3.21.19  Foreign Trust System

Manual Transmittal

November 08, 2013

Purpose

(1) This transmits revised Internal Revenue Manual (IRM) 3.21.19, International Returns and Document Analysis - Foreign Trust System.

Background

Form 3520 and Form 3520-A are information returns and are processed to the Business Master File (BMF). Form 3520 is processed under MFT 68, beginning with the 1998 calendar year ending. Form 3520-A is processed under MFT 42, beginning with the 2001 calendar year ending.

Material Changes

(1) The pipeline was restarted with limitations to control erroneous taxes and correspondence. The primary EIN and entity information was the primary concern to permit revamping of the IRM and process changes. This was mandated by LB and I and the Commissioner.

(2) Various editorial corrections were made throughout the IRM, including the update and removal of IRM cross references and dates.

(3) IRM 3.21.19.1 Updated amount to $15,102

(4) IRM 3.21.19.3: Updated BMF Consistency subsection Taxpayer Advocate Service (TAS)

(5) IRM 3.21.19.6 Added section for Refund Returns 180-Day Jeopardy/Million Dollar Refunds

(6) IRM 3.21.19.3: Updated BMF Consistency subsection Taxpayer Advocate Service (TAS)

(7) IRM 3.21.19.12.3.5 Added section for processing of returns containing a foreign address

(8) IRM 3.21.19.15 Table updated for OVDI and FAQ 18 issues

(9) IRM 3.21.19.15.1: Updated the IRS Received Date table.

(10) IRM 3.21.19.16 Added new CCC R

(11) IRM 3.21.19.16.4 Added new subsection on Computer Condition Code (CCC) "R."

(12) IRM 3.21.19.16.3 Updated initial return process

(13) IRM 3.21.19.16.6 Added CCC "N" to bypass EIN where programming requires and EIN and none is required

(14) IRM 3.21.19.18.1(1) Clarification of correspondence instructions
IRM 3.21.19.18.2(1)
IRM 3.21.19.18.3(1)
IRM 3.21.19.18.4(1)

(15) IRM 3.21.20.3 Updated various sections to depict the usage of CCC "N" to bypass initiation of CP 223 notice.
IRM 3.21.21.3
IRM 3.21.22.4
IRM 3.21.45.2

(16) IRM 3.21.19.20 Clarified instructions for editing of the return processing site

(17) IRM 3.21.19.21.3 Further clarification of when an EIN is not required

(18) IRM 3.21.19.22.4 Added instruction for when EIN is not required for line 3b

(19) IRM 21.19.45.2 Revised instructions for line 1b

(20) IRM 3.21.19.11.1(3) Updated routing instructions in table for detached SS-4

(21) IRM 3.21.19.34(8) Updated civil penalty per Chief Counsel

(22) IRM 3.21.19.43 added instructions as to when to use CCC R Added Computer Condition Code R

(23) IRM 3.21.19.44.2 Added CCC R to Condition Code List

(24) IRM 3.21.19.44.4 Updated initial return process

(25) IRM 3.21.19.45.10(1) clarified instructions for trustee contact for 3520-A

(26) 3.21.19.47 (1) Clarified the instructions in paragraph (1) regarding Form 3520-A, Page 2, Part II Foreign Trust Income.

Effect on Other Documents

IRM 3.21.19 dated October 26, 2013 (effective 01-01-2014) is superseded. This IRM also incorporates the following Interim Procedural Updates (IPU):13U0395 issued 02/21/2013;13U0732 issued 04/11/201312U1403;13U0757 issued 04-17-2013;13U1026 issued 06-03-2013,13U1302 issued 07-31-2013;

Audience

Wage and Investment, Code and Edit employees (OSPC Only)

Effective Date

(01-01-2014)

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

3.21.19.1  (01-01-2014)
Introduction

  1. This Internal Revenue Manual (IRM) provides general information and instructions on processing Business Master File (BMF) Form 3520 and Form 3520-A.

  2. Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is filed by U.S. persons (and executors of estates of U.S. decedents) to report certain transactions with foreign trusts and receipt of certain large gifts or bequests from certain foreign persons.

  3. Form 3520-A, Annual Informational Return of Foreign Trust With a U.S. Owner, is filed by a foreign trust with a U.S. owner in order for the U.S. owner to satisfy its annual information reporting requirements under IRC § 6048(b).

  4. Form 3520 and Form 3520-A are processed to the BMF. The effective dates are: "Form 3520:" - The earliest tax period processed to BMF is 199812 (Processing Year (PY) 1999).

    • "Form 3520-A :" - The earliest tax period processed to BMF is 200012 (PY 2001).

    Note:

    If the taxpayer uses a 1995 or prior Form 3520 or 3520-A to report the current year foreign trust information, then:

    Use of 1995 and prior Form 3520 and 3520-A
    1. Edit CCC "U" (F3520) or Action Code 215 (F3520-A) on the return.

    2. Prepare correspondence action sheet 3653C and ask the taxpayer to complete the correct tax year form.

3.21.19.1.1  (01-01-2014)
FIDEICOMISO (a.k.a. Foreign Trust)

  1. The name for Trust in Spanish is "Fideicomiso" .

  2. Process all Form 3520 or Form 3520-A returns where the name of a Trust begins with or includes "Fideicomiso" as you would any other Form 3520 or 3520-A return.

  3. Any statement attached to Form 3520 or 3520-A questioning whether a Form 3520 or 3520-A is required to be filed must remain attached to the return.

  4. ) Note that a fideicomiso (Mexican Land Trust) that is described in Rev. Rul. 2013-14, 2013-26 I.R.B. 1267, is not treated as a trust for U.S. tax purposes and thus the U.S. owner of the fideicomiso is not required to file a Form 3520 or a Form 3520A. If the fideicomiso at issue is not one that is described in Rev. Rul. 2013-14, then, depending on the facts and circumstances, it may be treated as a trust for U.S. tax purposes and the U.S. owner, as well as other U.S. persons that engage in transactions with the fideicomiso, may have information filing requirements as well as income tax filing requirements.

3.21.19.2  (01-01-2014)
IRS Employee Contacts - RRA98, Section 3705(a)

  1. Background: The Restructuring and Reform Act of 1998 RRA 98 Section 3705a, provides identification requirements for all IRS employees working tax related matters. IRS employees are required to give their name and unique identification number during taxpayer telephone, face to face, and written contact. In addition, a telephone number is required on all taxpayer correspondence. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax related matter.

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

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

    2. Face to Face Contact - Their title (e.g. Mr., Mrs., Ms., Miss), 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 IDRS (Integrated Data Retrieval System) number, letter system number, or their badge identification (ID Card) number.

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

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

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

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

    8. Otherwise, if the taxpayer does not need to contact a specific 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 telephone or in-person) his or her badge identification (ID Card) number on the first contact.

    Note:

    "As a general rule, do not give out another employee's name or telephone number. If the taxpayer or representative needs to speak to another employee or manager, offer to take the taxpayer's/representative's number and have the requested employee call them back."

3.21.19.3  (01-01-2014)
♦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 in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue. Do not refer these cases to TAS unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, 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.

    Exception:

    The Taxpayer Advocate Service (TAS) organization is not a point of filing and TAS employees have not been delegated the authority to accept returns for filing. Treat all TAS Received Dates as invalid by circling them and edit the received date according to instructions.

3.21.19.3.1  (01-01-2014)
♦TAS Service Level Agreements (SLA)♦

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

  2. The SLAs are located at http://tas.web.irs.gov under the heading "TAS Favorites" under the "SLA - Service Level Agreements" hyperlink.

3.21.19.4  (01-01-2014)
♦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. Code and Edit 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 or 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.

3.21.19.5  (01-01-2014)
General Disclosure Guidelines

  1. IRC § 6103 establishes the taxpayer's (T/P's) right to privacy of tax information. You must be sure that you provide correct information to the correct T/P or authorized representative (check IDRS CC CFINK for POA).

  2. Taxpayer returns and return information must remain confidential as provided for in IRC § 6103,Confidentiality and disclosure of returns and return information . IRC § 7431 provides civil damages for unauthorized disclosure of returns and return information. IRC § 7213 and IRC § 7213A provide criminal penalties for unauthorized disclosure or unauthorized inspection of returns and return information and require employees be discharged from duty if charged and convicted of these offenses.

