The amount in Field 04TB5 is not within the valid range of zero to $50,000.

The amount in Field 04TB6 is not within the valid range of zero to $25,000.

The amount in Field 04TB7 is not within the valid range of zero and $9,925,000.

Refer to the return for the correct tax period and to determine if the entries in Fields 04TB5, 04TB6, or 04TB7 are valid or misplaced entries.

Follow the instructions below:

Refer to the return for correct tax period and determine if the entry is valid or a misplaced entry.

Make necessary corrections to tax period if necessary, in the correct format (YYYYMM).

If an amount is present for an invalid tax period, delete the field.

If the tax period is 2000 or prior

Field 03K04 is "1" or "3" and Field 03PNC and/or Field 03PIN is blank.

Correct any coding and transcription errors.

Follow instructions below:

Total Assets Ending (Field 11TAE) is not present, and Total Assets End (Field 04TAE is equal to or greater than $250,000 or Total Receipts (Field 05TR>) is equal to or greater than $250,000.

Correct all coding and transcription errors.

Follow procedures below:

Line 11, Total Income amount (Field 0511) differs ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ from the amount the computer generated using the sum of lines 1c through line 10 of the Form 1120 return.

Line 27, Total Deductions (Field 06TOT) differs ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ from the amount the computer generated using the sum of lines 12 through 26 of the Form 1120 return.

When Taxable Income is adjusted because of this Error Code, check to see whether the adjustment will change a Net Operating Loss Carryover. If Taxable Income is increased, check for taxpayer worksheet for excess NOLD. If the loss carryover will be changed by at least a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to the taxpayer, prepare Letter 3833C. Explain the adjustment and specify the corrected loss carryover amount.

Total Income— Check all displayed fields against the return for transcription errors or misplaced entries and make sure all line items were transcribed correctly. When there are no transcription errors, check the attachments to make sure all line items were transcribed correctly, and make necessary changes. The computer uses the following formula to compute Total Income: Field 0501A − 0501B − 0502 + 0504 + 0505 + 0506 + 0507 + 0508 + 0509 + 0510.

Total Deductions-Check all displayed fields against the return for transcription errors or misplaced entries, and make necessary corrections. If there are no transcription errors, check the attachments to make sure all line items were transferred correctly. The computer uses the following fields to determine Total Deductions: 06COF + 06SAW + 06REP + 06BD + 06REN + 06TAX + 06INT + 06CHR + 06DPR + 06DPL + 06ADV + 06PEN + 06CON + 06OTH = 06TOT

Field 06COF—is transcribed from line 12. On Form 1120 this amount is transferred from line 4, Schedule E, page 2.

Fields 06SAW—is transcribed from line 13 on Form 1120. It is the total salaries and wages paid or incurred for the year less the employment credits.

Field 06NI>—is Net income before NOLD. This field is computer generated and is not correctable. It is used to compare the taxpayer's and computer's figures for net income.

Field 06NOL—represents the taxpayer's net operating loss deduction. If NOL is adjusted by $500.00 or more because of a change in the taxable income, no math error notice will be sent, prepare letter 3833C. Explain the adjustment and specify corrected loss carryover amount.

Field 06SPD—represents the taxpayer's special deduction. See Error Code 170 for further instructions.

Field 06TI—is the Taxable Income-Computer. This field is computer generated and is not correctable. It is used to compare the taxpayer's and computer's figures for taxable income.

Reserve Code is other than blank, "1" or "4" .

Transcription for Field 03RVC is from the margin to the left of “Deductions” section of the return following “5”. Valid codes are "1, 4, and blank" . Reserve Code "3" is computer generated.

Verify that Orphan Drug Credit is present and in Field 08ODC (199511 and prior). If it is in the correct field, delete Reserve Code "3" . If present, but in the wrong field, move to Field 08ODC and delete Reserve Code "3" . ( Valid for tax periods 198301 thru 199511 and 199607 and subsequent)

Charitable Contributions are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Total Income and Total Deductions are correct, and Special Deduction Code "2" or "3" is not present.

Transcription for Field 06CHR is from line 19, page 1. Charitable Contributions will underprint when the maximum allowable amount exceeds ten percent of Taxable Income Before NOLD less NOL carryover less capital loss carryovers plus Contributions. The computer uses the following formula to calculate the total allowable Charitable Contributions deduction but allows a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ (0511- 06TOT- 06NOL + 06CHR x 10% = MAXIMUM ALLOWANCE CONTRIBUTIONS).

Special Deductions are out of tolerance, Gross Tax is out of tolerance and Special Deductions Code "1" or "3" is not present.

Check all fields for any transcription errors or misplaced entries and correct as appropriate.

Transcription for Field 06SPD is from line 29b, Form 1120 and is the taxpayer's computation from page 2, Schedule C, line 20.

A different amount will underprint at this checkpoint only when Gross Income Tax is outside tolerance and the amount transcribed for Special Deductions (Field 06SPD) exceeds 80% of the computer's computation of Net Income Before NOLD. However, if a corporation meets certain conditions, the 80% limitation of Taxable Income does not apply.

The most common waiver condition is when a corporation sustains a Net Operating Loss for the taxable year. To determine whether a Net Operating Loss has occurred, compute Special Deductions as follows. Take the total on line 9, column C of Schedule C and subtract this amount from taxable income, line 28, page 1. If this results in a Net Operating Loss, enter a "1" in Field 03SDC.

