3.12.213  Form 1066, U.S. REMIC Income Tax Return

Manual Transmittal

October 22, 2014


(1) This transmits revised IRM 3.12.213, Error Resolution, Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return.

Material Changes

(1) Editorial changes have been made through out this IRM and all cross references verified.

(2) IRM added new subsection for BMF Identity Theft.

(3) IPU 14U1037 issued 06-23-2014 IRM Added (b) and (d) to list of returns not to send to Statute.

Effect on Other Documents

IRM 3.12.213 dated 11-13-2013 effective January 01, 2014 is superseded. This IRM also incorporated IRM Procedural Update (IPU) 14U1037 (dated 06/23/2014).


Wage and Investment, Submission Processing

Effective Date


Paul J. Mamo
Director, Submission Processing
Customer Account Services
Wage & Investment  (01-01-2015)
Purpose and Scope

  1. Error Resolution System for Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return, corrects errors made by taxpayers as well as those made by submission processing campus operations.  (01-01-2015)

  1. Records will be placed in the Error Inventory or the Workable Suspense Inventory for correction. Once the Error Resolution tax examiner accesses the record and it is displayed on the screen, it must either be fully corrected, placed in suspense for additional information, or rejected from pipeline processing. Corrections will include correcting errors in editing or transcription and correction of math errors.

  2. This manual is your main source of information in correcting the record on the screen and the related return. You will also find procedures in the following Internal Revenue Manuals:

    1. IRM 3.12.38, Error Resolution–Business Master File (BMF) General Instructions, containing instructions for correcting records on the screen, document control, inventories and management reports.

    2. IRM 3.11.213, Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return, Returns and Document Analysis, which provides instructions for coding and editing of Form 1066.  (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 a 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.

    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 to provide additional case-related information.

    8. Otherwise, if the taxpayer does not need to contact a specific employees, 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.  (01-01-2015)
♦Taxpayer Advocate Service (TAS)♦

  1. Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria) or has Form 911 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 13.7.4, Same-Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and forward to TAS in accordance with your local procedures.  (01-01-2015)
♦TAS Service Level Agreement (SLAs)♦

  1. The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage & Investment (W&I) Division, Small Business & Self-Employed (SB/SE) Division, Tax Exempt & Government Entities (TE/GE), Criminal Investigation (CI), Appeals, and Large Business & 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.  (01-01-2015)
♦BMF Identity Theft ♦

  1. BMF Identity Theft is increasing. If a tax examiner in Submission Processing (SP) Error resolution System (ERS) 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 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.  (01-01-2015)
Related Forms

  1. The following forms are referenced in this section. The chart below shows the form number, form title and use:

    Form Title Use
    3465 Adjustment Request To request transfer of credits.
    3696 Correspondence Action Sheet To initiate correspondence to the taxpayer through the ♦Suspense Unit.
    4227 Intra–SC Reject or Routing Slip To identify the reason for using the Action Code.
    8161 Error Resolution System (ERS) Return Charge-out To charge out returns on the new Suspense List, Rejected Records List and Duplicate DLN Register. Input Perfection will also use as a routing slip and history item.  (01-01-2015)
♦Customer Account Data Engine (CADE) 2♦

  1. The Customer Account Data Engine (CADE) 2 Program Office in Headquarters is charged with the primary goal to implement a single, modernized programming solution which provides daily processing of taxpayer accounts.

  2. The CADE 2 solution is comprised of several components, to modernize the IRS to a daily processing environment with several Transition States.

  3. With CADE 2 there will be changes to campus cycles which will begin with cycle 201201.
    The new BMF campus cycles are:

    1. Campus Cycle: Thursday - Wednesday

    2. Master File Processing: Friday - Thursday

    3. Notice Review Saturday: Monday (8+ days)

    4. Unpostables: New available - Tuesday; Closing - Tuesday

  4. BMF transaction posting timeframes are outlined as follows:

    • Transactions will be viewable using CFOL command codes on Saturday following the weekly Master File processing run on Thursday

    • Transaction will be viewable as posted transactions using IDRS command codes on Monday following the weekly Master File processing run on Thursday


      With the acceleration of the IDRS weekly analysis being performed the weekend directly after the Master File processing on Thursday, transactions will be posted instead of in pending status on Monday.

  5. Cycle posting dates will reflect a format of "YYYYCCDD" . "YYYY" will indicate the year and "CC" will indicate the posting cycle. For Individual Master File (IMF) transactions, the following values for DD are defined:

    • 01 = Friday

    • 02 = Monday

    • 03 = Tuesday

    • 04 = Wednesday

    • 05 = Thursday


    BMF cycle posting dates on BMFOL will continue to reflect YYYYCC. YYYY will indicate the year. CC will indicate the posting cycle. BMF cycle posting dates in TXMOD will reflect a format of YYYYCCDD. The DD value will be 08.  (01-01-2015)
Error Inventory Report

  1. Each day, the Error Inventory Report will be furnished showing the blocks by the block control number and block Document Locator Number (DLN) in DLN order.