  3. For more information on General Disclosure Guidelines refer to IRM 21.1.3,Operational Guidelines Overview, and for full discussions refer to IRM 11.3.1 through IRM 11.3.40,` Disclosure of Official Information.

3.21.19.6  (01-01-2014)
♦Refund Returns 180-Day Jeopardy/Million Dollar Refunds♦

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

    Note:

    :Expeditious processing of refund returns is critical if the 180-day period is about to expire.

    IF Then
    A refund return is batched in a non-refund batch, 1. Completely edit the return. 2. Pull the return from the nonrefund batch using local procedures. Note: Follow the instructions below when the processing date is more than 155 days after the Received Date or the return due date OR the refund is $1,000,000 or more.
    The processing date is more than 155 days after the Received Date or the return due date (whichever is later) and the refund is $5,000 or more, Note: Refund in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods.
    1. Edit CCC “U.”

    2. Give the return to the manager.

    The refund is $1,000,000 or more, Note: Refund in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods.
    1. Do not leave the return in the block

    2. Edit CCC “U” on numbered and unnumbered returns.

    3. Give the return to the manager.

    The W and I Submission Processing Liaison for TAS issues, walks a return through Code & Edit, In addition to normal editing, perform the actions below:
    1. Edit CCC “O” to freeze the refund only if TAS is issuing a manual refund.

    2. Edit CCC “Y” to send the return to Error Correction Unit (ERS).

3.21.19.7  (01-01-2014)
ITIN - Individual Taxpayer Identification Number

  1. An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has middle numbers within the following ranges, 70-88, 90-92, and 94-98 (e.g. 9XX-7X-XXXX).

  2. IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).

  3. ITINs are issued regardless of immigration status because both resident and nonresident aliens may have U.S. tax return and payment responsibilities under the Internal Revenue Code.

  4. Forward all Form W-7's and the required supporting documentation (i.e. passports, birth certificates, etc.) to the ITIN Unit located at the Austin Submission Processing Campus.

3.21.19.8  (01-01-2014)
♦BMF Consistency♦

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

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

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

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

3.21.19.9  (01-01-2014)
General Editing Guidelines

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. We will be forcing processing for anything else.

  3. The following general information can be used when editing Form 3520 returns.

  4. General instructions eliminate repetition of the same instructions for each return. If the general instructions and the specific instructions conflict, follow the specific instructions.

  5. All money amounts must be entered in U.S. dollars.

    Caution:

    If the entries on the return are other than U.S. dollars, see IRM 3.21.19.11.2

  6. When rounding up place an "X" to the left of the amount to delete the entry and edit the rounded amount to the left of the "X" . When the cents are .49 or less circle out the cents.

  7. Money amounts can be either a positive or negative number.

  8. Do not bracket negative amounts. Refer to IRM 3.21.19.9.1 (4) table, ninth row regarding brackets and parenthesis.

  9. Tax period is edited in YYYYMM format.

  10. Edit the date in MMDDYYYY format when the date does not appear to be clear. These are most of the fields on the foreign trust returns: Received date, correspondence received date, date of death, date trust created, date of transfer, date of original obligation, date foreign trust created, date of distribution, date of original loan, and date of gift.

    Example:

    Taxpayers often enter dates in the following formats (e.g. September 11, 2011, Sept. 11-11, 9-11-11) which is sufficient for Integrated Submission and Remittance Processing (ISRP). However, if the taxpayer enters a date like "Apr. 2011, Blank or 23 October 2011" then it is not clear for ISRP. Edit 04012011, 01012011 or 10232011.

  11. Year of sale, year of loan, year of subsequent variances, and tax year qualified obligation first reported, is edited in YY format.

  12. Arrange the return in the following order:

    1. Form 3520 , page 1

    2. Form 3520, page 2

    3. Form 3520, page 3

    4. Form 3520, page 4

    5. Form 3520, page 5

    6. Form 3520, page 6

      Note:

      Attachment(s) to support Part I - Line 14 or Line 18, Part II - Line 22, Part III - Line 29, 30 or 44 and/or Part IV - Line 54 or 55 do not have to be in any type of order, but must be behind page 6.

3.21.19.9.1  (01-01-2014)
♦Edit Marks♦

  1. Edit marks are edited on the return for transcription to the Automated Data Processing (ADP) System through Integrated Submission and Remittance Processing (ISRP). The editing can be entered in brown, red, orange, purple or green pencil/pen.

  2. The only items edited on the return are those to be transcribed except where specific instructions require editing of a non-transcribed item. Lines are left blank if the entry would be a zero amount unless otherwise instructed.

  3. The original entry on a return is never obliterated, altered or erased when deleting or correcting an entry. Always exercise care to ensure that the original entry remains legible. Perfected entries provide a legible "edit trail" for anyone who may work with the return later.

  4. For a description of specific edit marks, see the table below:

    Edit Mark Description
    "X" The "X" is used to delete tax data or to indicate that an item is not to be transcribed.
    "/" A "/" can be used when deleting a form or schedule not being transcribed.
    "//$" The "//$" is used in the entity area to identify the beginning and ending of a foreign country code. For example, "/EI/$" is edited for "Ireland" or "/GM/$" is edited for "Germany" .
    "c/o" or "%" Indicates an "in-care of" name for transcription.
    Circle Indicates that an entry is not to be transcribed. Also used to delete Entity data or a Received Date.

    Note:

    If the taxpayer circles an entry, edit the entry.

    Underline Indicates that an entry is to be transcribed (e.g., Name Control, Tax Period and a Received Date that is other than an IRS stamped date).
    Arrow Indicates the correct placement of a misplaced entry. An arrow may be used if the misplaced item is close to the correct line and there is no question where the entry belongs.

    Note:

    A double arrow may be used if the same figure is to be transcribed in two different places (along with any required transcription data between the two arrows).

    Check Mark Indicates that an entry has been manually math verified and is correct.
    Bracket/Parenthesis Indicates a negative numerical amount.

    Note:

    C and E is no longer required to bracket negative amounts when brackets are preprinted on the form or schedule or when the taxpayer clearly indicates a negative amount with brackets (-) sign. It will be necessary to bracket negative amounts when editing negative entries on transcription lines (i.e., computing and entering a line entry, entering a missing line entry, etc.)

    Vertical Line or Decimal Point Indicates the separation of dollars and cents if no distinction has been made by the taxpayer.
    Zero, Dash, None or N/A "ZERO" , "DASH" , "NONE" or "N/A" are considered valid entries except when specific instructions require editing of an entry.
    Edit Marks Made by Other IRS Functions Edit marks entered by other areas, such as Collection or Accounts Management, are not to be reedited except to place the marks in the correct area.
    Rocker Indicates the amount paid when drawn under a remittance amount.

3.21.19.9.2  (01-01-2014)
♦Action Codes♦ - Form 3520-A

  1. Action Codes are used to indicate whether correspondence, research or some other action is needed. The Action Code will set the suspense period to be assigned to the return and place the return in the workable or unworkable suspense inventory.

  2. When necessary, a three-digit International Action Code will be assigned by the tax examiner on Form 3520-A returns.

    Note:

    When corresponding with a foreign trust (Form 3520-A) use Action Code 215 or 226. The source line for the address information is on Lines 1c thru 1g.

  3. Edit the Action Code in the bottom left margin of the return.

  4. Assign Action Codes in the following priority:

    1. Action Code 310 (Statute Control).

    2. Action Code 320 (Entity Control)

    3. Action Code 4XX.

    4. Action Code 6XX.

    5. Action Code 3XX.

    6. Action Code 2XX (Correspondence)

      Exception:

      Use Action Code 215 or 226 before Action Code 341 to ensure the return is complete before a manual refund is issued.

  5. Attach Form 4227 when more than one Action Code is needed. Edit the second Action Code with the shortest suspense period on the form and edit the second Action Code on Form 4227.

    Note:

    Three digit Action Codes are to be used in the Form 3520-A program. No Action Codes are used in the Form 3520 program.

