3.12.251  Corporation Income Tax Returns

Manual Transmittal

October 01, 2014

Purpose

(1) This transmits revised IRM 3.12.251, Error Resolution Corporation Income Tax Returns.

Material Changes

(1) This IRM has had editorial changes made throughout.

(2) IRM 3.12.251 has had dollar amounts and tax years updated throughout.

(3) IRM has been updated throughout to change previous references to Chapter Three Withholding (CTW) to now also include Chapter Four Withholding (CFW) as well.

(4) IRM 3.12.251.1.8 is a new subsection that has been added to indicate that on Identification Theft returns Error Resolution Systems (ERS) employees will give these cases to either their Manager or their Work Leader so that they are routed correctly.

(5) IRM 3.12.251.3.10 has been updated to correct link for "The Truth About Frivolous Tax Arguments" and to explain what CFR represents.

(6) IRM 3.12.251.3.17 has been updated to provide additional guidance before correspondence is initiated.

(7) IRM 3.12.251.3.20 that provides guidance on Qualified Cellulosic Biofuel has been updated to provide clarification and updated instructions.

(8) IRM 3.12.251.4 has been updated to now include the newer sections that have been added to these returns.

(9) IRM 3.12.251.5.3 has been updated to provided corrected first two digits of an Employer Identification Number (EIN) that will indicate they are invalid.

(10) IRM 3.12.251.5.4 has been updated to include additional Correction Procedures.

(11) IRM 3.12.251.5.7(3) Table has been updated to include the meaning of new Computer Condition Code (CCC) of H which is only valid on Form 1120–F. Has also been updated to include information related to the CCC of "Q" .

(12) IRM 3.12.251.19, Section 21, has been updated to reflect the changes that have been made to the Form 8941. There is a new line for the SHOP Check box and 2 line numbers have been changed.

(13) IRM 3.12.251.22 Information related to Lines 2401T and 2401U of the Form 3800 have been added back in for use on Prior Year returns.

(14) IRM 3.12.251.24.12(4) j has been updated to remove the reference to Form 5471.

(15) IRM 3.12.251.24.12(5) has been updated to add information for Transaction Code (TC) 058 and also to change the title referenced at TC 091.

(16) IRM 3.12.251.24.25 is a new Consistency Error numbered as 124 for the Shop Check boxes that appear on the Form 8941.

(17) IRM 3.12.251.24.33 has been updated to clarify the" Rule of Two" requirements.

(18) IRM 3.12.251.25.4(1) If/Then chart has been updated to remove the reference to Form 5471.

(19) IRM 3.12.251.24.36, Error Code 177 has been updated to include one new notice numbered as TPNC 54 and TPNC 53 has been changed to remove the specific dollar amount. Additionally, there are now new Invalid Conditions that have been added due to the new SHOP Check box. Depending on the response to the new question on the Form 8941 once Error Code 124 has been resolved Error Code 177 may generate and need to be addressed.

(20) IRM 3.12.251.24.39 has been updated to remove reference to 6 Alpha Field Designators (AFD) that no longer display on the screen.

(21) IRM 3.12.251.24.39 has been updated to add additional guidance related to the Production Tax Credit.

(22) IRM 3.12.251.24.40 has been updated to provide additional guidance on the following AFD: 08TR, 08RLI, 08AMT and 08QZA.

(23) IRM 3.12.251.29 has been updated to add all of the new Taxpayer Notice Codes (TPNC)s that are related to the Form 8941, Error Code 177.

(24) IRM 3.12.251.42 has been updated to now include any Form 1120–F with a Consolidated Form 1042-S.

(25) IRM 3.12.251.42.7 has been updated to indicate that a CCC of H is now valid on the Form 1120–F.

(26) IRM 3.12.251.44.3.1 has been updated to now include a note that indicates that income amounts may now be reduced on cases claiming withholding from a Form 1042–S.

(27) IRM 3.12.251.44.3.1 has also been updated to add several new procedures for when withholding is claimed from a Form 1042–S. Guidance on the proper use of new CCC "H" has been included at this same tridoc. Information has been provided on how to handle Form 1042–S with Consolidation noted on it. New information on the correspondence procedures for the Form 1042–S has been included.

Effect on Other Documents

IRM 3.12.251 dated November 03, 2013 (effective January 1, 2014) is superseded. The following IRM Procedural Updates (IPUs), issued from January 17, 2014 through August 25, 2014 have been incorporated into this IRM: 14U0143, 14U0550, 14U0650, 14U0918, 14U1041, 14U1068, 14U1285

Audience

Audience Wage and Investment (W&I), Submission Processing Employees

Effective Date

(01-01-2015)

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

3.12.251.1  (01-01-2015)
Purpose and Scope

  1. The Error Resolution System (ERS) is a means to resolve errors made by taxpayers and correct errors made during campus processing.

  2. This section provides instructions for errors that appear on the ERS for the following:

    1. Form 1120, U.S. Corporation Income Tax Return (Document Code 10 or 11).

    2. Form 1120-H, U.S. Income Tax Return for Homeowners Associations (Document Code 71).

    3. Form 1120-F, U.S. Income Tax Return of a Foreign Corporation (Document Code 66 or 67).

    4. Form 1120-C, U.S. Income Tax Return for Cooperative Associations (Document Code 03).

    5. Form 1120-REIT, U.S. Income Tax Return for Real Estate Investments Trust (Document Code 12).

    6. Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies (Document Code 05).

    7. Form 1120–PC, U.S. Income Tax Return for Property and Casualty Insurance Companies

    8. Form 1120–L, U.S. Income Tax Return for Life Insurance Companies

  3. The instructions contained in this book are used when correcting any paper return or returns using Modernized e-Filed (MeF).

3.12.251.1.1  (01-01-2015)
♦ IRS Employee Contacts Section 3705a ♦

  1. The Restructuring and Reform Act of 1998, (RRA98), Section 3705(a) provides identification requirements for all IRS employees working tax- related matters. IRS employees are required to give their name and unique identification number (ID) during taxpayer telephone, face to face and written contact. In addition a telephone number is required on all taxpayer correspondence. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax related matters.

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

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

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

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

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

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

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

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

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

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

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

3.12.251.1.2  (01-01-2015)
♦Taxpayer Advocate Service (TAS)♦

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

3.12.251.1.3  (01-01-2015)
♦TAS Service Level Agreements (SLA)♦

  1. The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage and Investment (W&I) Division, Small Business and Self Employed (SB/SE) Division, Tax Exempt and Government Entities (TE/GE), Criminal Investigation (CI), Appeals and Large Business and International (LB&I), that outline the procedures and responsibilities for the processing of (TAS) casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLAs).

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

3.12.251.1.4  (01-01-2015)
Background

  1. Place records into the Error Inventory or the workable Suspense Inventory for correction.

  2. Once you access a record when it displays on the screen, you must resolve the error by:

    1. Fully correcting the record

    2. Placing the record in suspense until additional information is received or

    3. Rejecting the record from pipeline processing.

  3. Correct coding and transcription errors and misplaced entries, or in the case of a taxpayer error, notify the taxpayer of the error on the return.

3.12.251.1.5  (01-01-2015)
Related Manuals

  1. This IRM is your main source of information for correcting the record on the screen and the related return. You will also find procedures in the following IRMs:

    • IRM 3.11.16, Corporation Income Tax Returns, which includes instructions for coding and editing of Forms 1120, Form 1120-H, Form 1120-F, Form 1120-C, Form 1120-REIT, Form 1120-RIC, Form 1120–L and Form 1120–PC.

    • IRM 3.12.38, BMF General Instructions. This IRM contains instructions for correcting records on the screen, document control, inventories, and management reports.

  2. If there is any discrepancy between the instructions contained in other IRMs, always follow the instruction in IRM 3.12.251.

3.12.251.1.6  (01-01-2015)
Figures and Exhibits

  1. All figures and exhibits that were previously displayed in this IRM have been relocated. This was necessary due to the size of this IRM. All figures and exhibits related to the processing of forms contained in this IRM can now be accessed at http://coursebooks.enterprise.irs.gov/Books/BMF%20ERS/2519-012.pdf#page=255.