Dividends received before January 1, 1987, are limited to a deduction of 85%; dividends received after December 31, 1986, are limited to 80%. The taxpayer will compute the applicable percentage prior to entering the dividends on Schedule C, column c.

If the corporation has an entry on line 8, 10, 11, 12, or 18, Schedule C, the amount is not subject to the 80% limitation. Enter a "1" in Field 03SDC.

If the return is a Personal Holding Company (Field 03ABL is 001), no computation is necessary. Enter a "1" in Field 03SDC.

Accept any other waiver condition indicated by the taxpayer.

07 - Your special deductions were more than can be allowed.

40 - We have adjusted your tax because we did not receive a reply.

90 - Fill-in notice.

Computer Condition Code "Y" is present.

Check return for any transcription or coding errors and correct accordingly.

Generally, a CCC "Y" is present when the return must be manually computed. CCC "Y" will also change the FYM on the Master File. (See Error code 026 for additional information on short period returns).

If prepaid credits on lines 32(a) through 32(e) are claimed and the return is a short period return because it is a "Final" or has a "Change of Accounting Period," SSPND with Action Code "342" if Code-and-Edit has not already done so. Prepare Form 4227 with a notation, "Short Period with ES Credits."

Compute the tax per the individual manual computation requirement. IRM 3.12.251.25, Manual Computation Section.

Under normal circumstances, the computer and the taxpayer agree on the computation of the tax. This satisfies the Rule of Two.

On the usual type of return with a TRUE MATH ERROR, the computer and the tax examiner will agree on the computation of the tax. This satisfies the Rule of Two.

On a manually computed return with a TRUE MATH ERROR , the Rule of Two is not satisfied until two tax examiners arrive at the same tax computation.

IRM 3.12.251.25, Manual Computation, for instructions on manual computation of returns.

Gross Income Tax differs from Gross Income Tax Computer ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Correct any coding or transcription errors and misplaced entries.

Incomplete Lines - If the taxpayer has made entries on any lines between 1 through 30 but does not complete line 31 or below, research INOLES to determine if the return is a subsidiary. If INOLES shows a 1120-14 filing requirement, SSPND "640" . Otherwise, assign TPNC 05.

Mixed Component - A mixed component member is a consolidated return where the subsidiaries compute tax in different ways (i.e., Form 1120-L and Form 1120-PC) are combined with a Form 1120. If a return is a mixed component, accept the taxpayer's entry for gross tax and enter the amount in Field 07GVT.

Prepaid Credits - If prepaid credits are claimed on a Form 1120 (lines 32(a) through 32(e) "short period" , "final" , or "change of accounting period" return, SSPND with Action Code "342" , if Code & Edit has not already done so. Prepare Form 4227 with a notation, "Short Period with ES Credits"

Manual Computation - IRM 3.12.251.25, Manual Computation, for specific instructions regarding returns where a manual tax computation may be required.

Annualized Computation- IRM 3.12.251.26 for instructions. Taxpayers annualizing their tax due to a short period initial or final return is not permitted. Assess tax at the regular rate based on their taxable income.

See the EC 174 Correction Procedures below for additional instructions and applicable Taxpayer Notice Codes (TPNCs).

If the taxpayer makes an error in computing Gross Tax, assign TPNC 05.

Qualified Personal Service Corporations (QPSCs) are taxed at a flat 35%.

Check Field 03CGC and correct the Controlled Group/Personal Service Code, if necessary.

Taxable Income Brackets (Fields 04TB5, 04TB6, and 04TB7 are transcribed from Page 3, Schedule J, lines 2a(1), 2a(2), and 2a(3), for periods prior to 2006. For tax periods 200612 and subsequent, Schedule O is used. Field 04TB5 is transcribed from Part II, column (c), Field 04TB6 from Part II, column (d) and Field 04TB7 from Part II column (e).

If these fields are blank (not zero) and Field 03CGC is "1" , search return for an apportionment plan or schedule. If none is found, correspond.

If the taxpayer does not reply to correspondence for the Income Bracket amounts, assign TPNC 05.

If the Controlled Group Code is "1" then the amount in this field is added to the computer's computation of gross tax to arrive at the computers amount for Gross Income Tax (07GIT).

For tax periods 199612 and subsequent:

If the maximum Additional Tax amount(s) are entered on line(s) 2b(1) and/or 2b(2), Schedule J (for tax years prior to 200612) or Schedule O Part III, columns (f) and (g) are in obvious error, delete the amounts only if not included on line 2, Schedule J.

Field 07GIT (Gross Income Tax) is transcribed from line 2 Page 3, Schedule J of Form 1120. The Gross Income Tax field can be used to locate the math error. If the TP did not complete Schedule J, and is not a personal service corporation or part of a control group, enter the amount reported on line 31 in Field 07GIT.

Also use Field 06NI> (Taxable Income Before NOLD - Computer Generated) and Field 06TI> (Taxable Income - Computer Generated) to determine the error.

In order to determine which type of tax the computer is using to arrive at the underprint for Gross Income Tax, compare the underprint to Field 07RN> (Regular Tax New Rate) which is the computers computation of Regular Income Tax and Field 07AD> (Alternative Tax Schedule D New Rate), which is the computer's computation of Alternative Tax.

If the computer is computing tax using the flat rate of 35% (or 34%), and the Controlled Group code is not "2" , verify taxpayer's tax against the tax tables. If the taxpayer has figured his tax correctly using the tax tables, then enter the taxpayer's amount for tax into Field 07GVT.

