3.11.217  Form 1120S Corporation Income Tax Returns

Manual Transmittal

October 31, 2014

Purpose

(1) This transmits revised IRM 3.11.217, Returns and Documents Analysis, Form 1120S Corporation Income Tax Returns.

Material Changes

(1) Minor editorial changes have been made throughout this IRM (e.g., line number updates, spelling, punctuation, links, etc.). Other significant changes to this IRM are shown below.

(2) IRM 3.11.217.1.4 - New - Added information pertaining to BMF Identification (ID) Theft.

(3) IRM 3.11.217.1.6(4) - Edit Mark Table - Edit Marks Made By Other IRS Functions - Description Column - Entity was added to the other areas listed and added the statement that reads: "Do not edit (or write) over another area's edit marks" . (IPU 14U0523 issued 03-19-2014)

(4) IRM 3.11.217.2.1(3) - Added Caution that reads: "Do not edit (or write) over another area's edit marks or audit trail" . (IPU 14U0523 issued 03-19-2014)

(5) IRM 3.11.217.2.1(8) - Action Codes Table - Action Code 343 - Description Column - Corrected IRM reference. (IPU 14U0477 issued 03-12-2014)

(6) IRM 3.11.217.2.1(8) - Action Codes Table - 347 - Added Exception that reads: "Do not edit Action Code 347 if the return has already been to Entity Control" per SERP Feedback #201400975. (IPU 14U0387 issued 02-27-2014)

(7) IRM 3.11.217.2.4.3(4) - If/And/Then Table - First Then box - Added Caution that reads: "If the return comes back from AM with the information still incomplete, send the return to AM again to secure all the missing information." This change is per SERP Feedback 201304627 for IRM 3.11.13 (September 25, 2013). (IPU 14U0116 issued 01-14-2014)

(8) IRM 3.11.217.2.7(2) - Added Secured by Examination/Collections. Also removed the bullet that mentions Exam and processing as original. (IPU 14U0945 issued 06-02-2014)

(9) IRM 3.11.217.2.7(3) - New - Added a new paragraph with instruction on how to handle a OAR when the return attached needs to be cleared by Statute and renumbered remaining paragraphs accordingly. (IPU 14U0945 issued 06-02-2014)

(10) IRM 3.11.217.2.7(3) - Added "give the return to your lead. The lead will" to address IRM Review and Clearance question about who will contact TAS.

(11) IRM 3.11.217.2.9(3) - If/Then Table - Last Then box - Reworded the information and added an Exception to clarify the information. (IPU 14U0523 issued 03-19-2014)

(12) IRM 3.11.217.2.9(4) a. - Removed "unless check digits are present" .

(13) IRM 3.11.217.2.9(4) d. - Added a reference to see the Exception above. (IPU 14U0523 issued 03-19-2014)

(14) IRM 3.11.217.3.4 - Moved Signature subsection to IRM 3.11.217.18, Signature, to be consistent with other IRMs and renumbered accordingly.

(15) IRM 3.11.217.5.1(2) - If/Then Table - First If box - Updated tax period.

(16) IRM 3.11.217.5.1(3) - Tax Period Table - Updated tax periods.

(17) IRM 3.11.217.5.1(6) - Reworded paragraph (6) with language from paragraph (6) and paragraph (7). Removed Figure 3.11.217-7, Example of Editing a Final Short Period Return, per request from Course Development Focus Group call.

(18) IRM 3.11.217.5.1(7) - Removed since language was added to IRM 3.11.217(6) per request from Course Development Focus Group call.

(19) IRM 3.11.217.5.2(1) - If/And/Then Table - Third Then box - Updated year information.

(20) IRM 3.11.217.5.4(2) - Proof of Entitlement Table changed to If/And/Then Table. Reworded conditions in the table after discussions with the BMF Entity Analyst and BMF Entity Unpostable Analyst.

(21) IRM 3.11.217.5.4(2) - New - Added Note and Transaction Codes and Meanings Table.

(22) IRM 3.11.217.5.5(1) - If/Then Table - First Then box - removed Computer Condition Code "Y" since it is no longer needed after discussions with the BMF Entity Analyst and BMF Entity Unpostable Analyst.

(23) IRM 3.11.217.5.5(1) - New - Added Note and Transaction Codes and Meanings Table.

(24) IRM 3.11.217.5.7(1) - If/Then Table - First Then box - removed Computer Condition Code "Y" since it is no longer needed after discussions with the BMF Entity Analyst and BMF Entity Unpostable Analyst.

(25) IRM 3.11.217.5.7(1) - If/Then Table - Second If box - Corrected Transaction Code 058 to 059.

(26) IRM 3.11.217.5.7(1) - If/Then Table - Third If box - Corrected Transaction Code 058 to 059.

(27) IRM 3.11.217.5.7(1) - New - Added Note and Transaction Codes and Meanings Table.

(28) IRM 3.11.217.5.7(2) a. - Added Note that reads: "Do not detach Form 1128" .

(29) IRM 3.11.217.5.7(2) b. - Added Note that reads: "Do not detach Form 1128" .

(30) IRM 3.11.217.6(3) - If/And/Then Table - Third Then box - Moved Figure 3.11.217-14, Example of Editing a Timely Received Date, here and renumbered it to Figure 3.11.217-12 per request from Course Development.

(31) IRM 3.11.217.6(3) - If/And/Then Table - Third Then box - Added a Caution about private metered postmark per request from Course Development Focus Group call. (IPU 14U1062 issued 06-27-2014)

(32) IRM 3.11.217.6(6) - Reworded Received Date Stamp for BMF consistency. (IPU 14U0350 issued 02-20-2014)

(33) IRM 3.11.217.6(7) - Removed the Note about the private metered postmark per request from Course Development Focus Group call. (IPU 14U1062 issued 06-27-2014)

(34) IRM 3.11.217.6(8) - If/And/Then Table - Second row of boxes - Removed "The IRS date stamp information..." and moved Figure 3.11.217-14 to IRM 3.11.217.6(3) per request from Course Development.

(35) IRM 3.11.217.6(8) - If/And/Then Table - Second Then box - 3. Added "See Figure 3.11.217-14, Example of a Multiple Valid Received Date," here per request from Course Development.

(36) IRM 3.11.217.7(4) - If/Then Table - Second If box - Added Note that reads: "The number may not contain all repeating numbers, e.g., "0000" , "3333" , "6666" , "9999" , etc." per request from Course Development Focus Group call.

(37) IRM 3.11.217.10(1) d. - Added "(see Initial Return - 24 Month Rule table below)" and the Initial Return - 24 Month Rule Table.

(38) IRM 3.11.217.12.1(6) c. - Added cross reference that reads: "See IRM 3.11.217.13.11, CCC "S" - Form 8883, Asset Allocation Statement Under Section 338 for additional information."

(39) IRM 3.11.217.12.1(11) - Added Reminder that reads: "See IRM 3.11.217.13.1, CCC "B" - Schedule M-3 for additional information."

(40) IRM 3.11.217.13.15(2) - Reworded conditions and added "See IRM 3.11.217.5.4, Short Period-Editing Proof of Entitlement, through IRM 3.11.217.5.8, Short Period Return with Prepaid Credits for additional information" after discussions with the BMF Entity Analyst and BMF Entity Unpostable Analyst.

(41) IRM 3.11.217.13.19(1) 1. - Corrected Form 2220 line numbers. (IPU 14U0557 issued 03-26-2014)

(42) IRM 3.11.217.13.19(1) 2. - Corrected Form 2220 line numbers. (IPU 14U0557 issued 03-26-2014)

(43) IRM 3.11.217.14.1(1) - Added IRM references for additional information.

(44) IRM 3.11.217.17.8(2) c. - Form 2220 Prior Year Line Numbers Table - Updated tax years. (IPU 14U0557 issued 03-26-2014)

(45) IRM 3.11.217.18 - Moved Signature subsection here from IRM 3.11.217.3.4 to be consistent with other IRMs and renumbered accordingly.

(46) IRM 3.11.217.22.4 - New - Added Form 1120S, Schedule K, Line 13a information per SERP Feedback #201401178. (IPU 14U0477 issued 03-12-2014)

(47) IRM 3.11.217.22.5 - New - Added Form 1120S, Schedule K, Line 13b information per SERP Feedback #201401178. (IPU 14U0477 issued 03-12-2014)

(48) IRM 3.11.217.22.6(1) - Reworded for consistency.

(49) IRM 3.11.217.22.7(1) - Reworded for consistency.

(50) IRM 3.11.217.22.7(2) - Reworded for consistency.

(51) IRM 3.11.217.23(1) - Bullet List - Rearranged bullet list order for consistency.

(52) IRM 3.11.217.23(1) - Removed Reminder since this is not needed. This is not a consistency item. (IPU 14U0845 issued 05-12-2014)

(53) IRM 3.11.217.23(1) - Added Reminder to delete Schedule L when not required per SERP Feedback #201402373. (IPU 14U0821 issued 05-06-2014)

(54) IRM 3.11.217.28(1) - If/Then Table - First If box - Added "and subsequent" after 2013.

