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Part 3. Submission Processing

Chapter 12. Error Resolution

Section 16. Corporate Income Tax Returns (Cont. 1)

3.12.16  Corporate Income Tax Returns (Cont. 1)

3.12.16.5 
Section 03, Data - Forms 1120-FSC/L/ND/PC/SF

3.12.16.5.1  (01-01-2010)
Section 03, Error Register Format

  1. The chart below shows Section 03: Alpha Field Designator, Title, Field Length and Location on the Return or Edit Sheet (Form 3892).

    Section 03
    Alpha Field Title Field Length Location
    A ABLM (PC) Code 3 Generated
    (Forms 1120-L and 1120-PC)
    B Kind of Business Code 6 Form 1120-FSC, Page 1, above box A;
    Generated for Forms 1120-L/ND/PC/SF
    C Missing Schedule Code 2 Edit Sheet, Line 20
    D Penalty and Interest Code 1 Edit Sheet, Line 21
    E Reserve Code 1 Edit Sheet, Line 22
    F Tax Preference Code 1 Form 1120-FSC, Page 1, bottom center margin;
    Form 1120-L, Page 1, bottom center margin;
    Form 1120-PC, Page 1, bottom center margin
    H Audit Codes 9 Edit Sheet, Line 19
    I Installment Sales Indicator 1 Edit Sheet, Line 23. Form 1120-FSC only
    K Principal Shareholder Name 4 Form 1120-FSC, Page 1, Line 1a
    L Principal Shareholder EIN 9 Form 1120-FSC, Page 1, Line 1b
    M Subsidiary Filer Code 1 Form 1120-FSC, Page 1, Line 2 box checked;
    Form 1120-L, Schedule M, Line 6;
    Form 1120-PC, Schedule I, Line 4
    N Parent Name 4 Form 1120-FSC, Page 1, Line 2a;
    Form 1120-L, Schedule M, Line 6;
    Form 1120-PC, Schedule l, Line 4
    O Parent EIN 9 Form 1120-FSC, Page 1, Line 2b;
    Form 1120-L, Schedule M, Line 6;
    Form 1120-PC, Schedule I, Line 4
    P Type of Election Code 1 Form 1120-FSC, Page 1, Box B
    Q Kind of Business Code 1 Form 1120-PC, Schedule l, to the right of Line 2
    V Foreign Country Code 2 Form 1120-FSC, Page 1, left of Line 1a
    W Parent Total Assets 13 Form 1120-FSC, Page 1, Line 2, Box D
    X Types of Liabilities 5 Form 1120-SF, Page 2, Line 5a
    Y Empowerment Zone Indicator 1 Edit Sheet, left of Line 12
    Forms 1120-L/PC only

3.12.16.5.2  (01-01-2010)
Field 03-A, ABLM Code

  1. The ABLM Code is generated from the Document Code in the DLN for Forms 1120-PC and 1120-L. This field cannot be corrected.
    Note: ABLM is not an acronym. The letters are a carry over from when the tax Form 1120 was generic. THE ABLM Code identifies a specific type of tax return. The ABLM letters are defined as follows:

    • A - Consolidated tax return

    • B - Personal Service Corporation

    • L - Life Insurance tax return

    • M - Mutual Fund tax return.

3.12.16.5.3  (01-01-2010)
Field 03-B, North American Industry Classification System (NAICS) Code

  1. The 6-digit North American Industry Classification System (NAICS) Code (which is based on the Principal Business Activity (PBA) is computer generated for Forms 1120-L/ND/PC/SF.

  2. The NAICS Code is entered on Form 1120-FSC, Page 1, above Box A.

  3. Field 03-B will asterisk if blank, all zeroes or if Field 03-B does not contain six numeric digits on Form 1120-FSC only, on other than "G" coded returns. See Figure 3.12.16-10.

    Figure 3.12.16-10

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

    Blank Field 03-B

  4. When the 6 digit PBA Code (also known as NAICS Code) is missing, take the following action:

    If Then
    The NAICS Code is missing, 1. Check Form 1120-FSC, Page 2, Additional Information, Line 1a;
    2. Enter the six digit code. See Exhibit 3.12.16-17.
    You cannot make that determination, Use Code 999000.

  5. Field 03-B must always be present on Form 1120-FSC.

    1. A Missing Section will generate if this field and Section 03 are not present.

    2. Enter the appropriate code using Action Code "6" , if missing.

3.12.16.5.4  (01-01-2010)
Field 03-C, Missing Schedule Codes

  1. The Missing Schedule Code (MSC) is edited to and transcribed from Line 20 of the Edit Sheet. Below is a list of valid codes and an explanation of each.

    Note:

    Per taxpayer instructions, Forms 3468 (MSC "31" ), 5884 (MSC "38" ), 5884-A (MSC "70" ), 6765 (MSC "40" ), 8586 (MSC "44" ), 8820 (MSC "42" ), 8826 (MSC "47" ), 8830 (MSC "48" ), 8845 (MSC "51" ), 8846 (MSC "52" ), 8847 (MSC "53" ), 8861 (MSC "55" ), 8864 (MSC "61" ), 8874 (MSC "57" ), 8881 (MSC "58" ), 8882 (MSC "59" ), 8896 (MSC "62" ), 8900 (MSC "63" ), 8906 (MSC "65" ), 8907 (MSC "66" ), 8908 (MSC "67" ) 8909 (MSC "71" ), 8910 (MSC "68" ), 8911 (MSC "69" ) are no longer required to be attached to Forms 1120-FSC/L/ND/PC and correspondence is not required. The applicable Missing Schedule Codes have been removed from this section.

    Code Explanation
    29 Foreign Tax Credit is present and Form 1118 is not attached.
    30 Personal Holding Co. Tax is present and Schedule 1120PH is not attached.
    32 Schedule D is not attached.
    33 Recapture of Investment Credit is present and Form 4255 is not attached.
    35 Sales of Business Property is present and Form 4797 is not attached.
    37 American Samoa Economic Development Credit is present and Form 5735 is not attached. (For prior years 2007 and 2006 form revisions, Form 5735 credit was included on Schedule J, Line 5b.)

    Note:

    The title of Form 5735 with a revision date of April 2003 is Possessions Corporation Tax Credit.

    39 Alcohol and Cellulosic Biofuel Fuels Credit is present and Form 6478 is not attached.

    Note:

    The title of Form 6478 with a revision date of 2007 is Credit for Alcohol Used as Fuel.

    43 General Business Credit is present and Form 3800 is not attached.
    46 Credit for Prior Year Minimum Tax is present and Form 8827 is not attached.
    49 Qualified Electric and Plug-in Electric Vehicle Credit is present and Form 8834 is not attached.
    50 Renewable Electricity, Refined Coal, and Indian Coal Production Credit is present and Form 8835 is not attached.
    54 Empowerment Zone and Renewal Community Employment Credit is present and Form 8844 is not attached.
    56 Qualified Zone Academy Bond Credit is present and Form 8860 is not attached.
    60 New York Liberty Zone Business Employee Credit is present and Form 8884 is not attached.
    72 Credit to Holders of Tax Credit Bonds is present and Form 8912 is not attached.

  2. Check for coding and transcription errors if Field 03-C is asterisked.

    1. Reject the record with Action Code "3" if two or more Missing Schedule Codes.

    2. Input TC 599 with cc 17.

    3. Prepare Form 3696 (or other approved Correspondence Action Sheet).

    4. Otherwise correct Field 03-C (MSC), as appropriate.

  3. Do not enter the Missing Schedule Code if the entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

3.12.16.5.5  (01-01-2010)
Field 03-D, Penalty and Interest Code

  1. Precomputed Penalty and Interest Code is edited on Line 21 of the Edit Sheet when the return indicates an amount for Precomputed Penalty and Interest, and the return is received during the grace period of the original due date.

  2. CCC "R" must be present in Field 01-F, if interest only is indicated.

  3. Field 03-D must be blank or "1" .

    • If "1" is present, Field 01-E (Received Date), must be within the grace period. Otherwise both fields will asterisk.

  4. Check the Edit Sheet and the return for all coding and transcription errors.

    • Correct Fields 01-E (Received Date), 01-F (Computer Condition Codes) and 03-D (Penalty and Interest Code) and the Edit Sheet and return as appropriate.

