3.21.3  Individual Income Tax Returns (Cont. 1)

3.21.3.11  (01-01-2014)
General Instructions for Editing International Forms 1040/A/EZ/PR/SS/NR/NR-EZ

  1. The following subsections contain instructions for:

    • Caption Information

    • Taxpayer Identification Number

    • Name and Additional Information Line

    • Mailing Address

    • City and State

    • Zip Code

    • Country Name

  2. Additional instructions may be found within Form specific instructions.

3.21.3.11.1  (01-01-2014)
Caption Information

  1. Required Caption Information Includes:

    1. Primary Taxpayer Identification Number (P-TIN)

    2. Secondary Taxpayer Identification Number (S-TIN), if applicable

    3. Name(s)

    4. Additional Information line (which may be present to further identify the taxpayer's location or representative)

    5. Mailing Address

    6. City/State

    7. Foreign Province/State or Territory/Foreign Mail Routing Code/Postal Code

    8. Country (if applicable)

    9. ZIP Code when available

  2. For general instructions, refer to IRM 3.11.3.9.1 and 3.11.3.9.2 and use the instructions below. In addition to these instructions, form specific instruction must be followed (see IRM 3.21.3.72.3 through IRM 3.21.3.72.5) for Form 1040NR and Form 1040NR-EZ.

3.21.3.11.2  (01-01-2014)
Taxpayer Identification Number

  1. For complete instructions see IRM 3.11.3.9.2.1.

3.21.3.11.2.1  (01-01-2014)
Primary TIN

  1. If the P-TIN is missing or incomplete, examine the return and its attachments and enter the P-TIN, if found. Circle an incomplete P-TIN.

    Note:

    If there is an indication the taxpayer has used a TIN that is not her/his own, take no action. e.g., The taxpayer shows an ITIN on the return and an SSN on attached Form(s) W-2.

  2. If the primary taxpayer is an NRA and the secondary taxpayer has an SSN/ITIN and income, edit the secondary SSN/ITIN as the primary TIN and reverse the order of the names.

  3. See IRM 3.21.3.72.3.1.1 for 1040NR and Form 1040NR-EZ specific instructions.

  4. For additional instructions see IRM 3.11.3.9.2.1.1.

3.21.3.11.2.2  (01-01-2014)
Secondary TIN

  1. Edit the S-TIN from the return or attachments if it is missing or incomplete, and the Filing Status (FS) is "2," "3" or "6." Edit the S-TIN in the correct block if it is blank and the taxpayer has entered a TIN on the line to the right of FS box 3.

    Exception:

    A Secondary TIN is not allowed on a Form 1040NR or Form 1040NR-EZ

  2. For additional instructions see IRM 3.11.3.9.2.1.2 and IRM 3.21.3.72.4.1

3.21.3.11.2.3  (01-01-2014)
Canadian TIN

  1. Canadian TIN: Canada assigns a Canadian TIN in a 3-3-3 (000-000-000) format. If it can be determined that the TIN is a Canadian TIN, examine the return and attachments for a TIN in a 3-2-4 (000-00-0000) format:

    1. If found, circle the Canadian TIN and edit the correct U.S. TIN (000-00-000 format).

    2. If not found, circle the Canadian TIN.

3.21.3.11.2.4  (01-01-2014)
ITIN

  1. ITINs -- are issued to those individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a TIN issued by Social Security Administration. The ITIN is intended for tax purposes only and can be obtained by completing a Form W-7, Application for IRS Individual Taxpayer Identification Number.

  2. Stop editing the return and take the following actions when Form W-7 and Form W-7(SP) is attached to the return:

    1. Unnumbered:
      • Pull the return from the batch. Attach Form W-7 to the front of the return.
      • Edit Received Date "MMDDYY" and route the entire return to the ITIN unit.

3.21.3.11.3  (01-01-2014)
Name and Additional Information Lines

  1. Each return processed must have a legible last name. Research following local procedures when the name is illegible and cannot be perfected.

  2. There are two (2) lines available for taxpayer identification:

    1. The name line is for the first name, middle initial and last name(s) of the primary and secondary (if present) taxpayer(s). This includes any suffix.

    2. The additional information line (AIL) is used to further identify the taxpayer.

      Example:

      Additional name, address or representative information may be shown.