(55) IRM 3.11.217.28(1) - If/Then Table - Last Then box - Added Exception that reads: "If Form 1120S, Page 1, Line 22b has a significant entry, do not cross out or slash Schedule D. Continue processing." (IPU 14U0945 issued 06-02-2014)

(56) IRM 3.11.217.29(6) - Changed "should" to "must" to be consistent with IRM 3.11.16, Returns and Documents Analysis - Corporate Income Tax Returns. (IPU 14U0116 issued 01-14-2014)

(57) IRM 3.11.217.29(6) - Removed the words "from attachments". (IPU 14U0350 issued 02-20-2014)

(58) IRM 3.11.217.32(1) - Updated the Form 8941 line numbers (e.g., Line A (Small Business Health Options Program (SHOP) Box).

(59) IRM 3.11.217.32(1) - Note - Updated the Form 8941 line numbers for current and prior year revisions.

(60) IRM 3.11.217.33(1) - Form 5884-B is an historical form, so updated information.

(61) IRM 3.11.217.34(2) - Added "Payee is a foreign entity" to agree with IRM 3.0.101.4, General, Schedule K-1 Processing.

(62) IRM 3.11.217.35(1) - Added Prior Year Conversion - 2013 Table.

(63) IRM 3.11.217.35(1) - Added Prior Year Conversion - 2012 Table.

(64) IRM 3.11.217.35(1) - Removed Prior Year Conversion - 2011 Table for Form 8941, no longer needed.

(65) IRM 3.11.217.35(1) - Added Prior Year Conversion - 2010 Table.

(66) IRM 3.11.217.35(1) - Prior Year Conversion - 2010 - 2007 - Removed 2010 table and made separate table and renamed this to Prior Year Conversion 2009 - 2007 Table.

(67) Exhibit 3.11.217-1, Due Date Chart - Tax Period - Nov. 2013 - Corrected the due date per SERP Feedback #201401066. (IPU14U0425 issued 03-04-2014)

(68) Exhibit 3.11.217-1, Due Date Chart - Updated the due dates.

(69) Exhibit 3.11.217-3, Potential Frivolous Arguments Criteria - IRC 861 Business Employment Tax - Descriptive box - Added "Code of Federal Regulations" to define CFR.

(70) Exhibit 3.11.217-5, Routing Guide for Attachments - New - Added CP 2030, Initial Notice Issued to Request Verification for Unreported Income, Deductions, Payment and/or Credits on BMF Income Tax Returns Matched to Payer Information Documents Procedures. (IPU 14U0945 issued 06-02-2014)

(71) Exhibit 3.11.217-5, Routing Guide for Attachments - New - Added CP 2531, Initial Contact for Potential Discrepancy of Income, Deductions and/or Credits Claimed on BMF Income Tax Returns Matched to Payer Information Documents Procedures. (IPU 14U0945 issued 06-02-2014)

(72) Exhibit 3.11.217-5, Routing Guide for Attachments - Added "Petitions in opposition of tax law provisions" to the routing guide. This was a result of guidance titled "Demonstration, Photo and Petition Guidance for FA Managers" . (IPU 14U1364 issued 09-19-2014)

(73) Exhibit 3.11.217-5, Routing Guide for Attachments - Form 1128 - Action Column - Removed "Edit CCC Y" after discussions with the BMF Entity Analyst and BMF Entity Unpostable Analyst.

(74) Exhibit 3.11.217-5, Routing Guide for Attachments - Form 2848 - Action Column - Added the physical street address for private delivery carriers.

(75) Exhibit 3.11.217-5, Routing Guide for Attachments - Form 3520 - Action Column - Updated to Route to OSPC.

(76) Exhibit 3.11.217-5, Routing Guide for Attachments - Form 3520-A - Action Column - Updated to Route to OSPC.

(77) Exhibit 3.11.217-5, Routing Guide for Attachments - Form 6478 - Action Column - Corrected IRM reference. (IPU 14U0477 issued 03-12-2014)

(78) Exhibit 3.11.217-5, Routing Guide for Attachments - Form 8716 - Action Column - Removed "CCC Y" after discussions with the BMF Entity Analyst and BMF Entity Unpostable Analyst.

(79) Exhibit 3.11.217-5, Routing Guide for Attachments - Form 8821 - Action Column - Added the physical street address for private delivery carriers.

(80) IRM references updated throughout the IRM.

(81) Figures revised throughout the IRM.

(82) Exhibits revised throughout the IRM.

Effect on Other Documents

IRM 3.11.217, Returns and Documents Analysis, Form 1120S Corporation Income Tax Returns, dated November 8, 2013 (effective January 01, 2014), is superseded. The following IRM Procedural Updates (IPUs), issued from January 2, 2014, through September 19, 2014, have been incorporated into this IRM: 14U0116, 14U0350, 14U0387, 14U0425, 14U0477, 14U0523, 14U0557, 14U0821, 14U0845, 14U0945, 14U1062, and 14U1364.

Audience

Wage and Investment (W&I) Submission Processing Code and Edit personnel are the intended audience for this IRM.

Effective Date

(01-01-2015)

Paul J. Mamo
Director, Submission Processing
Wage and Investment Division

3.11.217.1  (01-01-2015)
General Information

  1. The purpose of this section is to provide instructions for general required processing actions on corporate returns in order to eliminate repetition of the same instructions in different subsections.

  2. In case of a conflict of instruction between this general subsection and the subsequent specific subsection, the specific subsection will govern.

3.11.217.1.1  (01-01-2015)
Purpose of Form 1120S, U.S. Income Tax Return for an S Corporation

  1. Form 1120S, U.S. Income Tax Return for an S Corporation, is used to report the income, gains, losses, deductions, credits, etc., of a domestic corporation or other entity for any tax year covered by an election to be an S Corporation.

3.11.217.1.2  (01-01-2015)
Internal Revenue Service (IRS) Employee Contacts - RRA98, Section 3705(a)

  1. The Restructuring and Reform Act of 1998 (RRA98), Section 3705(a), 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, a telephone number is required on all taxpayer correspondence. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax related matters.

  2. All IRS employees who communicate by telephone, correspondence or face-to-face, with taxpayers or their personal representatives, on tax-related matters are required to provide (at minimum) the following information:

    1. Telephone Contact - Their title (e.g., Mr., Mrs., Ms., Miss), last name and badge identification (ID Card) number.

    2. Face-to-Face Contact - Their title (e.g., Mr., Mrs., Ms., Miss), provided as appropriate during the conversation, their last name and badge identification (ID Card) number.

    3. Correspondence - All correspondence must include a telephone number where the taxpayer's question can be answered. In addition, manually generated and handwritten correspondence must have their title (e.g., Mr., Mrs., Ms., Miss), last name, and IDRS (Integrated Data Retrieval System) number, letter system number, or their badge identification (ID Card) number.

    4. The IDRS number and numbers for some other letter systems are automatically generated. If it is not generated, or a handwritten note is prepared, the badge identification (ID Card) number must be used. Toll-free employees may also provide their location for identification purposes. Faxes to taxpayers on tax-related matters are considered manually-generated correspondence and must include the required information.

      Caution:

      Email cannot be used to transmit taxpayer account information.

    5. Correspondence, whether sent directly to the taxpayer or to the taxpayer's personal representative, must contain the required information.

    6. When a taxpayer requests to speak with a specific employee who previously handled their inquiry or request, or complains about the level of service previously provided, every attempt should be made to resolve the taxpayer's inquiry. If the issue cannot be resolved, the employee should refer the inquiry using established procedures to his or her manager.

    7. Correspondex letters will require a specific employee name and telephone number only if the employee initiating the correspondence is in the best position to respond to any questions that the taxpayer may have about the correspondence, or the employee is asking the taxpayer for additional case-related information.

    8. Otherwise, if the taxpayer does not need to contact a specific employee, the correspondence needs only an IRS telephone number and standard signature.

    9. Secretaries, receptionists, or other people who answer the telephone in functional offices need to identify themselves and should provide their badge identification (ID Card) number only if they are answering telephones which are routinely used to provide tax or account information.

    10. It is not necessary to repeat the badge identification (ID Card) number on a subsequent contact, when the nature of an employee's work involves multiple contacts with the same taxpayer, and the employee has given the taxpayer (either telephone or in-person) his or her badge identification (ID Card) number on the first contact.

3.11.217.1.3  (01-01-2015)
♦Taxpayer Advocate Service (TAS)♦

  1. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

  2. Refer taxpayers to TAS (see IRM 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, TAS Case Criteria) or has Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), attached and you can’t resolve the taxpayer’s issue the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue. Do not refer these cases to TAS unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Same Day Resolution by Operations. When referring cases to TAS, use Form 911 and forward it to TAS in accordance with your local procedures.