3.12.16.5.6  (01-01-2010)
Field 03-E, Reserve Code

  1. Reserve Code is edited on Line 22 of the Edit Sheet.

  2. Code and Edit may enter a "9" to force the record to the error register and will attach an explanation to the return.

    1. Since the "9" is invalid, it must be deleted from Field 03-E when the problem is resolved.

  3. If Field 03-E is asterisked, correct the field and the Edit Sheet as appropriate.

  4. Enter Reserve Code "1" when a $1 million or more refund has been issued. The "1" is valid on correction only.

  5. Enter Reserve Code "4" if Form 2220, Underpayment of Estimated Tax by Corporations, is attached and the taxpayer has checked the box on Part II, Line 8 "Large Corporations" .

  6. Priority of Reserve Codes are as follows:

    1. "1"

    2. "4"

    3. "9" , will be deleted by Error Correction after proper action is taken.

3.12.16.5.7  (01-01-2010)
Field 03-F, Tax Preference Code

  1. This code applies only to Forms 1120-FSC/L/PC.

  2. The Tax Preference Code is edited as follows:

    1. Form 1120-FSC - to the bottom center margin of Page 1.

    2. Form 1120-L - to the bottom center margin of Page 1.

    3. Form 1120-PC - to the bottom center margin of Page 1.

  3. Tax Preference Code "1" is required when Form 4626 or substitute is attached or, when an amount is present for Alternative Minimum Tax computation as follows:

    1. Form 1120-FSC, Schedule J, Line 3.

    2. Form 1120-L, Schedule K, Line 3.

    3. Form 1120-PC, Page 1, Line 6.

  4. Field 03-F must be blank or "1" . Check for coding and transcription errors and correct accordingly.

3.12.16.5.8  (01-01-2010)
Field 03-H, Audit Code

  1. Field 03-H (Audit Code) is transcribed from Line 19 of the Edit Sheet.

  2. This field may be blank or contain digits 1 through 6. Only three codes can be entered. The following table lists the valid Audit Codes:

    Form Valid Audit Code
    1120-FSC/L/PC All codes are valid.
    1120-ND "3" is the only valid Audit Code and must be present.
    1120-SF "1 " and "3" .

  3. The Audit Codes and conditions are listed in the following table:

    Audit Code Condition
    Audit Code "1" - Disclosure Statement or Inconsistent Filer
    Form 1120-FSC
    Form 1120-L
    Form 1120-SF     		1. Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), is attached; or
    2. The return contains an attachment with the statement, "Notice of Inconsistent Treatment under IRC Section 6222(b)" ; or
    3. Form 8275, Disclosure Statement, or Form 8275-R, Regulation Disclosure Statement, is attached, or a statement referring specifically to IRC Section 6662 (Disclosure); or
    4. Form 8886, Reportable Transaction Disclosure Statement, is attached.
    Form 1120-PC 1. Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request, is attached; or
    2. Form 8275, Disclosure Statement, or Form 8275-R, Regulation Disclosure Statement, is attached, or a statement referring specifically to IRC Section 6662 (Disclosure); or
    3. Form 8886, Reportable Transaction Disclosure Statement, is attached.
    Audit Code "2" - International Income or Credit
    Form 1120-FSC Form 5472 is attached to the return.
    Form 1120-L 1. Schedule M, Question 8, is answered "Yes" .
    2. Schedule K, Line 5a, has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ in Foreign Tax Credit.
    3. Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, is attached, or Schedule N, Question 4a is answered "Yes" or Schedule N, Question 4b has an entry.
    4. Form 8621, Return by Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, is attached and Part IV, Lines 10a - 11f has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
    5. Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities, is attached or Schedule N, Question 1a is marked "Yes" or Schedule N, Question 1b has an entry.
    Form 1120-PC 1. An entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ appears on Schedule C, for any of the following Lines: 3, 6, 7, 8 10, 11 and 12.
    2. Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, is attached.
    3. Form 1118, Foreign Tax Credit - Corporations, is attached and reflects ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ foreign tax credit.
    4. Form 1120-PC, Schedule M-3, Net Income (Loss) Reconciliation for U.S. Property and Casualty Insurance Corporations with Total Assets of $10 Million or More, is attached and:

    1. Any entry on Part II, Column (c), Lines 2 through 5 or 10 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ;

    2. Any entry on Part III, Column (c), Lines 5 through 7 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ; or

    3. The sum of Part III, Columns (b) plus (c) of any of Lines 8, 23, 24 or 25 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .


    5. Schedule N (Form 1120), Foreign Operations of U.S. Corporations, is attached and any box other than Question 6 (Foreign Bank Account) is checked "Yes" .
    6. Form 3520, Annual Return to Report Transaction With Foreign Trusts and Receipt of Certain Foreign Gifts, is attached.
    7. Form 3520-A, Annual Return of Foreign Trust With a U.S. Owner (under IRC Section 6048(b)), is attached.
    8. Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, is attached or Schedule N, Question 4a is marked "Yes" or Schedule N, Question 4b has an entry.
    9. Form 5472, Information Return of a Foreign Owned Corporation, is attached.
    10. Form 5713, International Boycott Report, is attached and both Questions on Line 7(f) are answered "Yes" .
    11. Form 8621, Return by Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, is attached and Part IV, Lines 10a - 11f has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
    12. Form 8832, Entity Classification Election, is attached and either Box 6(d), (e) or (f) (Box 2(d), (e) or (f) for January 2006 and prior revisions) is checked.
    13. Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), is attached.
    14. Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities, is attached, or Schedule N, Question 1a is marked "Yes" , or Schedule N, Question 1b has an entry.
    15. Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, is attached.
    16. Form 8902, Alternative Tax on Qualifying Shipping Activities , is attached.
    Audit Code "3" - Examination Classification Criteria

    Note:

    Attach Form 4227, Intra-SC Reject or Routing Slip, (or other appropriate routing slip) with an explanation as to why the Audit Code was used.

    Form 1120-FSC Taxpayer quotes "Change of Accounting Period" under Headquarters Grant Letter, Revenue Procedure (Rev. Proc.) 2006-46, Rev. Proc. 2006-45, Rev. Proc. 82-25 or Treasury Regulations 1.442-1(b) or (c).
    Form 1120-L "Unusual Refundable Credits" are claimed, such as:

    • Section 826(3) credit,

    • Section 1341 credit "Claim of Right" ,

    • Section 337(d) credit,

    • Section 1383 credit, or

    • Any other unfamiliar credit.
    Form 1120-ND Edit on all Forms 1120-ND.
    Form 1120-PC 1. Form 8283, Noncash Charitable Contributions, is attached and Page 2, Part I, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is checked.
    2. Form 8283, Noncash Charitable Contributions, is attached and Page 2, Part I, Question 5, Column (c) has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
    3. Form 8883, Asset Allocation statement under Section 338, is attached and the amount in Box 5a, Stock Price, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
    4. Form 8594, Asset Acquisition Statement, is attached and the amount in Box 3 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    Note:

    It is not necessary to compute the totals of multiple Forms 8594 if more than one is present. If any ONE of the Form 8594 has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , edit Audit Code "3" .

    Form 1120-SF 1."Unusual Refundable Credits" are claimed, such as:

    • Section 826(3) credit,

    • Section 1341 credit "Claim of Right" ,

    • Section 337(d) credit,

    • Section 1383 credit, or

    • Any other unfamiliar credit.


    2. Taxpayer quotes "Change of Accounting Period" under Headquarters Grant Letter, Revenue Procedure (Rev. Proc.) 2006-46, Rev. Proc. 2006-45, Rev. Proc. 82-25 or Treasury Regulations 1.442-1(b) or (c).
    Audit Code "4" - Joint Committee Case
    Form 1120-FSC An unusual credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is claimed on Lines 2a through 2h.
    Audit Code "5" is Reserved.
    Audit Code "6" is Reserved.

  4. If Field 03-H (Audit Code) is asterisked, check for coding and transcription errors. Correct Field 03-H as appropriate.

3.12.16.5.9  (01-01-2010)
Field 03-I, Installment Sales Indicator

  1. Field 03-I is transcribed from Line 23, Edit Sheet, for Form 1120-FSC only.

  2. This field must be 1, 2, 3 or blank. The codes are based on the response to Question "3" , Form 6252, Installment Sale Income.

  3. Valid codes for Installment Sales Indicator are:

    Code One Form 6252 Multiple Forms 6252
    1 "YES" response to Question 3 At least one form has a "YES" response.
    2 "NO" response to Question 3 All "NO" responses, or a combination of "NO" and/or blank responses.
    3 "YES" and "NO" are checked or Question 3 is blank Question 3 is blank on all forms.

  4. The following table provides instructions for resolving Field 03-I.

    If Then
    Field 03-I asterisks, check for coding and transcription errors, Correct Field 03-I as appropriate.
    The return is a Form 1120-FSC, but the Document Code is not 07, Reject with Action Code "3" and indicate on Form 4227 (or other appropriate routing slip) incorrectly numbered, renumber as a Form 1120-FSC.

