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Part 3. Submission Processing

Chapter 12. Error Resolution

Section 249. Processing Form 8752 (Cont. 1)

3.12.249  Processing Form 8752 (Cont. 1)

3.12.249.2 
Processing Form 8752, Required Payment or Refund Under Section 7519

3.12.249.2.2 
Section 01 Fields and Correction Procedures

3.12.249.2.2.6 
Field 01-E, Computer Condition Code (CCC)

3.12.249.2.2.6.10  (01-01-2010)
Field 01-E (CCC) Correction Procedures

  1. To correct, compare the CCC with the code entered on the Form 8752. If it is a transcription error, correct it by lining out the code in Field 01-E (CCC) and inserting the correct code above it.

  2. If Form 8752 is coded incorrectly, determine the correct code by referring to the above list. Correct the return by lining out the code in Field 01-E, inserting the correct code above it, and entering Action Code 6 on the error register.

  3. The field is invalid if Field 01-E contains a "G" and;

    1. There are entries past Field 01-F (Received Date), or

    2. If Field 01-F is blank, or

    3. If Field 01-E (CCC) contains entries other than "G" or "U" (on raw input only).

  4. To correct, determine if the return is an amended return.

  5. If the return is amended:

    1. Delete all fields in Section 01 past Field 01-F (Received Date).

    2. Delete all condition codes except "G" in Field 01-E.

    3. If Field 01-F (Received Date) is blank, enter the correct received date. See IRM 3.12.249.2.2.7 .

    4. Enter Action Code 6 to the left of Section 01.

    5. Delete Section 02 using Action Code 4.

  6. If the return is not amended:

    1. Line through the "G" code in Field 01-E (CCC) and enter Action Code 6 to the left of Section 01.

    2. Verify the remaining fields for correct data, enter any missing data and correct any erroneous data.

  7. To correct, refer to the tax period, computer condition codes, and received date on the return.

    1. Correct any transcription errors in Field 01-E (CCC).

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡

  8. The field is invalid if CCC "U" is present on correction processing. The "U" code is used by Code and Edit when a return must be rejected. If it is necessary to reject a return in Error Correction, use Action Code 3.

3.12.249.2.2.7  (01-01-2010)
Field 01-F, Received Date

  1. Invalid Condition : Field 01-F (Received Date) is invalid if any one of the following conditions, described in (a) through (i), exists:

    1. The month (fifth and sixth digits) is other than 01 through 12; or

    2. The day (seventh and eighth digits) is other than 01 through 31 for the months 01, 03, 05, 07, 08, 10 or 12; 01-30 for the months 04, 06, 09 or 11; 01-28 for the month 02; or 01-29 for month 02 during leap year.

    3. The received date is later than the processing date.

    4. An alpha, special character, or blank is present in the field.

    5. The received date is blank with a Condition Code "G" , "D" , or "R" .

    6. It is blank and the processing date is greater than the year-month of the tax period by more than 6 months. This condition is valid on the correction run.

    7. It is blank and remittance is significant.

    8. It is blank and the Penalty and Interest Code is NOT blank.

    9. The received date is in a format other than YYYYMMDD.

    10. The received date is earlier than the tax period.

  2. If Field 01-F (Received Date) is invalid, refer to the return to determine the correct Received Date.

  3. Correction Procedures : Determine the date from the return or attachments in the following priority order:

    1. The earliest legible postmark date (U.S. Postal Service (USPS), foreign or Private Delivery Service (e.g., Federal Express)) on the envelope. Rules for using the USPS postmark or foreign postmark date are as follows:

      If Then
      An envelope is not attached, Use the postmark date stamped on the face of the return.
      An envelope has both a USPS and private metered postmark, Use the USPS postmark.
      An envelope has a foreign and private metered postmark, Use the foreign postmark.
      An envelope has two private metered postmarks, Use the latest private postmark.
      An envelope has only one private metered postmark, Use the private metered postmark.

      Note:

      A private metered postmark is to be considered timely if received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Revenue Officer’s Signature Date

    3. Signature Date (only if within current year)

    4. Julian Control Date minus 10 days

    5. Current Date minus 10 days

    6. The tax period is correct and there is no remittance, delete the received date.

    7. The tax period is correct and there is a remittance amount, change the received date to the first day of the month following the tax period (e.g., 20XX0101).

    Note:

    See IRM 3.10.72, Extracting, Sorting, and Numbering, for further information on determining valid postmark dates.

  4. Using Action Code 6, line out the Received Date on the register and enter the correct date above the lined-out date.

  5. If a remittance amount in Field 01-A (Remittance) is present, the received date must be present. If not present, determine the received date based on the instructions in (3) above.

3.12.249.2.2.8  (01-01-2010)
Field 01-G, Penalty and Interest (P/I) Code

  1. This field is invalid if any one of the following conditions exists:

    1. It is other than blank or "1" ,

    2. It contains a "1" and the received date is not present, or

    3. It contains a "1" and the received date is not within the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  2. To correct, refer to the received date and tax period on the return to determine if the received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    1. Blank the field if the taxpayer has not computed penalty, interest and/or the received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Form 8752 must be filed and the required payment made to the Service on or before May 15th (of the year following the applicable election year). (Therefore, Form 8752 for applicable election years beginning in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ following the due date of the return, so the return is delinquent if received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    2. Enter a 1 if the taxpayer has computed penalty and interest and the received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Enter the received date in Field 01-F (Received Date) if it is not present.

3.12.249.2.2.9  (01-01-2010)
Field 01-H, Partnership/S Corporation Indicator

  1. ISRP transcribes a "1" (Partnership) or "2" (S Corporation) based on the box checked by the taxpayer. If one of the boxes is checked, and Field 01-H (Partnership/S Corporation Indicator) is blank, enter the appropriate code on the error register. If both boxes or neither box is checked, blank the field.