3.21.3.11.3.1  (01-01-2014)
Name Line

  1. For complete instructions refer to IRM 3.11.3.9.2.2.1 and IRM 3.11.3.9.2.2.1.2.

3.21.3.11.3.2  (01-01-2014)
Additional Information Line

  1. An AIL can contain the following information:

    1. A fiduciary or taxpayer representative

    2. A parent signing for a minor child, see Figure 3.21.3-1.

    3. Mailing address of a foreign country

      Exception:

      A P.O. Box can be an AIL

    4. Puerto Rico address, see IRM 3.21.3.11.3.3.

  2. If any of the above items listed in paragraph 1 are present, edit and/or underline the AIL.

  3. If a foreign address is present on Form 1040/A/EZ and a name is present or has been edited as a second AIL, underline both. Then take the following actions for REFUND returns:

    1. For Decedent Returns do not edit CCC "L" or "W"

    2. Edit CCC "Y" and an action trail.

      Figure 3.21.3-1

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

      Parent Signing for a Minor Child

    Exception:

    Do not edit CCC "Y," if CCC "3" has been edited. If the taxpayer has elected to use Direct Deposit or has been issued an IRSN, do not edit CCC "Y" (An IRSN begins with a 9 and the middle 2 digits are other than 70-88, 90-92 and 94-98 The middle 2 digits identify the Campus location where it was issued from.)

  4. For additional instructions, refer to IRM 3.11.3.9.2.2.2.

3.21.3.11.3.3  (01-01-2014)
Additional Information Line (Puerto Rico)

  1. The Additional Information Line (AIL) may be found anywhere in the caption area.

    Note:

    See (2) h) below for examples of correct editing of address.

  2. For Puerto Rico only, the following are different types of address formats:

    1. Four-line address containing Name, Urbanization, House Number and Street Name, City, State and Zip Code.

    2. Three-line address containing Name, House Number and Street Name, City, State and Zip Code.

      Exception:

      Some areas in Puerto Rico do not have street names or repetitive house numbers. The urbanization name substitutes as the street name and becomes the primary identifier.

      Example:

      Name, House Number and Urbanization Name, City, State and Zip Code.

    3. Public Housing Projects (residenciales) without street names or repetitive apartment numbers. In these cases, the apartment number is the primary number and the public housing project becomes the street name.

      Example:

      Name, Apartment Number and Residential Name, City, State and Zip Code.

    4. Apartment Buildings and Condominiums with a physical (street) address containing Name, Building Name, Street Number Apartment Number, City, State and Zip Code.

    5. Buildings without a physical address. Certain Condominiums are located on an unnamed street and may not have an assigned number. The name of the Condominium substitutes as the street name and the number 1 is used when no building number exists.

    6. Do not substitute the prefix Calle with the suffix street. Such substitutes render the address Undeliverable.

    7. Urbanization -- denotes an area, sector or residential development within a geographic area. Commonly used in Puerto Rico urban areas, it is an important part of the addressing format, as it describes the location of a specific street. In Puerto Rico, identical street names and address number ranges can be found within the same Zip Code. In these cases, the urbanization name is the only element that correctly identifies the location of a particular address. Generally the abbreviation URB is placed before the urbanization name.

    8. Below is a table of examples of correct address coding:

      Tax Return Address Correct Coding
      URB. Jardines de San Blas A-4 URB. Jardines de San Blas A-4
      Estancias Detortuger, 521 Calle Tulpia Estancias Detortuger
      521 Calle Tulpia
      Bo Rocha Comunidad LaSalle HC 02 Box 12811 Bo Rocha Comunidad LaSalle
      HC 02 Box 12811
      Puerto Nuevo 512 Calle Aragon Puerto Nuevo
      512 Calle Aragon
      URB San Rafael EST C/ Violets E-19 Buzon 246 URB San Rafael EST C Violets
      E-19 Buzon 246
      Cond. Hato Rey Plaza Jesus T Pinero #200 Apt 6-M Cond. Hato Rey Plaza Jesus T Pinero
      #200 Apt 6-M
      URB Cuidad Jardin de Bairoa 88 Calle Franca URB Cuidad Jardin de Bairoa
      88 Calle Franca
      Villa Fortuna / Via Leticia 4LS-10 Villa Fortuna
      Via Leticia 4LS-10
      Plaza Antillana 151 Calle Caesar Gonzalez Apt 6203 Plaza Antillana
      151 Calle Caesar Gonzalez Apt 6203
      Rena de Los Angeles U-11 Calle 1 Rena de Los Angeles
      U-11 Calle 1

3.21.3.11.4  (01-01-2014)
Mailing Address

  1. There are two types of international mailing addresses:

    1. U.S. Territory address

    2. Foreign Country address (address not within the 50 United States, District of Columbia, or any U.S. territory)

  2. For Domestic addresses refer to IRM 3.11.3.9.2.3.

3.21.3.11.4.1  (01-01-2014)
International Mailing Address

  1. A U.S. Territory Address includes:

    1. Street Address

      Caution:

      Do not delete any reference of Urbanization or URB for Puerto Rico.