3.12.16.5.10  (01-01-2010)
Field 03-K, Principal Shareholder Name
(Form 1120-FSC)

  1. Field 03-K is transcribed from Form 1120-FSC, Page 1, Line 1a. The field must contain one to four characters. The valid characters are:

    1. Numeric,

    2. Alpha,

    3. Ampersand,

    4. Hyphen.

      Note:

      Change a slash (/) or period (.) in the name control to a dash (-)

  2. The name field must contain one to four characters and may contain from one to three blanks.

    1. The name must have an alpha or numeric in the first position.

    2. The remaining positions must be alpha, numeric, hyphen, ampersand, or blank.

    3. No character may follow a blank.

  3. Take the following action:

    If Then
    The name is invalid or blank, Check for coding and transcription errors. Enter the correct data in Field 03-K.
    The correct name cannot be found, Research using IDRS
    A correct name cannot be determined, Delete Field 03-K.

3.12.16.5.11  (01-01-2010)
Field 03-L, Principal Shareholder EIN
(Form 1120-FSC)

  1. Field 03-L is transcribed from Form 1120-FSC, Page 1, Line 1b.

  2. Field 03-L must contain an EIN.

  3. If Field 03-L is an EIN, it cannot begin with 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.

  4. Take the following action to correct the field:

    If Then
    The EIN is invalid or blank, Check for coding and transcription errors. Enter the correct EIN in Field 03-L.
    The correct EIN cannot be found, Research using IDRS.

    Reminder:

    EIN cannot begin with 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.
    The correct EIN cannot be determined, Delete Field 03-L.

3.12.16.5.12  (01-01-2010)
Field 03-M, Subsidiary Filer Code

  1. Field 03-M is transcribed from the following lines:

    1. Form 1120-FSC, Page 1, Line 2 box checked;

    2. Form 1120-L, Page 8, Schedule M, Line 6;

    3. Form 1120-PC, Page 7, Schedule I, Line 4.

  2. Field 03-M is a transcribed field which must contain a blank or 1 through 3.

    1. Code "1" - "Yes" box checked.

    2. Code "2" - "No" box checked.

    3. Code "3" - Both box 1 and 2 are checked.

  3. If this field asterisks, check for coding and transcription errors.

  4. Field 03-M will asterisk if the Parent Name Control or Parent EIN is not present on the return, when code "1" or "3" is entered in this field. A correct entry in Field 03-N (Parent Name Control) and Field 03-O (Parent EIN) will eliminate the asterisk.

3.12.16.5.13  (01-01-2010)
Field 03-N, Parent Name Control

  1. Field 03-N is transcribed from:

    1. Form 1120-FSC, Page 1, Line 2a;

    2. Form 1120-L, Page 8, Schedule M, Line 6;

    3. Form 1120-PC, Page 7, Schedule I, Line 4.

  2. Field 03-N must contain one to four characters. The valid characters are:

    1. Numeric,

    2. Alpha,

    3. Ampersand,

    4. Hyphen,

      Note:

      Change a slash (/) or period (.) in the name control to a dash (-)

  3. The name field must contain one to four characters and may contain from one to three blanks.

    1. The name must have an alpha or numeric in the first position.

    2. The remaining positions must be alpha, numeric, hyphen, ampersand, or blank.

    3. No character may follow a blank.

  4. If name control is invalid or blank, check for coding and transcription errors and correct accordingly.

  5. Field 03-N will asterisk if Field 03-M is coded "1" or "3" and Field 03-N is blank. Take the following action:

    If Then
    This field is invalid, Examine the return and attachments for valid Name Control.
    No Parent Name is found, Enter "XXXX" in Field 03-N if Field 03-M is coded " 1" or "3" .

3.12.16.5.14  (01-01-2010)
Field 03-O, Parent EIN

  1. The table below contains transcription information for Field 03-O:

    Form Page Line
    1120-FSC 1 2b
    1120-L 8 6
    1120-PC 7 4

  2. Take the following action for Form 1120-FSC only:

    If Then
    Field 03-O was edited and transcribed, The EIN must be present in this field.
    The Field 03-O is not present, Then it will be substituted with Field 03-L, if present, unless Field 03-L is a SSN.

  3. The table below lists pertinent information for Field 03-O.

    Form Field 03-O Cannot Begin With The Following Numerics
    1120-FSC/L/PC 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.

  4. Field 03-O will asterisk if the EIN is the same as the EIN for the return. They cannot be the same.

  5. Examine the return and attachments for a valid EIN, if this field is invalid. Take the following action:

    If Then
    A valid EIN is found, Enter the correct EIN in Field 03-O.
    A valid EIN is not found, Enter "129999999" in Field 03-O, if Field 03-M is coded "1" or "3" .

3.12.16.5.15  (01-01-2010)
Field 03-P, Type of Election Code
(Form 1120-FSC)

  1. Field 03-P is transcribed and edited from Form 1120-FSC, Page 1, Box B.

  2. Valid codes are 1, 2, or blank.

    1. Code "1" must be present if the FSC box is checked.

    2. Code "2" must be present if the Small FSC box is checked.

    3. If neither box is checked (Box B is blank), then no code is applicable.

    4. Correct accordingly.

  3. Field 03-P will asterisk if present on any return other than 1120-FSC. Delete this field if present on any other form.

3.12.16.5.16  (01-01-2010)
Field 03-Q, Kind of Business Code
(Form 1120-PC)

  1. Field 03-Q is transcribed and edited from Form 1120-PC, Line 2, Schedule I, (Tax Period 198812 and subsequent).

  2. Valid codes are 1 or 2.

  3. Code "1" must be present if the " Mutual" box is checked.

  4. Code "2" must be present if the " Stock" box is checked.

  5. If neither box is checked, Code and Edit will edit a " 1" .

    1. This field must always be present.

    2. A Missing Section will generate, if this field is not input and Section 03 is not present.

    3. Enter the appropriate code using Action Code "6" , if missing.

  6. This field is only valid on Form 1120-PC. Delete the field, if present on any other form.

3.12.16.5.17  (01-01-2010)
Field 03-V, Foreign Country Code
(Form 1120-FSC)

  1. The Foreign Country Code is a code transcribed from Form 1120-FSC, Page 1, left of Line 1a.

  2. This field must be blank or a two character alpha. See Exhibit 3.12.16-10 for a list of valid foreign county codes.

3.12.16.5.18  (01-01-2010)
Field 03-W, Parent Total Assets
(Form 1120-FSC)

  1. Field 03-W must be present if Field 03-N (Parent Name Control) was edited and transcribed.

    1. It is transcribed in dollars only.

    2. Delete Field 03-W if it is negative.

    3. The field must be blank or all numeric.

  2. Delete this field when an asterisk is present on Form 1120-SF.

  3. Enter the amount from Box 1d into Field 03-W, when the amount in Box 1d is greater than the amount present in Box 2d, Page 1.

  4. Copy any significant amount on Line 1d to Line 2d, when the amount on Line 2d is blank and the Common Parent’s name and EIN are blank.

3.12.16.5.19  (01-01-2010)
Field 03-X, Type of Liabilities
(Form 1120-SF)

  1. This is a five-digit field transcribed from Page 2, Additional Information, Line 5a on Form 1120-SF only.

  2. The field must be 1 through 5 or blank. All five codes do not have to be present.

  3. A blank cannot be in the first position, if a valid code is present.

  4. The valid codes are:

    Code Description
    1 Tort
    2 Breach of Contract
    3 Violation of Law
    4 CERCLA (Comprehensive Environmental Response, Compensation and Liability Act)
    5 Other

3.12.16.5.20  (01-01-2010)
Field 03-Y, Empowerment Zone Indicator

  1. This field is valid on Form 1120-L and Form 1120-PC only.

  2. The field has one position.

  3. The field can be found to the left of Line 12 on the Edit Sheet.

3.12.16.6  (01-01-2010)
Section 04, Data - Forms 1120-FSC/L/ND/PC/SF

  1. Section 04 contains the information fields for Forms 1120-FSC/L/ND/PC/SF

  2. If a field is asterisked, check to determine if that field is valid for that return and/or document code.

  3. The fields are variable in length and are money amounts.

  4. Fields 04-A, 04-B, 04-C, 04-D, 04-E and 04-F are transcribed in dollars only.

  5. Fields 04-A, 04-C and 04-F may be positive or negative.

  6. The remaining fields must be positive only.

3.12.16.6.1  (01-01-2010)
Section 04, Error Register Format

  1. The chart below shows Section 04: Alpha Field Designator, Title, Field Length, Dollars and Cents, and the Location on the Return.