    1. "1" — Partnership box is checked.

    2. "2" — S Corporation box is checked.

3.12.249.2.2.10  (01-01-2010)
Field 01-I, CAF Indicator

  1. Field 01-I (Centralized Authorization File (CAF) Indicator) is invalid if it is not one of the following numbers: 1, 2, 3, 4, 7, or blank.

  2. If Code and Edit entered an invalid number, enter one of the following codes in the lower right corner of Form 8752 and correct, using Action Code 6:

    Code Description
    1 The attached POA is for this return and states that one person receives notices and no one receives refunds.
    2 The attached POA/TIA is for this return and states that two people receive notices and no one receives refunds.
    3 The attached POA/TIA is for this return and states that one person receives notices and one person receives refunds.
    4 The attached POA/TIA is for this return and states that two people receive notices and one person receives refunds.
    7 The attached POA/TIA is for this return and states that one person can receive refunds but no one can receive notices.

  3. If the POA does not authorize refunds or notices, a code is not necessary on the return.

3.12.249.2.2.11  (01-01-2010)
Field 01-J, First Tax Year Box

  1. This box (Box B) is checked for the first applicable year the election under Section 444 is in effect. No payment is due the first year. When this box is checked, there should not be any amounts in Lines 1 through 10 and a blank or zero on Line 11. Any error indicator will appear when Field 01-J (First Tax Year Box) equals "1" and there is an amount on any other line.

  2. If Field 01-J (First Tax Year Box) was erroneously coded "1" , cross out the "1" and correct, using Action Code 6.

  3. If amounts were erroneously keystroked into Section 02 fields, delete Section 02 with Action Code 4.

  4. If the box is checked, and there are amounts in Lines 1 through 11, use Action Code 3 to send the case to Rejects. Notate on Form 4227: "Taxpayer showing amounts on first year return when amounts should be zero." Rejects should correspond with the taxpayer to determine if this return represents the first applicable year or not.

    1. If the taxpayer indicates that this is the first applicable year, delete Section 02 with Action Code 4.

    2. If the taxpayer indicates that this is not the first applicable year, cross out the "1" in Field 01-J (First Tax Year Box) and correct with Action Code 6.

    3. If the taxpayer does not respond to correspondence, cross out the "1" in Field 01-J (First Tax Year Box) and correct with Action Code 6.

3.12.249.2.2.12  (01-01-2010)
Field 01-K, Terminating Event Box

  1. This box (Box C) is used the year the Section 444 election is terminated. If checked, Computer Condition Code "F" must be present.

  2. If Field 01-K (Terminating Event Box) was erroneously coded "1" , cross out the "1" and correct, using Action Code 6.

  3. If Field 01-K (Terminating Event Box) was correctly coded, enter Computer Condition Code "F" in Field 01-E and correct, using Action Code 6.

3.12.249.2.2.13  (01-01-2010)
Field 01-L, Short Base Year Box

  1. Field 01-L (Short Base Year Box) currently is not used for validity or consistency checks.

3.12.249.2.2.14  (01-01-2010)
Field 01-M, Entity Underprint Code

  1. In all cases where there is an underprint of the name control, the record will not go to good tape until the applicable code is in Field 01-M (Entity Underprint Code), or the name control has been corrected to match the underprint.

  2. The underprint in Field 01-B (Name Control/Check Digit), will not clear until either an Entity Underprint Code is entered in Field 01-M or until the Name Control matches the underprint .

  3. Enter Code "1" if the Name Control is underprinting and the transcribed Name Control is correct.

  4. If there is no name control underprint, leave the field blank.

3.12.249.2.2.15  (01-01-2010)
Field 01-N, Taxpayer Notice Code (TPNC)

  1. Taxpayer Notice Codes (TPNCs) can be input only as correction data, using Action Code 1. Put the correct tax to the left of taxpayer’s figures and TPNC in upper left corner of the return.

  2. All invalid conditions must be corrected before Action Code 1 is used.

  3. The codes will appear in this field on the loop (correction run) when another error existed. When this occurs, correct any other invalid condition, but not this field. The use of another Action Code will cause this field to be blanked on the next loop. Correct by using Action Code 1 and the proper TPNC.

  4. The valid TPNCs are as follows:

    TPNC Explanation
    01 The amount shown on Line 4 was not computed correctly.
    02 The amount shown on Line 5 was not computed correctly.
    03 The wrong percentage figure for this tax year was used in computing Line 9a.
    04 The amount shown on Line 9a or Line 9b was not computed correctly.
    05 The amount shown on Line 11 or Line 12 was not computed correctly.
    90 Blank/open paragraph to attach a math error explanation to the return. The notice will have a space for "Notice Review" to type in the explanation you provide with the exact wording to be printed on the notice.

3.12.249.2.3  (01-01-2010)
Section 02 Fields and Correction Procedures

  1. Section 02 is transcribed in dollars and cents for the applicable fields. All fields (except Field 02-L (Payment Due/Refund Amount) contain positive (+) amounts only. If the taxpayer listed negative (-) amounts on Fields 02-A, 02-B, and /or 02-D through 02-K, delete with Action Code 6. The computer checked fields in this section will underprint if the taxpayer and computer ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Do not bring up the underprint . Send the appropriate TPNC.

  2. Section 02 fields on the Error Register are shown below: alpha designator, title, field length, and location on the return. See Exhibit 3.12.249-1 , Form 8752, Required Payment or Refund Under Section 7519, for additional information. See Exhibit 3.12.249-2 , Error Register for Form 8752, for additional information.