  2. If there is any discrepancy between the IRM and the information contained in the Job Aid, always follow the instruction in IRM 3.12.251.

3.12.251.1.7  (01-01-2015)
♦ Business Master File/ BMF Consistency ♦

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

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

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

  4. Text in normal print is the common process for BMF returns. The text in BOLD print is form-specific and applies to this IRM only.

3.12.251.1.8  (01-01-2015)
♦BMF Identification (ID) Theft♦

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

3.12.251.1.9  (01-01-2015)
Local Desk Procedures

  1. Some Submission Processing Campuses have developed Desk Procedures. These local Desk Procedures are only to be used:

    1. to supplement existing Headquarters procedures;

    2. to expand Submission Processing Campus Error Resolution procedures by incorporating material from other IRMs, Automatic Data Processing (ADP) handbooks, etc.;

    3. for local routing procedures; and

    4. are not limited to the uses listed above.

  2. A signed approval must be on file from the responsible manager on all Submission Processing Campus Desk Procedures.

  3. All existing local information and procedural issuances must be reviewed periodically by a manager (at least 2 times a year or with each IRM revision) to:

    1. Ensure conformance with Headquarters procedures,

    2. Make necessary updates to the Desk Procedures, and

    3. Secure necessary approvals.

  4. An Excel worksheet has been developed and may be used for verifying tax with Forms 1120. This job aid will be available for your use. This does not override the ♦"Rule of Two" . If the corrected tax is different than the computers generated tax, two tax examiners must figure the tax to ensure a quality product. This worksheet will be provided to employees during training.

  5. Immediately notify the Headquarters tax analyst of any processing problems that cause a work stoppage.

3.12.251.2  (01-01-2015)
♦CADE — Customer Account Data Engine ♦

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

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

  3. The BMF campus cycles are:

    1. Campus Cycle: Thursday – Wednesday

    2. Master File Processing: Friday – Thursday

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

    4. Unpostables: New available Tuesday; Closing Tuesday

  4. BMF transaction posting timeframes are outlined as follows:

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

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

      Note:

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

  5. Transaction posting dates will reflect a format of YYYYCCDD. YYYY will indicate the year. CC will indicate the posting cycle. For IMF transactions, the following values for DD are defined:

    • 01 = Friday

    • 02 = Monday

    • 03 = Tuesday

    • 04 = Wednesday

    • 05 = Thursday

    Note:

    BMF cycle posting dates on BMFOL will continue to reflect YYYYCC. YYYY will indicate the year. CC will indicate the posting cycle. BMF cycle posting dates in TXMOD will reflect a format of YYYYCCDD. The DD value will be 08.

3.12.251.3  (01-01-2015)
Error Resolution System (ERS) General Correction Procedures

  1. Perfecting the Tax Return and Error Screen Displays.

    1. The error screen displays will show the Document Locator Number (DLN), the Employer Identification Number (EIN) and the Name Control, if present, in the header portion of each error record. Previously assigned Taxpayer Notice Codes (TPNC) will be displayed in the header information.

    2. Make certain the taxpayer's entries are on the appropriate lines of the tax return. Correct all coding and transcription errors and misplaced entries in each section and field of the screen display and on the return. Follow specific instructions for all sections and fields. Ensure that all sections and fields were transcribed.

  2. Before making corrections to the Error Screen Displays, make certain that the DLN of the screen display matches the DLN of the document. If information from 2 taxpayers' returns appear on the error record under one DLN or the DLN does not match the return on the screen display

    1. Stop processing.

    2. Give the block of work to your manager. Management will make the determination if the mixed data can be corrected via the terminal screen displays, or will take action to have the blocks deleted and reinput.

  3. Working Trail—When you make corrections to the screen display also correct the tax return. When assigning a Taxpayer Notice Code, the two digit number(s) assigned must be written on the return, in the upper left hand corner. Leave a "working trail" for those who may work with the return later. A working trail is to be left at the point of Error on the return or schedule for each correction made to the taxpayer's figure. If the information is available on the page, it can be arrowed to the correct line. See IRM 3.12.251.3.23, Working Trails, for instructions.

  4. When making corrections to the Screen Display, be sure money amounts within a section have been transcribed in dollars and cents or dollars only, whichever is applicable. Brackets must be placed around negative amounts on the return. A signature is required on all returns. If no signature is present, follow instructions in IRM 3.12.38, BMF General Instructions, for missing signature. If the signature area on the tax return is not signed, SSPND with Action Code "225" and correspond.

    Note:

    Paper returns sent in by the filer that states their return was rejected through the E-file system require a signature. Form 8879-S is not an acceptable signature substitute for a paper return.

3.12.251.3.1  (01-01-2015)
Command Codes

  1. The Command Codes (CC) needed for correcting and researching the Error Inventory and the Workable Suspense Inventory are briefly described below. They are also explained in IRM 3.12.38, BMF - General Instructions, General Instructions. Any Command Code permitted by the Employees Security file will be available. Command Codes are used to tell the system what function to perform. They must be entered in a valid format, otherwise an error message will display. Correct the data entered with the correction and transmit.

    1. GTREC—Used to access the first error record in an ERS error block or to access a specific record in the Workable Suspense Inventory.

    2. CRECT—Used to enter a correction. CRECT will be valid only after an error has been displayed in response to the GTREC Command. The Remittance Field in a record is not correctable with the Command Code CRECT.

    3. GTSEC—Used to obtain the display of any data section within the record in process. The response will be a display of all correctable fields of the requested section, including blank fields. No computer generated fields or error indicators will be shown.

    4. GTRECQ—Used to access a worked record that has been held for Quality Review.

    5. GTRECW—Used to recover an ERS data record that has already been worked. This Command Code can be used at any time on the same processing day. If any error is discovered on a subsequent day, the record must be corrected using Notice Review and Adjustment procedures unless the record was held for Quality Review.

    6. DLSEC—Used to delete a section from an ERS record.

    7. SSPND—Used with an ERS Action Code to place a record into Suspense status. SSPND is valid for Error Correction and Suspense Correction.

    8. NWDLN—Used to assign a renumbered DLN and reject an ERS record.

    9. RJECT—Used to reject a record from ERS.

    10. BMFOL—Used to access BMF returns. When used with different definer codes, it will access screen displays for computer generated data and data transcribed from individual line items.

    11. NAMEB—Used to research a missing or invalid EIN, Name and address data is input to search the Key Index File.

    12. ENMOD—Used to research for a name control and transaction codes.

    13. INOLE—Used to access the most current entity data from the National Account Profile (NAP).

    14. ERVOL—Used with a Status Code to display the number of ERS records in the current Workable Inventory. The printed reports for ERS are updated nightly. You may obtain the actual count of records to be worked, at any time, by inputting Command Code ERVOL.

    15. ERINV—Used to research a specific DLN or Taxpayer Identification Number (TIN) on ERS. It is also used to display the number of records in a block.

    16. ACTVT—Used to transfer an Unworkable Suspense record to the Workable Inventory.

    17. NAMES—Used by authorized users of Name Search Facility (NSF). Used to research a missing or invalid Social Security Number (SSN).

    18. NAMEE—Used by authorized users of Name Search Facility. Used to research a missing or invalid EIN.

    19. NAMEI—Used to research missing or invalid SSN.

  2. Additional information can be found at http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/command-code.dr/idrs_command_codes_job_aid.htm

3.12.251.3.2  (01-01-2015)
Action Codes

  1. The ERS Action Code indicates that specific information is missing or that the record is to be suspended from processing. Only one Action Code may be assigned at a time to a record. The priority of the Action Code will be 310, 320, 4XX, 6XX, 3XX, 2XX.

  2. Action Code 001 will be computer-generated when the Block Out of Balance (BOB) Resolution Function has added a missing document by only inputting the TIN and the Name Control for the missing document.

  3. Document Perfection Tax Examiners will assign a three digit code to numbered returns when they determine that the document is unprocessable in its present form, needing additional information or some manual intervention. This code will be entered on the bottom left hand corner of the return preceded by the letters and "AC" .

  4. Correspondence Action Sheets are used for initiating correspondence and will be attached by Document Perfection. ERS requires no change in the manner in which this is currently being done. For routing within the Campus (In-House Research), the Action Code with a sufficient explanation concerning the missing information will need to be attached to the return.