      Note:

      For Puerto Rico address AIL editing, see IRM 3.21.3.11.3.3

    2. City

    3. U.S. Territory -- must be abbreviated with a valid two (2) character state abbreviation. Circle out the U.S. Territory and edit the abbreviation listed below. See Figure 3.21.3-2:
      • AS -- American Samoa
      • FM -- Federated States of Micronesia
      • GU -- Guam
      • MH -- Marshall Islands
      • MP -- Commonwealth of the Northern Mariana Islands
      • PR -- Puerto Rico
      • PW -- Palau
      • VI -- Virgin Islands

      Figure 3.21.3-2

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

      Editing a State Abbreviation for a U.S. Territory

    4. ZIP Code -- edit the zip code if missing. See Exhibit 3.21.3-6 and Figure 3.21.3-3 if unable to edit the zip code.

      Figure 3.21.3-3

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

      Editing the State Abbreviation and a Zip Code for a U.S. Territory

  2. A Foreign Country Address includes one name line and three lines of address/location information:

    1. Street Address -- underline the street address or location as the additional information line,

      Caution:

      When an address is short (no city, state, province or postal code is present), such as those from Hong Kong, the use of an AIL is not needed -- Do Not Underline the AIL, but Do /country/$. See Figure 3.21.3-4.

      Note:

      If a PO Box and street address are present, underline both as the AIL.

      Figure 3.21.3-4

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

      Editing a Short Address with No Additional Information Line (AIL)

    2. Foreign Province/State/Territory (located on the City/State line) and Foreign mail routing code/postal code,

    3. Foreign Country Name in a /country name/$ format, see Figure 3.21.3-5.

      Figure 3.21.3-5

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

      Perfecting a Foreign Address

  3. If a domestic and foreign address are both present, circle out the foreign address.

3.21.3.11.5  (01-01-2014)
City/State

  1. For domestic addresses refer to IRM 3.11.3.9.2.4.

3.21.3.11.5.1  (01-01-2014)
State/Province/Territory of Foreign Addresses

  1. States/provinces/territories for the countries listed below must be abbreviated. Circle out the state/province/territory and edit the abbreviation in its place. See Exhibit 3.21.3-5. for a list of abbreviations.

    • Australia

    • Brazil

    • Canada

    • Cuba

    • Italy

    • Mexico

    • Netherlands

    Caution:

    Many cities share names with states/provinces. Do not delete or abbreviate a city name.

    Note:

    See Figure 3.21.3-6 for coding examples.

    Figure 3.21.3-6
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Address Editing for Mexico and Australia

  2. Edit the state, province or territory to the city/state line.

3.21.3.11.6  (01-01-2014)
ZIP Code/International Mail Routing/Postal Code

  1. U.S. territories must have a Zip Code; edit if missing. See Exhibit 3.21.3-6

  2. A mail routing code/postal code for foreign addresses can contain alpha and/or numeric characters. If missing, edit the mail routing code following the state or province if it can be readily determined. See Figure 3.21.3-7.

    Figure 3.21.3-7

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

    Editing a Mail Routing Code from an Attachment

3.21.3.11.7  (01-01-2014)
Country Name

  1. The name of a country for foreign address must be edited using "/Country/$."

    Caution:

    If a foreign city/country is present, along with an APO/DPO/FPO address, circle the foreign address, leaving the APO/DPO/FPO address.

  2. If a domestic and foreign address are both present, circle out the foreign address.

  3. When an address is short (no city, state, province or postal code), such as those from Hong Kong, the use of an AIL is not needed -- Do Not Underline the AIL, but Do /country/$. See Figure 3.21.3-4

  4. If the country is missing and it can be readily determined, edit the country. See Exhibit 3.21.3-7.

  5. The country name in a foreign address must be spelled out. See examples below and Figure 3.21.3-8:

    • UAE -- circle and edit /United Arab Emirates/$

    • UK -- circle and edit /United Kingdom/$

    • ROC -- circle and enter /Taiwan/$

    • SAR -- circle and edit/Hong Kong/$

    • PRC or PROC -- circle and edit/China/$

    Figure 3.21.3-8

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

    Perfecting Countries from an Abbreviation

    Exception:

    The countries listed below must be abbreviated as follows:

    Country Abbreviation
    Ashmore and Cartier Islands Ashmore and Cartier Is
    Bosnia and Herzegovina Bosnia Herzegovina
    British Indian Ocean Territory British Indian Oc Terr
    British Virgin Islands British VI
    Central African Republic Central African Rep
    French Southern and Antarctic Lands FR Southern Antarctic
    Heard Island and McDonald Islands Heard Is McDonald Is
    Macedonia, The Former Yugoslav Republic of Macedonia
    Saint Pierre and Miquelon St Pierre Miquelon
    Saint Vincent and The Grenadines St Vincent Grenadines
    Serbia and Montenegro Serbia Montenegro
    South Georgia and The South Sandwich Islands S Georgia S Sandwich
    Turks and Caicos Islands Turks and Caicos Is

  6. Hong Kong and China are considered separate countries for tax purposes. If the taxpayer puts "Hong Kong China" as the country in the entity area, circle out China.