    Section 04
    Alpha Field Title Field Length $ / ¢ Location on the Return
    A Total Assets-End 15 $ Form 1120-FSC, Box E;
    Forms 1120-L/PC, bottom right margin
    B Total Assets-
    Begin     		15 $ Form 1120-SF, Schedule L, Line 6, Beginning Column
    C Modified Gross Income 11 $ Form 1120-SF, Page 1, Line 14
    D Total Liabilities-End 13 $ Form 1120-SF, Schedule L, Line 9, End Column
    E Total Liabilities-Begin 13 $ Form 1120-SF, Schedule L, Line 9, Beginning Column
    F Taxable Income Forms 1120-FSC/L/ND/PC 15 $
    Form 1120-FSC, Page 3, Line 18;
    Form 1120-L, Page 1, Line 27;
    Form 1120-ND, Page 1, Line 12;
    Form 1120-PC, Page 1, Line 1
    H Depreciation (Admin. Rules) 11 $ / ¢ Form 1120-FSC, Schedule G, Line 4, Column (a)
    I Depreciation (Non-Admin. Rules) 11 $ / ¢ Form 1120-FSC, Schedule G, Line 4, Column (b)

3.12.16.6.2  (01-01-2010)
Field 04-A, Total Assets - End

  1. Field 04-A is transcribed from the following returns:

    1. Form 1120-FSC, Box E;

    2. Forms 1120-L/PC, bottom right margin;

  2. Code and Edit will edit the amount in dollars.

  3. The field must be all numeric or blank.

  4. Field 04-A will asterisk when Fields 04-F through 04-J are present on Form 1120-SF.

  5. Delete the invalid fields for Form 1120-ND or 1120-SF.

  6. Check for misblocking, if the return is not a 1120-ND or 1120-SF.

    1. Reject using Action Code "3" .

    2. Prepare Form 4227 (or other appropriate routing slip) indicating reason for reject (e.g., return is misblocked, renumber as Form 1120-FSC, Form 1120-L, etc.).

3.12.16.6.3  (01-01-2010)
Fields 04-B through 04-E
(Form 1120-SF)

  1. The table below provides transcription procedures for these fields. They are valid on Form 1120-SF only.

    Field Name Transcription Line
    04-B Total Assets -
    Beginning of Year     		Schedule L, Line 6
    04-C Modified Gross Income Page 1, Line 14
    04-D Total Liabilities -
    End of Year     		Schedule L, Line 9
    04-E Total Liabilities-
    Beginning of Year     		Schedule L, Line 9

  2. These fields must be all numeric or blank.

  3. Field 04-C may be positive or negative.

3.12.16.6.4  (01-01-2010)
Field 04-F, Taxable Income

  1. The table below provides transcription procedures for Field 04-F.

    Form Transcription Line
    1120-FSC Page 3, Line 18
    1120-L Page 1, Line 27
    1120-ND Page 1, Line 12
    1120-PC Page 1, Line 1

  2. This field must be all numeric or blank.

  3. Field 04-F may be positive or negative.

3.12.16.6.5  (01-01-2010)
Fields 04-H and 04-I, Depreciation

  1. The table below provides Transcription procedures for Form 1120-FSC.

    Field Name Transcription Line
    04-H Depreciation (Administrative Pricing Rules) Schedule G, Line 4, Column (a)
    04-I Depreciation (Non-Administrative Pricing Rules) Schedule G, Line 4, Column (b)

  2. Fields 04-H and 04-I must be edited in dollars and cents.

  3. These fields must be all numeric or blank.

  4. They must be a positive amount only.

3.12.16.6.6  (01-01-2010)
Tax Rates for Form 1120-SF

  1. 200012 and prior = 39.6%

  2. 200101 through 200112 = 39.1%

  3. 200201 through 200212 = 38.6%

  4. 200301 and after = 35%

3.12.16.7  (01-01-2010)
Section 07, Data - Forms 1120-FSC/L/ND/PC/SF

  1. Section 07 contains tax information, credits and other taxes.

  2. If a field is asterisked, check to determine if that field is valid for that return and/or document code.

  3. Action Codes "4" , "5" , and "6" are applicable.

  4. All fields are positive except the following fields, which may be positive or negative.

    1. Field 07-I (Balance Due/Overpayment).

    2. Field 07-T (Salaries and Wages).

  5. Take the following action if an error reduces the correctly transcribed Total Tax,≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    1. Examine the return for a possible typing error.

    2. Check all the lines leading to the math computation.

    3. Search for omitted or incorrectly transferred amounts from attachments.

    4. If it appears that the error is not necessarily a true error condition, reject the record for correspondence with the taxpayer. Ask for clarification of the area in doubt.

  6. If there is an increase in Total Tax, then check if the taxpayer has any unused carryover credits. If so then apply them to the maximum amount available in the following order.

    If Then
    For Tax Periods beginning 199501 and subsequent: Apply as follows:
    1. Foreign Tax Credit
    2. Possessions Tax Credit
    3. Production Tax Credit
    4. General Business Credit
    5. Prior Year Minimum Tax Credit
    For Tax Periods 198801 through 199511: Apply as follows:
    1. Foreign Tax Credit
    2. Possessions Tax Credit
    3. Orphan Drug Credit
    4. Production Tax Credit
    5. General Business Credit
    6. Prior Year Minimum Tax
    Credit
    The taxpayer has not applied the credits in the proper order: Recompute in the order above. Refer to the supporting forms to determine the available amounts.

  7. Adjust the amount reported on the return to reflect the actual amount applied; and, change the appropriate fields on the error register.

  8. If an adjustment is made to any carryover credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , and no math error notice is required to be sent,

    • Send Letter 3833C (or applicable letter) explaining the adjustment and stating the corrected carryover amount.

  9. The valid taxpayer notice codes for Forms 1120-FSC/L/ND/PC/SF are TPNCs 88, 89 and 90.

    Note:

    See IRM 3.12.16.2.4.1 for the TPNC and the explanation.

  10. Manually Corrected Tax is used when neither the transcribed amount nor the underprinted amount for total tax is correct. All fields leading up to Field 01-A (Total Tax) must be corrected when applicable. If manually corrected tax is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

3.12.16.7.1  (01-01-2010)
Section 07, Error Register Format

  1. The chart below shows Section 07: Alpha Field Designator, Title, Field Length, Dollars and Cents, and the Location on the Return.

    Section 07
    Alpha Field Title Field Length $ / ¢ Location on the Return
    A Total Tax 15 $ / ¢ Form 1120-FSC, Line 1;
    Form 1120-L, Line 28;
    Form 1120-ND, Line 13;
    Form 1120-PC, Line 13;
    Form 1120-SF, Line 15
    A Total Income Tax (Generated Underprint)      
    B Estimated Tax Credit 15 $ / ¢ Form 1120-FSC, Line 2d;
    Form 1120-L, Line 29d;
    Form 1120-ND, Line 14d;
    Form 1120-PC, Line 14f;
    Form 1120-SF, Line 16d
    C Form 7004 Credit 15 $ / ¢ Form 1120-FSC, Line 2e;
    Form 1120-L, Line 29g;
    Form 1120-ND, Line 14e;
    Form 1120-PC, Line 14g;
    Form 1120-SF, Line 16e
    D Regulated Investment Credit /
    Reciprocal Credits     		11 $ / ¢ Form 1120-L, Line 29h(1);
    Form 1120-PC, Line 14h
    E Refundable Credits from Form 3800 and Form 8827 15 $ / ¢ Form 1120-L, Line 29j;
    Form 1120-PC, Line 14j
    F 1042S Credit (Form 1120-FSC) /
    Other Credit (Form 1120-PC)     		15 $ / ¢ Form 1120-FSC, Line 2g;
    Form 1120-PC, Line 14i
    G Foreign Investment Real Property Tax Act (FIRPTA) Credit 11 $ / ¢ Form 1120-FSC, space to the right of 2g
    H Estimated Tax Penalty 15 $ / ¢ Form 1120-FSC, Line 3;
    Form 1120-L, Line 30;
    Form 1120-ND, Line 15;
    Form 1120-PC, Line 15;
    Form 1120-SF, Line 17
    I Balance Due/
    Overpayment     		15 $ / ¢ Form 1120-FSC, Line 4/5;
    Form 1120-L, Line 31/32;
    Form 1120-ND, Line 16/17;
    Form 1120-PC, Line 16/17;
    Form 1120-SF, Line 18/19
    I Balance Due/
    Overpayment (Generated Underprint)     		     
    J Credit to Next Year’s Estimated Tax 15 $ / ¢ Form 1120-FSC, Line 6 (center);
    Form 1120-L, Line 33 (center);
    Form 1120-ND, Line 18 (center);
    Form 1120-PC, Line 18 (center);
    Form 1120-SF, Line 20, (center)
    N Gross Income 15 $ Form 1120-L, Schedule F, Line 9;
    Form 1120-PC, Schedule A, Line 14
    R Credit for Federal Telephone Excise Tax Paid (For 2006 tax form revision.) 15 $ / ¢ Form 1120-FSC, edited amount in the dotted area left of Line 2i;
    Form 1120-L, edited amount in the space above Line 29k;
    Form 1120-ND, Line 14f, edited amount in dotted area;
    Form 1120-PC, edited amount in the space above Line 14k;
    Form 1120-SF, Line 16f, edited amount in dotted area
    R Credit for Federal Telephone Excise Tax Paid (Generated Underprint) 15   Generated total of Form 8913, Line 15, Columns (d) and (e)
    S Credit for Federal Telephone Excise Tax Paid (verified amount) 15 $ / ¢ SCRS field only
    T Salaries and Wages 15 $ Form 1120-PC, Schedule A, Line 16
    W Tax Exempt Interest 15 $ Form 1120-L, Schedule F, Line 13;
    Form 1120-SF, Page 2, Additional Information Line 2
    X Interest Exempt Under Section 103 11 $ Form 1120-PC, Schedule A, Line 3b, Column (a)
    Y Refundable Credits (Computer Generated) 15 $ / ¢ Form 1120-FSC, Line 2h;
    Form 1120-L, Line 29k;
    Form 1120-ND, Line 14f;
    Form 1120-PC, Line 14k;
    Form 1120-SF, Line 16f
    Z Manually Corrected Total Tax 13 $ / ¢ Form 1120-FSC, Line 1 left;