  6. Edit the following Action Codes when a return cannot be perfected from the information present:

    Action Code Description
    215 (First Correspondence)
    • Return is so illegible, incomplete or contradictory that it is not acceptable for computer processing

    • The Foreign Trust notates on the return or attachment that they are reporting tax for more than one Tax Period or for more than one type of tax.

    226 (Missing Signature International Correspondence) Unsigned foreign return (only issue for correspondence).
    480 (Early Filed-Suspense) Early Filed Return.
    610 (Renumbered non-remittance) or 611 (Renumbered with-remittance) A return mis-blocked (e.g., Form 1065 is found in an 1120 batch of work).
    640 (Void) To delete the assigned Document Locator Number (DLN) on the return (e.g., Re-entry Returns).
    650 (International) An international return that must be forwarded to Ogden Submission Processing Campus (OSPC).

  7. Continue perfecting the return after editing the Action Codes.

  8. Valid Action Codes are listed below:

    Action Code Description Workday Suspense Period
    211 First Taxpayer Correspondence 40
    212 Second Correspondence 25
    215 International Correspondence 45
    225 Taxpayer Correspondence (Signature Only) 40
    226 International Correspondence (Signature Only) 45
    310 Statute Control 10
    320 Entity Control 10
    331 Frivolous Review 10
    341 Manual Refund 10
    342 Credit Verification 10
    352 Name Research 3
    343 Black Liquor 10
    360 Other-in-House Research 10
    420 2006 tax return with Form 8913 credit 5
    440 Manager's Suspense 15
    480 Early Filed Suspense 150
    610 Renumber - Non-remit 0
    611 Renumber – Remit 0
    640 Void 0
    650 International 0

3.21.19.10  (01-01-2014)
Unprocessable Conditions

  1. Follow local procedures in handling routine unprocessable conditions when no written instruction is provided.

    Example:

    A Campus might prepare a Form 4227, whereas another may just place the unprocessable document in a bucket for further action.

  2. A return must contain the following specific items before it is considered processable. After initial research, if the return cannot be perfected, then edit Computer Condition Code (CCC) "U" and route to the appropriate area.

    • An Employer Identification Number (EIN).

    • A legible name (for the Name Control).

    • A valid Tax Period (200012 and subsequent).

  3. Conditions which make a document unprocessable may require correspondence with the taxpayer or routing to Entity. Edit CCC "U" and prepare correspondence action sheet 3653C or 3463C.

    Caution:

    The following is forwarded to the Entity Control Unit.

    1. If the name is so illegible or incomplete that the Name Control cannot be determined, then send for IDRS research using command code INOLE, ENMOD, NAMES, NAMEE, NAMEB, or NAMEI

    2. If the EIN contains other than nine numeric characters and cannot be perfected from information on the return or attachments, then research IDRS using command code INOLE, ENMOD, NAMES, NAMEE, NAMEB, or NAMEI.

    3. The document has more than one ElN.

      Caution:

      The following listed conditions require correspondence. Edit CCC "U" on Form 3520 or Action code 215 on Form 3520-A and prepare correspondence action sheet 3653C or 3463C.

    4. Data entries are so incomplete or illegible that they cannot be perfected or transcribed.

    5. The return is unsigned. See for instructions.

    6. The return has only entity data and no other statements or attachments from the taxpayer.

    7. Any condition set forth as unprocessable in the sections on processing specific documents.

  4. If the filer has stated that they have combined information for more than one tax period or more than one type of return, prepare correspondence action sheet 3653C and request the taxpayer provide a separate return for each tax period.

3.21.19.11  (01-01-2014)
♦Correspondence♦

  1. Note: Initiate taxpayer correspondence for the primary tax payer information only (Section 1a)

    • We will be forcing posting for anything else

    • Any exceptions must be approved by the designated LB&I representative

  2. There are two types of correspondence that Code and Edit may encounter:

    1. Correspondence received from taxpayers, and

    2. Issuing correspondence to taxpayers.

  3. Issue correspondence to resolve any conditions causing the return to be unworkable or unprocessable.

    Note:

    Initiate taxpayer correspondence for primary tax payer (line 1b) information only (section 1a)

    Note:

    We will be forcing processing for anything else.

    Note:

    Any exceptions must be approved by the designated LB&I representative. Use 3635C letter with the following open paragraph≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    Do not correspond on returns prepared by Collections, Section 6020(b) or by Examination, "Substitute for Return (SFR)" .

  4. Form 3520 only: Always prepare correspondence action sheet 3653C and edit CCC "U" on a blank Form 3520 return where the taxpayer states they have no activity to report.

    Note:

    Beginning with 1997, Form 3520 and its instructions required U.S. Owners of a foreign trust to complete Part II of Form 3520 even if they did not have any transactions with the trust that were reportable on Parts I or III. However, this requirement was not explicitly stated in the Code. Recent legislation , effective for tax years beginning after March 18, 2010, now codifies this requirement that a U.S. owner of a foreign trust must file a Form 3520 every year.

    Reminder:

    Inform the U.S. Owner that they must complete the 2nd checkbox on page 1 of Form 3520, and Part II of the form.

  5. Examine the return so that all of the conditions can be included in the same correspondence.

    If... And... Then...
    Correspondence is needed Requires a response,
    1. Complete an approved Correspondence Action Sheet indicating the letter number (86C, 854C, etc,), Master File Tax (MFT), and the appropriate paragraphs.

      Note:

      Within these paragraphs, there may be Fill-ins that the tax examiner will be required to enter, such as, tax period, form number, DLN, etc.

    2. Attach the Correspondence Action Sheet to the front of the return below the Entity area.

    3. Edit Action Code "215" on Form 3520-A, or CCC "U" on Form 3520.

    4. Continue editing the return.

    5. Leave the return in the batch.

    Correspondence is needed Does not require a response,
    1. Complete an approved Correspondence Action Sheet indicating the letter number (86C, 854C, etc.), Master File Tax (MFT), and the appropriate paragraphs.

      Note:

      Within these paragraphs, there may be Fill-ins that the tax examiner will be required to enter, such as, tax period, form number, DLN, etc.

    2. Photocopy and attach the Correspondence Action Sheet below the Entity area on the front of the return. Be sure the name and address shows clearly above the approved Correspondence Action Sheet.

    3. Forward the copy to the Correspondence area.

    4. Edit an Action Trail (e.g., 3104C SENT ) in the lower left corner going vertically up the side of the return.

    5. Finish editing the return and leave in batch.

    Note:

    There may be additional letters that are exclusive to the Tax Examiner's campus. These letters are for specific forms or conditions where it was deemed necessary for processing. The Tax Examiner should go to his or her Lead or Manager for copies of these letters to facilitate processing.

3.21.19.11.1  (01-01-2014)
♦Correspondence Imaging System (CIS) Returns♦

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

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

  3. Verify all edit marks on a "CIS" return.

    If... Then...
    The edit marks are black, Underline the edit mark if correct or circle if incorrect.
    The edit marks are red or green, Circle if incorrect.

  4. Follow the 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 to Accounts Management. Continue processing the return.

    The return is not complete (e.g., missing signature, schedules or forms) Remove the return from the batch and route to Accounts Management.

    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) Follow normal correspondence procedures.

3.21.19.11.2  (01-01-2014)
♦Foreign Currency♦

  1. For returns completed in other than U.S. currency, process as filed. However, if corresponding for missing/incomplete item(s), include in the letter to resubmit in U.S. currency.

3.21.19.12  (01-01-2014)
Attachments to Form 3520

  1. Form 3520 and Form 3520-A must be in page order. All other attachments and/or statements are to be placed behind page 6 of Form 3520 (page 4 of Form 3520-A).

    Note:

    At times the taxpayer may attach a statement to Form 3520 describing entries for Lines 7b, 11b, 13, 15, 16, 17,19, 20, 24, 25, 28, 54 and 55. Edit/Transfer the data from the attachment to the corresponding line, but not more than the number shown for the "More than Indicator." In addition, Edit/Transfer the "Totals" amount from the attachment to the "Totals" line for Lines 13, 24 and 25.

  2. Examine all attachments to the return being processed and take action as required by the attachment. See IRM 3.21.19.12 or IRM 3.21.19.12.1 for instructions for specific attachments.