For Controlled Groups, the computer uses Fields 04TB5 through 04TB7 to compute the Gross Income Tax and then adds Fields 04AT1 and 04AT2 to arrive at Gross Income Tax Computer.

Field 07GVT will be used whenever the computer is unable to calculate the correct amount of Gross Tax.

Enter the correct amount of tax in Field 07GVT and change line 2, Schedule J, Form 1120, to the corrected amount. When the manually corrected tax is zero, enter $.01 (1 cent) in Field 07GVT.

For tax periods ending after May 22, 2008 and beginning before May 23, 2009, if a corporation has both net capital gain and qualified timber gain, then a maximum 15% capital gain tax rate may apply to the timber gain. If the TP is using Part IV, Schedule D, to figure tax, then follow instructions below:

See (14) below and assign an applicable TPNC. If no TPNC applies, use TPNC 90 to inform the taxpayer of the error.

If all of the above conditions have been checked and the Gross Income Tax amount still has an underprint, and the underprint is correct, assign the applicable TPNC(s).

If a taxpayer error causes an increase in tax, check to see if there is additional carryover credit available. If so, increase the credit to the amount of available credit or the amount of corrected tax, whichever is less. If the increase is for $10 or more, and a TPNC will not be sent, prepare a Letter 3833C to explain the adjustment and inform the taxpayer of the corrected carryover amount.

If the return requires manual computation, see IRM 3.12.251.25, Manual Computation. If the taxpayer limited his GBC to the amount of gross tax and gross tax is being increased, increase the amount of the available GBC up to the new gross tax amount and notify the taxpayer via TPNC 90, if the taxpayer's GBC is sufficient to cover the new gross tax amount, notify the taxpayer of the change in credits used via Letter 3833C

If a Taxpayer Notice Code (TPNC) was previously assigned for a math error leading up to the Gross Taxable Income error, reassign the TPNC(s).

The valid TPNCs are those listed below and any previously assigned TPNC:

Alternative Minimum Tax differs from Alternative Minimum Tax-Computer Generated ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Alternative Minimum Tax (AMT) is an additional tax on Tax Preference items. This amount is from line 3, Schedule J, Form 1120 and is displayed in Field 08AMT. The source is Form 4626, line 14. Correspond if Form 4626 is missing.

Check all of the displayed fields for transcription and editing errors.

Fields 0901>, 0903, and 0904E can be positive or negative, all other fields in Section 09 must be positive.

AMT may be reduced by any amount of General Business Credit from Form 3800, or the taxpayer writes `Section 38(c)(2)' and an amount on the dotted portion of line 3, Schedule J of Form 1120 or line 2, (For 1999 line 9, Schedule J of Form 1120 ).

Controlled Group returns (Field 03CGC is "1" ), and Form 4626 line 8a, is less than $150,000, or line 8c is less than $40,000.

Line 14 Form 4626, has an entry for "Additional regular investment credit allowed under Section 38(c)(3)" .

Alternative Minimum Tax (Field 08AMT) is present and Form 4626 is missing. Section 09 has no entries, and no reply to correspondence. Use Command Code GTSEC and enter Field 08AMT amount in Field 09VER and enter Audit Code "3" in Field 03ADC.

This field is the computer's amount for line 5, Form 4626. It is computed by adding Field 0904E to the sum of Fields 0901 and 0903.

This field cannot be corrected. It is used to help identify where a taxpayer error is located.

This field is transcribed from line 6, Form 4626.

This field will be limited to 90% of line 5. If this field exceeds the limitation, it will underprint with an amount different from the Taxpayer's amount. The computer will use the underprint amount in its computation. When tax period 200101 through 200212 is stated, Field 0906 will not be limited and the taxpayer can use 100%. Accept the taxpayers entry for Alternative Minimum Tax and enter in Field 09VER.

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

For tax periods 200801 through 201011 only:

If Field 0906 exceeds the 90% limitation, follow the procedures listed below.

If the corporation is a member of a controlled group (Field 03CGC is "1" ) then the computer's amount for this field will be wrong.

In this case, use the Taxpayer's amount from Schedule J, line 3, manually compute Alternative Minimum Tax, and enter that amount in Field 09VER.

This may affect the computation of GBC (Field 08GBC), especially when Section 38(c)(2) is used.

If Field 0912> does not match line 12, Form 4626, the taxpayer has made a math error, or the conditions in paragraph (13) a, (14) and/or (16) may exist.

If Field 0912> is the same as line 12, Form 4626, the taxpayer may have computed his Alternative Minimum Tax (Field 08AMT) incorrectly. The computer's formula for figuring the underprint of Field 08AMT is as follows: Field 08AMT equals Field 0912> less Field 07GIT underprint less Field 08FTC underprint.

Field 0912> minus the sum of Gross Income Tax Computer

General Business Credit differs from Computer Generated Business Credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Field 08SCV is blank.

Transcription for Field 08GBC is from line 5c, page 3, Schedule J, F1120. Field 08EZC is from the margin to the left of the “Deductions” section of the return following “1” (dollars and cents). Field 08GBC is valid for tax period 198412 and subsequent only. Field 08EZC is valid for tax periods 199404 and subsequent only.

Error Code 178 often generates due to transcription and coding errors. GTSEC 08 to determine if all credits have been transcribed correctly. Check attachments for any credits that were not carried forward to the edited area on the return (for prior Edit Sheet fields) and correct Screen 08 accordingly.