  2. Each batch will be on separate pages. Blocks received from Blocks out of Balance (BOB) will also be on separate pages.

  3. A copy of the Error Inventory Report can be placed on the carts of documents and used as a charge-out. This will help to determine when a cart is completed.

  4. The first line of the Error Inventory report will show the number of working days the records on that page have been in the Error Inventory. This will enable work left from a previous day to have priority.  (01-01-2015)
Workable Suspense Inventory Report

  1. Each day, the Workable Suspense Inventory Report will be furnished showing the records by program in DLN order for each status. Separate pages for each program with totals will be provided.

  2. The report will show the number of working days that the records have been in the Workable Suspense Inventory. This is the first line of the report. This will allow priority to be given to the older work.  (01-01-2015)
Types of Errors

  1. The Error Resolution System (ERS) will identify errors according to type and priority. The record heading will show the type of error.

  2. This IRM will furnish the solution for the displays of the errors. There may be records where the examiner finds that programming has not furnished a section that is needed to solve an error. In this event, the tax examiner can use Command Code (CC) GTSEC. Following are the types of errors that might be displayed in priority rank:

    1. Action Code Error (Priority I);

    2. Section Error (Priority II) - includes terminus error and Integrated Submission and Remittance Processing (ISRP) problem code;

    3. Validity Error (Priority III);

    4. Math/Consistency Error (Priority IV).  (01-01-2015)
Status Codes

  1. Records for the documents in the Error Resolution System (ERS) are controlled by Status Codes. The status is updated when the record is placed in a specific inventory.

  2. Below is a list of the status codes and a brief explanation:

    Status Code Description
    Status 100 1. Error awaiting correction.
    2. Records are in the Error Inventory.
    Status 2XX 1. Record awaiting information.
    2. Records are in the Unworkable Suspense Inventory.
    Status 3XX 1. Suspense period expired - no response.
    2. Records are in the Workable Suspense Inventory.
    Status 4XX 1. Record with information, awaiting correction.
    2. Records are in the Workable Suspense Inventory.
    Status 900 Record is on the Unselected Inventory.
  3. The final two positions of the Status Code will consist of the first two positions of the Action Code. This will put similar work together on the Workable Suspense Inventory. For example: 321 - Suspense period expired, no response to taxpayer correspondence. If a record has been selected to be held for Quality Review, the positions 2 and 3 will be "QA" .

  4. Records for which the suspense period has expired before being activated are automatically moved from Status 2XX to Status 3XX.  (01-01-2015)
Command Codes

  1. The Command Codes (CC) needed for correcting the Error Inventory and the Workable Suspense Inventory are briefly described below. They are also explained in IRM 3.12.38, ERS, General Instructions. Any Command Code permitted by the Employees Security File is available. CCs are used to tell the system which function to perform.

  2. CCs must be entered in a valid format. Otherwise, a field error displays.

  3. Correct the data entered using the applicable CC.

  4. The valid CCs are:

    Command Code: Description:
    • Establish control bases

    • Update or close control bases that are open

    • Correct name controls on dummy accounts

    • Append history items to modules on IDRS

    • Generate Transaction Code (TC) 902 to secure tax modules and their related entity data from the Master File

