
12 CHARGED TIPS Line 1
13 CHARGE RECEIPTS Line 2
14 SERVICE CHARGES Line 3
15 INDIRECT TIPS Line 4a
16 DIRECT TIPS Line 4b
17 TOTAL TIPS Line 4c
18 GROSS RECEIPTS Line 5
19 GROSS-TIMES-TIP RATE AMOUNT Line 6
20 TIP RATE PERCENTAGE Line 6 (Center)
21 ALLOCATED TIPS Line 7
22 ALLOCATION METHOD Line 7a, 7b, or 7c
23 NUMBER OF EMPLOYEES Line 8
24 TAX YEAR  
25 SPECIAL RETURN CODE  
26 RECEIVED DATE  
27 STREET - ESTABLISHMENT  
28 STREET - EMPLOYER  
29 CITY - EMPLOYER  
30 STATE - EMPLOYER  
31 ZIP CODE - EMPLOYER  

Exhibit 3.11.180-2  (01-01-2010)
Form 8027-T

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

Exhibit 3.11.180-3  (01-01-2010)
State Code / ZIP Code Range / EIN Prefix

State Code State ZIP Code Range Area Office EIN Prefix
AL Alabama 350-369 Birmingham 63
AK Alaska 995-999 Anchorage 92
AZ Arizona 850-865 Phoenix 86
AR Arkansas 716-729 Little Rock 71
CA California 900-961 (except 909) Laguna Niguel
N. Highlands
San Jose
Oakland
Los Angeles 		33
68
77
94
95
CO Colorado 800-816 Denver 84
CT Connecticut 060-069 Hartford 06
DE Delaware 197-199 Wilmington 51
DC District of Columbia 200, 202-205 Baltimore 52
FL Florida 320-339, 341, 342, 344, 346, 347, 349 Jacksonville
Fort Lauderdale 		59
65
GA Georgia 300-319, 399 Atlanta 58
HI Hawaii 967-968 Honolulu 99
ID Idaho 832-838 Boise 82
IL Illinois 600-629 Chicago
Springfield 		36
37
IN Indiana 460-479 Indianapolis 35
IA Iowa 500-528 Des Moines 42
KS Kansas 660-679 Wichita 48
KY Kentucky 400-427 Louisville 61
LA Louisiana 700-714 New Orleans 72
ME Maine 039-049 Augusta 01
MD Maryland 206-219 Baltimore 52
MA Massachusetts 010-027, 055 Boston 04
MI Michigan 480-499 Detroit 38
MN Minnesota 550-567 St. Paul 41
MS Mississippi 386-397 Jackson 64
MO Missouri 630-658 St. Louis 43
MT Montana 590-599 Helena 81
NE Nebraska 680-693 Omaha 47
NV Nevada 889-898 Las Vegas 88
NH New Hampshire 030-038 Portsmouth 02
NJ New Jersey 070-089 Newark 22
NM New Mexico 870-884 Albuquerque 85
NY New York 004, 005, 100-149 Brooklyn
Manhattan
Albany
Buffalo 		11
13
14
16
NC North Carolina 270-289 Greensboro 56
ND North Dakota 580-588 Fargo 45
OH Ohio 430-459 Cincinnati
Cleveland 		31
34
OK Oklahoma 730-732
734-749 		Oklahoma City 73
OR Oregon 970-979 Portland 93
PA Pennsylvania 150-196 Philadelphia
Pittsburgh 		23
25
RI Rhode Island 028-029 Providence 05
SC South Carolina 290-299 Columbia 57
SD South Dakota 570-577 Aberdeen 46
TN Tennessee 370-385 Nashville 62
TX Texas 733, 750-799, 885 Austin
Dallas
Houston 		74
75
76
UT Utah 840-847 Salt Lake City 87
VT Vermont 050-054, 056-059 Burlington 03
VA Virginia 201, 220-246 Richmond 54
WA Washington 980-994 (except 987) Seattle 91
WV West Virginia 247-268 Parkersburg 55
WI Wisconsin 530-549 Milwaukee 39
WY Wyoming 820-831 Cheyenne 83