    Form 1120-L, Line 28 left;
    Form 1120-ND, Line 13 left;
    Form 1120-PC, Line 13 left;
    Form 1120-SF, Line 15 left

3.12.16.7.2  (01-01-2010)
Field 07-A, Total Tax

  1. The forms and applicable transcription lines for Total Tax are listed in the following table.

  2. The ≡ ≡ ≡ ≡ ≡ ≡ for the Total Tax field is ≡ ≡ ≡ ≡ ≡ .

    Form Transcription Line Math Verify
    1120-FSC Page 1, Line 1 YES
    1120-L Page 1, Line 28 YES
    1120-ND Page 1, Line 13 YES
    1120-PC Page 1, Line 13 YES
    1120-SF Page 1, Line 15 NO

    Note:

    See IRM 3.12.16.9 , Manual Verifications Forms 1120-FSC/L/ND/PC, for additional information.

  3. Take the following action:

    If Then
    The return is a Form 1120-ND and any of the following fields are present: Field 07-D (Regulated Investment Credit), 07-F (1042S Credit/Other Credit), 07-G Foreign Investment Real Property Tax Act (FIRPTA) Credit). Delete the fields.
    The return is a Form 1120-SF and any of the following fields are present: Field 07-D (Regulated Investment Credit), 07-F (1042S Credit/Other Credit), 07-G (FIRPTA Credit). Delete the fields.

  4. The return is a Form 1120-SF and the total tax does not equal 35% of the Modified Gross Income (Field 04-C), Field 07-A (Total Tax) will underprint. Take the following action:

    If Then
    Field 07-A (Total Tax) is underprinting and the underprint is correct, On raw, enter amount in Field 07-Z (Manually Corrected Total Tax). On loop send TPNC 90.

    Note:

    The first time a document in error displays on an error register, it is called a raw register.
    Field 07-A (Total Tax) is underprinting and the underprint is incorrect, and the taxpayer’s figure has been verified as correct, Enter Action Code "0" to clear the register.
    Neither the taxpayer’s figure nor the underprint are correct, Enter the corrected figure in Field 07-Z (Manually Corrected Total Tax).

  5. Take the following action for Form 1120-SF:

    If Then
    The tax period straddles the 1992 and 1993 tax year, Manually compute the income tax using the two rates; See IRM 3.12.16.18 , Annualization Computations.
    No other errors are present, and there is no underprint in Field 07-A (Total Tax), Enter Action Code "0" to clear the register.

    Note:

    Field 07-A (Total Tax) can never be blank if Field 01-A (Remittance) has an entry. Enter .01 (1 cent) in Field 07-A (Total Tax) if the remittance amount in Field 01-A (Remittance) is the estimated penalty in Fields 07-H (Estimated Tax Penalty) plus 07-I (Balance Due/Overpayment).

  6. When the return is a Form 1120-L and Field 07-A (Total Tax) underprints take the following action:

    1. Manually verify total tax.

    2. If the taxpayer notates on the dotted line to the left of Line 3, Schedule K, "Tax differential rate of 31.6% used,"

    3. Accept the taxpayers figure and enter Action Code "0" to clear the register.

  7. Taxpayers who file an approved Form 1128, Application to Adopt, Change, or Retain a Tax Year, are required to annualize. If the taxpayer does not annualize, enter the correct annualized tax in Field 07-Z (Manually Corrected Total Tax). On loop, send TPNC 90 to inform the taxpayer of the error.

3.12.16.7.3  (01-01-2010)
Field 07-B, Estimated Tax Credit

  1. The form and the appropriate transcription line are identified in the table below:

    Form Transcription Line
    1120-FSC Page 1, Line 2d
    1120-L Page 1, Line 29d
    1120-ND Page 1, Line 14d
    1120-PC Page 1, Line 14f
    1120-SF Page 1, Line 16d

  2. Field 07-B (Estimated Tax Credit) is the total of:

    • Form 1120-FSC, Line 2d equals = Line 2a plus 2b minus 2c.

    • Form 1120-L, Line 29f equals = Line 29a plus 29b and 29c minus 29e.

    • Form 1120-ND, Line 14d equals = Line 14a plus 14b minus 14c.

    • Form 1120-PC, Line 14f equals = Line 14a plus 14b and 14c minus 14e.

    • Form 1120-SF, Line 16d equals = Line 16a plus 16b minus 16c.

  3. Reject to Accounting, if prepaid credits are claimed on Form 1120-FSC (Lines 2a, 2b, 2c), Form 1120-L (Lines 29a, 29b, 29c, 28g), Form 1120-ND (Lines 14a, 14b, 14e), Form 1120-PC (Lines 14a, 14b, 14c, 14g), or Form 1120SF (Lines 16a, 16b, 16e) and the return is one of the following conditions:

    1. A short period return,

    2. A final,

    3. Or has a change of accounting period.

  4. Prepare Form 4227 (or other appropriate routing slip) with a notation "Short Period with ES Credits" .

  5. Input TC 599 with cc 17 as defined below.

    1. Input for the short period if a copy of attached Form 7004 shows short period.

    2. Input for a full period (ending 12 months after beginning of the short period) if no Form 7004 is attached or use the underprinted FYM in Field 01-D.

3.12.16.7.4  (01-01-2010)
Field 07-C, Form 7004 Credit

  1. The form and the appropriate transcription line are identified in the table below:

    Form Transcription Line
    1120-FSC Page 1, Line 2e
    1120-L Page 1, Line 29g
    1120-ND Page 1, Line 14e
    1120-PC Page 1, Line 14g
    1120-SF Page 1, Line 16e

  2. On prior year returns (1982 and prior), if an amount is entered for Form 7005 credits, add to Form 7004 credits.

3.12.16.7.5  (01-01-2010)
Field 07-D, Regulated Investment Credit

  1. The form and the appropriate transcription line are identified in the table below:

    Form Transcription Line
    1120-L Page 1, Line 29h(1)
    1120-PC Page 1, Line 14h

  2. Field 07-D (Regulated Investment Credit) is also used for unusual credits.

    If Then
    Field 07-D (Regulated Investment Credit), Form 1120-L is ≡ ≡ ≡ ≡ ≡ ≡ and Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, is missing, Initiate correspondence.
    Any unusual refundable credits that are not already included in Field 07-D (Regulated Investment Credit), Include them.
    You are uncertain as to the acceptability of any unusual refundable credit, Enter Audit Code "3" in Field 03-H (Audit Code) and attach a Form 4227 (or other appropriate routing slip) with a brief explanation.

  3. Add any "Back-up Withholding" found on the return to the appropriate line as referenced in (1) above provided that it is not already included in Field 07-D (Regulated Investment Credit).

    Note:

    Any withholding identified in 1042-S or FIRPTA (8288-A) should appear in 07-G (FIRPTA Credit).