    ACTVT Used to transfer an Unworkable Suspense record to the Workable Inventory.
    BMFOL To research entity and/or tax data which may or may not be available on IDRS. This command code allows several screen displays based on the definer code input. It should be used in lieu of the Command Code MFTRA.
    BRTVU To access data that was transcribed from line items and/or computer generated transactions from BMF returns and their schedules. It can be used in researching original returns.
    CRECT Used to enter a correction. CRECT will be valid only after an error has been displayed in response to the GTREC command. The Remittance field in a record is not correctable with the Command Code CRECT.
    DLSEC Used to delete a section of the record.
    ENMOD To research for name control and transaction code information.
    ENREQ Entered (with a blank definer) after a response to ENMOD indicates that the entry is on the file. Used to generate CC BNCHG.
    ERINV Used to research a DLN or TIN on the ERS system.
    ERVOL Used with a Status Code to display the number of records in the current Workable Inventory.
    GTREC Used to access the first error record in an ERS error block or access a specific record in the Workable Suspense Inventory.
    GTRECW Used to recover an ERS data record that was already worked. This Command Code can be used at any time on the same processing day. If an error is discovered on a subsequent day, the record must be corrected using Notice Review and Adjustment procedures.
    GTSEC Used to obtain the display of any data section within the record in progress. The response will be the display of all correctable fields of the requested section, including blank fields. No computer generated fields or error indicators will be shown. If no data is present in the specified section, the format of the requested section will be displayed.
    GTRECQ Used to access a worked record that was held for Quality Review.
    INOLE To research the entity module. This information includes name lines, name control, address, employment codes, filing requirements, etc.
    MFREQ To request an entity module or tax module and its related entity data from Individual Master File (IMF), Business Master File (BMF), Individual Retirement Account (IRA), or Employee Plan Master File (EPMF) when case control is not required.
    NAMEB/NAMEE To research for a missing TIN. A name is required to be input to research the Names Search Facility (NSF).
    NWDLN Used to assign a renumbered DLN on an ERS record.
    RJECT Used to delete a record from ERS.
    SSPND Used with an ERS Action Code to place a record into suspense status. SSPND is valid for Error Correction and Suspense Correction.
    TERUP To allow an employee to delete his/her erroneous entry on the day of input. An employee can only delete his/her own entries.
    TRDBV Tax Return Data Base - To access 100 percent of return data as well as all subsequent corrections entered via ERS and Generalized Unpostable Framework (GUF) This command code can be used to verify specific line items (including any correction activity), resolve taxpayer inquires, identify refund issues, and verify filing and return status. Also available is Command Code TRERS, which will link the DLN entered with Command Code GTREC to Command Code TRDBV.
    TRERS Is an extension of CC TRDBV developed for ERS processing and acts like TRDBV. It allows the tax examiner to select a return based on the DLN of the latest GTREC command executed.  (01-01-2015)
ERS Action Codes

  1. The ERS Action Code indicates that specific information is missing or that the record is to be rejected from processing. The code will have sufficient detail to indicate if correspondence is to be sent to the taxpayer or specific in-house research or action is required.

  2. Document Perfection tax examiners will assign a three digit code to numbered returns when they determine that the document is unprocessable in its present form either because additional information is needed or some manual intervention is required. This code will be edited in the lower left margin of page 1. See Exhibit 3.12.213-2 for a listing of the Action Codes.

  3. Form 3696, Correspondence Action Sheet, used for initiating correspondence, will be attached by Document Perfection. For routing within the campus (In-House Research) an explanation concerning the missing information will need to be attached to the return.

  4. The Action Code assigned by Document Perfection will be transcribed into the record of the Form 1066.

  5. The presence of a valid Action Code other than 001, will place the record in the Suspense Inventory, either Workable or Unworkable.

  6. If the Action Code assigned by Document Perfection is invalid or incomplete, the record will be assigned to the Error Inventory for correction or deletion of the code.

  7. Only one Action Code may be assigned at one time to a record. The priority of the Action Codes will be:

    1. 310

    2. 320

    3. 6XX

    4. 4XX

    5. 3XX

    6. 2XX

  8. An ERS tax examiner may enter an Action Code on a record, delete or correct an invalid code or may overlay the present Action Code with another to either re-suspend or reject from ERS. This is done by entering a valid Action Code with a CC SSPND, RJECT or NWDLN. See IRM 3.12.38, BMF General Instructions, for explanations of these codes.

  9. An ERS tax examiner entering a valid Action Code with the SSPND CC will be clearing the record from the screen and placing the record in either Workable Suspense or Unworkable Suspense.

  10. An ERS tax examiner entering a valid Action Code with the RJECT CC will be rejecting the record from ERS. Generally, the Service Center Control File (SCCF) will be automatically updated for the rejected records.  (01-01-2015)
Computer Condition Codes

  1. Computer Condition Codes (CCC) are used to identify a special condition or computation for the computer. The valid CCCs are B, D, F, G, L, O, R, W, X, 3, 4 and 7.

  2. The codes are edited to the dotted portion of Section 1, Line 1.

  3. Below is a chart showing the Condition Codes, their definitions, and the checks.

    Code Definition Error Checks
    B Electing out of installment sales  
    D Reasonable cause for failure to pay taxes timely Must have a received date (Error Code 028). Not edited unless instructed by Headquarters.
    F Final Return Cannot be coded "G" (field error).
    G Amended Return (1) No other codes allowed except "W" or "3" (field error).
    (2) Must have received date (Error Code 028).
    (3) All fields must be blank, except RMIT, 01CCC, 01NC, 01EIN, 01TXP and 01RCD (Error Code 010).
    L Treaty Based Positions  
    O Module Freeze Manual Refund
    R Reasonable cause for delinquency Must have a received date (Error Code 028). Not edited unless instructed by Headquarters.
    W Return cleared by Statute Must be present on Statute Cases (Error Code 001).
    X Refund Freeze Code  
    3 No reply received for correspondence sent to taxpayer, suppress credit interest. Must not contain Correspondence Received Date (Error Code 073).
    4 Return prepared under IRC Section 6020(b)  
    7 Reasonable cause for delinquency or late payment considered and denied. Must have a Received Date (Error Code 028). Not edited unless instructed by Headquarters.  (01-01-2015)
Clear Code "C" and "000"