  5. The Action Code assigned by C&E will be transcribed into the record of the Form 1120. A valid Action Code other than 001 will place the record in the Suspense Inventory, either Workable or Unworkable.

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

    Action Code Description Workday Suspense Period Function Used In
    001 Input Document 0 GEN
    210 EPMF Correspondence 60 EC, S
    211 First Taxpayer Correspondence 40 CE, EC, S
    212 Second Taxpayer Correspondence 25 CE, EC, S
    213 Correspondence to Other Than Taxpayer 40 CE, EC, S
    215 International Correspondence 45 CE, EC, S
    225 Taxpayer Correspondence (Signature Only) 40 CE, EC, S
    226 International Correspondence (Signature Only) 40 CE, EC, S
    300 Examination (Fuel Tax Credit) 10 CE, EC, S
    310 Statute Control 10 CE, EC, S
    320 Entity Control 10 CE, EC, S
    331 Frivolous Review 3 CE, EC
    332 QRDT (Questionable Refund Detection Team) Review 3 CE, EC
    333 Prompt Audit 10 CE, EC, S
    334 Joint Committee 10 CE, EC, S
    335 Frivolous Case 10 CE, EC, S
    336 QRDT Case 10 CE, EC, S
    337 Other CID (Criminal Investigation Division) 10 CE, EC, S
    341 Manual Refund 10 CE, EC, S
    342 Credit Verification 10 CE, EC, S
    343 Black Liquor 10 CE, EC, S
    344 Manual Refund - ERS 0 EC
    347 Form 1120S - Form 2553 - First Year 20 CE, EC, S
    351 TIN Research 0 EC, S
    352 Name Research 3 CE, EC, S
    353 Address Research 3 CE, EC, S
    354 Filing Requirements Research 3 CE, EC, S
    355 Other MFTRA Research 5 CE, EC, S
    360 Other In-House Research 10 CE, EC, S
    370 Examination 10 CE, EC, S
    410 Assistance Needed 0 EC
    420 2006 tax return with Form 8913 credit (TETR) 5 CE, EC, S
    430 Management Suspense B 10 CE, EC, S
    440 Management Suspense C 15 CE, EC, S
    450 Management Suspense D 20 CE, EC, S
    460 Management Suspense E 25 CE, EC, S
    470 Complex Error Codes 0 EC
    480 Early Filed Suspense 150 CE, EC, S
    490 System Problem 5 CE, EC, S
    510 Missing Document 0 CE
    511 Missing Document - 1st Suspense 25 EC, S
    512 Missing Document - 2nd Suspense 20 S
    513 Missing Document - 3rd Suspense 20 S
    515 Missing Document - Short Term 5 EC, S
    550 Magnetic Tape Return - Check for Attachments 0 CE
    551 Magnetic Tape - Inconsistent Data 0 CE
    610 Renumber - Non-Remit 0 CE, EC
    611 Renumber - Remit 0 CE, EC
    620 NMF/Non-ADP 0 CE, EC, S
    630 Reinput 0 EC,
    640 Void 0 CE, EC, S
    650 International 0 CE, EC, S
    660 Data Control Delete 0 S
    670 Rejected Missing Document 0 S
    700 Duplicate Block DLN 0 GEN
    711 Duplicate Document DLN from Code & Edit 0 GEN
    712 Duplicate Document DLN from Error Correction 0 GEN
    713 Duplicate Document DLN from Unpostables 0 GEN
    714 Duplicate Document DLN from Unworkable Suspense 0 GEN
    715 Duplicate Document DLN from Workable Suspense 0 GEN
    800 NAP Linkage Problem 2 EC, S
    900 Unpostable Record 0 GEN


    CE = Code & Edit; EC = Error Correction; S = Suspense Correction; GEN = Computer Generated

3.12.251.3.3  (01-01-2015)
Using Action Codes with Command Codes

  1. An ERS tax examiner may enter an Action Code on a record, delete or correct an invalid code, or may overlay the present Action Code with another to either resuspend or reject from ERS. This is done by entering a valid Action Code with a Command Code SSPND, NWDLN, or RJECT.

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

    2. A Reject tax examiner entering a valid Action Code with RJECT Command Code will be rejecting the record from ERS. Generally Service Center Control File (SCCF) will be automatically updated for the rejected records.

    3. A Reject tax examiner entering an Action Code with NWDLN Command Code will be rejecting the record from ERS and establishing the new DLN under which the record is to be input.

  2. When the Action Code does not describe the required action, attach a note of explanation to the return (Form 4227).

  3. If an IDRS letter is necessary then, attach a Correspondence Action Sheet to issue the correspondence.

3.12.251.3.4  (01-01-2015)
Error Resolution System Coding

  1. The ERS Action Code indicates that specific information is missing or that the record is to be rejected from processing. The code will indicate if correspondence is to be sent to the taxpayer or the specific in-house research or action required. See the Action Code Chart in Section 1 of the 2519–019 Job Aid for the appropriate codes.

3.12.251.3.5  (01-01-2015)
Clear Code "C" and 000

  1. The letter "C" is used as a Clear Code for the error codes (consistency errors) where the error condition does not require a change or correction to the record as displayed. The display will include a Clear Code field, labeled "C" to indicate the possible need of a Clear Code. The Clear Code field will always be located to the right of CRECT on the screen display.

  2. Error codes indicating the possible need for a Clear Code are cleared by either correcting the condition or entering a "C" to indicate no correction is needed. If corrections are required, they must be entered and transmitted prior to entry of the Clear Code "C" . Assure that all corrective procedures have been input as shown under each individual error code before entering a "C" in the Clear Code Field.

  3. On Reject documents Clear Code "C" is also used for clearing the action code from the screen after corrections for the action code have been completed, or as with Action Codes 410 and 700, the action code must be cleared initially, so other errors in the record can be resolved. The presence of the "C" with a Priority I Error indicates that you have made the corrections to the action code and now wish to have any other errors on the record displayed.

  4. The "000" is also used as a Clear Code when deleting an action code. It will only be used for invalid or erroneous Action Codes and you have determined there is no reason to suspend the record. The "000" cannot be used in suspense correction.

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

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

  7. Error codes (including ones which may require a "C" Clear Code) are numbered consecutively for correcting.

    1. When correcting errors at the terminal, it is possible to create an error code with a higher priority than the one(s) you have cleared with a Taxpayer Notice Code or "C" Clear Code. Should this occur, programming will erase all "C" Clear Codes and TPNCs for error codes with a lower priority than the one created.

    2. Beginning with the higher priority error code created, programming will continue displaying error codes for the record. Displays using the corrected data may be different from those previously displayed.

    3. There may be instances when you will make a correction erasing an error code which you previously cleared with a "C" and now the error condition no longer exists. Should this occur, the "C" Clear Code for this error and all "C" and TPNCs for all subsequent errors in the record will be deleted. If after deleting the "C" and TPNCs, there are errors remaining on the record, they will continue to be displayed for resolution whether or not they were previously displayed.

  8. The "C" Clear Code will prevent any other corrections to the record to accompany the "C" Clear Code. If a correction must be entered but you already have transmitted the "C" Clear Code or SSPND, and the record is no longer displayed, then use Command Code GTRECW to make any corrections.

3.12.251.3.6  (01-01-2015)
Status Codes

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

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

    1. Status 100, error awaiting correction. Records are in the Error Inventory.

    2. Status 2XX, record awaiting information. Records are in the Unworkable Suspense Inventory.

    3. Status 3XX, suspense period expired-no response. Records are in the Workable Suspense Inventory.

    4. Status 4XX, record with information, awaiting correction. Records are in the Workable Suspense Inventory.

    5. Status Code 900, Record is on the Unselected Inventory.

  3. The final two positions of the Status Code will consist of the first two positions of the Action Code. This will put similar work together on the Workable Suspense Inventory. For example, "321" Suspense period expired, no response to taxpayer correspondence.

  4. Records for which the Suspense Period has expired before being activated are automatically moved from Status 2XX to Status 3XX.