  7. If the country name contains "Republic of" edit to leave the country name per the POD/Country Code Chart.

    Exception:

    If R.O.C. or Republic of China is present in the caption, circle and edit "/Taiwan/$."

  8. If England is present in the caption, circle and edit "/United Kingdom/$."

  9. If S.A.R. is present in the caption, circle and edit "/Hong Kong/$."

    Note:

    If there are no city, state, province or postal code present, do NOT edit an AIL.

3.21.3.12  (01-01-2014)
Filing Status Editing -- General Information for Forms 1040/A/EZ

  1. The filing status (FS) is used to determine the taxpayer’s standard deduction amount, eligibility for the earned income tax credit, and to compute his/her tax.

  2. The instructions in this manual subsection are for determining and editing the correct FS.

  3. Edit the FS by either checking the appropriate box or by editing the FS Code to the left of the filing status 3 box.

  4. The meaning of the Filing Status Codes are:

    1. FS "1" -- single taxpayer

    2. FS "2" -- married taxpayers filing a joint return

    3. FS "3" -- married taxpayer filing a separate return (spouse exemption is not claimed)

    4. FS "4" -- head of household

    5. FS "5" -- widow(er) with a dependent child

    6. FS "6" -- married taxpayer filing a separate return (spouse exemption is claimed)

    7. FS "7" -- head of household (dependent exemption is not claimed)

3.21.3.12.1  (01-01-2014)
Determining the Filing Status

  1. If a taxpayer is a U.S. citizen married to a nonresident alien, they can use FS 4 (head of household) and still claim an exemption for their spouse if they maintain a household for a qualifying child or other relative.

    1. If the spouse is claimed and a qualifying child or other relative is claimed, edit the spouse to exemption position 6.

    2. If the spouse is claimed and no qualifying child or other relative is claimed, "X" the spouse's exemption and change FS to 3.

  2. For additional instructions see IRM 3.11.3.12.2 through IRM 3.11.3.12.2.5.

3.21.3.13  (01-01-2014)
Exemptions for Forms 1040/A/EZ

  1. For complete instructions see IRM 3.11.3.13.

3.21.3.13.1  (01-01-2014)
Dependency Status Indicator (DSI)

  1. Edit the Dependency Status Indicator (DSI) on Form 1040/A in the blank area directly above line 6c, (column 4) or to the right of the text.

  2. Edit a DSI Code of "1" when the taxpayer indicates on the return or attachment that she/he is claimed on another person's return.

  3. Take the following actions for editing the DSI:

    If And Then
    The "Yourself" box on line 6a is not checked, FS is 1, 3, 4, 5, or 7, Exemption position 1 is "0," dash or blank and the total number of exemptions claimed in the box on line 6d is "0," dash or blank, Edit DSI "1."
    The "Yourself" box on line 6a is not checked, FS is 2 or 6, Exemption position 1 is "1," Edit DSI "1."
    The "Yourself" box on line 6a is checked, FS is 2 or 6, Exemption position 1 is "1," and the Spouse box on line 6b is not checked, Edit DSI "1."

    Reminder:

    When applicable, the DSI is still required if RPC "L" has been edited.

  4. For Form 1040EZ, place an "X" in the applicable "You" and/or "Spouse" boxes on line 5 when neither of the boxes is marked and either of the following conditions is present:

    1. There is a statement that the taxpayer was claimed on another person’s return.

    2. The amount on line 5 is a significant amount of less than $10,000 ($20,000 if married filing jointly).

    Note:

    If Filing Status 2 and no taxpayer statement is present and the amount on line 5 is less than $20,000, place an "X" in the "You" box, only.

3.21.3.13.2  (01-01-2014)
Exemption Coding

  1. For complete instructions, see IRM 3.11.3.13.2.2.2.

3.21.3.13.3  (01-01-2014)
Dependent Name Control and TIN

  1. For complete instructions, see IRM 3.11.3.13.3 through IRM 3.11.3.13.3.2.

3.21.3.14  (01-01-2014)
Form 1040 -- General Information

  1. Some returns may require special editing procedures. The taxpayer is instructed to note certain conditions on the return which the tax examiner must identify and edit according to the instructions found in the Special Returns section of this IRM or IRM 3.11.3.

  2. If there is any indication of Article XXV (e.g. notated by the taxpayer in the top center margin of the tax return), correspond for Form 1040NR.

    Note:

    Use the following literal when corresponding for Article XXV, "If you are claiming Article XXV, you must file Form 1040NR. Please complete, sign and return Form 1040NR along with all necessary forms, schedules and federal tax withholding statements."