  1. The letter "C" is used as Clear Code on an Error Code where the error condition is such that the resolution does not require a change or correction to the record as displayed. The display will include a clear field labeled "CL" to indicate the possible need of a Clear Code. Command Code CRECT is used to enter the "C" .

  2. Error Codes indicating the possible need of a Clear Code are cleared by either correcting the condition or entering a "C" to indicate no correction is needed.

  3. Code "C" is also used for clearing the Action Code from the screen after corrections for the Action Code are completed, or, as with 410, the Action Codes must be cleared initially, so other errors in the record can be resolved. The presence of the "C" with Priority I Error indicates that you have made the corrections to the Action Code and now wish to have any other errors on the record displayed (allowing for suspense correction only).

  4. The "000" is also used as a Clear Code when deleting Action Codes. It will only be used for invalid or erroneous Action Codes after you have determined there is no reason to suspend the record.

  5. Programming erases all "C" Clear Codes for Error Codes when a record is suspended with Command Code SSPND.

  6. Programming erases all "C" Clear Codes for Error Codes and Action Codes for the new day’s Error Inventory and Workable Suspense Inventory. Unfinished records from the previous day will contain none of the "C" Clear Codes that were assigned to a record that was not completely worked.


    The "C" Clear Code will prevent any other corrections to the record. If a correction must be entered and transmitted, it must be done prior to transmitting the "C" Clear Code.  (01-01-2015)
Unprocessable Returns

  1. If a return is unprocessable because of missing information that can be provided through research, then perform in-house research or, if necessary, refer the document to another area of the campus for resolution.  (01-01-2015)
Correspondence Needed

  1. Unprocessable condition can be resolved with correspondence.

    If... Then...
    Perfection of a return is not possible and it is necessary to correspond for missing signature or attachments, Initiate correspondence by using Form 3696, Correspondence Action Sheet, to request missing information. See IRM, Use of Fax for Taxpayer Submissions.


    Do not correspond for a signature on "CIS" returns that have a Form 13596, Reprocessing Returns, attached. See IRM, Correspondence Imaging System, for processing instructions.

    It is necessary to suspend the unprocessable record, Enter the Command Code SSPND followed by the appropriate Action Code.
    The condition is a new suspense item, A charge-out Form 8161 will be computer generated. The charge-out will be used for pulling documents as well as routing and controlling documents while the record is being held in suspense and for use in associating the document with the Workable Suspense Inventory when the record becomes workable.
    A record appears on the Workable Suspense Inventory, with the Action Code as first priority, The tax examiners will add the information received to the record or follow the IRM instructions for the "no reply" and clear the Action Code by entering the letter "C" in the Clear Field and transmitting. Once the Action Code is cleared, any Validity, Section or Math/Consistency errors will be displayed for correction.
    Records are unprocessable and again require suspension for additional information, A charge-out will not be generated for suspended items. The charge-out should be notated in the appropriate block by entering the Action Code and date.  (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. Follow the instructions below for processing "CIS" returns:

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


    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 return AM. Continue processing return.

    The return is not complete (e.g., missing signature, schedules or forms),
    1. Remove the return from the batch.

    2. Void the DLN.

    3. Attach Form 4227 to the return and route to Accounts Management to secure missing information.


    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 not complete (e.g., missing signature, schedules or forms), Research for prior posting (posted TC 150).
    1. If TC 150 is present and the information is the same, cancel the DLN and treat as classified waste.
    2. If TC 150 is not present, follow normal correspondence procedures.


    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 return to AM. Continue processing return.  (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. ERS examiners will indicate the fax paragraph on the approved Correspondence Action Sheet to advise taxpayers of the option to fax their response.