3.12.251.3.7  (01-01-2015)
Statute Control Documents

  1. A statute control document is a document that is filed for a barred period. A barred period is a taxable period on which statutory limitations are placed for allowing refunds, credits, or for assessing additional taxes.

  2. Any Form 1120 that the current processing date is equal to or more than two years after the return due date or received date, whichever is later, is a statute control document. It will appear on the screen with Error Code 001, unless Computer Condition Code "W" is present on the record. The Computer Condition Code "W" indicates the record has been cleared by Statute Unit.

  3. All "G" coded returns become statute returns if the processing date is equal to more than two years and ten months after the 15th day of the third month after the tax period ending.

  4. A claim for refund must be filed or additional tax assessments must be made not later than three years from the date the original return was filed or two years from the date the tax was paid, whichever is later.

3.12.251.3.8  (01-01-2015)
Criminal Investigation (CI) "Funny Box"

  1. Criminal Investigation (CI) investigates potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes. Criminal violations of the IRC are willful and deliberate attempts to evade or defeat the income tax. Flagrant criminal activity includes but is not limited to the failure to pay taxes due and/or taxes collected or withheld and claims of false refunds based on bogus return information.

  2. Pull any return identified as having any CI criteria found in the table below and place in "CI Funny Box" .

  3. If CI has stamped the return, no action is required, but if the return fits other criteria (e.g. Frivolous Argument) take the appropriate action.

    CI "Funny Box" Criteria
    Returns with ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ,

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ,

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

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

    Returns with ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  4. If CI has stamped the return, no further CI action is required, but if the return fits other criteria (e.g., Frivolous Argument) take appropriate action.

3.12.251.3.9  (01-01-2015)
Examination (Exam) "Funny Box"

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

3.12.251.3.10  (01-01-2015)
♦Frivolous Returns and Claims♦

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

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

    If Then
    The return meets any of the conditions identified as a frivolous return. (See table below)

    Exception:

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

    Remove return from the batch and place the return in the locally designated basket for Examination, Frivolous Return Processing (FRP) for review.
    Examination has selected the return as frivolous, indicated by an Action Code 331 and a Form 4227 with the remarks "Refer to Exam FRP for audit after processing" , but send the return for processing, Continue processing the return using procedures in IRM 3.12.251. However, do not circle or void the Action Code indicating a frivolous return.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    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 / UCC (Uniform Commercial Code) 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.
    C-Filings This frivolous position includes the following four categories:
    1. Files a return claiming various types of deductions, credits, or overpayments/refunds that have no relation to reality and because of their outrageous character, qualify as frivolous returns.

    2. Files a return containing the filers' identifying information but does not request a refund, often lacking sufficient information to determine a tax liability.

    3. Files a return with various types of rambling dialogue and/or confusing arguments that no one could reasonably view as a good faith attempt to comply with the law.

    4. Files a return that attempts to send some type of message or protest to the IRS but fails to include sufficient identifying information for the Service to either determine the identity of the taxpayer or correspondent or return address.

    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.
    Collections Issues Files frivolous documents contending that various collections issues are invalid (e.g. Offers in Compromise, Collection Due Process Requests, Installment Agreements, Appeals Requests, etc.) because they are not filed and/or signed by someone with delegated authority. They may have no certificate of assessment attached, do not comply in form or content with a State or Local law, are not in a certain format or lack a valid OMB (Office of Management and Budget) number or other frivolous positions.
    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 S Corporations from sources within the United States is taxable.
    Form 1099-OID (Original Issue Document) An individual or business files a return reporting false amounts of income (generally "Other" or "Miscellaneous" income) and claims a false amount of income tax withholding approximately equal to the amount of falsely reported income. Although the returns report income, they do not calculate any tax due. Some of the returns have Form 1099-OID attached and some have Forms 1096. Other false financial instruments may be filed in the place of or in addition to the Forms 1099-OID such as Form 2439, promissory notes, bonds, sight drafts, etc.
    IRC 861 Business Employment Tax (BMF 861) Argument targets employers and advises them that wages are exempt from withholding. Based on 26 Code of Federal Regulations (CFR) Section 1.861, promoters of this scheme advise employers to stop withholding and paying payroll taxes on their employee's wages. In addition, some employers file amended payroll tax returns and request refunds of previously paid payroll taxes.
    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 7701(a)(14) of the Internal Revenue Code.
    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 for 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. To explain the zeroes inserted on the form the individual references "U.S. vs. Long" .
    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 on all or most of the line items on the form (e.g. IRC §861. Forms 2439. OID, and other BMF filings that claim no income and request refunds). See Rev. Rul. 2004–34. 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. There are several variations on this type of filing such as those bearing the words "nunc pro tunc" and "not liable" .

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Other All others including those listed in Notice 2010-33 or any subsequent superseding notice. See also http://www.irs.gov/Tax-Professionals/The- Truth-About-Frivolous-Tax-Arguments-Introduction on IRS.gov. 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.

3.12.251.3.11  (01-01-2015)
Charge-Out (Form 8161 or Form 4251)

  1. A charge-out (Form 8161 or Form 4251) will be computer generated for all new suspense items.
    The Charge-Out will be used for pulling documents as well as routing the controlling documents while the record is being held in suspense and for use in associating the document with the Workable Suspense Inventory when the record becomes workable.

    Exception:

    AC 470 does not generate a charge-out.

  2. When a record appears on the Workable Suspense inventory with the Action Code as first priority:

    1. Tax examiners will add the information received to the record or follow the IRM instructions and clear the Action Code by entering the letter "C" in the Clear Code field (CL) and transmitting.

    2. Once the Action Code is cleared, any Validity, Section, or Math/Consistency errors will be displayed for correction.

    3. Records may have been unprocessable and again require suspension for additional information. A charge-out will not be generated for resuspended items. Attach Form 4227 notating the corrective action and route as necessary.

  3. Some Action Codes may not be resuspended. If this occurs the charge-out should be notated in the appropriate block by entering the correct Action Code and date.

3.12.251.3.12  (01-01-2015)
Non-Perfectable Conditions

  1. When perfection is not possible, the record may be rejected from ERS and action initiated to have the Document Locator Number (DLN) voided. If remittance is involved, remittance may be transferred to the "Unidentified Remittance File" .

  2. Perfection may be possible but the record may require renumbering (DLN or remittance amount may need correcting, therefore, the record will require rejecting for renumbering). Reject the record by entering the Command Code RJECT followed by the Action Code 640. If a new DLN is to be assigned, use Command Code NWDLN, with the appropriate Action Code, the new DLN and Master File ID Code if required.

  3. A charge-out will be generated for all Rejected Records. The charge-out will remain in the SC files for future reference. ERS will automatically control adjustments to SCCF.

    Note:

    If the DLN was transcribed incorrectly and is wrong on the screen, the DLN appearing on the charge-out will be in error. The correct DLN must be noted on the charge-out for use in pulling the document. Inform your supervisor of the block involved and the physical location of the document.

3.12.251.3.13  (01-01-2015)
Types of Errors

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

    • Priority I - Action Code/Unpostable Code Error

    • Priority II - Terminus Error / Integrated Submission and Remittance Processing (ISRP) system Problem

    • Priority III - Field Error

    • Priority IV - Math/Consistency Error

  2. This IRM will furnish the solution for the displays of the errors.

  3. There may be records where the tax examiner finds that programming has not furnished a section that is needed to correct an error. In this event, the tax examiner can use CC GTSEC.

    Note:

    This must be reported to the Headquarters for correction of the display.

3.12.251.3.13.1  (01-01-2015)
Priority I - Action Code/Unpostable Code Error

  1. Description

    • Records with an invalid Action Code assigned by Document Perfection will be placed in the Error Inventory and will be displayed as a Priority I Error.

    • Records with a valid Action Code will be assigned to a Suspense Inventory and will be displayed as a Priority I Error.

  2. Display - The Action Code for the record with the literal description of the action or unpostable condition will be shown.

  3. Suspense Inventory Correction Procedures (Reject Procedures)

  4. Correction Procedures

    1. Correct a Priority I error as follows:

    If Then
    Suspense action is required Enter Command Code SSPND with the correct Action Code. Then transmit.
    No suspense action is required Enter numeric "000" in the Clear Code field (CL) and transmit.