3.11.217.1.3.1  (01-01-2015)
♦TAS Service Level Agreements (SLAs)♦

  1. The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage and Investment (W&I) Division, Small Business & Self-Employed (SB/SE) Division, Tax Exempt & Government Entities (TE/GE), Criminal Investigation (CI), Appeals, and Large Business and International (LB&I), 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).

  2. The SLAs are located at http://tas.web.irs.gov/policy/sla/default.aspx.

3.11.217.1.4  (01-01-2015)
♦BMF Identification (ID) Theft♦

  1. BMF Identification Theft is increasing. If a tax examiner in Submission Processing (SP) Code and Edit (C&E) finds a case with attachments or correspondence indicating the taxpayer is a victim of ID Theft, provide the whole case to your senior/lead. Your senior/lead will expedite the case to the Planning and Analysis (P&A) staff for referral to one of the SP BMF ID Theft liaisons. The taxpayer must clearly state that they are a victim of "ID Theft" ; do not send cases that are subject to "Funny Box" or "Fraud" review.

3.11.217.1.5  (01-01-2015)
♦BMF Consistency♦

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

  2. Topics for BMF Consistency have been identified and developed as a coordinated effort between Cincinnati, Ogden, and Paper Processing Branch BMF Code and Edit/Error Resolution System (ERS).

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

  4. 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.

3.11.217.1.6  (01-01-2015)
♦Edit Marks♦

  1. Edit marks are edited on the return for transcription to the Automated Data Processing (ADP) System through Integrated Submission and Remittance Processing (ISRP) System. The editing can be entered in brown, red, orange, purple or green pencil/pen.

  2. 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.

  3. 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.

  4. For a description of specific edit marks, see the table below:

    Edit Mark Description
    "X" or "/" The "X" is used to delete tax data or to indicate that an item is not to be transcribed.
    A "/" can be used when deleting a form or schedule not being transcribed.
    "/ /$" "/ /$" is used in the entity area to identify the beginning and ending of a Foreign Country Code.
    For example, "/EI/$" is edited for "Ireland" or "/GM/$" is edited for "Germany" .
    "%" or "c/o" Indicates an "in-care-of" name for transcription.
    Circle Indicates that an entry is not to be transcribed. Also used to delete Entity data or a Received Date.

    Note:

    If the taxpayer circles an entry, edit the entry.

    Underline Indicates that an entry is to be transcribed (e.g., Name Control, Tax Period, etc.).
    Arrow Indicates the correct placement of a misplaced entry. An arrow may be used if the misplaced item is close to the correct line and there is no question where the entry belongs.

    Note:

    A double arrow may be used if the same figure is to be transcribed in two different places (along with any required transcription data between the two arrows).

    Check Mark Indicates that an entry has been manually math verified and is correct.
    Bracket/Parenthesis Indicates a negative numerical amount.

    Note:

    Code and Edit is not required to bracket negative amounts when brackets are preprinted on the form or schedule or when the taxpayer clearly indicates a negative amount with brackets () or "–" sign. It will be necessary to bracket negative amounts when editing negative entries on transcription lines (e.g., computing and entering a line entry, entering a missing line entry, etc.).

    Vertical Line or Decimal Point Indicates the separation of dollars and cents.
    Zero, Dash, None, or N/A "ZERO" , "DASH" , "NONE" , or "N/A" are considered valid entries except when specific instructions require editing of an entry.
    Edit Marks Made by Other IRS Functions Edit marks entered by another area; such as Entity, Collections or Accounts Management, are not to be re-edited except to place the marks in the correct area. Do not edit (or write) over another area's edit marks.
    Rocker Indicates the amount paid when drawn under a remittance amount.

3.11.217.1.7  (01-01-2015)
♦Frivolous Arguments♦

  1. A frivolous argument is used for the purpose of expressing dissatisfaction with the substance, form or administration of the tax laws by attempting to illegally avoid or reduce tax liabilities. Recognized frivolous arguments made by businesses include, but are not limited to, the examples in IRM 4.10.12, Frivolous Return Program (FRP), shown in Exhibit 3.11.217-3, Potential Frivolous Arguments Criteria.

  2. Review the return to determine whether it appears to be a frivolous return.

    If Then
    The return meets any of the conditions identified as a frivolous return. See Exhibit 3.11.217-3, Potential Frivolous Arguments Criteria.

    Exception:

    If the return shows Action Code "331" and has a Form 4227, Intra-SC Reject or Routing Slip, attached with the remarks, "Refer to Exam FRP for audit after processing" , continue to next procedure.

    Remove return from the batch and place the return in the locally designated basket for Examination, Frivolous Return Processing (FRP) for review.
    Examination has selected the return as frivolous, e.g., indicated by an Action Code "331" and a Form 4227 with the remarks, "Refer to Exam FRP for audit after processing" , but sends the return for processing, Continue processing the return using procedures in IRM 3.11.217. However, do not circle or void the Action Code indicating a frivolous return.

    Note:

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3.11.217.1.8  (01-01-2015)
♦Foreign Currency♦

  1. For returns completed in other than U.S. currency, process as filed. However, if corresponding for missing/incomplete item(s), include in the letter to resubmit in U.S. currency.

3.11.217.1.9  (01-01-2015)
♦Protective Claims♦

  1. Returns marked as "Protective Claim" , "Protective Refund" , "Protective Claim for Refund" , or similar statement will be removed from the batch and routed to Accounts Management. Notate "Protective Claim" in the remarks box of Form 4227, Intra-SC Reject or Routing Slip.

    Exception:

    If the return is amended, do not remove from batch. Edit Computer Condition Code "G" and follow normal processing procedures.

3.11.217.1.10  (01-01-2015)
♦Criminal Investigation (CI) "Funny Box" ♦

  1. Criminal Investigation (CI) investigates potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes. Criminal violations of the IRC include willful and deliberate attempts to evade or defeat the income tax. Criminal tax violations also include the willful failure to collect or pay over tax and claims of false refunds based on bogus return information.

  2. Pull any return identified as having any CI criteria found in paragraph (3) below and place in "CI Funny Box" .

  3. CI "Funny Box" criteria:

    ≡ ≡
    ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

3.11.217.1.11  (01-01-2015)
♦Examination (Exam) "Funny Box" ♦

  1. The primary objective in identifying tax returns for Examination (Exam) is to promote the highest degree of voluntary compliance. Examination will provide support and assist Submission Processing (SP) with any questionable return identified during processing. Exam has a vast multitude of programs and tolerance criteria already identified in various IRM sections. Exam does not restrict SP with the flexibility to refer questionable returns other than what is currently identified in various IRMs.

3.11.217.2  (01-01-2015)
Unprocessable Documents - Error Resolution System

  1. The Document Perfection tax examiner will have the first opportunity to identify a return having a problem which requires correspondence, research or other action in order to make the return processable. An Action Code is edited to identify these unprocessable returns.

  2. The tax examiner will determine the kind of action required and assign an Action Code to the return which will force it to the Error Resolution System (ERS) (on-line correction system). The code will indicate whether correspondence, research or some other action is needed.

3.11.217.2.1  (01-01-2015)
♦Action Codes♦

  1. 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.

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

  3. Edit the Action Code in the bottom left margin of the return.

    Caution:

    Do not edit (or write) over another area's edit marks or audit trail.

  4. Assign Action Codes in the following priority:

    1. Action Code "310" (Statute Control)

    2. Action Code "320" (Entity Control)

    3. Action Code "4XX"

    4. Action Code "6XX"

    5. Action Code "3XX"

    6. Action Code "2XX" (Correspondence)

      Exception:

      When more than one Action Code is needed, attach Form 4227. If more than one Action Code of the same priority is required (e.g., 310 and 341), edit the Action Code with the shortest suspense period and attach Form 4227 to indicate the second unprocessable condition. Use Action Code "211" , "215" , "225" or "226" before Action Code "341" to ensure the return is complete before a manual refund is issued.

  5. 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 the Form 4227. See Figure 3.11.217-1, Example of Editing Return When More Than One Action Code is Needed.

    Figure 3.11.217-1
    This image is too large to be displayed in the current screen. Please click the link to view the image.
  6. Edit the following Action Codes when a return cannot be perfected:

    Action Code Description
    "211" (First Correspondence) or "215" (International Correspondence) • Return is illegible, incomplete, or contradictory and therefore can not be processed.
    • The taxpayer notates on the return or attachment that they are reporting tax for more than one Tax Period or for more than one type of tax.
    "225" (Missing Signature Correspondence) • Unsigned returns (only issue for correspondence).
    "226" (Missing Signature International Correspondence) • Unsigned foreign returns (only issue for correspondence).
    "480" (Early Filed Suspense) • Early filed return.
    "610" (Renumbered Non-Remittance) or
    "611" (Renumbered with Remittance)
    • A return is mis-blocked (e.g., Form 1065, U.S. Return of Partnership Income, found in a Form 1120S batch of work).
    "640" (Void) • To delete the assigned Document Locator Number (DLN) on the return (e.g., Re-entry Returns).
    "650" (International) • An International return that must be forwarded to Ogden Submission Processing Center (OSPC).
    • Return has a foreign address and must be forwarded to Ogden Submission Processing Center (OSPC).