With EC 178, always verify the TP did not take more credit than allowed by law. Follow Form 3800 and any other additional credit reported on line 5c of Schedule J (returns prior to 200811) to figure the proper amount of credit. Once verified, enter the correct amount of credit in Field 08SCV. This should clear the error code.

If there is more than one of the above credits or a carry forward credit claimed, they must be summarized on Form 3800. If only one of these credits is claimed and Form 3800 is not attached, enter the credit into Field 08GBC. If the amount of the credit claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , enter “43” into Field 03MIC and in the margin to the left of “Deductions” section of the return following “3”. If there are two or more of these credits claimed and previous correspondence has not been initiated, SSPND and correspond for the Form 3800. See IRM 3.12.251.6.5 to determine if a schedule is missing or is not required to be attached. If Form 4626 is attached, GTSEC Section 9 and check for transcription errors.

Gross Income Tax (07GIT), minus

Foreign Tax Credit (08FTC), minus

Production Tax Credit (08PRO) (The results equal the Net Regular Tax)

Net Regular Tax plus Alternative Minimum Tax (The results equal the Net Income Tax)

Multiply Tentative Alternative Minimum Tax by 75% (.75)

If Net Regular Tax is greater than $25,000, multiply the excess over $25,000, by 25% (.25)

Take the greater of items "d" or "e" and subtract it from Net Income Tax

Subtract Empowerment Zone from General Business credit and subtract the result from the result of item "f"

Use the smaller of Net Regular Tax or the result of item"g" as Empowerment Zone Credit Computer

The transcribed amount: or

Gross Income Tax (07GIT), minus

Foreign Tax Credit (08FTC), minus

Production Tax Credit (08PRO), minus

Orphan Drug Credit (08ODC), or

75% of (amount computed in "b" above minus $25,000) plus $25,000; or

The amount computed in "b" above minus Tentative Minimum Tax Computer generated (0912>)

One reason for an underprint in GBC may be that the taxpayer falls under the provisions of Section 38(c)(2), which allows a larger deduction of investment Credit than normal GBC limitations.

If Form 3468, line 6; line 8, Form 3800; has a notation beside it referring to Section 38(c)(2) accept the transcribed amount for GBC by entering the correct amount of GBC in Field 08SCV.

The taxpayer cannot reduce Gross Tax Less Credits (line 7, Schedule J, Form 1120; line 3) to less than zero.

If the taxpayer has reduced Gross Tax Less Credits (08GT) to a negative, reduce GBC to an amount that will increase Gross Tax Less Credits to zero. Also use the remainder of the Section 38(c)(2) GBC to reduce the Alternative Minimum Tax.

Using the taxpayer's amount on line 13, verify General Business Credits and enter the amount in Field 08SCV for Controlled Group returns.

The transcribed amount or

Gross Income Tax (07GIT), plus

Alternative minimum tax, minus

Foreign tax credit (08FTC), minus

Possession tax credit (08PTC), minus

Orphan tax credit (08OTC), minus

Production tax credit (08PRO), minus

Research tax credit (08RES), minus

25% of (amount computed in "b" above minus $25,000)

Prior Year Minimum Tax Credit differs from Prior Year Minimum Tax Credit Computer ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Check all displayed fields against the return for any coding and/or transcription errors. All corrections must be made in dollars and cents.

Transcription for Field 08PYM is from line 5d, Schedule J, Form 1120 and is edited from Form 8801, or Form 8827. If the credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 8801 or 8827 is not attached, enter Missing Schedule Code 46 in Field 03MIC.

The transcribed amount, or

Gross Income Tax (07GIT), minus

Foreign Tax Credit (08FTC), minus

Orphan Drug Credit (08ODC), minus

Production Tax Credit (08PRO), minus

General Business Credit (08GBC), or

the amount computed in b above minus Tentative Minimum Tax—Computer Generated (Field 0912>).

Total Statutory Credits differs from Total Statutory Credits—≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Total Tax is out of tolerance.

Statutory Credits—When a taxpayer's error causes an increase or decrease in Total Tax, check to see if Form 1118, 3468, 3800, 5884, 6478, 6765, 8586, 8801, 8820, 8827, 8826, 8830, 8835, 8844, 8845, 8846, 8847 and/or 8874 is attached. If so and credit available to carryover for any credit(s) associated with the above forms is increased or decreased, the taxpayer must be notified. If the adjustment is done in such a way that the taxpayer will not receive a notice, prepare Letter 3833C. Explain the adjustment and tell what the corrected carryover amount is.

Check all fields for editing and/or transcription errors and correct any found. Also, check all attachments to ensure that all entries are correct and were brought forward correctly.

The additional credits, transcribed in Fields 08DAC (Form 8826), 08ORC (Form 8830), 08EPC (Form 8835), 08EZC (Form 8844), 08IEC (Form 8845), 08ECT (Form 8846), 08CDC (Form 8847), and 08NMC (form 8874) will not be displayed for this Error Code. They are transcribed for statistical purposes only and will not be used in any math computations.

If there is an indication on Form 1120, Schedule J, line 5c, that one of these Form(s) is attached and this Error Code is generated, check to see if the Form(s) should be attached. IRM 3.12.251.7.5 for schedules that must be attached If ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the appropriate Missing Schedule Code(s) in Field 03MIC. (For 1999 – Form 1120, Schedule J, line 4d).