    Section 02
    Alpha Designator Title Field Length Location on the Return
    A Net Income Amount 15 Line 1
    B Applicable Payment Base Year Amount 15 Line 2
    C Deferral Ratio 3 Line 3
    D Line 1 - Deferred Amount
    Line 1 - Deferred Amount
    (Computer)     		15 Line 4
    E Line 2 - Deferred Amount
    Line 2 - Deferred Amount
    (Computer)     		15 Line 5
    F Applicable Payments 15 Line 6
    G 12 Month or Short Year Amount 15 Line 7
    H Net Base Year Income Amount 15 Line 8
    I Net Base Year Percentage. Amount
    Net Base Year Percentage Amount
    (Computer)     		15 Line 9a
    J Required Payment Amount
    Required Payment Amount
    (Computer)     		15 Line 9b
    K Net Required Payment Balance 15 Line 10
    L Payment Due or Refund Amount
    Payment Due or Refund Amount
    (Computer)     		15 Line 11 or Line 12
    M Paid Preparer Social Security Number (SSN) 9 Bottom of Form 8752
    N Paid Preparer Employer Identification Number (EIN) 9 Bottom of Form 8752
    O Paid Preparer Phone Number 10 Bottom of Form 8752

  3. This section is required unless Field 01-E (Computer Condition Code) contains a "G" , or if Box A is checked. All fields in this section are transcribed from Page 1. Math verification will not be done if the Field 01-D (Tax Period) is invalid.

3.12.249.2.3.1  (01-01-2010)
Field 02-A, Net Income Amount

  1. This field is transcribed from Line 1. Check for transcription or transfer errors in Field 02-A (Net Income Amount) and correct with Action Code 6.

3.12.249.2.3.2  (01-01-2010)
Field 02-B, Applicable Payment Base Year Amount

  1. This field is transcribed from Line 2. Check for transcription or transfer errors in Field 02-B (Applicable Payment Base Year Amount) and correct with Action Code 6.

3.12.249.2.3.3  (01-01-2010)
Field 02-C, Deferral Ratio

  1. This field is transcribed from Line 3. The "Deferral Ratio" is the three-digit code representing the allowable deferral percentage for the taxpayer’s elected deferral period. The term "Deferral Period" means the number of months that occur between the last day of the elected tax year and the last day of the required tax year. For example, if the taxpayer elected a tax year ending on September 30 and his/her required tax year is the calendar year, the deferral period would be 3 months (the number of months between September 30 and December 31 (e.g., deferral ratio to enter is 250)). Using the same example (e.g., if the required tax year is the calendar year), the deferral period would be 2 months for an elected tax year ending in October (e.g., Deferral Ratio to enter is 167), while the deferral period would be one month for an elected tax year ending in November (e.g., Deferral Ratio to enter is 083).

    Note:

    By law (Tax Reform Act of 1986), the "required" tax year for corporate and partnership entities is a calendar year (ending in December). Statutes may dictate otherwise in circumstances permitting the taxpayer to file fiscal-year returns for a legally acceptable business purpose.

  2. The "Deferral Ratio" is the three-digit code representing the allowable deferral percentage for the taxpayer’s elected deferral period. The term "Deferral Period" means the number of months that occur between the last day of the elected tax year and the last day of the required tax year. There are eleven codes. These codes represent deferrals of one to eleven months and are shown in the chart below.

    Ending Month of
    Elected Tax Year     		Deferral Period
    (Number of Months)     		Deferral Ratio
    (Three-Digit Code)
    November 1 083
    October 2 167
    September 3 250
    August 4 333
    July 5 417
    June 6 500
    May 7 583
    April 8 667
    March 9 750
    February 10 833
    January 11 917

    Note:

    Do not put a decimal in front of the deferral ratio number.

  3. Check for transcription errors in Field 02-C (Deferral Ratio).

  4. Code and Edit is responsible for editing the correct number. If they did not edit the number, or, edited it incorrectly, follow these instructions:

    1. Enter the three-digit code for the percentage in Field 02-C (Deferral Ratio). Refer to the Deferral Ratio chart above. If missing or incorrect, edit the same three-digit code on the dotted portion of Line 3 (to the left of the taxpayer’s entry).

    2. Generally, the deferral percentage will not exceed 25%. However, entities with 1986 taxable years could make the Section 444 elections and retain that taxable year even if the deferral period was more than 3 months. If the taxpayer claims an amount greater than 25%, but less than 91.7%, accept taxpayer’s amount. If the taxpayer claims more than 91.7%, allow only 91.7%.

      Note:

      Before you lower the rate, multiply Line 1 by the amount shown on Line 3 to make sure the taxpayer actually used that rate. For instance, if a taxpayer put $1,000 on Line 1 and 83 percent on Line 3, but $1,000 on Line 1 and 83 percent on Line 3, came up with an amount of $83.00, he did not multiply by 83%, but rather, 8.3%. In this case, you would edit 083. IMPORTANT : Deferral Ratio—must have an entry as listed above. This field cannot be zero (even if Lines 1 or 2 have a "0" (zero) amount).

    3. The taxpayer may either round the percentage (e.g., put down 8% or 17% or 67% rather than 8.3% or 16.7%), or carry the percentage to multiple places (8.33% or 16.67% or 66.67%). In either case, you will enter "083" or "167" or "667" .

  5. If the taxpayer enters a percentage that does not approximate the allowable percentages, enter the acceptable code that is:

    1. Lower than the percentage claimed, and,

    2. Closest to the percentage claimed.

    Example:

    If the taxpayer put down 12%, you would edit "083" . If the taxpayer put down 21%, you would edit "167" .

    Exception:

    If the taxpayer puts down an amount that is less than 6 percent, correspond with the taxpayer to ask what his/her deferral period is. Edit the appropriate code based on the taxpayer’s answer. If there is no response, enter "083" .