    Before disclosing any tax information, you must be sure you are speaking with the taxpayer or authorized representative. See the Taxpayer Authentication guidelines in IRM, Required Taxpayer Authentication and IRM, Additional Taxpayer Authentication. Also, before leaving any messages on a taxpayer's answering machine, review IRM, Leaving Information on Answering Machines/Voice Mail. Fax procedures contained in IRM, Facsimile Transmission of Tax Information, must be reviewed prior to faxing confidential information to the taxpayer.  (01-01-2015)
Correcting Unprocessable Conditions

  1. Some unprocessable conditions can be corrected without correspondence.

    If... Then...
    Perfection may be possible but the record may require renumbering, 1. Uncorrectable fields, such as the DLN, may need correcting and the record will require rejecting for re-entry.
    2. Reject the record by entering the Command Code RJECT followed by the Action Code 630.
    A new DLN is to be assigned, Use Command Code NWDLN with the appropriate Action Code, the new DLN, and new Master File System ID Code, if required.


    A charge-out will be generated for all Rejected Records. The charge-out will remain in the Files function for future reference.

    The DLN was transcribed incorrectly and is incorrect on the screen. The DLN appearing on the charge-out is erroneous, The correct DLN must be noted on the charge-out for use in pulling the document.
    Inform your supervisor of the block involved, and the physical location of the document.
    Perfection is not possible, The record may be rejected from ERS and action initiated to have the DLN voided.
    Remittance is involved, Transfer the remittance. If you cannot determine where to transfer the remittance, transfer it to the "Unidentified Remittance File" .
  2. ERS will automatically control most of the adjustments to SCCF. When manual adjustment is required, Form 4028, Service Center Control File Adjustment Record (SCCF Format Code 216), will be used for ERS. Preparation of Form 4028 is explained in IRM 3.12.38, BMF General Instructions.  (01-01-2015)
Statute Control Cases

  1. Any return that has a processing date equal to or greater than two years and 9 months after the return due date (for "G" coded returns) or the later of the return due date or the received date (for non "G" coded returns) is a statute control document and will appear on the screen with Error Code 001, unless CCC "W" is present on the record. The "W" indicates the record has been cleared by the Statute Unit.

  2. The due date for Form 1066 is the 15th day of the fourth month after the tax period ending.

    If... Then...
    Return secured by Compliance (e.g., 6020(b)) or a substitute return prepared by Examination (SFR in top margin) with Form 13133, Expedite Processing Cycle, attached, Enter Computer Condition Code "W" in 01CCC and on the dotted portion of Section 1, Line 1 and continue processing.  (01-01-2015)
Refund Returns - 45-Day Jeopardy and Million Dollar Refunds

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


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

  2. Action Code (AC) 341 should be input by Code & Edit to show that a manual refund is needed.

  3. If these are not identified in Code & Edit, ERS examiners need to be aware of the following criteria:

    If... Then...
    The processing date is more than 20 days after 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


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

    Enter AC 341 and route to ERS/Rejects for manual refund
    The refund is $10,000,000 or more Enter Action Code 341 and route to ERS/Rejects for manual refund.  (01-01-2015)
Taxpayer Advocate Service (TAS) Manual Refunds

  1. Any return hand walked by a Wage & Investment (W&I) Submission Processing (SP) liaison for TAS as a manual refund should be processed by a lead tax examiner or designated tax examiner using the following procedures in the order listed:

    1. CCC "O" should be edited on the return and entered in Field 01CCC.

    2. Delete the CCC "Y" from Field 01CCC.

    3. Continue the process of the return according to Error Code processing.

  2. Correspondence - If the return requires correspondence for missing or incomplete information, then do the following:

    • Complete the appropriate correspondence request form and request all information that is missing or incomplete

    • Inform the W&I SP liaison of all information that is being requested

    • Suspense (SSPND) with appropriate suspense code and give the return back to the W&I SP liaison

    • Contact will be made with the Taxpayer Advocate by the W&I SP liaison to obtain the required information needed to complete the processing of the return

  3. Other Suspense Action–If the return requires other suspense action, then do the following:

    • Initiate suspense (SSPND) action according to the Error Code procedures

    • Inform the W&I SP liaison the reason of the action taken

    • Give the return back to the W&I SP liaison

    • Contact by the W&I SP liaison will be made with the Taxpayer Advocate, who in turn will take the necessary action to complete the processing of the return

  4. Assigning Taxpayer Notice Codes (TPNC)/Math Error - When a math error is identified, do the following:

    • Assign the TPNC in accordance to the Error Code procedures

    • Inform the W&I SP liaison of the TPNCs issued after all TPNCs have been assigned

    • Suspend (SSPND) with appropriate code (suspense should be done at the generated error code) and give the return to the W&I SP liaison

    • Contact by the W&I SP liaison will be made with the Taxpayer Advocate, who in turn will take the necessary action to complete the processing of the return

  5. When Balance Due/Overpayment Math Error Code generates do the following:

    • Make a screen print of the Error Code Screen Display, highlight the Computer Generated Refund amount, and attach the print to the front of the return with the entity portion of the return visible

    • Enter the amount the taxpayer claimed as the amount they requested to be refunded back into Field 07B/R

  6. If Balance Due/Overpayment Math Error Code regenerates because the taxpayer made a math error when computing their refund, then do the following:

    • Make a screen print of the Error Code Screen Display and highlight the Computer Generated Refund Amount

    • Attach the print to the front of the return with the entity portion of the return visible

    • Assign the appropriate TPNC

  7. Once return processing is complete, give the return, Form 12412, Operations Assistance Request, and the ERS screen print to the W&I SP liaison.