  4. Do not allow any credit referring to "Form 1138 filed" .

  5. Any amount on Line 14h, Form 1120-PC, credit by reciprocal for tax paid by attorney-in-fact under Section 835(d), must also be included in 07-D (Regulated Investment Credit).

3.12.16.7.6  (01-01-2010)
Field 07-E, Refundable Credits from Form 3800 and Form 8827

  1. Due to legislative changes under Section 3081 of Public Law 110-289 of the Housing and Economic Recovery Act of 2008, corporations may elect to claim additional research and minimum tax credits in lieu of claiming the additional first year depreciation under Section 168(k) for certain property. The increase in allowable credit is treated as refundable.

  2. The form and the appropriate transcription lines are identified in the table below:

    Form Transcription Line
    1120-L Page 1, Line 29j
    1120-PC Page 1, Line 14j

  3. Correct all misplaced entries, coding and transcription errors.

  4. Corrections to this field must be made in dollars and cents.

  5. If the credit claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 3800 and Form 8827 are not attached, correspond for the missing forms.

3.12.16.7.7  (01-01-2010)
Field 07-F, U.S. Income Tax Paid or Withheld at Source
(Form 1042-S Credit)

  1. The form and the appropriate transcription lines are identified in the table below:

    Form Transcription Line
    1120-FSC Page 1, Line 2g, U.S. Income Tax Paid or Withheld at Source
    1120-PC Page 1, Line 14i, Other Credits and Payments

  2. Correct all misplaced entries, coding or transcription errors.

  3. OSPC must take the following action to correct Field 07-F:

    If Then
    Field 07-F (U.S. Income Tax Paid or Withheld at Source) and Field 07-G (Foreign Investment Real Property Tax Act (FIRPTA) Credit) are present at the same time, Edit the 1042-S Credit to the left of Line 2g, Form 1120-FSC.
    The total credit on Form 1120-FSC, Field 07-F (U.S. Income Tax Paid or Withheld at Source) is supported by Form 1042-S, Accept the taxpayer’s figures.
    There is an amount present in Field 07-F (U.S. Income Tax Paid or Withheld at Source) and no Form 1042-S or supporting statement is attached, Enter Action Code "3" and prepare Form 3696, Correspondence Action Sheet (or other approved Correspondence Action Sheet) for supporting documentation.
    No response to the request for verification of withholding is received from the taxpayer, Disallow the withholding credit.

    Note:

    See IRM 3.12.16.16 , Reject Procedures General "No Reply" Procedures, for additional information.

  4. OSPC must refer any questionable verification of the withholding documents to Exam.

3.12.16.7.8  (01-01-2010)
Field 07-G, Foreign Investment Real Property Tax Act (FIRPTA)
(Form 8288-A)

  1. The FIRPTA credit is located on Form 1120-FSC, Page 1, to the right of Line 2g.

  2. Correct all misplaced entries, coding or transcription errors.

  3. If FIRPTA credit is claimed on Form 1120-FSC, OSPC must take the following action to correct Field 07-G (FIRPTA):

    1. Look for an approval from the FIRPTA Unit on the total amount of credit claimed on Form 13698, International Credit(s) Verification Slip.

    2. The credit must be claimed on Form 8288-A or a statement from the payor/withholding agent which identifies the amount of tax withheld, the withholding rate (including 0%, if exempt), and the country involved.

    Note:

    Form 13698, International Credit(s) Verification Slip, must be present when a FIRPTA credit (e.g., Form 8288-A) is indicated. If Form 13698 is not attached, reject the record and route the return to the FIRPTA Unit for verification.

  4. Follow the instructions in the table below for FIRPTA credit.

    If Then
    The total amount of FIRPTA credit claimed on Form 1120-FSC is verified by FIRPTA Unit, Accept the taxpayer’s figure.
    The total amount of FIRPTA credit claimed on the return is not approved by FIRPTA Unit of International, Check the attachments for a Form 1042-S withholding credit to make up the difference.
    Attachments present, Accept taxpayer figures.
    Attachments not present, and there is an indication that Code and Edit corresponded, Send TPNC 90 to inform the taxpayer of the error.
    Attachments not present, and there is no indication that Code and Edit corresponded, Enter Action Code "3" and prepare Form 3696, Correspondence Action Sheet (or other approved Correspondence Action Sheet) for supporting documentation.
    A reply is received, Route the return and attachments to the FIRPTA Unit for verification per local procedures.
    There is no reply, 1. Disallow the credit.
    2. Send TPNC 90 to inform the taxpayer why the credit was disallowed.

    Note:

    Input CCC "L" when taxpayer writes "Section 6114 Election" on the return or attached Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), to the return.

  5. OSPC must refer any questionable verification of the withholding documentation to Exam.

3.12.16.7.9  (01-01-2010)
Field 07-H, Estimated Tax Penalty

  1. The form and the appropriate transcription line are identified in the table below:

    Form Transcription Line
    1120-FSC Page 1, Line 3
    1120-L Page 1, Line 30
    1120-ND Page 1, Line 15
    1120-PC Page 1, Line 15
    1120-SF Page 1, Line 18

  2. Field 07-H (Estimated Tax Penalty) is edited from Line 38 (Line 34 for 2007 through 2005), Form 2220, Underpayment of Estimated Tax by Corporations, and must always be included in the Balance Due/Overpayment total.

  3. Enter Reserve Code "4" when a large corporation is indicated on Part II, Line 8 of Form 2220. See IRM 3.12.16.5.6.

    Note:

    Enter CCC "8" when a taxpayer writes "waiver of estimated tax penalties" under IRC Section 6655 for any period before January 1, 1998, with any payment the due date of which is before January 16, 1998.

3.12.16.7.10  (01-01-2010)
Field 07-I, Balance Due/Overpayment

  1. The form and the appropriate transcription line are identified in the table below:

    Form Transcription Line
    1120-FSC Line 4, Tax Due;
    Line 5, Overpayment
    1120-L Line 31, Amount Owed;
    Line 32, Overpayment
    1120-ND Line 16, Tax Due;
    Line 17, Overpayment
    1120-PC Line 16, Amount Owed;
    Line 17, Overpayment
    1120-SF Line 18, Tax Due;
    Line 19, Overpayment

  2. Field 07-I (Balance Due/Overpayment) will underprint if it is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Correct all misplaced entries, coding, transcription and transferring errors.

  4. The table below identifies the form and provides the computation for Field 07-I (Balance Due/Overpayment).

    Form Balance Due Or Overpayment Is Equal To:
    1120-FSC 1. Field 07-A (Total Tax) minus Fields 07-B (Estimated Tax Credit), 07-C (Form 7004 Credit), 07-F (1042S Credit), 07-G (FIRPTA) and 07-R (Credit for Telephone Excise Tax Paid),
    2. Plus Field 07-H (Estimated Tax Penalty),
    3. Minus Field 15-A (Total Gas Tax Credit) on the error register.

    Note:

    Delete Fields 07-D and 07-E, if present. They are invalid fields.
    1120-L 1. Field 07-A (Total Tax) minus Fields 07-B (Estimated Tax Credit), 07-C (Form 7004 Credit), 07-D (Regulated Investment Credit), 07-E (Refundable Credits from Form 3800 and Form 8827) and 07-R (Credit for Telephone Excise Tax Paid),
    2. Plus Field 07-H (Estimated Tax Penalty),
    3. Minus Field 15-A (Total Gas Tax Credit) on the error register.

    Note:

    Delete Fields 07-F and 07-G, if present. They are invalid fields.
    1120-ND 1. Field 07-A (Total Tax) minus Fields 07-B (Estimated Tax Credit), 07-C (Form 7004 Credit) and 07-R (Credit for Telephone Excise Tax Paid),
    2. Plus Field 07-H (Estimated Tax Penalty),
    3. Minus Field 15-A (Total Gas Tax Credit) on the error register.

    Note:

    Delete Fields 07-D, 07-E, 07-F and 07-G, if present. They are invalid fields.
    1120-PC 1. Field 07-A (Total Tax) minus Fields 07-B (Estimated Tax Credit), 07-C (Form 7004 Credit), 07-D (Regulated Investment Credit), 07-E (Refundable Credits from Form 3800 and Form 8827), 07-F (1042S Credit) and 07-R (Credit for Telephone Excise Tax Paid),
    2. Plus Field 07-H (Estimated Tax Penalty),
    3. Minus Field 15-A (Total Gas Tax Credit) on the error register.