  6. If the taxpayer shows a deferral ratio in the form of a decimal rather than a percentage, convert to a percentage.

    1. Example 1: If the taxpayer enters .17 as the deferral ratio, edit code "167" .

    2. Example 2: If the taxpayer enters .08 as the deferral ratio, edit code "083" .

3.12.249.2.3.4  (01-01-2010)
Field 02-D, Line 1 - Deferred Amount

  1. This field is transcribed from Line 4. It is computed by multiplying the deferral rate (Line 3, Field 02-C) by the amount shown for the net income amount (Line 1, Field 02-A).

  2. Check for transcription errors in Field 02-A (Net Income Amount), Field 02-C (Deferral Ratio), and Field 02-D (Line 1 - Deferred Amount) and correct with Action Code 6.

    Note:

    If Field 02-C (Deferral Ratio) is changed to one of the valid ones, DO NOT change the taxpayer’s figures on any transcription (T) lines.

  3. If the error in Field 02-D (Line 1 - Deferred Amount) causes an underprint in that field, send TPNC 01 using Action Code 1. If this field underprints to rounding of the percent, correct with Action Code 7.

3.12.249.2.3.5  (01-01-2010)
Field 02-E, Line 2 - Deferred Amount

  1. This field is transcribed from Line 5. It is computed by multiplying the deferral rate (Field 02-C, Line 3) by the amount shown for the net income amount (Field 02-B, Line 2).

  2. Check for transcription errors in Field 02-B (Applicable Payment Base Year Amount), Field 02-C (Deferral Ratio), and Field 02-E (Line 2 - Deferred Amount) and correct with Action Code 6.

  3. If the error in Field 02-E (Line 2 - Deferred Amount) causes an underprint in that field, send TPNC 02 (or other appropriate TPNC) using Action Code 1.

3.12.249.2.3.6  (01-01-2010)
Field 02-F, Applicable Payment Deferral Amount

  1. This field is transcribed from Line 6.

  2. Check for transcription or transfer errors in Field 02-F (Applicable Payment Deferral Amount) and correct with Action Code 6.

3.12.249.2.3.7  (01-01-2010)
Field 02-G, 12 Month or Short Year Amount

  1. This field is transcribed from Line 7.

  2. Check for transcription or transfer errors in Field 02-G (12 Month or Short Year Amount). If a negative amount is shown, enter $0. Correct with Action Code 6.

3.12.249.2.3.8  (01-01-2010)
Field 02-H, Net Base Year Income Amount

  1. This field is transcribed from Line 8.

  2. Check for transcription or transfer errors in Field 02-H (Net Base Year Income Amount) and correct with Action Code 6.

    Note:

    Unless this is a transcription error, Do not correct this field—accept the taxpayer’s figure.

3.12.249.2.3.9  (01-01-2010)
Field 02-I, Net Base Year Percentage Amount

  1. This field is transcribed from Line 9a. It is computed by multiplying Line 8, Field 02-H (Net Base Year Income Amount), by the tax rate applicable for that period.

  2. The tax rates are as follows:

    Tax Year Tax Rate
    1990 29%
    1991 and 1992 32%
    1993 through 2000 40.6%
    2001 40.1%
    2002 39.6%
    2003 through 2010 36%
    2011 and subsequent 40.6%

  3. Check for transcription errors in Field 02-H (Net Base Year Income Amount) and Field 02-I (Net Base Year Percentage Amount) and correct with Action Code 6.

  4. If Field 02-I (Net Base Year Percentage Amount) is blank and there is an underprint, edit Line 9a with the amount of the underprint. Bring up the underprint from Field 02-I (Net Base Year Percentage Amount) and correct with Action Code 6.

  5. If Field 02-I (Net Base Year Percentage Amount) is not blank and there is an underprint, send TPNC 03 using Action Code 1.

  6. If the taxpayer filed a return for the current year on a prior-year issue of Form 8752, but did not enter the correct "Net Base Year Percentage Amount" (Line 9a), Field 02-I will underprint.

    Note:

    The computer is programmed to compute the correct Net Base Year Percentage Amount.

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Instead, send TPNC 03 using Action Code 1.

3.12.249.2.3.10  (01-01-2010)
Field 02-J, Required Payment Amount

  1. This field is transcribed from Line 9b. Depending on the prior payment history of the organization, it should be either the amount shown on Line 9a or $0.

  2. Check for transcription errors in Field 02-J (Required Payment Amount) and correct with Action Code 6.

  3. If Field 02-J (Required Payment Amount) is not blank and differs from the underprint in Field 02-I (Net Base Year Percentage Amount), send TPNC 04 using Action Code 1.

3.12.249.2.3.11  (01-01-2010)
Field 02-K, Net Required Payment Balance

  1. This field is transcribed from Line 10.

  2. Check for transcription or transfer errors in Field 02-K (Net Required Payment Balance) and correct with Action Code 6.

3.12.249.2.3.12  (01-01-2010)
Field 02-L, Payment Due or Refund Amount

  1. This field is transcribed from Lines 11 or 12. The computer will underprint with a positive amount for a balance due (Line 11) and a negative amount for an overpayment (Line 12). Field 02-L (Payment Due or Refund Amount) will asterisk if the taxpayer's figure differs from the computer figure ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Line 11 (Required Payment Due) is computed by subtracting Line 10 (Field 02-K) from Line 9 (Field 02-J). Line 12 (Refund of Net Prior year payments) is computed by subtracting Line 9b (Field 02-J) from Line 10 (Field 02-K).