  8. Rejects Suspense - Manual refunds that are hand walked by a W&I SP liaison that have been suspended should be processed as follows:

    • Follow the specific instruction given by the W&I SP liaison in regards to correspondence issues and the assignment of the TPNCs

    • Refer to instructions shown above  (01-01-2015)
♦Frivolous Returns and Claims♦

  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, shown in Exhibit 3.12.213-6.

  2. Review of 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 3.12.213-6.


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

    Remove the 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 the procedures in IRM 3.12.213. However, do not circle or void the Action Code indicating a frivolous return.


    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡  (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 are willful and deliberate attempts to evade or defeat the income tax. Flagrant criminal activity includes but is not limited to the failure to pay taxes due and/or taxes collected or withheld and claims of false refunds based on bogus return information.

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

  3. CI "Funny Box" Criteria:

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

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

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

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

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ "≡ " ≡ ≡
  4. If CI has stamped the return, no further CI action is required, but if the return fits other criteria (e.g., Frivolous Argument) take appropriate action.  (01-01-2015)
♦Examination (Exam) "Funny Box" ♦

  1. The primary objective in identifying tax returns for examination is to promote the highest degree of voluntary compliance. Examination (Exam) 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.  (01-01-2015)
Routing of Attachments

  1. The following information pertains to taxpayer correspondence:

    If... Then...
    Unrelated, unanswered taxpayer correspondence is attached and no action has been taken, Detach and route to Accounts Management.
    Unanswered taxpayer correspondence related to the Form 1066 is attached, Make a photocopy of the attachment and forward it to the appropriate area.
    Installment Agreement request, Form 433-B, Form 433-D, or Form 9465, Detach and send to Collections.
    Attachment or photocopy of an attachment is to be routed elsewhere, Be sure that the attachment contains name, address, Employer Identification Number (EIN) and received date.  (01-01-2015)
♦BMF Consistency♦

  1. The purpose of this initiative is to achieve consistency in the Business Master File (BMF) Error Resolution System (ERS) processing IRMs.

  2. Topics for BMF Consistency have been identified and developed as a coordinated effort between CSPC, OSPC, and Paper Processing Branch, BMF Code & Edit/ERS Section.

  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.  (01-01-2015)
Background for Form 1066

  1. Form 1066 is used to report the income, deductions and gains and losses from the operation of a Real Estate Mortgage Investment Conduit (REMIC). Also, the form is used to report and pay taxes on net income from prohibited transactions, net income from foreclosure property, and contributions after the start up day. Forms 1066 are all filed at the Ogden Submission Processing Campus (OSPC).

  2. The taxpayer is now required to file Form 1065-X, Amended Return or Administrative Adjustment Request (AAR) to correct or amend Form 1066.

  3. Form 1066 for tax year 2012 will only contain 3 pages. Page 2, Schedule D, no longer exists.  (01-01-2015)
Section 01 - Correction Procedures General Information

  1. Section 01 contains the entity data and codes for returns. See Exhibit 3.12.213-1 for location of field designators on Form 1066.

  2. The field designator, maximum length for each entry, title and location where the entry can be found are listed below.

    Field Designator Max Field Length Title Location
    01NC 4 Name Control Pg. 1, Name Line
    >>>>   Name Control Underprint  
    01EIN 9 Employer Identification Number Pg. 1, Box A, or label
    01TXP 6 Tax Period Pg. 1, Form 1066 (upper right corner)
    >>>>   Tax Period Underprint  
    01RCD 8 Received Date Pg. 1, Form 1066 (face of return)
    01CCC 10 Computer Condition Code Dotted portion of Section 1, Line 1
    01DOB 6 Date REMIC Started Page 1, Box B
    01NOR 6 Number of Residual Holders Left margin of the "Deductions" section preceded by "3-"
    01TEF 1 TEFRA Left margin of the "Deductions" section preceded by "4-"
    01MSC 4 Missing Schedule Code Left margin of the "Deductions" section preceded by "5-"
    01CRD 8 Correspondence Rec’d Date N/A
    (No longer edited by Code and Edit.)
    01ADC 3 Audit Code Left margin of the "Deductions" section preceded by "8-"
    01ISI 1 Installment Sale Indicator Left margin of the "Deductions" section preceded by "9-"
    01CBI 1 Paid Preparer Checkbox Indicator Pg. 1, Form 1066, checkbox in bottom right corner
    01PSN 9 Paid Preparer SSN or PTIN Pg. 1, Form 1066, below checkbox
    01PEN 9 Paid Preparer EIN Pg. 1, Form 1066, below checkbox
    01PTN 10 Paid Preparer Phone Number Pg. 1, Form 1066, below checkbox  (01-01-2015)
Name Control - 01NC