    Note:

    An Army Post Office (APO), Diplomatic Post Office (DPO), or Fleet Post Office (FPO) address is not considered foreign.

  7. Continue perfecting the return after editing the Action Codes.

  8. Valid Action Codes are listed below:

    Action Code Description Workday Suspense Period
    211 First Taxpayer Correspondence 40
    212 Second Correspondence 25
    215 International Correspondence 45
    225 Taxpayer Correspondence (Signature Only) 40
    226 International Correspondence (Signature Only) 40
    310 Statute Control 10
    320 Entity Control 10
    331 Frivolous Review 3
    341 Manual Refund 10
    342 Credit Verification 10
    343 Other Accounting

    Note:

    This Action Code is also used for "Black Liquor" claims on Form 6478, Biofuel Producer Credit (Credit for Alcohol Used as Fuel for 2012 - 2007). See IRM 3.11.217.22.6, Schedule K, Line 13f, - Biofuel Producer Credit.

    10
    347 Form 2553, Election by a Small Business Corporation, attached to Form 1120S and/or taxpayer indicates "Revenue Procedure (Rev. Proc.) 2007-62" or "Rev. Proc. 2013-30" (effective September 3, 2013) on Form 1120S.

    Note:

    Action Code 347 is used to route Form 1120S to Entity Control for review of the Form 2553 and/or Rev. Proc. 2007-62 or Rev. Proc. 2013-30.

    Exception:

    Do not edit Action Code 347 if the return has already been to Entity Control.

    20
    352 Name Research 3
    360 Other-in-House Research 10
    370 Examination - Prompt Assessment - Form 4810, Request for Prompt Assessment Under IRC Section 6501(d)) 10
    420 2006 tax return with Form 8913, Credit for Federal Telephone Excise Tax Paid, credit 5
    440 Manager's Suspense 15
    480 Early Filed Suspense 150
    610 Renumber - Non-Remittance 0
    611 Renumber - Remittance 0
    640 Void 0
    650 International 0

    Reminder:

    Beginning with tax returns for periods ending 12-31-2007 and later, Form 2553 may be filed as an attachment to Form 1120S requesting to be considered a S Corporation. Edit Action Code (AC) 347 when a Form 2553 is attached to Form 1120S and/or taxpayer indicates "Revenue Procedure (Rev. Proc.) 2007-62" or "Rev. Proc. 2013-30" (effective September 3, 2013) on Form 1120S.

3.11.217.2.2  (01-01-2015)
Unprocessable Conditions and Rejection of Documents

  1. A tax return is an OSPC only return if at least one of the following conditions exists:

    1. The tax return has a foreign address.

    2. There is a refund credit claimed because of U.S. income tax paid or withheld at source because of the Foreign Investors in Real Property Tax Act whether or not Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, is attached.

3.11.217.2.3  (01-01-2015)
Treatment of All Unprocessable Tax Returns

  1. Cincinnati Submission Processing Center (CSPC) - If the tax return is an "OSPC only" return, discontinue perfection of the return. Prepare Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office, to inform the taxpayer the return has been sent to the Ogden Submission Processing Center.

  2. If the tax return is other than an "OSPC only" return, perfect the return.

    1. Examine schedules and other attachments for necessary information and edit the return as needed for processing.

    2. If perfection is not possible, perfect to the extent possible and proceed as set forth in (3) below.

  3. Action to Secure Perfection:

    1. Where indicated, prepare Form 4227, Intra-SC Reject or Routing Slip, indicating the reason for rejecting the document and that the document should be resubmitted for processing when it has been perfected.

    2. Attach the Form 4227 below the entity area.

    3. If the tax return has not been numbered, withdraw it from processing and forward it to the proper area.

    4. If the tax return has been numbered, edit the appropriate Action Code in the bottom left margin of the return and leave it in the block.

3.11.217.2.4  (01-01-2015)
♦Correspondence♦

  1. (1) There are two types of correspondence that Code and Edit may encounter:

    1. Correspondence received from taxpayers, and

    2. Issuing correspondence to taxpayers.

3.11.217.2.4.1  (01-01-2015)
♦Definition of Correspondence from Taxpayers♦

  1. Correspondence is all written communications from a taxpayer or his/her representative, excluding tax returns, whether solicited or unsolicited. This includes:

    1. Written communications in response to IRS requests for information or data.

    2. Written communications, including annotated notice responses, that provide additional information or dispute a notice.

    3. A telephone call that results in a written referral or research (Form e-4442, Inquiry Referral).

  2. The key to identifying taxpayers correspondence is to ask the following questions:

    1. Is the taxpayer waiting for a response from us?

    2. Is the taxpayer waiting for an action to be taken by us?

    3. Is the taxpayer asking a question?

    Note:

    A Post-It-Note, Sticky Note, or some other type of note stuck on the return by another function; such as, "Taxpayer (TP) requests penalties be waived" , does not constitute correspondence from the taxpayer.

3.11.217.2.4.2  (01-01-2015)
♦Issuing Correspondence♦

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

    Exception:

    Do not correspond on returns prepared by Collections, IRC 6020(b) or by Examination, "Substitute for Return" (SFR).

  2. Examine the return so that all of the conditions can be included in the same correspondence.

    If And Then
    Correspondence is needed, Requires a response,
    1. Complete an approved Correspondence Action Sheet indicating the letter number (86C, 118C, 854C, etc.), Master File Tax (MFT), and the appropriate paragraphs.

      Note:

      Within these paragraphs, there may be fill-ins that the tax examiner will be required to enter, such as, Tax Period, form number, DLN, etc.

    2. Attach the Correspondence Action Sheet to the front of the return below the Entity area.

    3. Edit Action Code "211" or "215" on the return.

    4. Finish editing the return and leave in the batch.

    Correspondence is needed, Does not require a response,
    1. Complete an approved Correspondence Action Sheet indicating the letter number (86C, 118C, 854C, etc.), MFT, and the appropriate paragraphs.

      Note:

      Within these paragraphs, there may be fill-ins that the tax examiner will be required to enter, such as, Tax Period, form number, DLN, etc.

    2. Photocopy first page of return and attach the Correspondence Action Sheet below the Entity area on the front of the copy of the return. Be sure the name and address show clearly above the Correspondence Action Sheet.

    3. Forward the copy to the Correspondence area.

    4. Edit an Action Trail (e.g., "118C Sent" ) in the lower left corner going vertically up the side of the return.

    5. Finish editing the return and leave in the batch.

    Note:

    There may be additional letters that are exclusive to the tax examiner's campus. These letters are for specific forms or conditions where it was deemed necessary for processing. The tax examiner should go to his or her Lead or Manager for copies of these letters to facilitate processing.

3.11.217.2.4.3  (01-01-2015)
♦Correspondence Imaging System (CIS) Returns♦

  1. Correspondence Imaging System (CIS) is an inventory system for scanning all Accounts Management (AM) receipts into digital images and working the cases from those images.

  2. "CIS" returns are identified with "CIS Image-Do not correspond for Signature" stamped below the signature line or "CIS" annotated on the front of the return.

  3. Verify all edit marks and ensure placement is correct on a "CIS" return.

    If Then
    The edit marks are black, Underline the edit mark if correct or circle if incorrect.
    The edit marks are red or green, Circle if incorrect.
    The edit marks are missing or incorrect, Perfect as necessary.
  4. Follow the instructions below for processing "CIS" returns.

    If And Then
    The "CIS" return has a Form 13596, Reprocessing Returns, attached,

    Note:

    If there is an indication on the return that correspondence has been sent (e.g., CCC "3" is edited on the return), do not route the return to Accounts Management. Continue processing the return.

    The return is incomplete (e.g., missing signature, schedules or forms), Remove the return from the batch and route to Accounts Management.

    Caution:

    If the return comes back from AM with the information still incomplete, send the return to AM again to secure all the missing information. Indicate "Additional information needed to process incomplete CIS return," or similar language on Form 4227 (or other appropriate routing slip).

    Note:

    Do not correspond for missing information on "CIS" reprocessable/re-input returns.

    The "CIS" return does not have a Form 13596, Reprocessing Returns, attached, The return is incomplete (e.g., missing signature, schedules or forms), Follow normal correspondence procedures.

3.11.217.2.4.4  (01-01-2015)
♦Use of Fax for Taxpayer Submissions♦

  1. 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.

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

  3. Code and Edit tax examiners will indicate the fax paragraph on the approved Correspondence Action Sheet to advise taxpayers of the option to fax their response.

    Caution:

    Before disclosing tax information by telephone, you must be sure you are speaking with the taxpayer or authorized representative. See the Taxpayer Authentication guidelines in IRM 21.1.3.2.3, Required Taxpayer Authentication and IRM 21.1.3.2.4, Additional Taxpayer Authentication. Also, before leaving any messages on a taxpayer's answering machine, review IRM 11.3.2.6.1, Leaving Information on Answering Machines/Voice Mail. Fax procedures contained in IRM 11.3.1.11, Facsimile Transmission of Tax Information, must be reviewed prior to faxing confidential information to the taxpayer.