    2. Check for transcription errors in Field 02-L (Payment Due or Refund Amount) and correct with Action Code 6.

    3. If Field 02-K (Net Required Payment Balance) is blank and Field 02-J (Required Payment Amount) and Field 02-L (Payment Due or Refund Amount) have entries, calculate the sum of or difference between Fields 02-J and 02-L and enter in Field 02-K.

    4. If Field 02-L is zero, blank, dash or none, and is underprinting a refund or balance due, verify Field 02-K on Command Code (CC) BMFOL (or applicable Command Code). Correct Field 02-K or Field 02-L, accordingly. If a math error exists, send TPNC 05 (or other appropriate TPNC) using Action Code 1.

    5. If Field 02-L (Payment Due or Refund Amount) is underprinting and Field 02-J (Required Payment Amount) is not greater than $500.00, accept with Action Code 0.

    6. If Field 02-L (Payment Due or Refund Amount) is underprinting and Field 02-I (Net Base Year Income Amount) and Field 02-J (Required Payment Amount) have entries and are not greater than $500.00, and no payments greater than $500.00 in the last 5 years, accept with Action Code 0.

    7. If Field 02-L (Payment Due or Refund Amount) is underprinting and Field 02-I (Net Base Year Income Amount) is not greater than $500.00, and no payments greater than $500.00 in the last 5 years, accept with Action Code 0.

    8. If Field 02-L (Payment Due or Refund Amount) is underprinting and Field 02-J (Required Payment Amount), Field 02-K (Net Required Payment Balance) and Field 02-L have entries and no corrections are needed to Fields 02-J, 02-K and 02-L but a math error exists, send TPNC 05 using Action Code 1.

    9. If Field 02-L (Payment Due or Refund Amount) has an entry and Field 02-K (Net Required Payment Balance) is blank, enter the amount from Field 02-L in Field 02-K.

      Note:

      If taxpayer requests a "credit elect" or in some way asks that the refund be posted to the next tax period:

      • Prepare Form 3465, requesting Accounts Management (AM) to transfer the referenced credits to the appropriate module and to release the "X" freeze;

      • Notate on the document "Form 3465 to AM." and make copy of page 1 of the document (mark as "Copy - Do Not Process)" ;

      • On the register, enter CCC " X" using Action Code 6 (to freeze the module from refunding or offsetting) and to correct Field 02-L (Payment Due or Refund Amount) by bringing up the underprint;

      • Route Form 3465 with a copy of document to Accounts Management.

    10. Any penalty or interest included by the taxpayer in Field 02-L (Payment Due or Refund Amount) should be subtracted from the amount on Lines 11 or 12 and the difference entered in Field 02-L. Also, X Lines 11 or 12 and edit the difference to the left of the X. If the taxpayer has made a math error, send TPNC 05 using Action Code 1.

  2. If Field 02-I (Net Base Year Income Amount) has an entry and Field 02-J (Required Payment Amount) is blank and the underprint of Field 02-J is greater than $500.00, send TPNC 04 using Action Code 1.

  3. If research shows a payment for any preceding year (five years) greater than $500.00, send TPNC 90 using Action Code 1.

    1. Suggested language for TPNC 90:" Since your previously required payments exceeded $500.00, you must make a payment even though your required payment for this year is less than $500.00."

    2. If research shows no payment for any preceding year (five years) greater than $500.00, accept taxpayer’s figures with Action Code 0.

  4. Field 02-L (Payment Due or Refund Amount) will asterisk if either of the following conditions occur:
    (1) The money amount exceeds the length of the field or,
    (2) The refund amount equals 1 million dollars or more and the Computer Condition Code "O" is not present in Field 01-E.

    1. If the taxpayer’s figure exceeds the length of the field, enter all 9’s in that field. Prepare Form 4227, Intra-SC Routing or Reject Slip, or appropriate routing slip, and route to Accounts Management. Note on 4227, "Money amount exceeds field length."

    2. If the refund amount exceeds 1 million dollars or more, follow instructions in (5) and/or (6), below.

  5. Enter CCC "O" if a completed Form 3753, Manual Refund Posting Voucher, or is attached to the return. These indicate that a pre-settlement manual refund was made.

    Note:

    The freeze is released by posting TC 840.

  6. IMPORTANT : Per Section 7519(c)(3)(A), any refund under this subsection shall be payable the later of —April 15 of the calendar year following: the calendar year in which it begins; the calendar year in which it ends; or, the day 90 days after the day on which claim therefore is filed with the Secretary (of Treasury). If you have a refund of 1 million dollars or more and Form 3753 is not attached:

    1. If Line 12 is 1 million dollars or more, correct with Action Code 3 and route to Rejects with Form 4227. Note "Manual Refund" on Form 4227.

      Note:

      If the required date, per Section 7519(c)(3)(A), on which a refund becomes payable has not arrived, hold the return until such date. When the refund becomes payable, follow procedures in IRM 3.12.38 for issuing manual refunds.

    2. If Line 12 is 1 million dollars or more and Form 8302, Application for Electronic Funds Transfer (EFT) of $1 Million or More, is attached, follow the instructions in "a." above, but DO NOT detach Form 8302.

3.12.249.2.3.13  (01-01-2010)
Field 02-M, Paid Preparer Social Security Number (SSN)

  1. The Small Business and Work Employment Act of 2007 provides a bridge to impose a penalty on a paid tax preparer who fails to sign the returns they prepare. In order for Compliance to determine whether a penalty should be assessed, the legislation requires Submission Processing, during the initial processing of the return to capture certain paid preparer information. Additional information can be found in Work Request WSP082292OTH ~ Forms 706NA and 8752 ISRP Capture of Paid Preparer Information.

  2. The Paid Preparer SSN is located at the bottom of Form 8752. Data may or may not be present in Field 02-M.

    Note:

    If the Preparer information is present, either Field 02-M or Field 02-N (Paid Preparer EIN) should have an entry. Only one of these fields is required. Follow the Correction Procedures below.