Exhibit 3.11.180-4  (01-01-2010)
State Codes and ZIP Codes Perfection Chart

State Codes and ZIP Codes Perfection Chart
State Code State or Area ZIP State Code State or Area ZIP
AA America-Atlantic 34001 MS Mississippi 38601
AE America-Europe 09001 MO Missouri 63001
AP America-Pacific 96201 MT Montana 59001
AL Alabama 35001 NE Nebraska 68001
AK Alaska 99501 NV Nevada 88901
AZ Arizona 85001 NH New Hampshire 03001
AR Arkansas 71601 NJ New Jersey 07001
CA California 90001 NM New Mexico 87001
CO Colorado 80001 NY New York 00501
CT Connecticut 06001 NC North Carolina 27001
DE Delaware 19701 ND North Dakota 58001
DC District of Columbia 20001 OH Ohio 43001
FL Florida 32001 OK Oklahoma 73001
GA Georgia 30001 OR Oregon 97001
HI Hawaii 96701 PA Pennsylvania 15001
ID Idaho 83201 RI Rhode Island 02801
IL Illinois 60001 SC South Carolina 29001
IN Indiana 46001 SD South Dakota 57001
IA Iowa 50001 TN Tennessee 37001
KS Kansas 66001 TX Texas 75001
KY Kentucky 40001 UT Utah 84001
LA Louisiana 70001 VT Vermont 05001
ME Maine 03901 VA Virginia 20101
MD Maryland 20601 WA Washington 98001
MA Massachusetts 01001 WV West Virginia 24701
MI Michigan 48001 WI Wisconsin 53001
MN Minnesota 55001 WY Wyoming 82001

Exhibit 3.11.180-5  (01-01-2010)
Attachment Guide

If And Then
Form 8027 Single Establishment Form 8027-T is not present, If attachments are present, arrange as follows:
1. Form 8027
2. Determination Letter
3. Good-faith Agreement
4. Copy of Form 8809 or filing extension approval Letter 2519 (CG)
5. Explanation for late filing.
Form 8027 Single Establishment Form 8027-T is present, Attach Form 8027-T behind Form 8027 and arrange any other attachments as indicated above.
Form 8027 Multiple Establishments Form 8027-T is present, Arrange as follows:
1. Form 8027 (first in group)
2. Form 8027-T
3. If used for more than one establishment:
a. Determination Letter
b. Good-faith Agreement
c. Copy of Form 8809 or filing extension approval Letter 2519 (CG)
d. Explanation for late filing
4. Form 8027 (in Establishment Number order, if present)
Note: Attachments that are for a particular establishment should be attached behind that Form 8027.
Original Form 8508, Request for Waiver From Filing Information Returns Electronically,   Route to:
IRS/Enterprise Computing Center-Martinsburg (ECC-MTB)
Information Reporting Program
Attn. Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430.
Copy of Form 8508 Attached to Form 8027, Keep attached. See IRM 3.11.180.2.5.2.
Original Form 8809, Request for Extension of Time to File,   Route to:
IRS/Enterprise Computing Center-Martinsburg (ECC-MTB)
Information Reporting Program
Attn. Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430.
Copy of Form 8809 Attached to Form 8027, Keep attached. See IRM 3.11.180.2.1.3.1.
Determination Letter,   Keep attached.
Good-faith Agreement,   Keep attached.
Letter 2519 (CG),   Keep attached.
Explanation for late filing,   Keep attached.
Gaming Industry Tip Compliance Agreement (GITCA),   Detach and route to:
Internal Revenue Service
Attn. National Tip Reporting Compliance Analyst
110 City Parkway
Las Vegas, NV 89106.
Tip Reporting Alternative Commitment (TRAC),   Detach and route to:
Internal Revenue Service
Attn. National Tip Reporting Compliance Analyst
110 City Parkway
Las Vegas, NV 89106.
Tax Rate Determination Agreement (TRDA),   Detach and route to:
Internal Revenue Service
Attn. National Tip Reporting Compliance Analyst
110 City Parkway
Las Vegas, NV 89106.
Revenue Procedure (Rev.Proc.) 2007-32 (Gaming Industry Tip Compliance Agreement (GITCA)),   Detach and route to:
Internal Revenue Service
Attn. National Tip Reporting Compliance Analyst
110 City Parkway
Las Vegas, NV 89106.
Revenue Procedure (Rev.Proc.) 2003-35 (Gaming Industry Tip Compliance Agreement (GITCA)),   Detach and route to:
Internal Revenue Service
Attn. National Tip Reporting Compliance Analyst
110 City Parkway
Las Vegas, NV 89106.
Form W-2,   Detach and consult with your manager for disposition instructions.
List of establishments,   See IRM 3.11.180.1.3(9).
Requests for forms,   See IRM 3.11.180.1.3(11).
CP 215 - Civil Penalty Notice response and/or
Correspondence related to a penalty assessment, 		  See IRM 3.11.180.2.5.4.
Petitions to Reduce the Tip Rate and
User Fee (payment), 		 
1. See IRM 3.11.180.1.3(12) .
2. Copy any current (TY2009 or TY2008) Form 8027 and process original.
Envelope,   1. Check envelope for remittance.
2. If found, immediately hand carry to your manager.
Response to Letter 1858C,   Keep attached and edit based on the information provided.
Unrelated, unanswered correspondence No action has been taken, Detach and route to the appropriate area.

Exhibit 3.11.180-6  (01-01-2010)
Reasonable Cause Criteria

This chart is not all inclusive. Refer to IRM 20.1.7, Penalty Handbook - Information Return Penalties, for additional information regarding penalties and reasonable cause.