  3. The following line by line instructions refer to a Form 1040. Use the chart below to determine the corresponding line numbers when processing Form 1040A and Form 1040EZ.

    Example:

    When a taxpayer files a Form 1040A, refer to Line 64a instructions to determine the instructions for Line 38a, Form 1040A.

    Form 1040 Line Number Form 1040A Line Number Form 1040-EZ Line Number
    7 7 1
    8a 8a 2
    8b 8b  
    9a 9a  
    9b 9b  
    13 10  
    15a 11a  
    15b 11b  
    16a 12a  
    16b 12b  
    19 13 3
    20a 14a  
    20b 14b  
    22 15  
    23 16  
    32 17  
    33 18  
    34 19  
    36 20  
    37 21 4
    43 27 6
    44 28 10
    48 29  
    49 31  
    50 32  
    51 33  
    53 30 (Schedule R)  
    54 34  
    61 35  
    62 36 7
    63 37  
    64a 38a 8a
    64b 38b 8b
    65 39  
    66 40  
    72 41 9
    74a 43a 11a
    75 44  
    76 45 12
    77 46  

3.21.3.14.1  (01-01-2014)
Income -- Lines 7 Through 22

  1. Edit amounts on lines 7 through 22 in dollars only.

3.21.3.14.1.1  (01-01-2014)
Line 7 -- Wages

  1. If the taxpayer claims exempt income under IRC § 933 on Form 1040, Form 1040A, or Form 1040EZ, see IRM 3.21.3.68.4.

  2. If the taxpayer claims an exclusion under IRC § 931 on Form 1040, Form 1040A or Form 1040EZ, see IRM 3.21.3.65.2.

  3. If the taxpayer claims exempt income under IRC § 893, or § 871, see IRM 3.21.3.14.1.14.

  4. If the taxpayer exempts income under IRC § 911 or notates 2555 Exclusion on line 21, see IRM 3.21.3.38.1 (General Information).

    Caution:

    If a foreign earned income exclusion is claimed on line 21, ensure that the income is reported on any of lines 7, 12, 17 and 18.

  5. For additional instructions refer to IRM 3.11.3.

3.21.3.14.1.2  (01-01-2014)
Line 8a -- Taxable Interest Income

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.3  (01-01-2014)
Line 8b -- Tax Exempt Interest (TEI)

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.4  (01-01-2014)
Line 9a -- Ordinary Dividends

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.5  (01-01-2014)
Line 12 -- Business Income or Loss

  1. If a foreign earned income exclusion is claimed on line 21, ensure that the income is reported on any of lines 7, 12, 17 and 18.

  2. If a taxpayer from the U.S. Virgin Islands, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, or Puerto Rico files Form 1040 with a Schedule C, C-EZ, E (Part II present), F, or SE to report self-employment taxes in lieu of Form 1040-PR or Form 1040-SS, prepare a dummy Form 1040-PR or Form 1040-SS as follows:

    Caution:

    If the taxpayer is claiming wages and/or withholding, do not convert.

    1. Edit the caption and transcription lines.

    2. "X" Form 1040 and attach all information behind the dummy 1040-PR or Form 1040-SS.

  3. If line 12 contains SE income of $434 or more and Schedule SE is not attached or claimed on line 56:

    • Edit RPC "S" if the taxpayer resides in one of the following countries:

      Australia
      Austria
      Belgium
      Canada
      Chile
      Czech Republic
      Denmark
      Finland
      France
      Germany
      Greece
      Ireland
      Italy
      Japan
      Luxembourg
      Netherlands
      Norway
      Poland
      Portugal
      South Korea
      Spain
      Sweden
      Switzerland
      United Kingdom (includes notations of Great Britain, England, Northern Ireland. Scotland and Wales)

  4. For additional instructions refer to IRM 3.11.3.

3.21.3.14.1.6  (01-01-2014)
Line 13 -- Capital Gain or Loss

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.7  (01-01-2014)
Line 14 -- Other Gains and Losses

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.8  (01-01-2014)
Line 15a & 15b -- Total and Taxable IRA Distributions

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.9  (01-01-2014)
Line 16a & 16b -- Total and Taxable Pensions and Annuities

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.10  (01-01-2014)
Line 17 -- Rental Real Estate, Royalties, Partnerships, Estates, Trusts or S Corporations

  1. If a foreign earned income exclusion is claimed on line 21, ensure that the income is reported on any of lines 7, 12, 17 and 18.

  2. If a taxpayer is from the Virgin Islands, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, or Puerto Rico files Form 1040 with a Schedule C, C-EZ, E (Part II present), F, or SE to report self-employment taxes in lieu of Form 1040-PR or Form 1040-SS, prepare a dummy Form 1040-PR or Form 1040-SS as follows:

    Caution:

    If the taxpayer is claiming wages and/or withholding, do not convert.