If Form 8912 is attached, enter credit amount into Field 08SCV.

If there is an indication on Form 1120, Schedule J, line 5c , that one of these Form(s) is attached and this Error Code is generated, GTSEC 08 to ensure proper transcription. For 1999 – Form 1120, Schedule J, line 4d). Valid tax periods for these credits are:

If these credits are present and tax periods are prior to the valid periods stated above, delete the credit.

Valid TPNC Codes for EC 182 are as follows:

FOREIGN TAX CREDIT (Field 08FTC) is transcribed from line 5a, page 3, Form 1120 and is edit from Form 1118. (For 2005 – line 6a, 1999 – line 4a, page 3, Form 1120) This field will underprint when it exceeds the computer's figure for Field 07GIT. If the underprint in Field 08FTC is correct, send TPNC 11. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more and Form 1118 is not attached, enter Missing Schedule Code 29 in Field 03MIC.

POSSESSIONS TAX CREDIT (Field 08PTC): Beginning with the 2006 tax return, Possessions Tax Credit is no longer transcribed. The credit was from line 6b, page 3, Form 1120 of the 2005 tax return and was edited from Form 5735. (For 1999 – line 4b, page 3, Form 1120) Returns with Possessions Tax Credit (Section 936) will be processed in Ogden Submission Processing Campus. Computer Condition Code "6" must be present. If received in another Submission Processing Campus, SSPND with Action Code "650" and route to OSC via Form 4227. OSC Only: Ensure that any returns claiming Section 936 credit should have a DLN with Filing Location Code 98. If not, SSPND "610" for renumbering. If Field 08PTC underprints, send TPNC 90 and attach a statement with an explanation of the error.

Form 5735 must be attached to support a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If not present, enter a Missing Schedule Code 37 in Field 03MIC. If no TPNC is sent, prepare Letter 3833C to inform taxpayer of the credit difference.

ORPHAN DRUG CREDIT (Field 08ODC): Transcription is from and is edited from Form 8820 . The valid tax periods are 198301 through 199511 and 199607 and subsequent. If Field 08ODC underprints, send TPNC 90 and attach a statement with an explanation of the error.

If no TPNC will be sent, prepare Letter 3833.

PRODUCTION TAX CREDIT (Field 08PRO): Transcription is from Form 1120, Schedule J line 5b, page 3. No form is available. (For 1999 Form 1120, Schedule J line 4c, page 3). Valid periods are 198001 and subsequent. If Field 08PRO underprints, send TPNC 90 and attach a statement with an explanation of the error.

A statement supporting the credit must be attached if the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If not, enter a Missing Schedule Code 49 in Field 03MIC. If no TPNC will be sent, prepare Letter 3833C.

Research Credit (Field 08RES): Transcription is from line and edited from line 1d, Form 3800 or line 44, Form 6765 in DOLLARS ONLY. Corrections are made in DOLLARS ONLY. This field will not underprint for current periods. It is transcribed for statistical purposes only. It will not be used by the computer in math computations.

EMPOWERMENT ZONE CREDIT (Field 08EZC): Transcription is from line and is edited from line 10, Form 8844.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Enter a Missing Schedule Code 54 in Field 03MIC if necessary.

NON-ENERGY INVESTMENT CREDIT (Field 08NEI) 198412 and subsequent – This field will not underprint for this period. It is transcribed for statistical purposes only. It will not be used by the computer in math computations.

ALCOHOL FUELS CREDIT (Field 08AFT): This field will not underprint for current periods. Field 08AFT is transcribed for statistical purposes only. It will not be used by the computer in math computations.

NON-REFUNDABLE ENERGY CREDIT (Field 08NRE): This field is transcribed for statistical purposes only for current periods. It will not be used by the computer in math computations. Corrections to this field must be made in dollars only.

WORK OPPORTUNITY CREDIT (Field 08JOB): This field will not underprint for current periods. It is transcribed for statistical purposes only. Transcription is from line and is edited from line 1b, Form 3800 or line 4, Form 5884. Corrections to this field must be made in dollars only.

Transcription is from line 5c, page 3, Schedule J, Form 1120 (For 2003 – line 2a, 1999 – line 4d, page 3, Schedule J, Form 1120). The field is transcribed in dollars and cents.

Beginning with the 2006 year tax return, if one General Business Credit or carryforward credits is being claimed, Form 3800 must be attached. The credit limitation computation is no longer included on the General Business Credit form. The credit limitation is computed on Form 3800. If there is one credit larger than ≡ ≡ ≡ ≡ being claimed and Form 3800 is not attached enter 43 into Field 03MIC. If there are two or more of these credits claimed and previous correspondence has not been initiated, SSPND and correspond for the Form 3800.

For 2005 and prior year tax returns, if more than one General Business Credit or carryforward credits are being claimed, Form 3800 must be attached to combine the credits and compute the overall limitations. If the taxpayer uses the individual forms for computing the credits, transfer the amounts to Form 3800.

Form 2005 and prior year tax returns, if only one General Business Credit is being claimed, the Form 3800 is not required. The individual forms supporting each credit (except carryforward credits) must always be attached. If missing, correspond if amount is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

For tax period 199612 and Subsequent—In addition to Fields 08NEI through 08ESC, the computer does not use Fields 08RES or 08LIH to compute General Business Credit or to determine Total Tax, Field 07TTX.

If Form 3800 is required and is missing, enter Missing Schedule Code 43 in Field 03MIC if the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ more.