  3. When an attachment has an effect on the document being processed, leave it attached or photocopy the attachment (e.g. Page 3 and 4 of Form 3520-A) and attach the copy to the return, unless a specific instruction requires that it be detached.

    Example:

    If the taxpayer requests an address change, the entity on the front of the return should be changed and the request should be left attached to the return.

  4. Leave any approved extensions (which are applicable to the Form 3520 or Form 3520-A itself or to the filers income tax return) attached to the return.

  5. If Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authority, is attached to correspondence, review the correspondence to determine if other requests are involved:

    1. If other requests are involved, photocopy the correspondence and send the copy, along with the authorization to the Centralized Authorization File (CAF) function for processing.

    2. If other requests are not involved, send the original correspondence and the authorization to the Campus CAF function for processing.

  6. If the taxpayer has requested that an attachment be returned:

    1. Photocopy the attachment and attach it to the Form 3520 or Form 3520-A.

    2. Return the original attachment to the taxpayer using Form 3699, Return of Documents to Taxpayer.

  7. If Form 3520 has an original signed Form 3520-A (pages 1-3 or 1-4, with possible multiple pages 3 and/or 4) attached to it, photocopy all pages 3 and/or 4 and attach the copy(s) to Form 3520. Detach and forward the original Form 3520-A to Batching to get re-batched under program 12320. Photocopies of Form 3520-A attached to Form 3520 are to remain attached, however, "X" out all pages of Form 3520-A.

    Reminder:

    The Form 3520-A will make it's way back to Code and Edit for coding under program 12320 before being numbered.

  8. Do not remove any attachment requesting an adjustment.
    .

    Reminder:

    If the attachment does not include the taxpayers name, address, Tax Identification Number (TIN) or received date, enter this information on the attachment.

  9. Other Unrelated Attachments:

    1. Remove other unrelated attachments (such as other returns, acknowledgments, requests for tax forms, etc.) from the document being processed, and

    2. Route to the proper function for necessary action.

    Reminder:

    Leave an " Action Trail" in the bottom left margin of Form 3520, notating the attachments removed from the Form 3520.

3.21.19.12.1  (01-01-2014)
♦Routing Guide for Attachments♦

  1. All attachments to the return must be reviewed before the return can be considered processable.

    1. Attachments should only be detached when specifically instructed.

    2. Edit Action Trail(s) (e.g. 2848 DETACHED) in the lower left corner going vertically up the side of the return.

    3. Total up and verify data already in the columns in lines 24&25.

  2. The following acronyms are found within the routing guide:

    • PAMC - Philadelphia Account Management Campus

    • CAF - Central Authorization File

    • CCC - Computer Condition Code

    • NDC - National Distribution Center

    • TIN - Taxpayer Identification Number

    • LB and I - Large Business and International Division

    • AM - Accounts Management

    • FIRPTA - Foreign Investment in Real Property Tax Act

    • EIN - Employer Identification Number

    • IMF - Individual Master File

    • BMF - Business Master File

    • IRC - Internal Revenue Code

    • ITIN - Individual Taxpayer Identification Number

  3. Follow the general guidelines written below for each attachment.

    DOCUMENT/FORM DETACH ACTION
    A General Power of Attorney or a Durable Power of Attorney or Tax Information Authority is submitted on any document other than Form 2848 or Form 8821 NO Take no action. Leave the Power of Attorney or Tax Authorization attached to the return. Do not route to the CAF function.
    Closing Agreement NO Leave attached
    TD F 90-22.1, Report of Foreign Banks and Financial Accounts YES Transship to:
    U.S. Department of the Treasury
    P. O. Box 32621
    Detroit, MI. 48232-0621
    CP 259, 515-518 NO Route notice and return to Collections.

    Exception:

    Do not route to Collections if "599" is notated.

    Includes tax liability for Multiple Tax Periods or Types of Tax NO
    • Numbered returns route to Rejects.

    • Unnumbered returns, prepare a dummy return if possible: otherwise correspond.

    Other Tax Returns (original signature) YES
    1. Edit received date to the detached return.

    2. Route to appropriate function unless specifically directed otherwise.

      Exception:

      Returns attached to a consolidated return will NOT be detached.

    3. Detach Form 8822/Form 8822-B and route to Entity Control using Form 4227 or follow local procedures.

    4. Notate on Form 4227 "Change of Address Per Form 8822 or Form 8822-B."

    Note:

    The lead tax examiner is required to batch all Forms 8822 or Form 8822-B daily and hand carry to Entity Control for expedite processing.

    State Tax Returns, original or copy, with an original signature YES Route to Receipt and Control.
    State Tax Returns (Photocopy, facsimile or no signature) NO Leave attached.
    Statement establishing Reasonable Cause for delinquent filing NO
    1. Issue Letter 1382C . (See IRM 3.21.19.13.2 (8))

    2. Continue editing the return.

    Remittance Found NO Immediately hand-carry return and remittance to Supervisor.
    Request for Acknowledgement NO No Action Required
    Request for information or inquiries YES
    1. Photocopy any data necessary to process the return

    2. Attach the photocopy to the return.

    3. Route original attachment to the proper office for necessary action.

    Request for Adjustment to Form 3520 or 3520-A YES Route to PSC. Attachment must contain Name, Address, EIN and Received Date. Enter if missing.
    Request for Forms or Schedules NO If requesting current year forms:
    1. Prepare Form 4190.

    2. Forward to National Distribution Center (NDC) for processing.



    If requesting prior year forms:
    1. Prepare Form 6112.

    2. Forward to National Distribution Center (NDC) for processing.

      Note:

      Form 4190 and 6112 are generally used for IMF requests. Therefore, enter all BMF requests for forms and/or schedules in the "WRITE-IN" portions of the forms.

    Form 2848, Power of Attorney and Declaration of Representative YES
    • Edit taxpayer name and TIN on Form 2848 if missing.

    • Edit received date on Form 2848.

    • Route Form 2848 to CAF function.

    • Edit action trail on tax return.

    Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts YES

    Note:

    If with original signature.

    Route to Receipt and Control for rebatch.
    Form 3520-A, Annual Return of Foreign Trust With a U.S. Owner YES

    Note:

    If with original signature.

    Route to Receipt and Control for rebatch.
    Form 4970, Tax on Accumulation Distribution of Trusts NO Leave attached
    Form 5471 or 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business YES Route to Receipt and Control for rebatch (form will be scanned for LB and I purposes).
    Form 5495, Request for Discharge from Personal Liability Under Internal Revenue Code Section 2204 or 6905 NO Leave attached
    Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns YES If the extension is for a different period. Route to Receipt and Control for re-batch.
    Form 8582, Passive Activity Loss Limitations. NO Leave attached
    Form 8809, Application for Extension of Time to File Information Returns NO Leave attached
    Form 8821, Tax Information Authorization YES
    • Edit taxpayer name and EIN on Form 8821 if missing.

    • Edit received date on Form 8821.

    • Route Form 8821 to CAF function.

    • Edit action trail on tax return.

    Form 8822, Change of Address, or Form 8822-B, Change of Address - Business, is attached YES Mailing address information is the same and no location address is listed on Form 8822/Form 8822-B line 7, Take no action and continue processing Route to Entity Control if the address is different than what is on the forms entity.

    Mailing address information is different and/or a location address is listed on Form 8822/Form 8822-B line 7
    1. Enter address shown on Form 8822/Form 8822-B in Field (form specific) FAD.

    2. Notate "Form 8822 or Form 8822-B detached" on tax return.

    Note:

    The lead tax examiner is required to batch all Form 8822 or Form 8822-B daily and hand carry to Entity Control for expedite processing

    Form SS-4 Application for Employer Identification Number YES Loose/detached Forms SS-4 are processed by EIN Operations in CAMC (Stop 532G)

    Note:

    Leave the SS-4 attached if the return has already been to Entity and had an EIN assigned.

    Form W-7, Application for IRS Individual Taxpayer Identification Number YES

    Note:

    Along with all of the documentation attached to it (i.e. passport, birth certificate, etc.)