    1. Edit the caption and transcription lines.

    2. "X" Form 1040 and attach all information behind the dummy Form 1040-PR or Form 1040-SS.

  3. For additional instructions refer to IRM 3.11.3.

3.21.3.14.1.11  (01-01-2014)
Line 18 -- Farm Income or Loss

  1. If a foreign earned income exclusion is claimed on line 21 then ensure that the income is reported on any of the lines 7, 12, 17 and 18.

  2. If a taxpayer is from the Virgin Islands, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, or Puerto Rico files Form 1040 with a Schedule C, C-EZ, E (Part II present), F, or SE to report self-employment taxes in lieu of Form 1040-PR or Form 1040-SS, prepare a dummy Form 1040-PR or Form 1040-SS as follows:

    Caution:

    If the taxpayer is claiming wages and/or withholding, do not convert.

    1. Edit the caption and transcription lines.

    2. "X" Form 1040 and attach all information behind the dummy Form 1040-PR or Form 1040-SS.

  3. For additional instructions refer to IRM 3.11.3.

3.21.3.14.1.12  (01-01-2014)
Line 19 -- Unemployment Compensation (UEC)

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.1.13  (01-01-2014)
Line 20a & 20b -- Total and Taxable Social Security Benefits

  1. If the taxpayer is a U.S. citizen residing in one of the countries listed below, " X" any reported Social Security Benefits where found.

    • Canada

    • Egypt

    • Germany

    • India (only if paid with respect to services for the government and if the recipient is both a resident and a national of India who does not have a lawful permanent residence in the United States)

    • Ireland

    • Israel

    • Japan

    • Italy (must also be a citizen of Italy for the exemption to apply)

    • Romania

    • United Kingdom (includes notations of Great Britain, England, Northern Ireland, Scotland, and Wales)

      Caution:

      If the taxpayer is living in the United States and indicates on an attachment that they are U.S. citizens, they are not exempt from U.S. tax. Do not "X" the Social Security Benefits.

      Reminder:

      If Form 8833 is attached to a Form 1040 claiming an exemption from Social Security Benefits from one of the exempt countries listed above, "X" the lines 20a, 20b and/or 21.

  2. If Social Security income, Form SSA/RRB 1042-S, and withholding are the only income/withholding reported on the return, see IRM 3.21.3.14.6.1.

  3. If the taxpayer reports WORLDWIDE INCOME (i.e., there are multiple types of income and/or withholding reported on the return) AND the only "questionable" aspect of the return is the presence of Form SSA 1042-S, PROCESS THE RETURN AS SUBMITTED and edit SSA 1042-S withholding to the dotted portion of line 72.

  4. For additional instructions, see IRM 3.11.3.

3.21.3.14.1.14  (01-01-2014)
Line 21 -- Other Income

  1. For International entries on Line 21, follow the chart below:

    Line Entry And Action
    Article XXV   Correspond for Form 1040NR

    Note:

    Use the following literal when corresponding for Article XXV, "If you are claiming Article XXV, you must file Form 1040NR. Please complete, sign and return Form 1040NR, along with all necessary forms, schedules and federal tax withholding statements."

    Form 1099   See Self Employment
    Form 2555 or Form 2555-EZ
    1) Form 2555 or Form 2555-EZ is missing
    2) Taxpayer:
    1. resides in

      • Baker Island

      • Howland Island

      • Jarvis Island

      • Johnston Atoll

      • Kingman Reef

      • Midway Islands

      • Palmyra Atoll

      • Wake Island

    2. is excluding income earned at:

      • "Raytheon " (Christchurch, New Zealand)

      • "Antarctic Support Associates " (Englewood, Co.)

      • "Honeywell International, Inc." , (Tempe, AZ)


    3) Two Forms 2555 and/or Form 2555-EZ are submitted and only one Form 2555 and/or Form 2555-EZ is valid
    4) Positive amount

    1) Correspond
    2) Take the following actions:
    • "X" line 21, Form 1040 (Foreign Earned Income Exclusion)

    • "X" the dotted portion of line 36, Form 1040

    • "X" Form 2555 or Form 2555-EZ

    • Ensure the income is reported on the appropriate line(s) 7 - 21

    • If the deleted Form 2555 or Form 2555-EZ is the only foreign aspect of the return, rebatch the return to a Domestic Program


    3) Adjust line 21, Form 1040 (if necessary) to exclude the amount for the invalid Form 2555 or Form 2555-EZ
    4)
    1. Amount has been verified to be an exclusion , bracket the amount

    2. Amount is income, "X" the line 21 entry and edit to line 7

    IRC § 871 (Capital Gains) Taxpayer excludes income on line 21 Ensure the income is included on line 13 and/or 14.
    IRC § 893 or " Employee of International Organization and Foreign Government"
    1) Taxpayer provides:
    • The number of the Executive Order

    • Written evidence of their acceptance or Designation by the Secretary of State.