The transcribed amount, or

Gross Income Tax (07GIT), minus

Foreign Tax Credit (08FTC), minus

Possessions Tax Credit (08PTC), minus

Production Tax Credit (08PRO), minus

Orphan Drug Credit (08ODC), or

75% of (amount computed in "b" above minus $25,000) plus $25,000, or

The amount of computed in "b" tax credits above minus Tentative Minimum Tax Computer generated (0912>)

PRIOR YEAR MINIMUM TAX CREDIT (Field 08PYM): Transcription is from line 5d (prior year line 6(e)), page 3, Form 1120 and is edited from Form 8801 or 8827. (For 1999 – line 4(e), page 3, Form 1120).

All corrections must be made in DOLLARS and CENTS . If the credit claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , enter Missing Schedule code 46 in Field 03MIC. This field will underprint when the transcribed amount differs from the computer generated amount.

The transcribed amount, or

Gross Income Tax (Field 07GIT), minus

Foreign Tax Credit (Field 08FTC), minus

Possessions Tax Credit (Field 08PTC), minus

Orphan Drug Credit (Field 08ODC), minus

Production Tax Credit (Field 08PRO), minus

General Business Credit (Field 08GBC), or

the amount computed in "b" above minus Tentative Minimum Tax

NEW YORK LIBERTY ZONE CREDIT (Field 08NYL) Valid tax periods are T 200201 through 200511. If Form 8884 is not attached to support a credit of $500.00 or more, for a valid tax period, enter a Missing Schedule Code of "60" in Field 03MIC.

TOTAL STATUTORY CREDIT (Field 08TSC). Transcription is from line 6, page 3, Form 1120. (For 1999 – line 5, page 3, Form 1120.) This field will underprint when the transcribed amount differs from the Computer-Generated ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

STATUTORY CREDIT VERIFIED (Field 08SCV) will be used whenever the computer is unable to calculate the correct amount of gross tax. Enter the correct amount of statutory credits in Field 08SCV and change line 4, Schedule J, Form 1120 to the corrected amount. (For 1999 – line 5, page 3, Form 1120).

The valid Taxpayer Notice Codes for this error are those listed below and any previously assigned TPNC.

Total Tax differs from Total Tax Computer by ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

If an adjustment is made to any carryover ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and no math error notice is required to be sent, send Letter 3833C explaining the adjustment and stating the corrected carryover amount.

Correction Procedure Field 07TTX: Total Tax—Transcription is from line 31, Form 1120. In terms of return sequence, transcription or taxpayer error lies somewhere between Gross Tax and this field (Field 07TTX) inclusively. Field 07TTX will underprint when it differs by ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Correct all coding and transcription errors. If it appears the return is being filed for a bank or savings and loan and has an Audit Code 1, CCC "X" and blocking series 979 or 499, it should be treated in the normal manner. If the return has a refund, do not send TPNC; instead, change the taxpayer's figures to agree with the underprint.

Homeowners Associations may file on Form 1120. When they do so, they are to be taxed at the normal corporate rate. If the taxpayer indicates "Sec. 277" , or "minimum tax" when no taxable income is present, accept the taxpayers figures by entering the taxpayers amount in 07MCT.

After an amount has been entered in Field 07MCT, the computer will not be able to correctly calculate Statutory Credits or Alternative Minimum Tax. Ignore any erroneous underprints after Field 07MCT has been entered. Check all fields for editing and/or transcription errors and correct any found. Also, check all attachments to ensure that all entries are correct and were brought forward correctly.

Follow the procedures below when Field 07TTX is underprinting:

Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. The taxpayer writes in "SEC 1294" and the amount to be added to or subtracted from the total on line 9, Schedule J. (For 1999 – line 12, Schedule J). The taxpayer will bracket the amount if it is subtracted from line 10.

Installment payment of tax attributable to LIFO recapture by corporations making a S corporation election, 1987 Act Section 10227(a). The taxpayer writes in "SEC 1363(d) deferral" and the amount on line 9, Schedule J. (For 1999 – line 12, Schedule J). The 1120 corporation pays one-fourth. The 1120S corporation pays the other three-fourths over first three years as an S corporation.

Mutual savings bank conducting life insurance business, Section 594. The taxpayer computes a partial tax on Form 1120, and a partial tax on Form 1120L. The combined tax is entered on line 3, Schedule J. Form 1120L is attached as a schedule and identified as such by the taxpayer.

Interest on a tax attributable to payment received on installments sales of certain timeshare and residential lots, Section 453(1)(3). The taxpayer writes in "SEC 453A(c) interest" and the amount on line 3, Schedule J.

Interest on tax deferred under the installment method for certain non-dealer real property installment obligations, Section 453A. The taxpayer writes in "SEC 453A(c) interest" and the amount on line 3, Schedule J.

Deferred tax amount under Section 1291, (PFIC). The taxpayer writes in "SEC 1291 tax" and the amount on line 3, Schedule J.

Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. The taxpayer should write "From Form 8697" on the dotted portion of line 9, Schedule J. (For 1999 – on the dotted portion of line 12, Schedule J). If the taxpayer has added the amount from line 11, of Form 8697 to line 9, Schedule J, enter the taxpayer's Total Tax in Field 07MCT. If the taxpayer has subtracted the amount of line 9, Form 8697 from line 10, Schedule J, enter the underprinted amount in Field 07TTX in Field 07MCT.