3.11.217.2.5  (01-01-2015)
C/SC Letters

  1. Listed below are letters and a form which are provided by Headquarters for Submission Processing Center use in corresponding for items listed in this IRM. It is expected that tax examiners or their supervisors (or delegates) will have access to and be familiar with the Submission Processing Center Correspondex Handbook for selection of appropriate letters.

    1. Letter 86(C/SC/SP) - Letter referring taxpayer inquiry/forms to another office.

    2. Letter 118(C) - Letter requesting missing schedules or documents.

    3. Letter 143(C) - Letter advising taxpayer that we have received tax form and need additional information in order to complete action on it. (Also use this letter for missing signature only.)

    4. Letter 319(C/SC) - Letter advising taxpayer that IRS cannot process return because it shows an improper Tax Period or a period of more than 12 months or a period less than 12 months without an explanation.

    5. Letter 105(C) - Letter disallowing Federal Telephone Excise Tax Credit, explaining appeal rights and procedures.

3.11.217.2.6  (01-01-2015)
♦Compliance Secured/Prepared Returns♦

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

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

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

      Note:

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

3.11.217.2.6.1  (01-01-2015)
♦IRC 6020(b) Prepared by Collections♦

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

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

    1. Returns must have a Received Date. If missing, follow the normal procedures for editing the Received Date. See IRM 3.11.217.6, Received Date.

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

      Note:

      Starting July 1, 2013, we will accept the Revenue Officer's (RO's) electronic signature or typed signature as a valid signature on the return.

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

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

    5. Edit CCC "W" if the Received Date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control. See IRM 3.11.217.2.7, Statute Returns.

3.11.217.2.6.2  (01-01-2015)
♦Collection Secured♦

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

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

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

    3. Edit CCC "W" if the Received Date is more than 2 years and 9 months after the Return Due Date. Do not send to Statute Control. See IRM 3.11.217.2.7, Statute Returns.

      Reminder:

      If there is an indication a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.11.217.13, Computer Condition Codes - General, for additional information.

3.11.217.2.6.3  (01-01-2015)
♦Examination Prepared♦

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

    1. Return must have a Received Date. If no Received Date is present, follow the normal procedures for editing the Received Date.

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

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

    4. Edit CCC "W" if the Received Date is more than 2 years and 9 months after the Return Due Date. Do not send to Statute Control. See IRM 3.11.217.2.7, Statute Returns.

3.11.217.2.6.4  (01-01-2015)
♦Examination Secured♦

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

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

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

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

    4. Edit CCC "W" if the Received Date is more than 2 years and 9 months after the Return Due Date. Do not send to Statute Control. See IRM 3.11.217.2.7, Statute Returns.

    Reminder:

    If Form 13133 (or something similar) indicates a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.11.217.13, Computer Condition Codes - General, for additional information.

3.11.217.2.7  (01-01-2015)
♦Statute Returns♦

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

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

    Exception:

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

    • Compliance (IRC 6020(b)) returns

    • Returns secured by Examination/Collections

    • Returns with Transaction Code "TC 59X" or Integrated Collection System "ICS" notated on the face of the return

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

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

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

    Note:

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

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

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

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

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

    2. Pull the return from the batch.

    3. Attach Form 4227, Intra-SC Reject or Routing Slip, and route to Statute Control Unit.

  5. Edit a CCC "W" if the return has been "cleared" by the Statute Control Unit. Statute Control Unit will stamp or indicate clearance on the front of the return.

  6. Statute may stamp a return as "No Statute Issue" . Follow the chart below to determine if a CCC "W" is needed:

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

3.11.217.2.8  (01-01-2015)
♦Re-Entry Document Procedures♦

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

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

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

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

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

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

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

    Caution:

    If the Received Date is 2 years and 9 months or more after the Return Due Date, refer to Statute procedures before re-entering or reprocessing the return. See IRM 3.11.217.2.7, Statute Returns.

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

3.11.217.2.8.1  (01-01-2015)
♦Form 3893 - Re-Entry Document Control♦

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

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

  3. Circle CCC "G" if present.

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

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

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

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

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

    2. Do not change any Tax Due amounts.

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

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

    If Then
    Received Date is not present, Edit a Received Date to the middle of the return. See IRM 3.11.217.6, Received Date.
    Multiple Received Dates are present, Circle all but the earliest date.
  10. When additional information is still needed to make the return processable, prepare approved Correspondence Action Sheet or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

    Exception:

    Do not correspond for missing Schedules K-1.

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

3.11.217.2.8.2  (01-01-2015)
♦Form 13596 - Reprocessing Returns♦

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

  2. Circle CCC "G" if present.

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

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

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

    Caution:

    If you receive a Form 1120S converted from Form 1120, ensure that the following items are present: EIN, Name Control, NAICS, Received Date, Audit Code "4" , Tax Period (prior year returns), and CCC "3" (as applicable for "No Replies" ). If not, then edit the needed items.

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

    Form 13596 Action Taken
    Taxpayer Identification Number (TIN) correction, Edit the correct TIN on return.
    Tax Period correction, Edit the correct Tax Period ending on the return.
    Reasonable cause, Edit appropriate Computer Condition Code(s).
    1. Edit CCC "R" if the "FTF" (Failure to File) box is checked.

    2. Edit CCC "D" if the "FTP" (Failure to Pay) box is checked.

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

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

    If Then
    Received Date is not present, Edit a Received Date to the middle of the return. See IRM 3.11.217.6, Received Date.
    Multiple Received Dates are present, Circle all but the earliest date.
  9. Circle any green rocker and edit marks that may indicate a receipt of remittance.

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

    Exception:

    Do not correspond for missing Schedules K-1.

3.11.217.2.9  (01-01-2015)
♦Amended Returns♦

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

    • The Amended box is checked

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

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

      Note:

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

  2. Examine the return for attachments:

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

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

    Note:

    Pull any amended Form 1120S that has "CBR" notated and route to Accounts Management.

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

    If Then
    "TC 59X " or "ICS" was edited on the return by Compliance Services, Do not edit CCC "G" .
    Process the return as an original.
    The return is stamped "Delinquent Original Cleared for Processing" by Statute Control, Do not edit CCC "G" .
    Process the return as an original.
    Form 3893 or Form 13596 is attached, Do not edit CCC "G" .
    See IRM 3.11.217.2.8.1, Form 3893 - Re-Entry Document Control, and IRM 3.11.217.2.8.2, Form 13596 - Reprocessing Returns.
    None of the above are present, Edit CCC "G" .
    No other codes may be used with CCC "G" .

    Exception:

    CCC "S", CCC "T", CCC "W", CCC "3" and/or Error Resolution System (ERS) Action Codes may be used with CCC "G".

  4. The following data must be edited on all Amended returns:

    1. Name Control - See IRM 3.11.217.4.3, Entity Perfection - Name Control

    2. Employer Identification Number (EIN) - See IRM 3.11.217.4.2, Entity Perfection - Employer Identification Number (EIN)

    3. Tax Period (See IRM 3.11.217.5, Tax Period)

    4. CCC "G" - See IRM 3.11.217.13.4, CCC "G" - Amended Returns, and Exception above

    5. Received Date - See IRM 3.11.217.6, Received Date

    6. Signature - See IRM 3.11.217.18, Signature

3.11.217.2.10  (01-01-2015)
Prompt Assessment or Prompt Determination - Form 4810

  1. If a Prompt Assessment, IRC 6501 is requested, either in the form of a letter or on Form 4810, Request for Prompt Assessment Under IRC Section 6501(d), or a "Prompt Determination" is requested under IRC 505(b) of the U.S. Bankruptcy Code.

    If And Then
    A Prompt Assessment or Prompt Determination request is not attached to a tax return,   Forward the Prompt Assessment/Prompt Determination request to Examination.
    A Prompt Assessment or Prompt Determination is attached to a tax return, A Transaction Code (TC) 150 has not posted for that return, Process the return and forward the Prompt Assessment/Prompt Determination request to Examination with a copy of the tax return.
    A Prompt Assessment or Prompt Determination is attached to a tax return, A TC 150 has posted for that return, Route the return and Prompt Assessment/Prompt Determination request to Examination.

    Note:

    If return is numbered, edit Action Code "370" and continue processing.

3.11.217.2.11  (01-01-2015)
♦Refund Returns 45 Day Jeopardy and $10 Million or more Refunds♦

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

    Note:

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

    If Then
    A refund return is batched in a non-refund batch,
    1. Pull the return from the non-refund batch using local procedures.

    2. Code and edit the return as completely as possible.

    Note:

    Follow the instructions below when the processing date is more than 20 days after the Received Date or the Return Due Date (2nd If box) or the refund amount is $10,000,000 or more (3rd If box).

    The processing date is more than 20 days after the Received Date or the Return Due Date (whichever is later) and the 45 day interest free period is in jeopardy and the refund amount is $25,000 or more,

    Note:

    Refund in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods.