Reasonable Cause Criteria
Reasonable cause for the information return penalties exists when:
1) The filer acted in a responsible manner, both before and after the failure occurred, and
2) There are significant mitigating factors, or
3) The failure was the result of circumstances beyond the filer's control.
Responsible Manner
Acting in a Responsible Manner would include exercising the same degree of care that a reasonably prudent person (or organization) would use in the course of its business in determining filing obligations and in handling account information such as account numbers and balances. The filer must act in a responsible manner both before and after the failure occurs.
Acting in a responsible manner also includes taking steps to avoid the failure, for example:
1) Requesting appropriate extensions of time to file when practical to avoid the failure,
2) Attempting to prevent a failure if it was foreseeable,
3) Acting to remove an impediment or the cause of the failure, and
4) Correcting the failure as promptly as possible, generally within 30 days.
Where a penalty is imposed for missing or incorrect TINS, a filer must comply with special rules for acting in a responsible manner. See IRM 20.1.7.9.2 for additional information.
A waiver should not be automatically granted where the filer claims ignorance of the filing requirements. However, ignorance of the law may be considered as one factor which may indicate that the filer acted in a responsible manner if all the other facts support this contention.
Significant Mitigating Factors
Significant mitigating factors - For the filer to establish reasonable cause under this category, the filer must show that they acted in a responsible manner as well as the existence of a significant mitigating factor. Events generally considered to be significant mitigating factors include, but are not limited to:
1) First time filer: prior to the failure, the filer had not previously been required to file this particular form or statement or
2) The filer has a history of complying with the information return reporting requirements. Significant consideration is given to:
a) A filer may not continually rely on the same explanation to establish reasonable cause, when the filer's compliance history indicates a pattern of failures. A filer is expected to take significant steps to prevent future failures of the same type. Consider the Intentional Disregard provisions.
b) Compliance history must be considered, along with the other evidence provided, to determine if the penalty should be abated. The fact that the filer previously had a penalty should not be the only criteria used to decide if the penalty should be abated/waived.
c) However, if the filer can show that he/she acted in a responsible manner and the failure was due to an event beyond the filer's control, then a penalty in a prior year should not be used as cause not to abate/waive the penalty.
The filer contacted a tax advisor who was competent on the specific tax matter, furnished necessary and relevant information, and was then incorrectly advised that the filing of a return was not required. If the filer exercises normal business care and prudence based on its information and knowledge in determining whether to secure further advise, reasonable cause may apply.
Circumstances Beyond The Filer's Control
Events beyond the filer's control - For the filer to establish reasonable cause under this category, the filer must show that it acted in a responsible manner, as well as the event being beyond the filer's control. Events generally considered beyond the control of the filer include (but are not limited to) the following.
Actions by the Service - To establish an event beyond the filer's control as the result of Actions by the Service, the filer must show it relied on erroneous written information provided by the Service. The filer must also show that reliance on the written advise was reasonable and that it relied in good faith on the information. The taxpayer must provide a copy of the written information provided by the Service.
Actions by the Payee or any other Person - For the filer to establish reasonable cause as the result of actions by the payee or any other person with respect to the return or payee statement, the filer must show that:
1) The payee, or other person, failed to provide the necessary information to the filer, or
2) The payee, or other person failed to provide correct information to the filer.
3) The filer must provide documentary evidence when requested by the Service showing that the failure was attributable to the payee.
Unavailability of business records - The business records must have been unavailable as a result of unforeseen conditions, and in a manner which would prevent timely compliance (ordinary at least a two week period prior to the due date (or extended due date) of the information return), and the unavailability was caused by a supervening event. A supervening event includes, but is not limited to:
1) A fire or other casualty that damages the business records or impairs the system for processing such records,
2) A statutory or regulatory change that relates directly to the data processing and is made so close to the time the information return or statement is required that for all practical purposes the change cannot be made,
3) The unavoidable absence (death or serious illness) of the person with the sole responsibility for filing as return or furnishing a statement. In the case of a corporation, estate, trust, etc., the death or serious illness must have been that of an individual having sole authority to file the return (not the individual preparing the return). If another person shares responsibility for filing the return and that other person is unaffected by the event, the event is not an event beyond the filer's control.
The taxpayer's statement that they erroneously addressed their return to the state taxing agency does not in itself constitute reasonable cause for filing late, since a properly addressed envelope is a legal requirement in determining timely mailing/filing (IRC section 7502(a)(2)(B)).
Further documentation of the circumstances that resulted in the taxpayer misdirecting the returns must be considered evidence the taxpayer acted in a responsible manner and was nevertheless unable to file on time.
Undue Economic Hardship related to filing Electronically - When a filer with over 250 returns or statements fails to file electronically as required, the filer must show that they failed to file electronically because of a lack of hardware and that to meet the requirement would have caused an undue economic hardship.

Prev

More Internal Revenue Manual