    Transship to:
    Internal Revenue Service
    ITIN Operation
    P.O. Box 149342
    Austin, TX 78714-9342
    Section 108(i) Election NO Leave attached
    Statements:
    • Foreign Nongrantor Trust Beneficiary Statement

    • Foreign Grantor Trust Beneficiary Statement

    • Foreign Grantor Trust Owner Statement

    • Fideicomiso statements

    • Attachment statement to support line entries.

    NO Leave attached

3.21.19.13  (01-01-2014)
Special Conditions

  1. Use the following instructions when processing special or nonstandard returns for both Form 3520 and Form 3520-A.

3.21.19.13.1  (01-01-2014)
♦Amended Returns♦

  1. A return is considered Amended based on the following:

    • The Amended box is checked

    • Words such as "Supplemental, Corrected, or Additional" are present

    • Any indication from the taxpayer that a previous return was filed

      Note:

      Words such as "Copy or Duplicate" are not sufficient indicators and must be accompanied by a statement from the taxpayer that a previous return was filed.

  2. Examine the return for attachments.

    • Do not detach any related attachments submitted to explain the reason for the Amended return (information may be useful to Accounts Management)

    • Detach any unrelated documents and route them to the appropriate function using Form 4227 and edit the Action Trail on the return

  3. There is an indication the return is amended and (This does not apply to Form 3520):

    If... Then...
    "Transaction Code (TC) 59X" or "ICS" was edited on the return by Compliance Services, Do not edit CCC "G." Process the return as an original.
    The return is stamped "Delinquent Original Cleared for Processing" by Statutes, Do not edit CCC "G." Process the return as an original.
    Form 3893 or Form 13596 is attached, Do not edit CCC "G."
    None of the above are present, See paragraph (5) below.

  4. The following data must be edited on all amended returns:

    1. Name control (unless Check Digits are present)

    2. EIN

    3. Tax period

    4. ""

    5. Received Date

    6. Signature

  5. If you receive an Amended or Corrected Form 3520 or Form 3520-A, do not edit Computer Condition Code (CCC) "G or U" on the return; Instead do the following:

    1. Attach Form 4227 to the amended/corrected Form 3520 or Form 3520_A and write"Amended Return" in the remarks area..

    2. and send to Ogden Accounts Management Campus (OAMC), BMF INT'L unit, . In the remarks area write "Amended Form 3520 or 3520-A"

3.21.19.13.2  (01-01-2014)
Delinquent Return

  1. A return is normally delinquent if it is not received on or before the return due date. However, accept the return as timely filed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM 3.10.72, Receiving, Extracting, and Sorting or IRM 3.10.73, Batching and Numbering.

    Note:

    Do not research the taxpayers filing requirements on a late filed Form 3520 or Form 3520-A .

  2. Accept a return as timely filed if the return was mailed in time to reach the Service through normal handling within the legal period but, through no fault of the taxpayer, it was not delivered.

    Note:

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

  3. Consider a return timely if one of the following conditions exist:

    1. It appears that the Post Office might have sent it to another government agency in error.

    2. The original envelope bears a timely postmark or a timely date stamp by that agency.

      Note:

      If the return was erroneously addressed to another agency, it will be date stamped with the current date when the IRS received it.

  4. Consider a return timely if it is received or postmarked on the next workday when the last day for filing falls on a Saturday, Sunday, or legal holiday.

  5. The due date for Form 3520 is the same as the due date for the filer's income tax return:

    1. If the Form 3520 filer is an individual, the regular due date (without extensions for tax year 2013) is April 15, 2014. If the filer is a U.S. citizen or resident alien residing overseas, or is an individual in the military on duty outside of the United States, the regular due date (without extensions) for tax year 2013 is June 16, 2014.

    2. If the Form 3520 filer will be a business entity, then the Return Due Date (RDD) is the same as the business entity’s income tax return (it can be a fiscal or calendar year filer).

      Note:

      The business entity can be a Partnership or Corporation. Generally, the RDD for a partnerships calendar year return is April 15, 2014, whereas a corporations will be March 17, 2014. However, either of these business entities can be a fiscal filer.

      Reminder:

      The business master file (BMF) automatically generates a CP 223 to the Accounts Management (AM) department when Form 3520 is filed late. AM in turn assesses a civil penalty to the U.S. Owner.

    3. If the Form 3520 is filed with respect to a U.S. decedent, the due date is the date the Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) is due (including extensions) or would be due if the estate were required to file a return.

    4. If the filer requests an extension of time to file his income tax return, the due date for the filing of the Form 3520 is also extended.

    5. The due date is extended to the next business day when the regular due date falls on a Saturday, Sunday, or legal holiday.

  6. The due date for Form 3520-A is the 15th day of the 3rd month after the end of the Foreign trusts tax year (it can be a fiscal or calendar year filer).

    1. The U.S. Owner can file an extension of time to file Form 3520-A with Form 7004.

      Note:

      The business master file (BMF) automatically generates a CP 223 to the Accounts Management (AM) department when Form 3520-A is filed late. AM in turn assesses a civil penalty to the U.S. Owner.

  7. If a return is delivered to the IRS after the date prescribed for filing,

    • If the received dated is after the due date (generally April 15 for individuals) and has OVDI or OVDI FAQ 18 marked across the top of the return, enter CCC R to suspend initiation of CP 223 notice.

    • Consider the postmark date stamped on the envelope as the date of delivery.

    • Also, consider the document as timely if the postmark date falls on or before the prescribed date for filing the return.

  8. If the return (3520 or 3520-A) is delinquent, check the return for an explanation of late filing. If the taxpayer attaches correspondence with a reasonable cause explanation for failure to file a timely return, take the following action:

    1. Do not detach the reasonable cause explanation correspondence from the original return and send through processing.

    2. , ", " . "CP 223 will generate to OAMC for processing of civil penalty to the U.S. Owner TIN for late filing of Form 3520 or 3520-A. Per IRM 21.8.2.20.1, 20.3 (7) and (8) and 20.4 (6) and (8)." See Exhibit 3.21.19-7.

    3. Note: Currently this is no correspondence to the taxpayer. Prepare correspondence action sheet for IDRS letter 1382C (use paragraphs "A, N and V" ) and assign it to a clerk for input to IDRS, or follow local procedures. It may or may not include the Rejects function.

      Note:

      Disregard this note while correspondence is suspended.Do not edit CCC "U or R" on the return. OAMC will address the taxpayers reasonable cause letter.

    4. Continue processing Form 3520 or 3520-A. Do not attach the correspondence action sheet 1382C to the return.

3.21.19.13.3  (01-01-2014)
♦Compliance Secured/Prepared Returns♦

  1. Compliance functions secure returns from the taxpayer and also prepare returns if the taxpayer does not provide them.

    1. Prepared tax returns are notated with "IRC § 6020(b)" or "SFR" (Substitute for Return).

    2. Secured tax returns are notated with "TC 59X" or "ICS" (Integrated Collection System) or notated "Process as Original" with an attached Form 13133, Expedite Processing Request. The "Delinquent Return" box on Form 13133 should be checked.

    Note:

    If "RD" is notated on the front of the return and not circled, remove from the batch and route to Collections.

3.21.19.13.3.1  (01-01-2014)
♦IRC § 6020(b) - Prepared by Collection♦

  1. When the taxpayer fails to file a required return, IRC § 6020(b) provides the authority for the IRS to prepare the return.

  2. These returns are identified by the notation: "PREPARED AND SIGNED UNDER THE AUTHORITY OF SECTION 6020(b) OF THE INTERNAL REVENUE CODE" which is located in the center bottom of Page 1 of the return.

    1. Returns must have a Received Date. If missing, follow the normal procedures for editing the Received Date, (IRM 3.21.19.16).

    2. Returns must be signed by Compliance Function representative. If not signed, route to Compliance using Form 4227.

    3. Edit CCC "4" . See IRM 3.21.19.17 .

      Note:

      CCC "R" should not be used with CCC "4" .

    4. Do Not correspond with the taxpayer for unprocessable conditions. If the return is completely unprocessable, edit CCC "3" and continue processing.

    5. Edit CCC "W" if the Received Date is more than 2 years and 9 months after the Return Due Date. Do Not send the return to Statute Control. This applies to Form 3520-A and NOT to Form 3520.