  1. The name control is located on Page 1, entity area, first name line, or on prior years the preprinted label.

  2. 01NC has four positions and the valid characters are alpha, numeric, hyphen (-), ampersand (&), and blank.  (01-01-2015)
Name Control Invalid Condition

  1. The name control field is invalid if any of the following situations occur:

    1. The first position is not alpha or numeric.

    2. The first position is blank or there are intervening blanks between characters.

    3. The second, third, and fourth positions are not alpha, numeric, ampersand, hyphen or blank.  (01-01-2015)
Correction Procedures

  1. Check the field with the return-

    If... Then...
    The data was transcribed incorrectly, 1. To determine the correct name control, see Document 7071-A, Name Control Job Aid.
    2. If name control is unavailable, research using Command Code ENMOD or INOLE to secure the name control.
    Name control is found, Enter the correct name control in Field 01NC and on the return.
    Unable to determine the name control, 1. Suspend the record with Action Code 320.
    2. Route to Entity Control.  (01-01-2015)
Employer Identification Number - 01EIN

  1. The data for this entry is located in Box A on the return or on the preprinted label.

  2. The entry must contain nine numeric digits and cannot begin with 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.

    If... Then...
    The EIN has any of the numbers shown above in the first two positions, or is other than nine numeric characters, Compare 01EIN with the EIN on the return and correct any transcription errors.
    The EIN was transcribed correctly, 1. Search the return and attachments and IDRS for another EIN. If one is found, enter it on the return and on the screen.
    2. If the EIN is changed from the one the taxpayer used, issue Letter 3875C as a non-suspense letter to the address on the return. Continue processing the return.


    Do not send Letter 3875C when:

    • Three or less digits of the EIN are transposed, different, or missing, or

    • INOLES indicates the account has been "merged to" or "merged from" , or

    • The EIN on the return is the taxpayer's SSN and research shows there is no valid entity on Master File for that EIN.

    There is no record of an EIN, Suspend the record with Action Code 320 and route to Entity Control for an EIN to be assigned.
    Entity Control has found the correct EIN, Enter it in Field 01EIN.
    Entity Control has assigned an EIN, Enter it in Field 01EIN. Enter the entity assignment date, found in the lower left hand corner of the return in Field 01CRD if it is after the due date of the return.  (01-01-2015)
Tax Period - 01TXP

  1. The tax period is printed in year (YYYY), month (MM) format (e.g., December 31, 2012 will be displayed as 201212). The tax period is located above the first name line, to the right on the return.

  2. The tax period must be present and contain six numeric digits.

  3. The last two digits must be 12, unless the Form 1066 is a final return. Valid entries for tax period month on final returns are 01 through 12.

  4. The year (first four digits) must not be greater than the current year.

  5. The tax period cannot be earlier than 198712.  (01-01-2015)
Correction Procedures

  1. The following information pertains to correction procedures for the tax period:

    If... Then...
    The correct tax period cannot be determined from the return, Process for the current year.
    Multiple tax periods are on the return, Correspond with the taxpayer and suspend the record with Action Code 21X.  (01-01-2015)
Received Date - 01RCD

  1. The received date appears on return in MMDDYY format, but will be displayed in YYYYMMDD format. It must be eight numerics. The fifth and sixth digits (month) must be 01-12, and the seventh and eighth digits (day) must be 01-31.

  2. The received date must be equal to or greater than the tax period ending date and equal to or earlier than the current date.  (01-01-2015)
Correction Procedures

  1. The following information pertains to correction procedures for received date.

    If... Then...
    The received date was transcribed incorrectly, Enter the date from the return.
    The received date was edited incorrectly, Enter the date as determined in the following order of priority:
    • Earliest legible postmark date of the U.S. Post Office, foreign, or a Private Delivery Service.


      For certified mail only - If a postmark is not present, look for a "USPS.com Track & Confirm" record that has been attached to the return (should be before the envelope). Use the "Acceptance" date on the record to determine timeliness follow normal editing procedures. See Exhibit 3.12.213-8.
      If the "USPS.com Track & Confirm" record is not attached, no action is required.