    Unnumbered Returns:
    1. Pull the return from the batch.

    2. Code and edit the return as completely as possible.

    3. Edit Action Code "341" . See Figure 3.11.217-2, Example of Editing Action Code 341.

    4. Give the return to the manager for expedited processing.



    Numbered Returns:
    1. Code and edit the return as completely as possible.

    2. Edit Action Code "341" and leave in the batch.

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

    Note:

    Refund in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods.

    Unnumbered Returns:
    1. Pull the return from the batch.

    2. Code and edit the return as completely as possible.

    3. Edit Action Code "341" .

    4. Give the return to the manager for expedited processing.



    Numbered Returns:
    1. Code and edit the return as completely as possible.

    2. Edit Action Code "341" and leave in the batch.

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

    Figure 3.11.217-2

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

3.11.217.2.12  (01-01-2015)
Credit for Federal Telephone Excise Tax Paid Only Tax Return (Tax Year 2006 revision)

  1. For S Corporation returns claiming a refund of the Federal Telephone Excise Tax Credit (Form 8913, Credit For Federal Telephone Excise Tax Paid) ONLY and no other income or deduction entries are present on the return, edit the following:

    1. Entity area - See IRM 3.11.217.4, Entity Perfection.

    2. Tax Period - See IRM 3.11.217.5, Tax Period.

    3. Action Code - See IRM 3.11.217.2.1, Action Codes.

    4. Received Date - See IRM 3.11.217.6, Received Date.

    5. Initial Return Code - See IRM 3.11.217.10, Initial Return Code - Page 1, Box G, Is the corporation electing to be an S corporation beginning with this tax year? (Page 1, Box F(1), Initial Return for 2006 and prior).

    6. Signature - See IRM 3.11.217.18, Signature.

    7. Form 8050, Direct Deposit of Corporate Tax Refund, (place in sequence order if entries are present).

    8. Form 8913 (place in sequence order if Line 15, Column (d) or (e) contain a significant entry).- See IRM 3.11.217.31, Form 8913 - Credit for Federal Telephone Excise Tax Paid, for additional information.

3.11.217.3  (01-01-2015)
Examination of Tax Data

  1. This subsection addresses general tax data editing procedures.

3.11.217.3.1  (01-01-2015)
Non-Standard or Prior Year Format

  1. All prior year returns must be reformatted to current year format. See the Code and Edit - BMF Job Aids located at the Submission Processing Design Center at http://coursebooks.enterprise.irs.gov/index.htm for specific year coding.

  2. If the return is on other than current form format (may be either a prior year or non-standard form) and the transcription lines cannot be numbered to agree with the current year return:

    1. Edit all available transcribed tax data items to the tax data portion of a blank current year form.

    2. Place a large "X" across the tax data entries of the prior year (or non-standard) form.

    3. Staple the forms together, attaching the dummied form (current format) on top so that ISRP can enter the Entity data from the prior year (or non-standard) form.

3.11.217.3.2  (01-01-2015)
Conversion of Form 1120 to Form 1120S

  1. If a taxpayer filed Form 1120 and the Entity Control Unpostable Unit has determined the taxpayer has a valid Small Business Election (Form 2553, Election by a Small Business Corporation) on file, Rejects function will convert Form 1120 to a Form 1120S, U.S. Income Tax Return for an S Corporation. No action is required of Document Perfection.

    Caution:

    If you receive a Form 1120S converted from Form 1120 and the Form 13596, Reprocessing Returns, is attached for reprocessing, see IRM 3.11.217.2.8.2, Form 13596 - Reprocessing Returns, for additional information.

3.11.217.3.3  (01-01-2015)
Significant Entries

  1. Reference is made throughout this IRM to "significant entries" . A significant entry is defined as any amount other than zero.

    Note:

    "Blank" , "Dash" , "None" , "N/A" , or "Zero" are not significant entries unless otherwise specified.

3.11.217.3.4  (01-01-2015)
Incomplete Return

  1. When the return serves only as a transmittal for statements, schedules, and other attachments, or is otherwise incomplete, analyze the supporting documents and edit the missing entries on the form itself.

  2. Examine attachments and edit the information to appropriate transcription lines of both the income and deduction sections.

    1. Edit the income section if Line 6 is the only entry in the income section.

    2. Edit the deduction section if Line 21 is the only entry in the deduction section.

    3. Edit the income and/or deduction section if blank and there is an indication the income and/or deduction items are included on an attachment (e.g., a notation such as "See attached" , "See Schedule F" , "Statement attached" , etc.).

    Note:

    When a doubt exists concerning placement of an income or deduction item because of terminology used by the taxpayer, edit income items as "other income" and deduction items as "other deductions" .

  3. Secured Delinquent Returns are returns secured by compliance personnel. If information is missing from one of these returns, do not send the return back to the taxpayer; correspond using approved Correspondence Action Sheet.

3.11.217.3.5  (01-01-2015)
Editing Dollars and Cents

  1. Document Perfection is not required to edit a vertical line, 00, dash, or decimal point to indicate dollars and cents.

    If Then
    The taxpayer has entered money amounts showing dollars and cents separated by a decimal point, No editing is required.
    The taxpayer has entered dollars only where dollars only should be entered, No editing is required.
    The taxpayer has entered dollars only where dollars and cents should be entered, No editing is required.

3.11.217.3.6  (01-01-2015)
Negative Entries

  1. Edit negative entries as follows:

    If Then
    Brackets are pre-printed on the form, No editing is required.
    The taxpayer indicates a negative amount with brackets or a minus () sign, No editing is required.
    Editing a negative amount to a transcription line (e.g., computing a line entry, entering a missing entry, etc.), Bracket the negative amount.

3.11.217.4  (01-01-2015)
♦Entity Perfection♦

  1. This subsection addresses instructions related to taxpayer identification for Form 1120S.

3.11.217.4.1  (01-01-2015)
♦Entity Perfection - General♦

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

    • Employer Identification Number (EIN)

    • Name

    • "In-care-of" Name

    • Address

3.11.217.4.2  (01-01-2015)
♦Entity Perfection - Employer Identification Number (EIN)♦

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

  2. Determine the EIN as follows:

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

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


      Numbered
      1. Edit Action Code "320" .

      2. Leave return in batch.

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

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


      Numbered
      1. Edit Action Code "320" .

      2. Leave return in batch.

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

      • Missing;

      • Other than 9 digits;

      • All zeroes; or,

      • All nines,

      Unnumbered/Numbered Unnumbered
      1. Research IDRS.

      2. If found, edit to the proper location.

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


      Numbered
      1. Circle all illegible EINs, zeroes, or nines.

      2. Edit Action Code "320" .

      3. Leave return in batch.

      "Pending" , "applied for" , etc. is indicated in the EIN area, Unnumbered/Numbered Unnumbered
      1. Research IDRS.

      2. If found, edit to the proper location.

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


      Numbered
      1. Edit Action Code "320" .

      2. Leave return in batch.

3.11.217.4.3  (01-01-2015)
♦Entity Perfection - Name Control♦

  1. The Name Control consists of four characters or less.

    1. Valid characters are alpha, numeric, ampersand (&), hyphen (-), and blank. However, blanks are only valid in the last three positions.

    2. Disregard the word "The" in the Name Control only when followed by more than one word.

  2. See Job Aid Document 7071-A (Name Control Job Aid - For Use Outside the Entity Area) to determine the Name Control.

  3. If Box H(2) (Box F(3) for 2006 and prior) "Name Change" is checked, route the return to Entity Control following local procedures.

  4. Edit the Name Control as follows:

    1. If And Then
      Able to determine the Name Control,   Underline the Name Control.
      See Figure 3.11.217-3, Example of Editing a Name Control.
      Unable to determine the Name Control, Unnumbered/Numbered Unnumbered
      1. Research IDRS.

      2. If found, edit to the proper location.

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


      Numbered
      1. Edit Action Code "352" (Name Research).

      2. Leave return in batch.

      A return indicates the taxpayer has filed bankruptcy (e.g., shows "RECEIVER" , "TRUSTEE" , or "DEBTOR IN POSSESSION" ) in the entity area or on an attachment,   Route to Entity Control following local procedures.

    Figure 3.11.217-3
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.217.4.4  (01-01-2015)
♦Entity Perfection - "In-Care-Of" Name♦

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

  2. Ensure the "in-care-of" name is located in the proper location.

    If Then
    The "in-care-of" name is located on the street address line preceding the street address, No editing is required.
    The "in-care-of" name is located above the first name line or below the street address, Arrow the "in-care-of" name so it appears below the first name line and above the street address.
    The "in-care-of" name is shown on an attachment,
    1. Edit the "in-care-of" name above the street address beginning with the "%" or "c/o" in the first position.

    2. Continue editing the return.

    The street address for the "in-care-of" name is different from the street address of the S Corporation,
    1. Arrow the "in-care-of" street address below the "in-care-of" name or edit the "in-care-of" street address below the "in-care-of" name if located on an attachment.