  3. Valid Condition - Field 02-M can be blank or numeric. If numeric, it cannot be all zeros and it cannot be all nines.

    Note:

    The first position can be a " P" , followed by eight numbers. These numbers cannot be all zeros or all nines

  4. Invalid Condition - This field is invalid if any of the following conditions are present:

    1. All zeros, or

    2. All nines, or

    3. Less than nine positions.

  5. Correction Procedures:

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

    2. If unable to determine a valid entry, delete Field 02-M (Paid Preparer SSN).

3.12.249.2.3.14  (01-01-2010)
Field 02-N, Paid Preparer Employer Identification Number (EIN)

  1. The Small Business and Work Employment Act of 2007 provides a bridge to impose a penalty on a paid tax preparer who fails to sign the returns they prepare. In order for Compliance to determine whether a penalty should be assessed, the legislation requires Submission Processing, during the initial processing of the return to capture certain paid preparer information.

  2. The Paid Preparer EIN is located at the bottom of Form 8752.

    Note:

    If the Preparer information is present, either Field 02-M (Paid Preparer SSN) or 02-N should have an entry. Only one of these fields is required. Follow the Correction Procedures below.

  3. Valid Condition - This field can be blank or numeric. It cannot be all zeros or all nines.

  4. Invalid Condition - This field is invalid if any of the following conditions are present:.

    1. All zeros, or

    2. All nines, or

    3. Less than nine characters.

  5. Correction Procedures:

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

    2. If unable to determine a valid entry, delete Field 02-N (Paid Preparer EIN).

3.12.249.2.3.15  (01-01-2010)
Field 02-O, Paid Preparer Phone Number

  1. The Small Business and Work Employment Act of 2007 provides a bridge to impose a penalty on a paid tax preparer who fails to sign the returns they prepare. In order for Compliance to determine whether a penalty should be assessed, the legislation requires Submission Processing, during the initial processing of the return to capture certain paid preparer information.

  2. The Paid Preparer Phone Number is located at the bottom of Form 8752 below the Paid Preparer's EIN towards the bottom right hand corner.

  3. Valid Condition - Field 01-I must be alpha or numeric or a combination of alpha, numeric and/or blank characters, not to exceed 10 characters.

  4. Invalid Condition - Field 01-I is invalid if other than 10 alpha/ numerics and/or blank.

  5. Correction Procedures:

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

    2. If a telephone number is invalid, delete Field 02-O (Paid Preparer Phone Number) and continue processing.

3.12.249.2.4  (01-01-2010)
Section 03 Fields and Correction Procedures

  1. Section 03 contains address information. Section 03 on Form 8752 with a foreign address are processed at the Ogden Submission Processing Campus (OSPC). Army Post Office (APO) and Fleet Post Office (FPO) are not considered foreign addresses.

  2. Section 03 on Form 8752 will be present when a change of address has been entered.

  3. Fields 03-A through 03-F are variable length and it is not necessary to account for every position allotted.

  4. This section will not be present on G-coded returns.

  5. Action Codes 4, 5, and 6 are valid.

  6. If a return has a street, Post Office (PO) Box number, city, state, or ZIP Code change, this section should be present.

  7. If a foreign address is present, see IRM 3.12.249.2.4.2, Foreign Address.

  8. Correction of address change validity errors are explained in the following texts in IRM 3.12.249.2.4.2 through IRM 3.12.249.2.4.5.

  9. Section 03 fields on the Error Register are shown below: alpha designator, title, field sign, and field length. All fields are variable length. See Exhibit 3.12.249-1 , Form 8752, Required Payment or Refund Under Section 7519, for additional information. See Exhibit 3.12.249-2 , Error Register for Form 8752, for additional information.

    Section 03
    Alpha Designator Title Field Sign Field Length
    A "In-Care-Of" Name + 35
    B Foreign Address + 35
    C Street Address + 35
    D City + 22
    E State Code + 2
    F ZIP Code + 12

3.12.249.2.4.1  (01-01-2010)
Field 03-A, "In- Care-of" Name

  1. Field 03-A is located in the Entity section of Form 8752.

  2. Valid Condition - Field 03-A has 35 positions and the valid characters are alpha, numeric, ampersand, dash, or slash.

    Note:

    The last position must be alpha or numeric.

  3. Invalid Condition - Field 03-A is invalid if any of the following conditions are present:

    • The first position is % (percent) and the second position is not blank, or

    • The first position is blank, or

    • The first position is not alpha or numeric, or

    • There are two consecutive blanks between significant characters.

  4. To correct, refer to the name line on the return.

  5. Correction Procedures - Correct all coding and transcription errors.

    If Then
    A % (percent) is in the first position, 1. Delete % (percent).
    2. Enter the "in-care-of" name beginning with an alpha or numeric in Field 03-A.
    A blank is in the first position, 1. Line through field.
    2. Enter the "in-care-of" name beginning with an alpha or numeric in Field 03-A.
    The first position is not alpha or numeric, 1. Line through field.
    2. Verify in-care-of name on the return.
    3. Enter the in-care-of name beginning with an alpha or numeric in Field 03-A.
    Two consecutive blanks present between significant characters, 1. Line through field.
    2. Enter the in-care-of name beginning with an alpha or numeric in Field 03-A.

3.12.249.2.4.2  (01-01-2010)
Field 03-B, Foreign Address

  1. Section 03 on Form 8752 with a foreign address are processed at the Ogden Submission Processing Campus (OSPC). Route any returns with foreign addresses to the OSPC for processing. Prepare Letter 86C to inform the taxpayer that the return has been sent to OSPC.