    Note:

    Delete Field 07-G, if present. It is an invalid field.
    1120-SF 1. Computer’s underprint amount minus Fields 07-B (Estimated Tax Credit), 07-C (Form 7004 Credit) and 07-R (Credit for Telephone Excise Tax Paid),
    2. Plus Field 07-H (Estimated Tax Penalty),
    3. Minus Field 15-A (Total Gas Tax Credit) on the error register.
    Note: Delete Fields 07-D, 07-E, 07-F and 07-G if present. They are invalid fields.
    Note: A ripple type error will cause an underprint in Field 07-I (Balance Due/Overpayment) on Form 1120-SF.

    Note:

    The total of the applicable Fields 07-B (Estimated Tax Credit), 07-C (Form 7004 Credit), 07-D (Regulated Investment Credit), 07-E (Refundable Credits from Form 3800 and Form 8827), 07-F (1042S Credit), 07-G (FIRPTA) and 07-R (Credit for Telephone Excise Tax Paid), plus Field 15-A (Total Gas Tax Credit) will be computer-generated into Field 07-Y (Refundable Credits), for all Form 1120 series returns.

  5. Field 07-I (Balance Due/Overpayment) will underprint for all Form 1120 series returns, when a refundable credit is present, but not claimed on a refundable credit line. Follow local campus procedures to allow the credit.

  6. Delete all penalties and interest for all Form 1120 series returns that are included in Field 07-I (Balance Due/Overpayment), except for the amount from Field 07-H (Estimated Tax Penalty).

  7. Occasionally, the taxpayer will enter tax only on the total income tax line or only on the tax due line.

    1. If this happens, deduct any penalties and interest from the total income tax line ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    2. Enter the correct tax in Field 07-A (Total Income Tax), or Field 07-I (Balance Due/Overpayment), whichever is appropriate.

  8. Field 07-I (Balance Due/Overpayment) may underprint if Field 07-I is out of tolerance. If the out of tolerance was caused by an adjustment to the Credit for Federal Telephone Excise Tax Paid, Field 07-S (Credit for Federal Telephone Excise Tax Paid, Verified Amount) has a significant entry, then:

    1. Send TPNC 88 if the credit was partially denied (Field 07-S amount is less than Field 07-R, Letter 106C issued). See IRM 3.12.16.7.13.

    2. Send TPNC 89 if the credit was fully denied (Field 07-S entry is ≡ ≡ ≡ ≡ ≡ ≡ , Letter 105C issued). See IRM 3.12.16.7.13.

  9. When no other errors are discovered take the following action:

    1. Change Field 07-I (Balance Due/Overpayment) to the underprinted amount.

    2. Enter the revised figure on the return.

3.12.16.7.10.1  (01-01-2010)
Refund Returns

  1. Field 07-I (Balance Due/Overpayment) will asterisk as a precautionary flag whenever there is a refund for review and manual verification.

    1. Returns will not be forced to the error register solely because of the presence of a refund amount in Field 07-I.

    2. Field 07-I will asterisk on initial input and on all subsequent loops. Once all true error conditions are corrected, Field 07-I will automatically clear.

  2. Field 07-I will also asterisk, until Reserve Code "1" is entered if the overpayment amount minus credit elect per computer (not taxpayer’s amount) is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Check for coding and transcription errors.

    2. Reject and flag the return for issuance of a manual refund, if the refund is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the refund has not been manually refunded. Once the manual refund has been issued enter a Reserve Code "1" .

  3. Refund returns have a 45-day interest free period. The interest free period is the 45 calendar day span of time between the received date or the due date of the return (whichever is later) and the actual date the refund will be issued.

    1. The return is in jeopardy when 20 or more days have elapsed, since the received date or the return due date.

    2. The due date of the return is two months and fifteen days after the end of the tax year.

      Example:

      The due date for a 2007 calendar year return is March 15, 2008.

    3. If it is apparent that the 45 day interest free period is in jeopardy or that the interest free period has actually expired on a return with a refund of ≡ ≡ ≡ ≡ ≡ ≡ ≡ , then bring the matter to the immediate attention of your supervisor and follow local campus procedures.

    4. Interest is never payable on "no replies" .

    5. If a date is correctly present in Field 01-G (Correspondence Received Date), interest is payable 45 days from the Correspondence Received Date.

    6. If a manual refund must be issued, reject the record from the register and flag the return for expedite issuance of the manual refund.

  4. Input TC 599 with cc 17 to prevent delinquency notice from generating, when a refund return is pulled for manual refund.

  5. Handle the return on an EXPEDITE basis, when a manual refund is necessary.

  6. Enter CCC "0" in Field 01-F, when a manual refund has been issued.

    Note:

    See IRM 3.12.16.1.11 to ensure the refund is issued timely. See IRM 3.12.16.1.12 for TAS Manual Refunds.

3.12.16.7.11  (01-01-2010)
Field 07-J, Credit to Next Years Estimated Tax

  1. The form and the appropriate transcription line are identified in the table below.

    Form Transcription Line
    1120-FSC Page 1, Line 6, center
    1120-L Page 1, Line 33, center
    1120-ND Page 1, Line 18, center
    1120-PC Page 1, Line 18, center
    1120-SF Page 1, Line 20, center

  2. CCC "F" is incompatible with an amount in Field 07-J and both will asterisk.

    1. Determine which is correct,

    2. Delete the other.

3.12.16.7.12  (01-01-2010)
Field 07-N, Gross Income

  1. The form and the appropriate transcription line are identified in the following table.

    Form Transcription Line
    1120-L Page 3, Schedule F, Line 9
    1120-PC Schedule A, Line 14

  2. Correct all misplaced entries, coding or transcription errors.

3.12.16.7.13  (01-01-2010)
Field 07-R, Credit for Federal Telephone Excise Tax Paid
Field 07-S, Credit for Federal Telephone Excise Tax Paid Verified Amount

  1. For tax returns filed with tax period ending 200612 through 200711, a refund for the federal telephone excise tax paid on long-distance service may be claimed.

  2. The credit claimed is for the tax paid on service that was billed after February 28, 2003, and before August 1, 2006.

  3. Corporations claiming this credit must complete and submit Form 8913, Credit for Federal Telephone Excise Tax Paid, with the tax return.

  4. An Invalid Condition will asterisk when any of the following conditions are present:

    • Tax Period is prior to 200612, or after 200711.

    • There are entries in Fields 20-A and 20-B and there is no entry in Field 07-R.

    • Field 20-B is greater than Field 07-R and the total claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    • The transcribed amount for telephone excise tax refund amount (return amount) differs from the computer amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  5. Correction Procedures:

    1. Correct all misplaced entries, coding and transcription errors.

    2. Compare entries with the return. If incorrect, overlay the register with the correct information.

      Note:

      Field 07-R is not transcribed when included on a 2007 or subsequent tax return revision.

    3. If the tax period was entered incorrectly, enter the correct tax period in Field 01-D.

      If Then
      The tax period is prior to 200612 or after 200711 and is not an "initial" or "final" return, 1) Enter ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ in Field 07-S.
      2) Send Letter 105C explaining that the credit cannot be claimed on a return other than tax year 2006.

      Note:

      Send TPNC 89 if Field 07-I (Balance Due/Overpayment) is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ due to an adjustment to the Credit for Federal Telephone Excise Tax Paid.

      The return is a "final" return and the normal (regular) tax period ending date is 200612 through 200711, 1) Enter Field 07-R amount in Field 07-S.
      The return is a "final" return and the normal (regular) tax period ending date is prior to 200612 or after 200711, 1) Enter ≡ ≡ ≡ ≡ ≡ ≡ in Field 07-S.
      2) Send Letter 105C explaining that the credit cannot be claimed on a return other than tax year 2006.

      Note:

      Send TPNC 89 if Field 07-I (Balance Due/Overpayment) is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ due to an adjustment to the Credit for Federal Telephone Excise Tax Paid.

    4. If Form 8913 is attached and the combined amount was not shown on Form 1120-FSC, edited in the dotted area left of Line 2i (Form 1120-L, edited in the space above Line 29k) (Form 1120-ND, Line 14f, edited in dotted area) (Form 1120-PC, edited in the space above Line 14k) (Form 1120-SF, Line 16f, edited in dotted area), enter the amount from Field 07-R underprint in Field 07-R.

    5. If Form 8913 is attached and Field 20-B is greater than Field 07-R, correspond to inform the taxpayer that the interest amount cannot be more than the excise tax paid and request a corrected Form 8913.

      If Then
      A reply is received, 1) Compare Form 8913 to entries in Fields 20-A and 20-B.
      a) If different, enter the total corrected Form 8913 in Field 07-S.
      b) If the amounts are the same, enter Field 07-R in Field 07-S.
      No reply is received, 1) Enter Field 07-R in Field 07-S.

    6. If Field 07-R underprint (computer amount) differs from Field 07-R (transcribed amount) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , correspond and request a corrected Form 8913.