Alternative Minimum Tax may be reduced by any amount of General Business Credit from Form 3800, Sch. A, line 34. The taxpayer writes in "Section 38(c)(2)" and the amount on the dotted portion of line 3, Sch. J, page 3 F1120 . (For 1999 – line 9, Sch. J, page 3 F1120

If the difference between the underprint and the transcribed figure is the write-in amount, enter the taxpayer figures for Total Tax in Field 07MCT.

Field 07MCT is to be used when a manual computation return has a math error. This indicates that neither the transcribed amount nor the underprinted (generated) amount is correct; or in the case of Computer Condition Code "Y" and the transcribed amount is incorrect.

Enter the correct amount of total tax in Field 07MCT and change line 31, page 1, Form 1120 to the corrected amount. When the manually corrected total tax is zero, enter .01 (1 cent) in Field 07MCT.

The applicable TPNC should be sent. If no TPNC applies, use TPNC 90 to inform the taxpayer of the error. Attach a 3 × 5 card with the exact statement to be printed on the notice.

IRM 3.12.251.25 for returns requiring manual computation.

Field 08PHC transcription is from line 8, Schedule J. (For 1999 – line 7, Schedule J).

Check attachments for a Schedule PH, Personal Holding Company form. If the Schedule PH is not attached and Field 08PHC has an entry, enter Missing Schedule Code 30 in Field 03MIC.

Field 08TRI transcription is from line 9, Schedule J, page 3, Form 1120 and is edited from Form 4255. (For 1999 – line 8, Schedule J, page 3, Form 1120).

Current Year Investment Credit may not be used to offset a recaptured tax.

Check attachments for a schedule of the taxpayer's Prior Year Investment Credit and Recaptured Tax. If not found, do not delete Field 08TRI. Send TPNC 05.

If the taxpayer is trying to offset the recaptured tax with CARRYOVER investment credit, delete Field 08TRI and reduce Field 08GBC (for tax periods 198412 and subsequent), by the amount used on Form 4255.

Field 08RLI transcription is from the right margin of line 9, Schedule J, Form 1120 and is edited from Form 8611, line 12. If multiple Forms 8611 are attached, the total of line 12, Form 8611 should be the edited amount. (For 1999 – line 8, Schedule J, Form 1120).

Any corrections to this field must be made in dollars and cents.

If a taxpayer error is creating a math error, send TPNC 33.

If the taxpayer checked the Form 8611 box on line 9, Schedule J, Form 1120, or Form 8611 is attached, enter Computer Condition code "9" in Field 01CCC. (For 1999 – line 8, Schedule J, Form 1120 ).

If the taxpayer noted "Form 8693 Attached" on line 9, Schedule J, Form 1120 , or Form 8693 is attached, enter Computer Condition Code "9" in Field 01CCC. (For 1999 – line 8, Schedule J, Form 1120.)

Transcription is from line 3, Schedule J, Form 1120. The source is Form 4626, line 14. (For 2005 – line 4,1999 – line 9, Schedule J, Form 1120.

This field will underprint if the transcribed amount differs from the computer generated amount only if Section 09 is present.

If this field has an entry of $500.00 or more and Form 4626 is not attached, correspond. On "no replies" enter Alternative Minimum Tax Taxpayer (Field 08AMT) into Alternative Minimum Tax Verified (Field 09VER). This will remove the underprint in Field 08AMT.

Field 08QZA -Qualified Zone Academy Bond Credit Transcription is from line . This credit is edited from line 9 of Form 8860.

Check attachments for Form 8860. If Form 8860 is not attached, enter Missing Schedule Code 56.

Field 08GT> Gross Tax Less Credits—Computer Generated - The amount in Field 08GT> should be the same as line 7, Schedule J, Form 1120. This field is the computer's amount for Gross Tax minus Statutory Credits. If the amount in this field differs from the above mentioned line on the form, there is an error in credits. If these amounts are the same, the error will result in additional taxes.

See chart for when to send Letter 3833C;

The valid Taxpayer Notice Codes for this error code are those listed below and any previously assigned TPNC.

Balance Due/Overpayment differs from Balance Due/Overpayment ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If the difference between Total Tax Taxpayer and Total Tax Computer equals the difference between Balance Due Taxpayer and Balance Due computer, Error Code 188 will not display.

Correct any coding and transcription errors. Also check all attachments and Form 4136 entries to ensure that all amounts were brought forward correctly.

Field 07TTX, Total Tax—If it appears the return is being filed for a bank or savings and loan and has an Audit Code "1" , CCC "X" and blocking series 979 or 499, it should be treated in the normal manner. If the return has a refund, do not send TPNC; instead, change the taxpayer's figures to agree with the underprint.

Field 07EST, Estimated Tax Credit: Transcription is from line 32d, Form 1120. Field 07EST is the total of lines 32a and 32b minus line 32c and is entered on line 32d. If the total payments line is the only payments entry, arrow it to line 32d and enter in Field 07EST. If the taxpayer's amount on line 32d is negative, input CC SSPND "355" for research. A tax examiner working Rejects will research IDRS for credit or debit of a similar amount. If found, adjust line 32d (Field 07EST) accordingly. If not found, correspond. If no reply, delete amount on line 32d (Field 07EST). If prepaid credits (on lines 32a through 32e) are claimed and the return is a short period return because it is a final or has a change of accounting period, SSPND with Action Code "342." Prepare Form 4227 with a notation "Short Period with ES Credits."