    2. Circle the S Corporation's street address and input Transaction Code "TC 014" . See IRM 3.11.217.4.5, Entity Perfection-Domestic Addresses.

    3. Continue editing the return.

    Note:

    Always circle out the in-care-of symbol ("%" or "c/o" ) if it is present with an address. Do not use the ampersand (&) and the percent sign (%) when editing address information.

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

    • A check mark in Box H(2) (Box F(3) for 2006 and prior) "Name Change" , or

    • A check mark in Box H(3) (Box F(4) for 2006 and prior) "Address Change" , or

    • An indication that the "in-care-of" name is changed (e.g., the taxpayer crossed out the original "in-care-of" name and added the new name or has entered a new "in-care-of" name in brackets)

    If Then
    An "in-care-of" name is changed but there is no indication of an address change,
    1. Edit the "in-care-of" name as shown above.

    2. Continue editing the return.

    An "in-care-of" name is present and Box H(3) (Box F(4) for 2006 and prior) "Address Change" is checked (or there is an indication of an address change),
    1. Edit the "in-care-of" name as shown above.

    2. Correct the address.

    3. Continue editing the return.

3.11.217.4.5  (01-01-2015)
♦Entity Perfection - Domestic Addresses♦

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

    Exception:

    Do not perfect the address on amended returns (CCC "G" ).

  2. A business may have two addresses. One is the mailing address and the other is the location address or physical location of the business.

  3. The procedures for perfection of addresses are as follows:

    If And Then
    There is an indication on an attachment that the address has been changed,   Edit the new address in the Entity section of the return.
    See Figure 3.11.217-4, Example of a Return With a Change of Address.
    Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party - Business, is attached, Mailing address information is the same and no location address is listed on Form 8822/Form 8822-B, Line 7 Take no action.
    Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party - Business, is attached, Mailing address information is different and/or a location address is listed on Form 8822/Form 8822-B, Line 7 Detach Form 8822 or Form 8822-B and route to Entity Control following local procedures.
    Both a P.O. Box and a street address are shown,  
    1. Notate Transaction Code "TC 014" in the upper left margin.
      See Figure 3.11.217-5, Example of a Return With a P.O. Box and Street Address.

    2. Input "TC 014" .

    Two street addresses are shown,  
    1. Underline the second street address.

    2. Notate the "TC 014" in the upper left margin.

    3. Input "TC 014" .

    One street address is shown, The taxpayer changed the address to a P.O. Box,
    1. Notate the "TC 014" in the upper left margin.

    2. Input TC "014" .

    The city and state are not shown on the return, but are shown on an attachment,   Edit the city and state in the Entity section of the return.
    The ZIP Code is missing or illegible, Is not available from the return or attachments, See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries to determine the ZIP Code.

    Note:

    Edit the 3 digits followed by "01" of the first zip code listed for the applicable state (e.g., "99501" for Alaska).

    Only the first three digits of the ZIP Code can be determined,   Edit "01" for the fourth and fifth digits.
    Box H(3) (Box F(4) for 2006 and prior) "Change of Address" is checked, An "in-care-of" name is present, 1) Edit the "%" (percent sign) or "c/o" to the left of the "in-care-of name" (in the first position) followed by the appropriate name.
    2) Correct the address.
    3) Continue editing the return.
    It is necessary to edit the street address,   See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, for current Address/Street Abbreviations.
    The address contains information other than a street address or P.O. Box,   No perfection is necessary. ISRP will enter the complete address.

    Note:

    Always circle the "in-care-of" symbol ("c/o" or "%" ) if it is present with an address. Do not use the ampersand (&) and the percent symbol (%) when editing address information. See Figure 3.11.217-6, Example of a Return with In-Care-Of on the Address Line.

    Figure 3.11.217-4

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

    Figure 3.11.217-5

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

    Figure 3.11.217-6

    This image is too large to be displayed in the current screen. Please click the link to view the image.
  4. The U.S. Postal Service established new address requirements for APO/DPO/FPO addresses. If the old address appears, convert to the new state code abbreviation based on the ZIP Code (e.g., APO New York, NY 091XX would be converted to APO AE 091XX). APO/DPO/FPO addresses are considered domestic addresses. Refer to APO/DPO/FPO Conversion Chart below:

    Address State Code Abbreviation ZIP Code
    APO/DPO/FPO AA 340XX
    APO/DPO/FPO AE 090XX - 098XX
    APO/DPO/FPO AP 962XX - 966XX

3.11.217.4.6  (01-01-2015)
♦Entity Perfection - Foreign Address (OSPC)♦

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

  2. Returns with APO, DPO or FPO addresses are considered domestic addresses. See IRM 3.11.217.4.5, Entity Perfection-Domestic Addresses.

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

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

    1. A two-character alpha code must be edited for the Possession/Territory name.

      U.S. Possession Abbreviation
      American Samoa AS
      Federated States of Micronesia FM
      Guam GU
      Marshall Islands MH
      Northern Mariana Islands MP
      Palau PW
      Puerto Rico PR
      Virgin Islands (U.S.) VI
    2. A ZIP Code must be present for U.S. Possessions/Territories. Edit the appropriate ZIP Code if one is not provided. See Exhibit 3.11.217-6, U.S. Possessions ZIP Codes.

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

    1. The foreign country must be the last entry in the address.

    2. Circle the foreign country and edit the Country Code preceded by a "/" and followed by "/$" (e.g., "/GM/$" is edited for Germany). See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, for acceptable Foreign Country Codes.

    3. A unique country code will be edited for returns filed with an address in Canada. See IRM 3.11.217.4.6.1, Country Code - Canada.

      Note:

      Submission Processing BMF Address Job Aid (Number 2324-002) provides examples for editing foreign addresses.

    4. If the foreign address is from Australia, Brazil, Canada, Cuba, Italy, Mexico or The Netherlands, check if the address contains a province, state or territory.

      If Then
      A province, state or territory name is present,
      1. Circle the province, state or territory name.

      2. Enter the appropriate abbreviation.
        See Exhibit 3.11.217-4, Province, State and Territory Abbreviations.

      A province, state or territory name is not present, Continue editing the return.
      A province, state or territory is shown in abbreviated format, Continue editing the return.
    5. A ZIP code or state is not required on a foreign address. Foreign addresses use a postal code that is entered before the city or foreign country and is part of the address.

3.11.217.4.6.1  (01-01-2015)
♦Country Code - Canada♦

  1. In an effort to assist Compliance with workload assignment, returns filed with an address in Canada will be edited using a unique Country Code based on the province/territory.

    If Then
    The foreign address contains a Canadian Province/Territory name, or abbreviation shown in the table below,
    1. See table below to ensure the correct Canadian Province/Territory is present or edited to the return.

    2. Circle the country name.

    3. Edit the appropriate Country Code based on the province/territory preceded by a "/" and followed by a "/$" as the last entry in the address.

    The foreign address does not contain a Canadian Province/Territory name, or abbreviation shown in the table below,
    1. Circle the country name.

    2. Edit the Country Code "/CA/$" as the last entry in the address.

    Canadian Province/Territory Abbreviations, Postal Codes and Canadian Country Codes Table

    Canadian Province/Territory Province Abbreviation Postal Code Beginning Country Code
    Alberta AB T XA
    British Columbia BC V XB
    Manitoba MB R XM
    New Brunswick NB E XN
    Newfoundland and Labrador NL A XL
    Northwest Territories NT X XT
    Nova Scotia NS B XS
    Nunavut NU X XV
    Ontario ON K, L, M, N, or P XO
    Prince Edward Island PE C XP
    Quebec QC G, H, or I XQ
    Saskatchewan SK S XW
    Yukon YT Y XY
  2. The rest of the foreign address is edited using procedures in IRM 3.11.217.4.5, Entity Perfection - Domestic Addresses.

3.11.217.5  (01-01-2015)
Tax Period

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

3.11.217.5.1  (01-01-2015)
Tax Period - General

  1. All Forms 1120S must have a Tax Period.

  2. Edit the Tax Period to the right of the title area of Form 1120S in YYMM format following the instructions below.

    If Then
    The return is for the current processing calendar year (e.g., 201412), Do Not edit the Tax Period.
    The return is for a prior year, Edit the Tax Period.
    The taxpayer has notated a Tax Period other than the preprinted year on the return, Edit the Tax Period based on the taxpayers indication, per paragraph (3).
    The Tax Period is missing, incomplete or illegible,
    1. Review the return or attachments for the correct period.

    2. If found, edit the Tax Period to the right of the form title in YYMM format.

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

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

    Tax Period Ends Tax Period
    Oct. 3, 2014 (52-53 week document) 1409
    Oct. 3, 2014 (Final short period return) 1410
    Oct. 25, 2014 (52-53 week document) 1410
    Oct. 25, 2014 (Final short period return) 1410
    Nov. 30, 2014 1411
    Dec. 31, 2014 1412 (no editing required)
    Feb. 28, 2015 1502
  4. Tax Periods reported under the 52-53 week rule may end not more than 6 days before, and not more than 3 days after, the end of a month. In the edit format, use the numeric designation of the month, the last day of which is closest to the actual ending date.