    Note:

    Except for priority statute and manual refund cases, do not remove the document from the block.

  5. For purposes of the ERS program, Action Code 001 is identified as a Priority I error.

    1. This condition occurs whenever the Block out of Balance (BOB) Resolution function has added a document to a block by entering Name Control and TIN. The remainder of the record must be added by Error Resolution.

    2. Enter CC GTSEC for each record section that should contain data. Add the required data.

    3. When all the sections have been entered, enter "C" in the Clear Code field, and the record will be subjected to normal validity checks.

3.12.251.3.13.2  (01-01-2015)
Correction Procedures Priority I Errors, Action Code 21X, Correspondence

  1. Status 321: If the reply is available, follow instructions in the reply before clearing Priority I error. For correspondence with no reply, follow the "no reply instructions" found under "Correspondence Action" before clearing the Priority I Error.

  2. Status 421: Follow instructions in the reply before clearing the Priority I Error.

3.12.251.3.13.3  (01-01-2015)
Priority I Error, Action Code 310, Statute Control

  1. Status 331 or Status 431: Document will be received from Statute Control with instructions. If the Statute Control Group requests that the record be voided to them for non-remittance documents, use "RJECT 640" and for remittance documents use NWDLN 611 (see IRM 3.12.38, BMF Error Resolution - General Instructions, and the DLN of the payment posting voucher (Form 3244) that posts the remittance to the year and Master File Transaction (MFT) OF THE VOIDED Statute document), or

  2. If the Statute Control Group indicates clearance, use GTSEC for Section 01, verifying Field 01TXP, tax period, and entering CCC "W" in Field 01CCC. Transmit and then clear the Priority I Error with the "C" Clear Code.

3.12.251.3.13.4  (01-01-2015)
Priority I Error, Action Code 320, Entity Control

  1. Status 332 or 432: Document will be furnished to the tax examiner with instructions from Entity Control.

  2. Follow instructions from Entity Control before clearing the Priority I Errors Enter the correct fields using Command Code GTSEC for Section 01 if the return was referred to Entity for the Name Control or EIN.

3.12.251.3.13.5  (01-01-2015)
Priority I Error, Action Code 33X, Review/Routing to Criminal Investigation (CI)

  1. Status 333 or 433: Document will have been referred to CI before giving it to the tax examiner.

  2. If instructed to void the record and refer the Form 1120 to CI, use Command Code RJECT or NWDLN, Action Code 640, following Criminal Investigation instructions. NWDLN 611 is for the voided Form 1120 with a remittance. The new DLN is the DLN of the payment posting voucher that posts the remittance to the year and MFT of the voided document sent to CI or Unidentified Remittance File (URF) if CI instructs that the money is to be applied to the URF.

  3. Follow CI instructions before clearing Priority I Errors if processing the Form 1120 will continue.

3.12.251.3.13.6  (01-01-2015)
Priority I Error, Action Code 34X, Routing-Accounting

  1. When forms are received from Accounting the tax examiner should follow instructions furnished by Accounting before clearing the Action Code.

3.12.251.3.13.7  (01-01-2015)
Priority I Error, Action Code 35X, KIF/MFTRA Research

  1. Action Code 351, Status 435: Indicates KIF was not available when record was on the Error Inventory. If after researching the KIF with NAMEB, the EIN is located, enter in Field 01EIN after using Command Code GTSEC for Section 01. If researching the KIF with NAMEB and the EIN cannot be located, follow the instructions for resuspending (SSPND "320" ) for referral of document to Entity for EIN.

  2. Action Codes 352, 354 or 355, Status 335 or 435: If after researching, you are unable to solve, resuspend to Entity with Action Code "320."

  3. Action Code "353" will not be used on Forms 1120, unless correspondence is necessary and there is no address.

3.12.251.3.13.8  (01-01-2015)
Priority I Error, Action Code 360, Other In-House Research

  1. Status 336 or 436: Document and instructions from other area will be furnished to the tax examiner.

  2. Follow instructions furnished by other areas of the Campus before clearing Priority Error.

  3. Priority I Error, Action Code 410, Assistance Needed: Clear the Priority I Error with the "C" Clear Code, so that other errors in the record might display.

3.12.251.3.13.9  (01-01-2015)
Priority I Error, Action Codes 420 thru 460, Management Suspense

  1. Management may direct either that you work or resuspend the record.

  2. If resuspending, use Command Code SSPND and the Action Code as directed.

  3. When instructed to work the record, clear the Priority I Error with the "C" Clear Code, so if other errors exist in the record, they can be displayed.

3.12.251.3.13.10  (01-01-2015)
Priority I Error, Action Codes 470, Management Suspense

  1. ERS TEs will never work cases that they have been directed to suspend with Action Code 470

  2. There have been special colored Forms 4227 to be used for these cases

  3. Attach one of the special colored Forms 4227 to the front of the return and leave the return in the pack of work, when no other error is present

3.12.251.3.13.11  (01-01-2015)
Priority I Error, Action Code 490, System Problem

  1. Instructions are needed from the Computer Branch through your supervisor for working. If instructions are not furnished for Status 349, you may be advised to resuspend, using SSPND "490."

  2. Once you clear Action Code "490," if no other error exists in the record, the record will go to good tape. It is imperative to await instructions from the Computer Branch or RP.

3.12.251.3.13.12  (01-01-2015)
Priority I Error, Action Code 51X, Status 451 or 351

  1. Suspend record with Action Code 51X to initiate special search. The charge-out issued for missing document may be used for the initial search. It may also be used for subsequent searches by marking "Second Request" , "Third Request" , etc. on the charge-out returned from files. Special search is continued as indicated in IRM 3.12.38, BMF Error Resolution - General Instructions, until document is located or record is rejected from ERS with Action Code 670. If the missing document is a non-remittance document, use "RJECT 670" . If the missing document is a remittance document, use NWDLN 670 and the DLN of Form 3244 for the payment or if unable to designate where remittance should be applied, use "NWDLN 670 URF" . Action Code 551 "Contradiction within the Mag Tape Record" is not used for Forms 1120.

3.12.251.3.13.13  (01-01-2015)
Priority I Error, Action Code 6XX, Rejects

  1. If suspended to Workable Suspense, with Action Code 6XX, review document to see if you agree with the recommended reject action. If so, delete with Command Code RJECT or NWDLN and the appropriate Action Code.

  2. If you determine not to delete the record, clear the Priority I Error with the Clear Code "C" deleting the action code so that any other errors that might exist can display.

3.12.251.3.13.14  (01-01-2015)
Priority I Error, Action Code 700, Duplicate Block DLN

  1. Clear the Priority I Error with the "C" Clear Code so that other errors in the record might display.

3.12.251.3.13.15  (01-01-2015)
Priority I Error, Action Code 900, Unpostable Records

  1. The literal for the Action Code 900 will include the Unpostable Code. For Action Code 900 returns, determine if the record can be resolved. If so, use Command Code GTSEC for the desired section(s) and make the correction(s). After all corrections are made and transmitted, enter a "C" in the Clear Code field. Once the Action Code 900 is cleared, all other errors on the record will be displayed for correction. If no other errors exist, the record will clear the screen. The record has never posted to Master File. Fields displayed will be as processed prior to being an "Unpostable" . The record may contain coding and transcription errors and misplaced entries. All Clear Codes and Taxpayer Notice Codes assigned when previously processed will have been deleted from the record and will need to be assigned again if still applicable.

  2. If the error on the Unpostable Record (Action Code "900 " ) cannot be resolved, resuspend the record using Command Code SSPND with the appropriate Action Code. Attach Form 4227 notating corrective action and route as necessary.

3.12.251.3.13.16  (01-01-2015)
For Action Codes 3XX Status 33X

  1. If circumstances should warrant resuspending the document, requested information is not available, the tax examiner will need to be advised to resuspend the record; Action Code 3XX. Should this occur often, the suspense period should be reviewed with Headquarters.