    2) Taxpayer does not provide ALL items listed

    1) Allow the exempt amount on line 21 and ensure the income is reported on Lines 7, 12, 17 and/or 18
    2) Correspond*
    IRC § 911   See Form 2555
    IRC § 931   IRM 3.21.3.64.2
    IRC § 933   IRM 3.21.3.68.4
    Negative amount Taxpayer notates Foreign income Correspond for an explanation.
    Self Employment Income or Form 1099-MISC
    1) Form 2555 or Form 2555-EZ is attached to exclude the income
    2) SE income is $434 or more and Schedule SE is not attached or claimed on line 56.

    1) Edit the Self Employment income or 1099-MISC to line 7
    2)
    1. Edit RPC "S" if the taxpayer resides in one of the following:

      1. Australia

      2. Austria

      3. Belgium

      4. Canada

      5. Chile

      6. Czech Republic

      7. Denmark

      8. Finland

      9. France

      10. Germany

      11. Greece

      12. Ireland

      13. Italy

      14. Japan

      15. Luxembourg

      16. Netherlands

      17. Norway

      18. Poland

      19. Portugal

      20. South Korea

      21. Spain

      22. Sweden

      23. Switzerland

      24. United Kingdom (includes notations of Great Britain, England, Northern Ireland, Scotland and Wales)

    2. If the taxpayer does not reside in one of the countries listed above, edit RPC "N"

    Treaty
    1) Taxpayer provides:
    • The name of the foreign country of which the taxpayer is a citizen or resident and whose tax treaty with the U.S. provides the exempt status.

    • The treaty article number that allows the exemption.

    • The amount of "exempt" income during the tax year.


    2) Taxpayer does not provide ALL items listed above.

    1) Validate the treaty using Exhibit 3.21.3-11
    1. If valid, make sure the income is reported on line 7 and enter the exempt income on line 21 as a negative amount**.

    2. If valid, but the taxpayer excludes more than the amount allowed by the treaty, adjust the excluded amount to the allowable limit of the exclusion. Ensure the income is reported on line 7.

    3. If invalid, "X" line 21 and make sure the income is reported on line 7.

    Note:

    If the line 21 treaty amount exceeds the allowable deduction, "X" line 21. Edit the allowable amount per the treaty to line 21 and edit the exceeded amount to line 7.


    2) Correspond

    Exception:

    * North Atlantic Treaty Organization (NATO) also known as the Ottawa Agreement and the listing at Exhibit 3.21.3-4 have already been designated by the president and do not require correspondence with the taxpayer.

    Exception:

    ** Taiwan is not considered to be China and is not allowed to exclude income per China treaties.

  2. A Fulbright Grant received by a U.S. citizen or U.S. resident alien taxpayer for the purpose of lecturing or teaching in a foreign country is considered a payment for services and is subject to U.S. tax.

    Note:

    If the Fulbright Grant was paid by an agency of the U.S. Government, the income may be excluded under the provisions of the law regarding Bona Fide Residence or Physical Presence in a foreign country, provided the taxpayer is not a U.S. government employee.

  3. If the housing deduction amount (line 50, Form 2555) is entered on line 21, "X" the entry and edit to the dotted portion of line 36. Adjust line 21 to exclude the housing deduction if both housing deduction and foreign income exclusion are both claimed on line 21 and edit the housing deduction to the dotted portion of line 36. See IRM 3.21.3.38.9 (7).

  4. For additional instructions refer to IRM 3.11.3.

3.21.3.14.1.15  (01-01-2014)
Line 22 -- Total Income

  1. For complete instructions refer to IRM 3.11.3.

    Exception:

    Do not adjust or compute line 22 if making an adjustment to lines 7 - 21.

3.21.3.14.2  (01-01-2014)
Adjustments to Income -- Lines 23 Through 37

  1. Edit amount on lines 23 through 37 in dollars only.

3.21.3.14.2.1  (01-01-2014)
Line 23 -- Educator Expense

  1. Reserved

3.21.3.14.2.2  (01-01-2014)
Line 24 -- Certain Business Expenses of Reservists, Performing Artists and Fee Basis Government Officials (Form 2106 or Form 2106EZ)

  1. For complete instructions, see IRM 3.11.3.

3.21.3.14.2.3  (01-01-2014)
Line 25 -- Health Savings Account Deduction (Form 8889)

  1. For complete instructions, see IRM 3.11.3.

3.21.3.14.2.4  (01-01-2014)
Line 26 -- Moving Expenses (Form 3903)

  1. Form 3903 (or similar statement) must be attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Correspond if missing.