    If Then
    The Tax Period ending is not more than 3 days after the beginning of the month, Edit the previous month.
    (e.g., October 3, use the numeric designation for September, YY09)
    The Tax Period ending is not more than 6 days before the end of the month, Edit the month shown on the return.
    (e.g., October 25, use the numeric designation for October, YY10)
  5. If the Tax Period is for more than 12 months or 53 weeks, correspond.

  6. On a "Final" return, if the taxpayer has not indicated in which month the business ended, or the month and year is equal to or later than the Received Date's month and year (future return), edit the Tax Period to be one month prior to the Received Date. See Figure 3.11.217-7, Example of Editing an Early Filed Final Return.

    Figure 3.11.217-7
    This image is too large to be displayed in the current screen. Please click the link to view the image.
  7. On a "Final" return, if the Received Date is after the short period due date but on or before the regular full Tax Period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , edit CCC "R" and CCC "F" .

    Note:

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

  8. The separate short period return of a subsidiary which became affiliated with a "consolidated" group may end on the day preceding such affiliation. As a practical matter, do not question the ending date on any change-of-accounting period return.

  9. Check all Tax Periods for the Statute of Limitation (2 years and 9 months from the normal due date of the return). For statute instruction, see IRM 3.11.217.2.7, Statute Returns.

3.11.217.5.2  (01-01-2015)
Tax Period Beginning - Final, Initial, or Short Period Return

  1. Edit the Tax Period Beginning to the left of the title area of Form 1120S in MMDDYY format following the instructions below: (See Figure 3.11.217-8, Example of Editing the Tax Period Beginning.)

    If And Then
    The return is a final, initial, or a short period, Tax Period Beginning is present, Edit Tax Period Beginning.
    The return is a final, initial, or a short period, The day is not present in the Tax Period Beginning, Edit "01" for the day.
    (e.g., Taxpayer writes May 2014, edit Tax Period Beginning as 050114.)
    The return is a final, initial, or a short period, Tax Period Beginning is not present, No editing required.

    Figure 3.11.217-8

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3.11.217.5.3  (01-01-2015)
Early Filed Returns - Full Year and Short period

  1. Never send an early filed return back to the taxpayer.

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

    If Then
    The Tax Period Ending (TPE) is equal to or later than the Received Date by four months or less (e.g., the Received Date is in April but the TPE is April, May, June or July),
    1. Edit Action Code "480" (Early Filed -Suspense).

    2. Leave return in batch.

    The Tax Period Ending (TPE) is later than the Received Date by more than four months (e.g., the Received Date is in April but the TPE is in September),
    1. Edit Action Code "211" or "215" and attach approved Correspondence Action Sheet to request confirmation of the Tax Period Ending.

    2. Completely edit the return. Edit the future Tax Period indicated by the taxpayer. Leave return in batch.

3.11.217.5.4  (01-01-2015)
Short Period - Editing Proof of Entitlement

  1. A Short Period Return is one which covers a period of less than 12 months or 52-53 weeks.

    • If the Short Period Return is marked "Final" , see instructions for editing the Tax Period in IRM 3.11.217.5.1, Tax Period - General

    • If the Short Period Return is marked "Initial" , "First Return" , "New Corporation" , etc. or meets any of the identifying conditions in the instructions for "Initial Return Code" , see IRM 3.11.217.10, Initial Return Code - Page 1, Box G, Is the corporation electing to be an S corporation beginning with this tax year? (Page 1, Box F (1) Initial Return for 2006 and prior)

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

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

    Proof of Entitlement
    If And Then
    A statement the S Corporation is changing Tax Period under:
    1. National Office "Grant Letter" or
    2. Revenue Procedure 2006-46,
    Command Code BMFOLE shows a Transaction Code (TC) 053 or TC 054,
    (This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year, or National Office “Grant Letter” has been approved.)
    Continue processing.

    Note:

    No CCC “”Y” is needed.


    See Figure 3.11.217-9, Example of a Short Period Return with Proof of Entitlement.
    Command Code BMFOLE shows a TC 059,
    (This is an indication that the Form 1128 or National Office “Grant Letter” has not been approved.)
    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" .
    See IRM 3.11.217.5.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Statement referring to "S" (1120S) Status Termination or revocation under Section 1362, or
    Form 1120S, Page 1, Item H, Box 5, S Election termination or revocation is checked,
      Edit CCC R.

    Note:

    No CCC “”Y” is needed.

    Caution:

    If return reflects tax, or if return was filed after the due date based on a full year, prepare Form 3465, Adjustment Request, and route Form 3465 and a copy of Form 1120S, Page 1 to Accounts Management (AM) requesting review of interest and/or Failure To File (FTF) penalty.

    Statement referring to Termination of Shareholders Interest under Section 1377(a)(2) and Regulations Section 1.1377-1(b),   Continue processing.

    Note:

    No CCC “”Y” is needed.

    Statement referring to "S" Status Election and a National Office "Grant Letter" is attached allowing the fiscal year (other than 12/31/XX),   Continue processing.

    Note:

    No CCC “”Y” is needed.

    Notation referring to:
    1. Section 444, or
    2. Reference to Revenue Procedure 2006-46,
    Command Code BMFOLE shows a Transaction Code (TC) 053, TC 054, or TC 055,
    (This is an indication that the Form 1128 or Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, has been approved.)
    Continue processing.

    Note:

    No CCC “”Y” is needed.

    Command Code BMFOLE shows a TC 058 or TC 059,
    (This is an indication that the Form 8716 or Form 1128 has not been approved.)
    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" .
    See IRM 3.11.217.5.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Form 1128, Application to Adopt, Change, or Retain a Tax Year, Command Code BMFOLE shows a Transaction Code (TC) 053 or TC 054,
    (This is an indication that the Form 1128 has been approved.)
    Continue processing.

    Note:

    No CCC “”Y” is needed.

    Command Code BMFOLE shows a TC 059,
    (This is an indication that the Form 1128 has not been approved.)
    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" .
    See IRM 3.11.217.5.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Statement referring to Qualifying Disposition under Regulations Section 1.1368-1(g)(2)(i),   Edit CCC "Y" .
    Statement referring to "S" Status Election and taxpayer is changing to required tax year (12/31/XX),   Edit CCC "Y" .
    Statement the S Corporation is coming out of consolidation,   Edit CCC "Y" .
    Statement the corporation is a qualified sub chapter S subsidiary,   Edit CCC "Y" .
    Notation referring to:
    1. "Section 1398 election" (Bankruptcy Petition has been filed), or
    2. "Second Short Year after Section 1398 Election" ,
      Edit CCC "Y" . Do not correspond.

    Note:

    The following table is a list of transaction codes and meanings.

    Transaction Code (TC) Meaning
    053 A TC 053 identifies a Fiscal Year Month (FYM) change from Form 1128, (other than Revenue Procedure 2006-46).
    054 A TC 054 identifies a FYM change from Form 1128 or Form 2553, approved under Revenue Procedure 2006-46.
    055 A TC 055 identifies a FYM change from Form 8716.
    058 A TC 058 identifies a Denied Form 8716.
    059 A TC 059 identifies a Denied Form 1128.

    Note:

    Edit the Tax Period Beginning on short period returns according to IRM 3.11.217.5.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Figure 3.11.217-9

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3.11.217.5.5  (01-01-2015)
Short Period - Missing Proof of Entitlement

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

    If Then
    Command Code BMFOLE shows a Transaction Code (TC) 053, TC 054 or TC 055,
    (This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year or Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, has been approved.)
    Continue processing.

    Note:

    No CCC “”Y” is needed.


    Reminder:

    Edit the Tax Period Beginning on short period returns according to IRM 3.11.217.5.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Command Code BMFOLE shows a TC 058 or TC 059,
    (This is an indication that the Form 8716 or Form 1128 has not been approved.)
    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" .
    See IRM 3.11.217.5.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Command Code BMFOLE does not show a TC 053, TC 054, TC 055, TC 058 or TC 059, Correspond with the taxpayer using Letter 319C, Return Covers Other Than 12-month Accounting Period.

    Note:

    The following table is a list of transaction codes and meanings.

    Transaction Code (TC) Meaning
    053 A TC 053 identifies a Fiscal Year Month (FYM) change from Form 1128, (other than Revenue Procedure 2006-46).
    054 A TC 054 identifies a FYM change from Form 1128 or Form 2553, approved under Revenue Procedure 2006-46.
    055 A TC 055 identifies a FYM change from Form 8716.
    058 A TC 058 identifies a Denied Form 8716.
    059 A TC 059 identifies a Denied Form 1128.

3.11.217.5.6  (01-01-2015)
Short Period Returns - Editing a Disapproved Application (Form 1128)

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

    1. Edit Action Code "211" or "215" and correspond.

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


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