Field 07EXT, Form 7004 Credit Transcription is from line 32e, Form 1120.

Field 07RIC, Regulated Investment Credit: Transcription is from line 32f, Form 1120. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 2439 is missing, initiate correspondence. U.S. Income Tax Paid or Withheld at Source, Form 1042S Credit must be included in this Field. Add any "Back-up Withholding" found on the return to the Field 07RIC if not already included. Do not allow any credit referring to "Form 1138 filed."

Field 07FIR, FIRPTA Credit—Transcription is from page 1, bottom center margin, Form 1120 only. Enter any "FIRPTA" credit, Form 8288A, in Field 07FIR. Any Form 1120 with this credit must be transferred to OSC.

Field 07ESP, Estimated Tax Penalty Transcription is from line 33, Form 1120. It is edited from line 38, Form 2220, Underpayment of Estimated Tax by Corporations and must always be included in the Balance Due/Overpayment total. Enter/edit Reserve Code "4" when a large corporation is indicated on Box 8 of Form 2220.

Field 07B/R, Balance Due/Overpayment: Transcription is from line 34, Balance Due or line 35, Overpayment, Form 1120. The computer will compute Balance Due/Overpayment The formula is 07B/R = 07TTX − 07EST − 07EXT − 07RIC − 07FIR − 07FTE (2006 only)- 07ARC (200812 and subsequent)+ 07ESP.

Balance Due/Overpayment amount minus Credit Elect (Refund ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is not equal to "1" .

Correct any coding and transcription errors.

SSPND Action Code "341."

If there is no indication that a manual refund has been issued, follow local Submission Processing Campus procedures for expediting large dollar refunds.

If the condition is being resolved and a manual refund will NOT be issued, input "1" in field 03RVC only. Do Not Enter the "O" in 01CCC.

Balance Due/Overpayment amount minus Credit Elect (Refund ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 25 days later than the Interest Penalty Date (later of the Received Date, Correspondence Received Date or Return Due Date) and Reserve Code "1" is not present.

CCC "O" is not present

Check for coding and transcription errors and misplaced entries. Correct any errors found.

SSPND Action Code "341."

If there is an indication that a manual refund has been issued, enter "O" in Field 01CCC

Remittance amount or an RPS indicator is present, Total Tax Taxpayer is zero, and CCC "G" is not present.

Check for coding and transcription errors and correct if found.

If the return indicates amended, revised, superseding, duplicate or any other positive indication that the return is not the first return filed for this tax period, enter CCC "G" in Field 01CCC.

If literal "RPS" displays on the screen and no remittance is present and the Total Tax Field is blank, enter $.01 in Field 07TTX.

If the remittance equals the refund amount or was sent only for penalties and/or interest, enter one cent ($.01) in Field 07TTX.

Enter the correct tax in Field 07GVT and on the return.

Attach your tape with two stamps on it or two individual tapes (this applies the Rule of Two). When verifying the 5% surcharge, a tape is not required.

Also send the applicable Taxpayer Notice Code.

Enter taxable income (line 30, page 1)

Enter line 1, or the organization's share of the $50,000 taxable income bracket, whichever is less

Subtract line 2 from line 1

Enter line 3 or the organization's share of the $25,000 taxable income bracket, whichever is less

Subtract line 4 from line 3

Enter line 5 or the organization's share of the $9,925,000 taxable income bracket, whichever is less

Subtract line 6 from line 5

Multiply line 2 by 15%

Multiply line 4 by 25%

Multiply line 6 by 34%

Multiply line 7 by 35%

If the taxable income of the controlled group exceeds $100,000, enter this member's share of the smaller of 5% of the taxable income in excess of $100,000 or $11,750

If the taxable income of the controlled group exceeds $15 million, enter this member's share of the smaller of 3% of the taxable income in excess of $15 million or $100,000

Add lines 8 through 13 to determine total taxable income

Check the upper right corner of page 1 of the return and/or the pre-addressed label for a correct tax period.

If the tax period is later than the processing date, check to see if the Form 1120-H is a "Final" return.

Received Date is not present,

Received Date is not all numerics,

Month is not 01 through 12,

Day is not valid for the month,

Received Date is later than the current processing date,

Form 1120-H Received Date is prior to 197601, or

Received Date is not in YYYYMMDD format.

Check for coding and transcription errors.

Make necessary corrections.

Field 01RCD is transcribed from the stamped or edited date in the center of page 1 of the return.

Correct any coding and transcription errors.

When the code(s) entered on the return are illegible or invalid, examine the return and refer to the CCC chart below. Determine the correct code(s) and enter on the screen.

Computer Condition Code Chart

If CCC "G" is present and:

If CCCs "F" and "Y" are both present:

If Computer Condition Code "7" is present, and CCCs "D" and "R" are both present:

Check for coding and transcription errors.

Make necessary corrections.

Correct any coding and transcription errors.

If the 35th character is a pound sign (#), refer to Document 7475, State Abbreviations, Major City Codes and Address Abbreviations. Abbreviate the address to 35 or fewer characters.

If unable to correct, DLSEC 02.

Correct any coding and transcription errors.

If a valid city is not available from the return or envelope, take any of the following steps:

If unable to correct, DLSEC 02.

Correct any coding and transcription errors.

If a valid state code is not available from the return or envelope, take any of the following steps:

If unable to correct, DLSEC 02.

Check for coding and transcription errors.

Make necessary corrections.