3.21.19.13.3.2  (01-01-2014)
♦Collection Secured♦

  1. These returns are identified by the notations: "TC 59X" or "ICS" .

    1. Do Not edit CCC "G" on these returns.

    2. Use approved Correspondence Action Sheet to correspond for conditions that cannot be processed (e.g., missing signatures, missing schedules, etc.).

    3. Edit CCC "W" if the Received Date is more than 2 years and 9 months after the Return Due Date. Do Not send the return to Statute Control. This does not apply to Form 3520.

3.21.19.13.3.3  (01-01-2014)
♦Examination Prepared♦

  1. These returns are identified by the notation: "SFR" or "SUBSTITUTE FOR RETURN" on Page 1.

    1. Return must have a Received Date. If no Received Date is present, follow the normal procedures for editing the Received Date.

    2. Do Not correspond with the taxpayer for unprocessable conditions. If the return is completely unprocessable, use No Reply procedures and edit CCC "3" and continue processing.

    3. If Form 13133 is attached, edit the Computer Condition Codes that are checked on the form.

      Note:

      CCC "R" should not be used with a CCC "4" .(CCC 4 only used for 6020B returns)

    4. Edit CCC "W" if the Received Date is more than 2 years and 9 months after the Return Due Date. Do Not send the return to Statute Control. This does not apply to Form 3520.

3.21.19.13.3.4  (01-01-2014)
♦Examination Secured♦

  1. These returns are identified by the notation: "Process as Original" or "Secured by Exam" on Page 1 of the return and a Form 13133, Expedite Processing Request, attached with the "Delinquent Return" box checked.

    1. Do Not edit CCC "G" on these returns (Form 3520 or Form 3520-A returns).

    2. Use approved Correspondence Action Sheet to correspond for conditions that cannot be processed (e.g., missing signatures, missing schedules, etc.).

    3. Edit the Computer Condition Codes that are checked on Form 13133

      Note:

      CCC "X" (Hold Credits on Module) is not valid for Form 3520 or Form 3520-A.

    4. Edit CCC "W" if the received date is more than 2 years 9 months after the Return Due Date. Do Not send to Statute Control function.

      Note:

      CCC "W" does not apply to Form 3520.

3.21.19.13.3.5  (01-01-2014)
Foreign Address Returns

  1. The filer is a foreign taxpayer (non-US address) and they filed after 4/15/2014 but before 6/15/2014 they get an automatic 2 month extension to file. Edit CCC "R" to suspend initiation of the CP 223 notice

3.21.19.13.3.6  (01-01-2014)
♦Frivolous Argument♦

  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 4.10.12.1.1, Frivolous Return Program.

  2. Review the return to determine whether it appears to be a frivolous return. See Exhibit 3.21.19-5

    If... Then...
    The return meets any of the conditions identified as a frivolous return, (SeeExhibit 3.21.19-2

    Note:

    Exception

    if the return shows CCC "U" or shows an Action Code 331) or has a Form 4227 attached with the remarks, "Refer to Exam 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.

    Note:

    IRM 4.10.12.1.3.3, Campus FRP Coordinators, requires Examination to expedite the return and make a determination whether it qualifies as a frivolous return within two (2) business days.


    If a determination is not made within the allowed time frame, the Examination examiner will edit Action Code 331 in the lower left margin of the Form.
    Examination has selected the return as frivolous, (e.g., indicated by CCC "U" or an Action Code 331) and a Form 4227 with the remarks, "Refer to Exam FRP for audit after processing," but sends the return for processing, Continue processing the return using procedures in IRM. However, do not circle or void the Action Code indicating a frivolous return.

    Note:

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

3.21.19.13.4  (01-01-2014)
♦Re-Entry Document Procedures♦

  1. A return posted to the wrong account or module or attempting to post must be reprocessed to post to the proper account or module.

    A Re-entry document is referred to as:

    • A Re-input return (a return that has not posted to the master file, e.g. unpostable).

    • A Re-processable return (a return that has posted to the master file, e.g. return posted to the wrong account or module).

    `

  2. Some re-entry returns may have originally been filed electronically (E-File). These returns may be identified by the presence of Mod E-File printouts in lieu of the actual return. Do not correspond for missing signatures on these documents.

  3. Each re-entry return must have a Form 3893, Re-entry Document Control, or Form 13596, Reprocessing Returns, attached.

    • Form 3893 is used to reinput documents that have not posted to an account or module.

    • Form 13596 is used to reprocess documents to the correct account or module that had previously posted to the wrong account or module.

  4. Always leave the Form 3893 or Form 13596 on the front of the return. It must remain as a permanent part of the document.

  5. Examine Form 3893 to determine the action needed to make the return processable.

    If... Then...
    Form 3893 is missing
    1. Edit CCC "U" on return.

    2. Route to Receipt and Control using Form 4227.

    3. Use local procedures for routing.

    Form 3893 is attached Determine if the return was edited according to current processing instructions.

    Caution:

    If the Received Date is 2 years and 9 months or more after the Return Due Date, refer to Statute procedures before re-entering or reprocessing the return. See IRM 3.21.19.13.5

  6. If additional information is needed to make the return processable, prepare Form 3696 or follow local correspondence procedures.

    1. Enter CCC "U" (Unprocessable F3520) or Action Code 215 (F3520-A) on the return.

    2. Forward Form 3696 to Typing and Suspense to issue letter and filing in the "Hold File" or follow local correspondence procedures.

3.21.19.13.4.1  (01-01-2014)
♦Form 3893 - Re-entry Document Control♦

  1. Form 3893, Re-entry Document Control, is used to reinput a return that has not posted to an account or module.

  2. If more than one return is in the batch and only the top Form 3893 has an entry in Box 1 (Alpha/Numeric block control no.), edit all returns using current processing instructions and keep all returns clipped together.

  3. Circle the CCC "G" if present.

  4. Do not edit CCC "G" on amended returns.

  5. Do not send Letter 1382C if a request for reasonable cause is attached, because this responsibility belongs to the customer service representative initiating the re-entry document.

  6. If the return was not edited according to current processing instructions, circle any Action Codes, Computer Condition Codes and any other edit marks that are no longer applicable. Re-edit according to current processing instructions.

  7. If the return was edited according to current processing instruction, ensure that the information from Form 3893 is edited on the return.

    Form 3893 Action Taken
    Box 14 (Remarks) Ensure that the information is edited to the return.
    Box 15 (Process as)
    1. Circle out any green rockered money amounts and edit marks that may indicate a receipt of remittance.

    2. Do not change any tax due amounts.

  8. Examine returns that have any color other than red editing in the tax data section to determine if the corrections are the result of improper perfection or taxpayer error.

    If... Then...
    Improper perfection Edit the same correction in red to the appropriate area.
    Taxpayer error Leave the entries as shown on the document.

  9. A received date must be present on all Re-input returns:

    If... Then...
    Received date is not present Edit a received date to the middle of the return.
    Multiple received dates are present Circle out all but the earliest date.

  10. When additional information is still needed to make the return processable, prepare Form 3696(or other approved Correspondence Action Sheet) or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

  11. When perfection is not possible, attach Form 4227 noting, "PERFECTION NOT POSSIBLE" and return to initiator.

3.21.19.13.4.2  (01-01-2014)
♦Form 13596 - Reprocessing Returns♦

  1. Form 13596, Reprocessing Returns, is used to reprocess a return to the correct account or module that had previously posted to the wrong account or module.

  2. Circle CCC "G" if present.

  3. Do not edit CCC "G" on amended returns.

  4. Do not send Letter 1382C if a request for reasonable cause is attached, because this responsibility belongs to the customer service representative initiating the re-entry document.

  5. If the return was edited according to current processing instructions, ensure that the information from Form 13596 is edited on the return.

    Form 13596 Action Taken
    TIN correction Edit correct TIN on return.
    Tax period correction Edit correct tax period ending on return.
    Reasonable Cause Edit appropriate computer condition code:

    Note:

    Does not apply to Form 3520 or Form 3520-A.