  2. Field 03-B is located in the Entity section of Form 8752.

  3. Valid Condition - Field 03-B has 35 characters and the valid characters are alpha, numeric and special characters.

  4. Invalid Condition - Field 03-B will error when any of these conditions are present:

    • The first position is blank.

    • There are two consecutive blanks followed by valid characters.

    • There are more than 35 characters present in the field.

  5. If a foreign address is present, then research IDRS using CC INOLE (or other applicable command code) to see if address is the same.

    Note:

    Foreign address cannot be input on registers.

    1. If address is the same, take no action.

    2. If address is different, then update address on CC ENMOD.

  6. Correct all coding and transcription errors.

3.12.249.2.4.3  (01-01-2010)
Field 03-C, Street Address

  1. Field 03-C is located in the Entity section of Form 8752.

  2. Valid Condition - Field 03-C has 35 characters and the valid characters are alpha, numeric and special characters.

  3. Invalid Condition - Field 03-C will error when any of these conditions are present:

    1. The first position is blank.

    2. Any characters are not alpha, numeric, blank, hyphen (-) or slash (/).

    3. There are two consecutive blanks followed by valid characters.

  4. To correct, refer to the street address on the return.

    1. Correct all coding and transcription errors.

    2. If the address on the return is illegible, refer to the envelope and attachments to determine the taxpayer’s correct address.

    3. If the address cannot be perfected, delete the address section on the error register with Action Code 4.

  5. This field is invalid if a major city code (MCC) is present in Field 03-D (City) and a street address is not present.

  6. To correct, refer to the address shown on the return and to Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, to verify the MCC.

    1. If the MCC is correct and valid and the street address is present and legible on the return, enter the street address in Field 03-C.

    2. If there is not a valid MCC for the city on the return, enter the full name of the city in Field 03-D (City).

  7. If Form 8822, Change of Address, is attached to the return, compare the Name Control, EIN, Address, City, State and ZIP Code information on the Form 8822 to the return.

    Note:

    These instructions will apply to Error Resolution only if Document Perfection has not detached and sent the Form 8822 to Entity Control.

    1. If the information is the same, take no action and continue processing.

    2. If the information is different, input the correct address from Form 8822 in Section 03.

3.12.249.2.4.4  (01-01-2010)
Field 03-D, City

  1. A maximum of 22 characters may be entered in this field.

  2. This field is invalid if:

    1. The first position is blank.

    2. A character follows the first two adjoining blanks.

    3. Any character is not alpha or blank.

    4. It is blank.

  3. To correct, refer to the city shown on the return.

    1. Correct any transcription errors.

    2. If the city on the return is illegible, refer to the envelope and attachments to determine the correct city.

    3. If the city cannot be perfected, delete the address section on the error register with Action Code 4.

  4. Field 03-D (City) and Field 03-E (State) are invalid if a Major City Code (MCC) is present and a state code is also present in Field 03-E.

  5. To correct, refer to the return and Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, to verify the MCC.

  6. If the MCC is correct, delete the state code entered in Field 03-E.

  7. If the MCC is not correct:

    1. Line through the MCC and enter the full name of the city in Field 03-D (City),

    2. Verify that the state code entered in Field 03-E (State) is correct, and

    3. Enter Action Code 6 to the left of the address section.

  8. This (City) field and the ZIP Code field are invalid if a MCC is present and the ZIP Code is not valid for the city.

  9. To correct, refer to the return and Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, to determine the correct MCC and ZIP Code.

    1. Correct any transcription errors.

    2. If the ZIP Code and MCC were transcribed correctly and the ZIP Code is invalid for the city, refer to the envelope and attachments to locate a valid ZIP Code. If one is located, enter in Field 03-F.

    3. If the correct ZIP Code is not available on the taxpayer’s submission, look up the ZIP Code and enter in Field 03-F.

  10. This (City) field is invalid if the MCC is not valid.

  11. To correct, refer to the return and Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, to verify the MCC.

    1. Correct any transcription errors.

    2. Search for a valid MCC for the city on the return. If one is found, line through the entry in Field 03-D (City) and enter the correct code above it.

    3. If the city on the return does not have a valid MCC, line through the code in Field 03-D and enter the full name of the city.

3.12.249.2.4.5  (01-01-2010)
Field 03-E, State

  1. This field contains two alpha characters.

  2. This field is invalid if:

    1. It is blank and a MCC is not present in Field 03-D (City).

    2. It contains other than a valid state code.

  3. Refer to the return and Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, to determine the correct state code.

    1. Correct any transcription errors.

    2. Determine the correct state code from Document 7475 and enter it in Field 03-E.

    3. If the state cannot be perfected, delete the address section of the error register.

  4. Field 03-E (State) and Field 03-F (ZIP Code) are invalid if the ZIP Code is not valid for the state.

  5. To correct, refer to the return and Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, to verify the state and ZIP Codes on the error register.

    1. Correct any transcription errors.

    2. If the state code is incorrect, determine the correct code and enter it in Field 03-E (State).

    3. If the ZIP Code is not valid for the state, refer to the envelope and attachments to obtain a valid code.

    4. If a valid ZIP Code cannot be found on the taxpayer’s submission, look up the correct code and enter it in Field 03-F (ZIP Code).

  6. The U.S. Postal Service (USPS) established new address requirements for Army Post Office (APO), Diplomatic Post Office (DPO) and Fleet Post Office (FPO) addresses. If the old address appears (e.g., APO New York, NY 091XX), convert to the new state code abbreviation based on the ZIP code (e.g., the previous example would be converted to APO AE 091XX). APO/DPO/FPO addresses are considered domestic addresses. Refer to conversion chart below:

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

  7. Returns with foreign address changes and the following American possession address changes can be input via Integrated Submission and Remittance Processing (ISRP) with the return, the same as domestic address changes.