  2. Should the document not be available for a record on the Workable Suspense Inventory. Action Code other than 510 the Suspense Documents File Unit will contact the Supervisor who will conduct a special search within ERS and if unsuccessful, indicate document missing. The tax examiner working the record will resuspend the record with Action Code 511, initiating a search for the document. It will be necessary to use Command Code ESTAB to initiate a Form 4251 to obtain the document from Files.

  3. If the Form 4251 comes back without the document, wait until the suspense period for Action Code 511 expires, resubmit original Form 4251 indicating on it "SPECIAL SEARCH" and resuspend the record with Action Code 512.

3.12.251.3.13.17  (01-01-2015)
Priority II Error Section Errors

  1. Most edit, missing section, and terminus errors should be eliminated by the Integrated Submission and Remittance Processing System (ISRP). The following conditions may be present if normal ISRP validity checks have been bypassed: Edit Error—A section with an error detected by ISRP.

    1. Code 1 - Split screen transmission. Key Verifier changed four or more digits of the Primary Taxpayer Identification Number, TIN, or the Original Entry.

    2. Operator indicated that a required section was missing.

    3. Code 3 - Invalid section ending point.

    4. Code 4 - Invalid field length.

    5. Code 5 - Questionable Section—A section entered twice or entered out of sequence by ISRP.

  2. Terminus Error—A section with variable length fields containing an erroneous size field or otherwise being of erroneous size.

  3. Display—All transcribed fields, except the ERS Action Code and the Remittance (Payment Received), will be displayed in columnar format with or without data. The error type will also be indicated for ISRP Problem Code errors. Only one section (error) will be displayed at a time.

  4. Content—Any individual section, excluding computer generated fields and the Action Code. The Action Code is an uncorrectable field except as defined for SSPND and RJECT.

  5. When displayed, this type of error will show all input fields except for the Remittance in Section 01 of the section in error. Transcribed data will be present. Computer generated data will not be present.

  6. ISRP error codes are displayed by a 4 digit field. Validation remains the same but the error is reported by the display of a numeric character in a specific position of the field. The positions and the valid characters are as follows:

    Position Name Values Explanation of Value
    1 ISRP PROBLEM CODE 0 Normal
    1 ISRP set problem code
    2 MIXED FIELD CHECK 0 Normal
    2 Documents specified fields (by group) are compared with the corresponding data fields. If all of the fields within the group are the same for any one of the available combinations, then generate value. Bypass the check if the field contains all blanks or all zeros.
    3 SECTION END PROBLEM CODE 0 Normal
    3 Section length is other than defined parameter
    5 Duplicate section numbers
    4 FIELD LENGTH PROBLEM CODE 0 Normal
    4 Non-numeric data, other than blanks, is present in numeric field

3.12.251.3.13.18  (01-01-2015)
Priority II Error, Section Errors Correction Procedures

  1. ISRP Errors—All fields of the section must be examined when this condition exists. If Section 01 of a return is coded, examine the section for an error to ensure that the return is for the taxpayer whose name is in Section 01. Once the section is correct, or if no corrections are necessary, transmit from the bottom of the screen.

  2. Terminus Errors—All fields of the section must be examined when this condition exists. Make the necessary corrections to the record. Once the section is correct, or if no corrections are necessary, transmit from the bottom of the screen.

  3. Questionable Section—Verify and enter all of the data for the displayed section. When all of the data is correct, transmit from the bottom of the screen. Correct all fields in the display before transmitting.

3.12.251.3.13.19  (01-01-2015)
Priority III Errors, Field Errors

  1. Definition - Any field failing to meet the requirement(s) for that field (and that field only) will be shown as a Priority III error. Consistency and/or relationships with other fields will not be a factor. Individual field validity errors to be bypassed after initial consideration will be shown as Priority IV Errors. Some reasons for field errors include:

    • Non-numeric character in a numeric field

    • Non-alphabetic character in an alpha field

    • Blank space in a number field

    • Blank in the first position of an alpha field

  2. Display - All fields with a Priority III error will be displayed in columnar format in the order encountered in the record. The Action Code and Taxpayer Notice Codes will never be displayed as a Priority III Error.

    1. An overflow field is identified by all question marks for a money field or a single pound sign in the last position of a name line.

    2. If any money amount exceeds the maximum field length allowable, follow correction procedures in the Math/Consistency Errors Priority IV. See IRM 3.12.251.24. or IRM 3.24.37, ISRP System - General Instructions.

  3. Correction Procedures:

    1. Every field displayed is in error. Correct the field using the specific instructions within each section for the field in error.

    2. Check the information on the source document to determine if each displayed field has been correctly edited and transcribed.

    3. Enter the correct data for each field displayed.

    4. If no data is to be displayed in the field, blank the field.

    5. Correct every field displayed.

    6. Transmit.

  4. This IRM shows each section for Priority III errors as:

    1. Error Record Format

    2. Each field within that section, with description, invalid condition and correction procedures

3.12.251.3.14  (01-01-2015)
Taxpayer Notice Codes (TPNC)

  1. This code is used when a math error is present involving the tax liability or tax due/overpayment. It is entered on the terminal screen following the literal "NC" . The TPNC must also be entered in the upper left corner of the return.

  2. The TPNC is entered after determining that no corrections to the record are needed. The presence of a TPNC will indicate to the computer that no other corrections to the screen display will be made. All corrections must be entered and transmitted for each error condition prior to TPNC assignment.

  3. Whenever a TPNC is assigned, a working trail showing the changes made must be entered on the return at the point of error and on the Total Tax line.

  4. Each math error will have certain TPNCs that are valid to clear the math error. The TPNC assigned to the error and entered in the "NC" Field must be valid for that Error Code. If an invalid code is assigned, the error will be re-displayed.

  5. Each math error display will require a correction to a field or the entry of a TPNC. The transmission of a TPNC must not be accompanied by any other correction. A TPNC assigned to a math error will be displayed on subsequent displays for the record. The field is used for display purposes only and is not correctable.

  6. A return can have a total of three TPNCs. If more than three codes are to be assigned, use TPNC 90 instead and list the errors for Notice Review to type and send to the taxpayer.

  7. TPNC 90 is actually a fill-in and should be used when no other TPNC fully explains the correction(s) made or when more than three notice codes are necessary. The tax examiner will write an explanation exactly as it should appear on the notice and attach it to the face of the return. Notice Review will type the math error explanation on the notice before mailing to the taxpayer. TPNC 90 can be used in conjunction with other notice codes.

  8. Once a code is transmitted to the record, it may be changed in the following manner:

    1. Records which have not been cleared from the terminal—If errors remain after transmitting the TPNC, you can create an error with a higher priority. This will cause all "C" clear codes and any notice code already assigned a lower priority error to be deleted from the record. TPNCs will be deleted from the header display. Beginning with the high Priority IV error created, all subsequent errors will be displayed for resolution, even though they may have been displayed previously.

    2. A correction you make erases an error code which you have previously cleared with a TPNC or "C" Clear Code. In this case, the "C" or TPNC on this error and all subsequent error codes will be displayed for resolution whether or not they were previously displayed. The TPNC(s) for this error and subsequent error codes will be deleted from the header display.

    3. Records which have been worked may be reworked using Command Code GTRECW. See IRM 3.12.38, Error Resolution - BMF General Instructions, for further details.

    4. All TPNCs are erased when a record is suspended with Command Code SSPND.

    5. Unfinished records from the previous day will contain none of the TPNCs that were assigned to the records that were not completely worked.

  9. See IRM 3.12.251.29 for a list of the TPNCs that are valid for Forms 1120.

  10. Beginning January 2014, there are changes to the Taxpayer Notice Code (TPNC) 90 Math Error (ME) Codes. Unified Work Request (UWR) 83070 was submitted to have the TPNC 90 literals programmed into On Line Notice Review (OLNR) Retype Application for Notice Review (NR). This addition will eliminate the need for the NR tax examiner to manually type the notice literal and reduce potential copying/typing incorrect paragraphs/messages in the notices. For a full listing of the programmed TPNC 90 Math Error Codes and information on how to use the Math Error Codes see TPNC 90 Math Error Code Job Aid.

  11. The TPNC 90s that are used most often have been programmed. There may still be occasions when you will have to prepare a handwritten TPNC. The TPNC 90 Math Error Code Job Aid should always be reviewed first to see if there is already an OLNR TPNC that addresses your specific error condition.