    1. Edit CCC "R" if the Failure to File ("FTF" ) box is checked.

    2. Edit CCC "D" if the Failure to Pay ("FTP" ) box is checked.

  6. Examine returns that have any color other than red editing in the tax data section to determine if the corrections are the result of improper perfection or taxpayer error.

    If... Then...
    Improper perfection Edit the same correction in red/green (per local procedure) to the appropriate area.
    Taxpayer error Leave the entries as shown on the document.

  7. A received date must be present on all reprocessed returns:

    If... Then...
    Received date is not present Edit a received date to the middle of the return.
    Multiple received dates are present Circle out all but the earliest date.

  8. Circle out the green rocker or green check and edit marks that may indicate a receipt of remittance.

3.21.19.13.5  (01-01-2014)
♦Statute Returns♦

  1. Any return with a received date that is 2 years and 9 months or more after the Return Due Date is a potential statute control return.

  2. Form 3520 and 3520-A Statute returns must be routed to the Statute Control Unit daily or more often if needed to be cleared.

  3. Do not route to the Statute Control Unit for clearance if any of the following conditions are present:

    • Compliance Section 6020(b) returns.

    • Returns with "TC 59X" or "ICS" notated on the face of the return.

    • Returns that are substitute returns prepared by Examination (SFR) in top margin of the return.

    • Returns with a stamp indicating a previous clearance by Statute Control within the last ninety days.

  4. Statute returns are unprocessable until they are cleared by Statute Control.

    If... Then...
    The return is numbered,
    1. Edit Action Code 310 on the return.

    2. Leave the return in the batch and continue processing.

    The return is unnumbered,
    1. Do not continue processing.

    2. Pull the return from the batch.

    3. Attach Form 4227 and route to Statute Control Unit.

  5. Form 3520-A Only: Edit CCC "W" if the return has been cleared by Statute Control Unit. Statutes will stamp or indicate clearance on the front of the return.

    Note:

    After a Form 3520 has been cleared by the Statute Control Unit, continue to process the return and do not edit CCC "W."

3.21.19.13.6  (01-01-2014)
♦Protective Claims♦

  1. Returns marked as "Protective Claim," "Protective Refund," "Protective Claim for Refund," "Protective Filing, " or similar statement will be removed from the batch and routed to PAMC. Notate "Protective Claim" in the remarks box of Form 4227 and prepare Form 3499 transship.

    Exception:

    If the return is amended see IRM 3.21.19.13.1 (5)

3.21.19.13.7  (01-01-2014)
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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  3. CI "Funny Box" Criteria

    "Criminal Investigation (CI) Funny Box Criteria"
    "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

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

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

3.21.19.13.8  (01-01-2014)
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3.21.19.14  (01-01-2014)
Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts

  1. Form 3520 is processed at the Ogden Submission Processing Campus (OSPC) under Program Code 12310 with the following Master File Tax (MFT) Code and Document Locator Number (DLN) make-up:

    • MFT Code 68,

    • File Location Code 60;

    • Tax Class 3,

    • Doc. Code 83;

  2. Form 3520 is the annual return used to report

    • Certain transactions with Foreign Trusts, and/or

    • Ownership of a Foreign Trust by a U.S person, and/or

    • The receipt of certain foreign gifts or bequests by U.S. Persons from foreign persons. See Exhibit 3.21.19-1.

  3. Form 3520 is to be filed annually by U.S. individuals, corporations, fiduciaries, partnerships, etc. to:

    • Report the creation of a foreign trust by a U.S. person during the tax year;

    • Report certain transfers of money or other property to a foreign trusts by a U.S. person during the tax year.

    • Identify U.S. persons who are treated as owners of a foreign trusts during all or part of the tax year;

    • Provide information about distributions received by a U.S. person from a foreign trust during the tax year;

    • Report the receipt of a loan to a U.S. person from a foreign trust during the tax year.

    • Report the receipt of uncompensated use of trust property by a U.S. person from a foreign trust (applicable only after March 18, 2010) or

    • Provide information about certain gifts or bequests received by a U.S. person from foreign person.

    An extension (Form 4868) to file the U.S. taxpayer's annual tax return is also an extension for the filing of Form 3520.

    Caution:

    Do not process a photocopied Form 3520 return, which has a Philadelphia IRS received date stamp on it with the letters "OCI - POIU" (Offshore Compliance Initiative - Philadelphia Offshore Identification Unit). Instead, lookup the account on IDRS using Command Code BMFOLI or TXMODA. Make a screen print, highlight the DLN and attach it to the photocopied return, and send to files for association.

    Note:

    Send loose pages of Form 3520-A to Accounts Management to be scanned into CIS ( civil penalty ISPJ) and reassign to OSC.

    To research the account on TXMOD use the following format:
    TXMODAxx-xxxxxxx
    68 RPN YYYYMM then transmit

    The Report Plan Number (RPN) is the last 3 digits of the Trust TIN from Line 2b or the default number "520" if their is no Trust TIN on line 2b. Other TIN formats are TXMODAxxx-xx-xxxxV or TXMODAxxx-xx-xxxxW.

    To research the account on BMFOLI use the following format:
    BMFOLIxx-xxxxxxx then transmit.

    Other TIN formats are BMFOLIxxx-xx-xxxxV or BMFOLIxxx-xx-xxxxW

  4. Form 3520 is to be filed with the Ogden Submission Processing Campus.

  5. Form 3520 can be filed with an SSN, ITIN, or EIN. Line 2b must be an EIN (except for instances of a one time disclosure of a gift), however, if it is not an EIN then follow the instructions shown on the third row of the "If/Then" table in IRM 3.21.19.20.3 (5).

  6. Form 3520 is a "Non-Remittance" return.

  7. Payment of Taxes - Any tax arising from a transaction reported on Form 3520 must be paid with the filer's tax return. (i.e., Form 1040, 1120, 1041, 1065, etc.).

  8. Civil Penalty -
    For late-filed Form 3520 filed for tax years ending before January 1, 2010 :

    • A U.S. person (or the executor, in the case of a form filed with respect to a U.S. decedent) who filed a late Form 3520 will be charged with a civil penalty of 35 percent of the gross reportable amount under IRC § 6677 on the failure to timely or accurately report the transfer of property to a foreign trust (on Part I of the Form) or the receipt of property from a foreign trust (on Part III of the Form).

    • A U.S. person who filed a late Form 3520 to report foreign gifts or bequests received from a foreign person (on Part IV of the Form) will be charged with a civil penalty of 5 percent of the value of the gift or bequest.

    • Note that a U.S. person who is treated as an owner of a foreign trust (U.S. owner) that filed a late Form 3520-A will be charged with a civil penalty equal to 5 percent of the gross value of the portion of the trusts assets that are treated as owned by the U.S. owner at the close of the foreign trust’s tax year. See IRM 3.21.19.34

    • For late-filed Forms 3520 filed for tax years beginning after December 31, 2009:

    • A U.S. person (or the executor, in the case of a form filed with respect to a U.S. decedent) who filed a late Form 3520 will be charged with a civil penalty of the greater of $10,000 or 35 percent of the gross reportable amount under IRC § 6677 on the failure to timely or accurately report the transfer of property to a foreign trust (on Part I of the Form) or the receipt of property from a foreign trust (on Part III of the Form).

    • ● A U.S. person who filed a late Form 3520 to report foreign gifts or bequests received from a foreign person (on Part IV of the Form) will be charged with a civil penalty of 5 percent of the value of the gift or bequest.

    • Note that a U.S. person who is treated as an owner of a foreign trust (U.S. owner) that filed a late Form 3520-A will be charged with a civil penalty equal to the greater of $10,000 or 5 percent of the gross value of the portion of the trusts assets that are treated as owned by the U.S. owner at the close of the foreign trust’s tax year. See IRM 3.21.19.34.

    • Additional civil penalties:

    • All of the penalties just described are initial penalties. If a Form 3520 or 3520-A is not filed until more than 90 days after the IRS contacted the person responsible for filing the form, additional civil penalties of $10,000 are imposed for each 30-day period during which the failure to file continues. In the case of failure to file Parts I or III of Form 3520 or to file Form 3520-A, the aggregate amount of the civil penalty imposed with respect to a particular failure cannot exceed the gross reportable amount. In the case of failure to file Part IV of Form 3520, the aggregate amount of the civil penalty cannot exceed 25% of the value of the gift or bequest.