    U.S. Possessions/Territory Abbreviation
    American Samoa AS
    Federated States of Micronesia FM
    Guam GU
    Northern Mariana Islands MH
    Marshall Islands MP
    Palau PW
    Puerto Rico PR
    Virgin Islands VI

    Note:

    Route any returns with foreign or American Possession addresses to the Ogden Submission Processing Campus (OSPC) for processing. Prepare Letter 86C to inform the taxpayer that the return has been sent to OSPC.

3.12.249.2.4.6  (01-01-2010)
Field 03-F, ZIP Code

  1. This field can contain 5, 9, or 12 numeric characters.

  2. This field is invalid if:

    1. It is not all numeric or blank.

    2. There are not 5, 9, or 12 numeric characters.

  3. To correct, refer to the return and attachments to determine the correct ZIP Code.

    1. Correct any transcription errors.

    2. Research for the correct ZIP Code if it is not available on the taxpayer’s submission.

    3. If the ZIP Code cannot be perfected, refer to Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, for the valid ZIP Code. However, if only the first three digits of the ZIP Code can be determined, perform research to perfect the Zip code by calling the Postal Service's automated service at its toll-free telephone number, 1-800-275-8777, which allows anyone to call up and give a street address and a city/town and the service, will give you the appropriate Zip code or access the "Find a Zip Code" feature at : www.usps.com to perfect the return with the appropriate Zip code.

Exhibit 3.12.249-1  (01-01-2010)
Form 8752, Required Payment or Refund Under Section 7519

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Exhibit 3.12.249-2  (01-01-2010)
Error Register for Form 8752

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Exhibit 3.12.249-3  (01-01-2010)
Potential Frivolous Arguments for Examination Review

Returns or submissions that contain positions/arguments not listed below, which on their face have no basis for validity in existing law, or which have been deemed frivolous in a published opinion of the United States Tax Court or other court of competent jurisdiction, may be determined to reflect a desire to delay or impede the administration of Federal tax laws and thereby subject to penalty.

Note:

A complete list of frivolous positions/arguments can be found in Notice 2008-14.

Potential Frivolous Argument Description
Alleged Churches/First Amendment Income from non-religious sources and may claim a vow of poverty.
Altered Form Altering any or all line items with the intent of facilitating non-compliance with the tax laws.
Altered Jurat/Uniform Commercial Code (UCC) 1-207 Return contains income and deductions but the jurat has been altered or stricken. May include reference to UCC 1-207 or a statement that the return was not signed under penalties of perjury.
Amended Returns/Form 843 Claim Amended return or a Form 843 filed to obtain a total refund of all taxes paid in prior years, based on a tax avoidance argument.
Challenges to Authority/Due Process Questions various administrative authorities such as delegation orders, summons authority, privacy act, etc. Argues that they must be afforded a hearing or a trial before taxes can be assessed or before property can be seized.
Challenges to Authority/Title 26 or "law" in Other Documents Argues that Title 26 of the United States Code is not law because it was never enacted as named
Disclaimer Submits a disclaimer stating, "disclaims the liability for the tax due" , making the liability on the return zero.
Fifth Amendment Assertion of the Fifth Amendment right against self-incrimination as a basis for not providing any financial information.
Foreign Income Argues that United States citizens and residents are not subject to tax on their wages or other income derived from sources within the United States, as only foreign-based income or income received by nonresident aliens and foreign corporations from sources within the United States is taxable.
IRS is a Private Organization/Collects Tribute, Not Taxes Argues that the IRS is an entity named the Internal Revenue and Tax Service, Inc., which was incorporated in Delaware in 1933, it is a collection agency for the Federal Reserve Bank, or is part of the United Nations and is clandestinely leading the tax-paying public into a "new world order."
Not a Person Argues that a taxpayer is not a "person" within the meaning of IRC Section 7701(a)(14).
Obscene, Vulgar, Harassing Submits documents or other materials indicating that non-filing is due to dissatisfaction with tax policies or taxation in general. Often, this argument is expressed with obscene, vulgar, or crude language and characters in an extremely demeaning manner.
Protest Against Government Action/Inaction Argues that refusal to file or pay is justified because they disagree with government policies or spending plans.
Sixteenth Amendment Argues the Sixteenth Amendment was not properly ratified and therefore the federal government does not have the legal authority to collect an income tax without apportionment.
Straw Men Argues the government has created an entity separate and distinct from the taxpayer - a "straw man" and any tax obligations are exclusively those of the "straw man" .
Taxes are Voluntary/Law Does Not Require Submits a return, amended return or correspondence that argues income taxes are voluntary.
U.S. v. Long Submits a return with zero money amounts much the same as the Zero Return category and U.S. V. Long is referenced. See NOTE in Zero returns below.
Unsigned Returns The individual completes a return but fails to sign, a statement indicating disagreement with the tax system is attached or added to the return.
Valuation Income is not taxable because of the declining fair market value of the dollar, because the dollar is not backed by gold/silver, because the value of services is offset by the value of the labor (barter income), etc.
Zero Returns Submits a return with zero money amounts. A statement is attached claiming there is no section of the Internal Revenue Code that established an income tax liability. The statement may also contain arguments regarding the definition of income.
Note: Returns having only zeros, no entries, are blank, or indicate "None " ,"Not Liable" , etc. with no evidence of frivolous arguments are not to be considered as frivolous returns.
Other All others including those listed in Notice 2008-14. This category includes non-filer accounts resulting from initial compliance check such as cross-reference TINs.
Note: Frivolous arguments citing "Collection Due Process" (CDP) should be reviewed by Collections for possible referral to Appeals. Refer to IRM 5.19.8, Collection Appeal Rights, for additional information.

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