      If Then
      A reply is received, 1) Compare Form 8913 to entries in Fields 20-A and 20-B.
      a) If different, enter the total corrected Form 8913 in Field 07-S.
      b) If the amounts are the same, enter Field 07-R in Field 07-S.
      No reply is received, 1) Enter Field 07-R underprint amount in Field 07-S.
      2) Send Letter 106C advising the claim was partially not allowed because the refund amount was not computed correctly.

      Note:

      Send TPNC 88 if Field 07-I (Balance Due/Overpayment) is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ due to an adjustment to the Credit for Federal Telephone Excise Tax Paid.


      Caution:

      DO NOT send Letter 106C or TPNC 88 if the amount in Field 07-R underprint is greater than Field 07-R.

    7. If Field 07-R has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 8913 is not attached, enter Field 07-R is Field 07-S.

    8. If Field 07-R has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 8913 is missing or incomplete (e.g., the only entry on Form 8913 is Line 16), correspond and request a completed Form 8913.

      If Then
      A reply is received, 1) Enter the total from Form 8913 in Field 07-S.
      No reply is received, 1) Enter ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ in Field 07-S.
      2) Send Letter 105C stating the claim for refund was not allowed because a Form 8913 was not received.

      Note:

      Send TPNC 89 if Field 07-I is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ due to an adjustment to the Credit for Federal Telephone Excise Tax Paid.

3.12.16.7.14  (01-01-2010)
Field 07-T, Salaries and Wages

  1. Field 07-T is valid for Form 1120-PC.

  2. Transcription is from Form 1120-PC, Schedule A, Line 16.

  3. It must be numeric or blank.

  4. It must be transcribed in dollars only.

  5. It may be positive or negative.

  6. Field 07-T is transcribed for STATISTICAL PURPOSES ONLY.

  7. Correct all misplaced entries, coding and transcription errors.

3.12.16.7.15  (01-01-2010)
Field 07-W, Tax Exempt Interest

  1. The form and the appropriate transcription line are identified in the following table.

    Form Transcription Line
    1120-L Page 3, Schedule F, Line 13
    1120-SF Page 2, Additional Information, Line 2

  2. Correct all misplaced entries, coding or transcription errors.

3.12.16.7.16  (01-01-2010)
Field 07-X, Interest Exempt Under Section 103

  1. Transcription is from Schedule A, Line 3b, Form 1120-PC.

  2. Correct all misplaced entries, coding or transcription errors.

3.12.16.7.17  (01-01-2010)
Field 07-Y, Refundable Credits
(Computer Generated)

  1. This field is computer generated and cannot be changed.

  2. It can be used to identify math errors.

3.12.16.7.18  (01-01-2010)
Field 07-Z, Manually Corrected Total Tax

  1. Field 07-Z is used when a manual computation return has a math error.

  2. This often indicates that neither the transcribed amount nor the underprinted (generated) amount is correct except for " Y" coded returns (short period).

  3. Enter the correct amount of tax in Field 07-Z and change the appropriate line on the return to the corrected amount. When the manually corrected tax is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ in Field 07-Z.

  4. On loop send TPNC 90 to inform the taxpayer of the error. Attach a TPNC 90 card/paper with the exact statement to be printed on the notice.

  5. When a taxpayer files a consolidated return with a "Mixed Component Member" ensure Audit Code "3" has been entered. Accept the taxpayer entries for taxable income and tax and enter in Field 07-Z.

    Note:

    Field 07-Z must be entered on Form 1120-SF if there is a math error in tax.
    Field 07-A will underprint. Use Action Code "6" to enter correct tax in Field 07-Z. When document loops send TPNC 90.

    See Figure 3.12.16-11.

    Figure 3.12.16-11

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

    Manually Correct Tax

3.12.16.8  (01-01-2010)
Section 08, Data - Forms 1120-L/PC/SF

  1. Section 08 contains information fields that are variable in length and are money amounts.

  2. If a field is asterisked, check to determine if that field is valid for that return and/or document code.

  3. Fields 08-A through 08-C are valid for Form 1120-SF. Fields 08-A and 08-B are transcribed in dollars only.

  4. Fields 08-O through 08-AM are valid for Forms 1120-L/PC and are transcribed in dollars only.

3.12.16.8.1  (01-01-2010)
Section 08, Error Register Format

  1. The chart below shows Section 08: Alpha Field Designator, Title, Field Length, Dollars and Cents, and the Location.

    Section 08
    Alpha Field Title Field Length $ / ¢ Location
    A Transfer’s Fund 13 $ Form 1120-SF, Page 2, Additional Information, Line 1a
    B Direct/Indirect Payment 13 $ Form 1120-SF, Page 2, Additional Information, Line 3b
    C Distribution Indicator 1   Form 1120-SF, Page 2, Additional Information, Dotted portion of Line 4a
    O Disabled Access Credit (Form 8826) 11 $ Edit Sheet, Line 9;
    P Enhanced Oil Recovery Credit (Form 8830) 11 $ Edit Sheet, Line 10

    Note:

    This field is no longer edited by Code and Edit.
    Q Renewable Electricity, Refined Coal, and Indian Coal Production Credit (Form 8835) 11 $ Edit Sheet, Line 11
    R Empowerment Zone and Renewal Community Employment Credit (Form 8844) 11 $ Edit Sheet, Line 12
    S Indian Employment Credit (Form 8845) 11 $ Edit Sheet, Line 13
    T Credit for Employer Social Security Taxes Paid on Certain Employee Tips Credit (Form 8846) 11 $ Edit Sheet, Line 14
    U Credit for Contributions to Selected Community Development Corporations (Form 8847) 11 $ Edit Sheet, Line 15
    V Welfare To Work Credit (Form 8861) 11 $ Edit Sheet, Line 17
    W Qualified Zone Academy Bond Credit (Form 8860) 11 $ Edit Sheet, Line 16
    X New Markets Credit (Form 8874) 11 $ Edit Sheet, Line 25
    Y Credit for Small Employer Pension Plan Startup Costs (Form 8881) 11 $ Edit Sheet, Line 26
    Z Credit for Employer-Provided Child Care Facilities and Services (Form 8882) 11 $ Edit Sheet, Line 27
    AA New York Liberty Zone Business Employee Credit (Form 8884) 11 $ SCRS field only
    AB Orphan Drug Credit (Form 8820) 11 $ Edit Sheet, Line 8
    AC Biodiesel and Renewable Diesel Fuels Credit (Form 8864) 11 $ Edit Sheet, Line 18
    AD Low Sulfur Diesel Fuel Production Credit (Form 8896) 11 $ Edit Sheet, Line 28
    AE Credits for Employers Affected by Hurricane Rita or Wilma (Form 5884-A) 11 $ Edit Sheet, Line 4

    Note:

    This field is no longer edited by Code and Edit.
    AF Qualified Railroad Track Maintenance Credit (Form 8900) 11 $ Edit Sheet, Line 29
    AG Distilled Spirits Credit (Form 8906) 11 $ Edit Sheet, Line 30
    AH Nonconventional Source Fuel Credit (Form 8907) 11 $ Edit Sheet, Line 31
    AI Energy Efficient Home Credit (Form 8908) 11 $ Edit Sheet, Line 32
    AJ Energy Efficient Appliance Credit (Form 8909) 11 $ Edit Sheet, Line 33
    AK Alternative Motor Vehicle Credit (Form 8910) 11 $ Edit Sheet, Line 34
    AL Alternate Fuel Vehicle Refueling Credit (Form 8911) 11 $ Edit Sheet, Line 35
    AM Credit to Holders of Tax Credit Bonds (Form 8912) 11 $ Edit Sheet, Line 36

3.12.16.8.2  (01-01-2010)
Field 08-A, Transfer’s Fund

  1. Field 08-A is transcribed from Form 1120-SF, Page 2, Additional Information, Line 1a.

  2. Field 08-A must be all numeric or blank.

  3. Field 08-A must be transcribed in dollars only.

  4. Field 08-A must be positive.

3.12.16.8.3  (01-01-2010)
Field 08-B, Direct/Indirect Payment

  1. Field 08-B is transcribed from Form 1120-SF, Page 2, Additional Information, Line 3b.

  2. Field 08-B must be all numeric or blank.

  3. Field 08-B must be transcribed in dollars only.

  4. Field 08-B must be positive.

3.12.16.8.4  (01-01-2010)
Field 08-C, Distribution Indicator

  1. Field 08-C is transcribed from Form 1120-SF, Page 2, Additional Information, the dotted portion Line 4a.

  2. This is a one digit numeric field.

    Code Description
    1 Yes
    2 No


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