    • Service Center Automated Mail Processing System (SCAMPS) digital date.

    • Revenue Officer’s or other IRS official’s signature date.

    • Signature date, if within the current year (unless other information indicates signature date is invalid).

    • DLN Julian Date.

    1. Earliest legible postmark date (U.S. Post Office, or Private Delivery Service postmark. If both present, use USPS postmark.) See "Note" above regarding certified mail.
    2. Revenue Officer’s signature date.
    3. Taxpayer’s signature date (only if within current year).
    4. Julian control date.  (01-01-2015)
Computer Condition Codes - 01CCC

  1. The valid computer condition codes are B, D, F, G, L, O, R, W, X, 3, 4 and 7.

    Computer Condition Code Definition
    B The REMIC has made an election out of the installment sale method notated on the margin of Form 4797, Sales of Business Property, or Schedule D.
    D The taxpayer has established reasonable cause for failure to pay taxes timely.
    F Final Return.
    G Amended or superseding return - Computer Condition Code "G" is invalid if any other Computer Condition Code is present except "W" or "3" is present.
    L "Section 6114 Election or Treaty- Based Position Returns" - Taxpayer writes either "Section 6114" or "Section 6114 Election" on the return, or Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), is attached to the return.
    O "Module Freeze" - Form 3753, Manual Refund Posting Voucher, is attached or a duplicate copy of Form 4466, Corporation Application for Quick Refund of Estimated Tax, is attached.
    R The REMIC has established reasonable cause for filing a delinquent return.
    W Record cleared by Statute Control Unit.
    X Refund Freeze code.
    3 No reply received for correspondence sent to taxpayer. Editing "CCC 3" suppresses computation of credit interest.
    4 Return was prepared under IRC 6020(b).
    7 Reasonable cause for filing a delinquent return or late payment of taxes was examined and denied.  (01-01-2015)
Correction Procedures

  1. The following information pertains to 01CCC correction procedures.

    If... Then...
    01CCC was transcribed incorrectly, Enter the correct Computer Condition Code from the dotted portion of Section 1, Line 1.
    01CCC was transcribed correctly, Determine the correct code.  (01-01-2015)
Date REMIC Started - 01DOB Page 1, Box B

  1. The date REMIC started appears as YYYYMM format. The first four digits are the year and the last two digits are the month.

  2. Field 01DOB must be all numerics or all blanks.

    If... Then...
    01DOB was transcribed incorrectly, Enter the correct date from Page 1, Box B.
    Either the year or month is not present in Box B, Do not enter in 01DOB.
    The taxpayer enters a future date as the date business started, Do not enter in 01DOB.  (01-01-2015)
Number of Residual Interest Holders - 01NOR

  1. If other than 1 through 999,999, then the entry is invalid.

  2. This entry should reflect the Number of Residual Interest Holders shown on Page 3, Question F.  (01-01-2015)
Correction Procedures

  1. The following information pertains to the number of Residual Interest Holders:

    If... And... Then...
    01NOR is other than 1 through 999,999, Question F has an entry of 1 through 999,999, 1. Enter the number on Question F in Field 01NOR.
    2. Correct the number edited in the left margin of the "Deductions" section preceded by "3-" .
    01NOR is other than 1 through 999,999, Question F is blank and Schedules Q are attached, 1. Count the number of Schedules Q and enter the total in field 01NOR.
    2. Edit the number of Schedules Q in the left margin of the "Deductions" section preceded by "3-" .
    01NOR is other than 1 through 999,999, Question F is blank and no Schedules Q are attached, 1. Enter "1" in Field 01NOR if the "Trust" or "Corporation" boxes are checked on Question E and edit in the left margin of the "Deductions" section preceded by "3-" .
    2. Enter "2" in Field 01NOR if the "Partnership" box is check on Question E and edit in the left margin of the "Deductions" section preceded by "3-" .


    If Question E is also blank, enter "2" in Field 01NOR and edit in the left margin of the "Deductions" section preceded by "3-" .

    Taxpayer's figure exceeds 999,999,   Enter "999999" (six 9s) in Field 01NOR.  (01-01-2015)

  1. Valid entries are 1 or blank.  (01-01-2015)
Correction Procedures

  1. The following information provides correction procedures for Field 01TEF:

    If... Then...
    01TEF was transcribed incorrectly, Enter the correct code in the left margin of the Deductions section preceded by "4-" .
    The incorrect code was edited, Determine the correct entry from the taxpayer's response to question G, Page 3, Form 1066 as follows:
    1. Question G Box checked - Code 1.
    2. All other instances, leave the entry blank.

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