3.12.251.3.15  (01-01-2015)
Unprocessable ADP Returns

  1. Unprocessable returns occur when perfection of a return is not possible or it is necessary to correspond, perform in-house research or refer the document to another area of the campus. The record will be suspended and the required action taken. Suspend the unprocessable record by entering Command Code SSPND followed by the appropriate Action Code.

  2. In cases where the Action Code cannot describe the required action, attach a note of explanation to the return (use Form 4227 ).

  3. If an IDRS letter is necessary attach a Correspondence Action Sheet to issue the correspondence and SSPND with Action Code "211. "

3.12.251.3.16  (01-01-2015)
On-Line Entity (OLE)

  1. OLE is the system designed to allow for validation of the EIN and EIN/name control on line using IDRS input Command Codes. It is designed to allow for entity research on a national basis.

  2. Command Code INOLE is used with the National Accounts Profile (NAP) to research the entity module. This information includes name lines, name control, address, employment codes, filing requirements, etc.

  3. Definer Code "S" should be used when you need more information that cannot be found using Command Code NAMEB or NAMEE to verify that the EIN the taxpayer has furnished is on the Master File. The display for a BMF EIN account will show the following:

    • Primary name and all the name lines on the BMF

    • Mailing address

    • Primary name control

    • Prior name control

    • Sole proprietor SSN

    • Fiscal month

    • Prior fiscal month

    • Establishment date

    • Employment date

    • Exempt Organization (EO) data, if present

    • Filing requirements

    • Parent Corporation EIN

    • Subsidiary Corporation.

  4. Validation of IDRS Command Codes—IDRS Command Codes that create transactions posting to the Master File will have the EIN and EIN/name control validated using the Taxpayer Identification File (TIF) and the National Accounts Profile (NAP). The Command Codes will not return the "Request Completed" response until the EIN and EIN/name control have been validated by the NAP as being on the Master File. The transaction will then attempt to post. The following IDRS Command Codes are affected by OLE validation:

    • FRM49—Taxpayer Delinquent Return Notices and Investigations;

    • ENREQ—Entity Changes.

  5. If the EIN matches the EIN and name control, normal processing will continue.

3.12.251.3.17  (01-01-2015)
Correspondence

  1. Correspondence records with Action Code 21X will be automatically suspended for a predetermined number of days or until the taxpayer replies, whichever is earlier.

    Note:

    DO NOT CORRESPOND for information on any return "secured by Examination" . If unprocessable, treat as a no-reply case and follow the no-reply instructions. See IRM 3.12.251.3.22.1

  2. As an ERS tax examiner initiating correspondence, you may either:

    1. Use the IDRS Correspondence feature Command Code LETER which will be available, or

    2. Initiate correspondence by using a Correspondence Action Sheet, as is currently done for the IDRS operator or typist to use in issuing the actual correspondence.

  3. Most correspondence is either a computer-generated notice, a computer-generated letter or a pre-printed letter. All correspondence now reflects a response period within 30 days and the potential consequences for not replying.

  4. Review the document prior to issuing correspondence to ensure all needed information is requested the first time. Check CC BMFOLI to ensure the return is not a duplicate document prior to corresponding. If a return is posted to the tax module, use CC BRTVU or BMFOLR to see if the raw return is a duplicate. If it is, SSPND 640 to have it deleted. If it does not match the posted return, enter CCC "G" and continue processing the document as an amended return.

  5. All correspondence to taxpayers requesting information should indicate that a response is required. Specify the length of time the taxpayer has to respond and include a statement on the action the IRS will take if the response is not received timely. Include the statement "When you reply, please send your telephone number and the most convenient time for us to call so we may contact you if we need additional information" . Provide for a purge date at least 10 days after the date provided in the letter to the taxpayer.

  6. Whenever possible, pattern letters should be used to correspond with taxpayers. If a CNOTE or QUICKNOTE is used, be sure that it clearly communicates the message in simple language and contains the above required information.

  7. Before initiating manual correspondence on an account dealing with anything other than a recently filed return, check the Centralized Authorization File (CAF) to ensure that the information will be mailed to the taxpayer's representative if one is on record.

  8. Specific turnaround times for working taxpayer correspondence as outlined in IRM 3.30.123, Processing Timeliness: Cycles, Criteria, and Critical Dates, must be followed. Monitored reports must be kept to ensure that these guidelines are met.

  9. All areas receiving correspondence must participate in the mail routing accuracy test outlined in the Quality Assurance Program IRM 3.30.28, Individual Review. The Quality Assurance Branch will conduct this test and you will be advised of dates and procedures.

  10. When taxpayer errors are discovered in processing which have caused or will cause processing delays and no other notification is to be sent to the taxpayer, advise the taxpayer of the reasons for the delay.

3.12.251.3.17.1  (01-01-2015)
♦Correspondence Imaging System (CIS) Returns♦

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

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

  3. Follow the correspondence instructions below for processing "CIS" returns:

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

    Note:

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

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

    2. Void the DLN.

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

    Note:

    Do not correspond for missing information on CIS reprocessable/reinput returns.

    The CIS return does not have a Form 13596 attached The return is not complete (e.g., missing signature, schedules or forms) Research for prior posting (TC 150 posted)
    1. If TC 150 is present and the information is the same, cancel the DLN and treat as classified waste.

    2. If TC 150 is not present, follow normal correspondence procedures.

    Note:

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

3.12.251.3.18  (01-01-2015)
Use of Fax for Taxpayer Submissions

  1. Tax return information can be received via fax as part of return perfection even if a taxpayer signature is required. In circumstances where contact with the taxpayer has been made and documented, fax signatures are acceptable.

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

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

    Caution:

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

3.12.251.3.19  (01-01-2015)
Unprocessable Conditions

  1. An error record must be rejected when:

    1. The tax period is prior to 198412 or after 200711 for Form 1120-A.

    2. It is International related and it contains a foreign address or claims Possessions Tax Credit (197601 and subsequent), or claims Credit for Income Tax Withheld (or paid) at source (Form 1042-S credit) (except Ogden Submission Processing Center (OSPC) only).

    3. It covers multiple tax periods or reports multiple types of tax.

    4. It is misblocked.

    5. It requires correspondence with the taxpayer for missing or clarifying information.

    6. Subsidiary returns are detached from parent returns.

    7. It is a potential Statute Case not cleared by Statute Control Group.

    8. It is an unprocessable return "Secured by Audit/Examination" . Do not correspond. Treat as a "No Reply" and follow No Reply instructions.

    9. The return is stamped "Pro Forma" or bears other designation that indicates it was intended to demonstrate income calculation for any and all states which might require such tax filing requirements.

    10. The return is determined to be a supporting document for Form 1139.

    11. The return is determined to be a supporting document for Form 6166.

  2. When a record is rejected, it will be necessary to suspend with Action Code 640 and prepare one or more of the following:

    1. Form 4227, Intra-SC Reject and Routing Slip. Note the reason for rejecting the document.

    2. Correspondence Action Sheet used to correspond with the taxpayer.

    3. Form 6882, IDRS/Master File Information Request.

3.12.251.3.20  (01-01-2015)
Qualified Cellulosic Biofuel known as "Black Liquor"

  1. These instructions apply to: 2009 tax year returns only including fiscal year returns filed for periods 200901 through 201011.

  2. The following procedures are for returns claiming a nonrefundable credit on Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit. Lines 5 and/or 8 (2010 revision), Lines 5 and/or 7 (2009 revision), or Lines 7 and/or 9 (2008 revision).

  3. For 2010 and prior, the credit was reported on Form 3800, General Business Credit, Page 2, Line 29c. (For 2011-2014, it was reported on Page 3, line 4c.)

  4. These returns should have "CBR" notated at the top of the return by the taxpayer and should be identified in C&E by Action Code "343" .