    Note:

    If the taxpayer is only claiming an expense for storage fees while out of the United States, Form 3903 is not required.

  2. For Unallowable 95 instructions, see IRM 3.21.3.72.18.6.1.

3.21.3.14.2.5  (01-01-2014)
Line 27 -- Deduction for Self-Employment Tax

  1. Reserved

3.21.3.14.2.6  (01-01-2014)
Line 28 -- Self-Employed SEP, Simple and Qualified Plans

  1. For complete instructions, see IRM 3.11.3.

3.21.3.14.2.7  (01-01-2014)
Line 29 -- Self-Employed Health Insurance Deduction

  1. For complete instructions, see IRM 3.11.3.

3.21.3.14.2.8  (01-01-2014)
Line 31a and 31b -- Alimony Paid and Alimony Recipient's TIN

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.2.9  (01-01-2014)
Line 32 -- IRA Deductions

  1. For complete instructions refer to IRM 3.11.3.

3.21.3.14.2.10  (01-01-2014)
Line 33 -- Student Loan Interest Deduction

  1. Reserved

3.21.3.14.2.11  (01-01-2014)
Line 34 -- Tuition and Fees

  1. For complete instructions, see IRM 3.11.3.

3.21.3.14.2.12  (01-01-2014)
Line 35 -- Domestic Production Activities Deduction (Form 8903)

  1. For complete instructions, see IRM 3.11.3.

3.21.3.14.2.13  (01-01-2014)
Line 36 -- Dotted Portion (Total Adjustments)

  1. If an amount claimed on line 36 or near the dotted portion of line 36 is identified as "Form 2555," "IRC § 911" or "IRC § 931:"

    IF AND THEN
    The U.S. citizen resides in any of the following territories:
    • Baker Island

    • Howland Island

    • Jarvis Island

    • Johnston Atoll

    • Kingman Reef

    • Midway Island

    • Palmyra Atoll

    • Wake Islands

     
    1. "X" line 21 and the dotted portion of line 36 Form 1040.

    2. "X" Form 2555, if attached.

    The taxpayer does NOT reside in one of the areas mentioned above Form 2555 is missing Correspond for Form 2555.

  2. Edit the housing deduction amount from line 50, Form 2555 to the dotted portion of line 36, if not already entered by the taxpayer.

    Note:

    If the housing deduction amount is entered on any other line, "X" the entry and edit it to the dotted portion of line 36.

  3. Edit any amount claimed on lines 23 through 36 identified as "MSA" or "Archer MSA Deduction" to the blank area between lines 22 and 36. This amount must be deleted from lines 23 through the dotted portion of line 36 and edited in dollars only with the label "MSA" to the left of the amount.

  4. Delete the following adjustments from lines 23 through 35 and edit the amount to the dotted portion of line 36.

    Note:

    Include these amounts in the line 36 total.

    • "403(b) -- Contributions by certain chaplains to section 403(b) plans"

    • "501(c)(18)"

    • "UDC"

    • "WBF"

    • Jury Duty Pay

    • Deduction for Clean Fuel Vehicles

    • "PPR" -- Personal Property Rental

    • "Reforestation," "RFST" -- Forestation/reforestation amortization

    • "Sub-Pay TRA" -- Repayment of Supplemental Unemployment Benefit (SUB) payments received in a prior year under the Trade Act of 1974 (TRA).

      Exception:

      "X" the SUB pay amount where found and subtract the amount from line 7 when there is no indication that the adjustment is for benefits received in a prior year.

    • Housing Deduction -- line 50, Form 2555

  5. Delete these adjustments where found and edit the amount to the dotted portion of line 36 when any of the adjustments in (4) are claimed elsewhere on the return.

  6. "X" the amount if a taxpayer claims an adjustment to income on the dotted portion of line 36 for anything other than the items listed in (1) or (4) above.

  7. "X" the amount when there is no explanation present for an adjustment amount.

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

3.21.3.14.2.14  (01-01-2014)
Line 36 -- Total Adjustments

  1. For complete instructions, see IRM 3.11.3.

3.21.3.14.2.15  (01-01-2014)
Line 37 -- Adjusted Gross Income (AGI)

  1. Perfect line 37 in the following priority when it is blank or illegible:

    1. Edit the amount from line 22 when there are no amounts on lines 23 through 36.

    2. Compute by subtracting line 36 from line 22.

    3. Edit the amount from line 38 on page 2 of Form 1040.

    Exception:

    Do not adjust or compute line 37 if adjusting line 7 - 36.

3.21.3.14.3  (01-01-2014)
Tax Computation -- Lines 38 Through 46

  1. Edit amounts on lines 43 and 44 in dollars only.

    Note:

    The only T-lines on lines 38 through 42 are the Age/Blind Indicator boxes on line 39a.


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