3.12.251.3.21  (01-01-2015)
Refund Returns 45 Day Jeopardy and Million Dollar Refunds

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

    Note:

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

  2. Action Code 341 should be input by Code & Edit to show that a manual refund is needed. If these conditions are not identified in Code & Edit (C&E), ERS must follow the following criteria:

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

    Note:

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

    Enter Action Code 341 and route to ERS/Rejects for manual refund.
    The refund is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Enter Action Code 341 and route to ERS/Rejects for manual refund.
  3. TAS Manual Refunds- any return hand walked by a W&I SP (SP) liaison for TAS must be processed by a Lead Tax Examiner or designated tax examiner using the following procedures in the order listed:

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

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

    3. Continue processing the return according to Error Code procedures.

  4. Correspondence: If required for missing or incomplete information, follow procedures below:

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

    2. Inform the W&I liaison of all information that is being requested.

    3. Suspend (SSPND) with appropriate suspense code and give return back to the W&I SP liaison.

      Note:

      The W&I liaison will contact the TAS to obtain the required information needed to complete processing.

  5. Additional Suspense action needed: If the return requires other suspense action, then follow procedures below:

    1. Initiate suspense (SSPND) action according to IRM procedures.

    2. Inform the W&I liaison the reason for the action taken.

    3. Give the return back to the liaison.

      Note:

      The W&I liaison will contact TAS, who in turn will take the necessary action to complete the processing of the return.

  6. Assigning TPNCs/Math Error: When a math error is identified, do the following:

    1. Assign the TPNC according to IRM procedures.

    2. After all TPNCs have been assigned, inform your liaison of TPNCs issued.

    3. Suspend (SSPND) with appropriate code (suspense must be done at the generated point of error and give the return to the liaison.

      Note:

      The W&I liaison will contact the TAS, who in turn will take the necessary action to complete the processing of the return.

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

    1. Make screen print of the Error Code Display, highlight the Computer Generated Refund Amount, and attach the print to the front of the return with the entity portion of the return visible.

    2. Enter the amount the taxpayer claimed as the amount they requested to be refunded back in to Field 07B/R.

    3. If Balance Due/Overpayment Math Error Code regenerates because the taxpayer made a math error when computing their refund, then make a screen print of the Error Code Screen Display and highlight the computer generated refund amount. Attach the print to the front of the return keeping the entity area visible and assign the appropriate TPNC.

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

  8. Rejects Suspense Procedures:

    1. Follow specific instruction given by W&I SP liaison. Correspond and assign appropriate TPNCs as directed.

    2. Refer to paragraphs (6) and (7) above.

3.12.251.3.22  (01-01-2015)
Correspondence Action

  1. General Information—This sub-section contains general instructions for processing correspondence items. If instructions contained in this sub-section differ from specific instructions in other parts of this IRM, follow the specific instructions.

  2. Replies to Correspondence:

    1. The Correspondence Received Date (CRD) must be present when returns have been held in suspense and the reply is received after the due date of the return. The field format is YYYYMMDD. This field will be invalid when day of the month (DD) exceeds the allowable number of days for the transcribed calendar month (MM).

    2. Enter the Received Date of the correspondence reply in the Correspondence Received Date Field, 01CRD, except when the correspondence reply was received prior to the due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the return or the correspondence was required because of an IRS processing error. or we failed to ask for all required information.

    3. Correct the screen display and the return if necessary with the information received, including address changes.

  3. Missing Information—Do not correspond a second time if one contact from any processing area has already been made. Missing information on a return should be treated as a no reply.

  4. Frivolous Replies—If an item being questioned by the IRS is protested by the taxpayer, follow instructions for protest returns. If in doubt whether an item is a protest, check with your manager, who may consult with Examination for final determination.

  5. All 1120-F returns claiming credit on Line 5(i), U.S. income tax paid or withheld at source, on Form 8288-A and/or 8805 must be routed back to C&E, for verification of these credits on the International National Standard Application (NSA) database. C&E will attach a credit verification slip, Form 13698, to the return as an indication that the credit has been verified.

    Note:

    This applies to forms the taxpayers include with their replies. If we correspond for the forms because they are missing, the credits must be verified before processing continues.

  6. No Replies/Incomplete Replies

    1. If there is no reply or an incomplete reply to correspondence, perfect the document from available information and resolve any doubt in favor of the Internal Revenue Service.

    2. Disallow unsubstantiated credits where substantiation is required.

      Example:

      Form 2439 and Form 4136.

    3. When unable to identify an excess remittance, transfer the remittance to the Unidentified Remittance File.

    4. Enter CCC "X" on refund returns with a missing signature.

    5. Refer to the chart of "No Reply" cases at the end of the section.

    6. Edit a CCC "3" in Field 01CCC for no reply returns.

  7. Undeliverable

    1. When working reject cases, if the correspondence is returned "Undeliverable" , check to see if the address was correctly input on the letter. If it was not, resuspend using Action Code 212 to have another letter sent. Examine the return or attachments for a second address. If one is found, resuspend using Action Code 212 to have another letter sent.

    2. If none of the above conditions apply, process as a "No Reply" .

  8. Late Replies—When a reply to correspondence is received after "No Reply" procedures have been implemented, special routing instructions are required. Follow procedures in IRM 3.12.38, Business Master File (BMF) Error Resolution - General Instructions.

  9. Return Secured by Audit - If a return secured by Audit is unprocessable due to missing information, do not correspond. Treat the return as "No Reply" .

3.12.251.3.22.1  (01-01-2015)
No Reply Cases

  1. "No reply" cases require the following action:

    1. All "No reply" cases must have Computer Condition Code "3" entered in Field 01CCC.

    If Then
    Tax period is one to eleven months later than the current date SSPND with Action Code "480" and attach Form 4227 to hold until the end of the tax period.
    Unexplained short year or unauthorized change in accounting period Enter CCC "Y" .
    Multiple tax periods Use earliest tax period. See "no reply" instructions in IRM 3.12.38, BMF Error Resolution - General Instructions.
    Signature is missing or it is not in the correct location on the return Enter CCC "X" .
    Form 851, Affiliations Schedule is missing Prepaid Credits on return: Research BMFOLT and if found, continue processing.
    Prepaid credits not found: Adjust the credits on the return to match BMFOLT and send appropriate TPNC 90.
    Form 1118, Foreign Tax Credit Corporations, is not supported Deny the credit.
    Form 2439, Notice to Shareholder of Undistributed Capitol Gains Credit, is not supported Deny the credit.
    Form 3800, General Business Credit, is not supported Deny the credit.
    Form 4136, Credit for Federal Tax Paid on Fuels, is not supported Deny the credit and send TPNC 40. Adjust Field 07B/R accordingly.
    Form 4626, Alternative Minimum Tax Corporations (AMT), is required Assess AMT per computer and assign appropriate TPNC
    Form 5735, American Samoa Economic Development Credit, Section 936, is not supported Deny the credit.
    Form 5884, Work Opportunity Credit, is not supported Deny the credit.
    Form 6478, Credit for Alcohol Used as Fuel (Biofuel Producers Credit), is not supported Deny the credit.
    Form 6765, Credit for Increasing Research Activities, is not supported Deny the credit.
    Form 8007, Credit for Employee Stock Ownership Plan, is not supported Deny the credit.
    Form 8827, Credit for Prior Year Minimum Tax Corporations, is not supported Deny the credit.
    Form 8834, Qualified Electricity Vehicle Credit, is not supported Deny the credit.
    Form 8835, Renewable Electricity, Refined Coal and Indian Coal Production Credit, is not supported Deny the credit.
    Taxable Income Bracket Amounts Assign TPNC 05.
    Form 8844, Empowerment Zone and Renewal Community Employment Credit, is not supported Deny the credit.
    Form 8845, Indian Employment Credit, is not supported Deny the credit.
    Form 8847, Credit for Contributions to Selected Community Development Corp., is not supported Deny the credit.
    Form 8860, Qualified Zone Academy Bond Credit, is not supported Deny the credit.
    Form 8864, Biodiesel and Renewable Diesel Fuels Credit, is not supported Deny the credit.
    Form 8884, New York Liberty Zone Business Employee Credit, is not supported Deny the credit.
    Negative entry on Line 32d (2010 revision and prior), Form 1120 Delete the entry.
    No Production Tax Credit Statement Deny the credit.
    No Schedule D Loss Claimed Delete the amount claimed for the loss.
    No Schedule L Process as is.
    Excess Remittance Transfer to Unidentified.

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