  9. The Program Completion Date (PCD) is 45 days from the due date or received date, whichever is later.

3.21.19.14.1  (01-01-2014)
Pre-Master File Processing of Form 3520

  1. Reject any Form 3520 filed for tax period ending December 31, 1997 and prior.

  2. Rejection Action:

    1. Prepare Form 3210, Document Transmittal, and write "ALPHA" in the remarks section of the transmittal. Address the transmittal to "Cycle Control M/S 6725."

    2. Attach Form 4227 with explanation "199712 return or prior" to the face of the document and write the same explanation on the first line of Form 3210.

  3. Forms 3520 with tax periods 199812 and forward are processed through the pipeline and should be filed like any other return. IRM 3.21.19.14.1IRM 3.21.19.13 and IRM 3.21.19.34.13.21.19.34 contain additional details.

3.21.19.15  (01-01-2014)
Tax Period

  1. All returns must have a Tax Period.

  2. Edit the Tax Period on all Form 3520 and Form 3520-A returns in YYYYMM format in the margin to the left of the pre-printed tax period if it is not a current calendar year return.

    Figure 3.21.19-1
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Form 3520, Editing the Tax Period

  3. In the absence of an affirmative indication, the tax period, by "default" is the calendar year printed on the return.

    If... Then...
    The return is for the current processing year No editing is required.
    The return is for a prior year Edit the Tax Period in YYYYMM format.
    The taxpayer has notated a Tax Period other than the preprinted year on the return Edit the Tax Period in YYYYMM format based on the taxpayers indication.
    The Tax Period is missing, incomplete or illegible
    1. Review the return or attachments for the correct period.

    2. If found, edit the Tax Period to the right below the form name.

    3. If unable to determine the Tax Period after researching, edit the return for the year currently being processed.

  4. A Tax Period should end on the last day of a month except as otherwise specified below.

    Note:

    Ignore a minor discrepancy such as October 30, instead of October 31.

  5. Tax periods reported under the 52-53 week rule may not end more than six days before or three days after the end of a month.

    If... Then...
    The tax period ending date is not more than 3 days after the beginning of the month edit the previous month.
    The tax period ending date is in the middle of the month edit the month shown. See Figure 3.21.19-2
    The tax period ending date is not more than 6 days before the end of the month edit the month shown. See Figure 3.21.19-2

    Figure 3.21.19-2
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    52-53 Week Tax Periods

3.21.19.15.1  (01-01-2014)
"Initial" Short Period Return

  1. Identify an "Initial" Short Period return by any of the following situations and edit a CCC "I" (i) on the return.

    1. The "Initial Return" box is checked.

    2. The return or attachments indicate "INITIAL" , "FIRST RETURN" or "FIRST TIME FILER," etc.

3.21.19.15.2  (01-01-2014)
"Final" Short Period Return

  1. A "FINAL" short-period return ends on the date the foreign trust was liquidated or distributed all of its assets.

    1. This may be any day of the month.

    2. Use the numeric designation of the month that the Taxpayer has designated as final.

      Example:

      October 16, 2014 would be 201213.

      If however, the taxpayer did not specify a month ending date then edit "12" as the calendar month for the tax period.

    3. Edit Computer Condition Code (CCC) "F" on the return.

  2. Use the numeric designation for the calendar month that precedes the received date of the return if a calendar year return is received before the end of the current processing year and the trust indicates that the return is a final return but does not specify a month ending date.

3.21.19.15.3  (01-01-2014)
Early-Filed Return

  1. Early-filed returns must be held for processing until the beginning of the appropriate processing year. Therefore, route early filed returns to be held for processing to Rejects. Attach Form 4227, and edit CCC "U" (leave return in batch).

  2. An early-filed Form 3520 for Tax Period 12 (that is, filed before January 1, 2014), must be held for processing in 2014.

3.21.19.15.4  (01-01-2014)
Fiscal Year Return

  1. If Form 3520 indicates that it is a Fiscal Year return, verify that the tax year of the filer is the same fiscal period indicated on the Form by searching through Form 3520 and its attachments for the correct tax year.

  2. If the filer's tax period is different from the tax period indicated on the Form, change the tax period on the form to conform with the tax period on the filer's tax return.

3.21.19.16  (01-01-2014)
♦Received Date♦

  1. The date a document is received in the Campus or IRS Office is the date stamped as the "IRS Received Date."

  2. An IRS Received Date is required on all Form 3520 and Form 3520-A returns. Use the chart below to perfect the received date.

    If... And.. Then...
    The return is received within ≡ ≡ ≡ ≡ ≡ of the legal or extended due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .   The return is considered timely.
    The due date falls on a weekend or legal holiday,   The return is timely if postmarked by the first business day following the weekend or legal holiday.
    If the received date for Form 3520 is after April 15 (plus grace period) or for Form 3520-A is after the 15th day of the 3rd month after the end of the trust's taxable year (which generally would be March 15th for calendar year foreign trusts) (plus the grace period). Has OVDI or OVDI FAQ 18 marked across the top of the return, Edit CCC R to suspend initiation of CP 223 notice
    The IRS received date stamp is after the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the legal or extended due date The postmark or shipment date is on or before the legal or extended due date, Edit the Received Date to agree with the postmark date.

    Note:

    For certified mail only: If a postmark is not present, look for a "USPS.com Track and Confirm" record that has been attached to the return (should be before the envelope). Use the "Acceptance" date on the record to determine timeliness and follow normal editing procedures.

  3. The IRS Received Date may or may not be stamped on the face of the return.

  4. A valid Received Date Stamp consists of the following (MMDDYY):

    • The word "Received"

    • Month (alpha or numeric)

    • Day (numeric 01-31)

      Example:

      "1" or "01"

    • Year (numeric) - four digits

    • "Area Office" , Campus, "Field Office" , "Taxpayer Assistance (TAC)" Site plus the "City" location or a functional area within one of these sites (e.g. CSCO, Exam, ICT, CIS, AM, etc.)

      Caution:

      The Taxpayer Advocate Service (TAS) organization is not a point of filing and TAS employees have not been delegated the authority to accept returns for filing. Treat all TAS Received Dates as invalid by circling them and edit the Received Date according to instructions.

  5. If the IRS Received Date stamp is not present or the date is illegible or invalid, edit the IRS Received Date in MMDDYYYY format according to the following priority:

    Reminder:


    (For Form 3520 Only) — Edit the date or postmark date in the margin to the right of the 2nd checkbox that begins with "You are a U.S. owner of all..." .

    (For Form 3520-A Only) — Edit the date in the middle of Page 1, before Line 3a.

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

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

      Note:

      A private metered postmark is to be considered timely if received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the legal due date.

    2. Service Center Automated Mail Processing System (SCAMPS) digit date.

    3. Revenue Officer's signature date.

    4. Signature date (only if within current year).

      Exception:

      Use the signature date on prior returns only when it is signed in the current year. DO NOT use the signature date stamp to determine the received date for replies to correspondence.

    5. Julian control date minus 10 days.

    6. Current date minus 10 days.

  6. Edit the Received Date as follows:

    If Then
    A timely IRS Received Date is the only received date stamped on the return, No editing is required.
    Two or more dates stamped on the return.
    1. Use the earliest IRS Received Date stamped on the return.

    2. Circle out all other dates. (handwritten or stamped) not needed for transcription.

    Note:

    Received dates that have been circled out by another function should be treated as if they are not present.

    A Federal return is addressed to the IRS but delivered to a State agency, Use the Postmark Date as the IRS Received date.
    A Federal return is addressed to a State agency, Use the IRS Received Date stamp as the IRS Received Date.
    The only Received Date on the return is a TAS Received Date, Edit the IRS Received Date according to instructions.

    Reminder:

    If an envelope is attached to the return, check the envelope for remittance. If found, hand carry remittance to manager.

  7. If Form 3520 or Form 3520-A is received prior to January 1 of the current processing year:

    1. Edit the first day after the end of the tax period as the received date. For example, if the actual received date for a Tax Year 2012 return is "12122012," enter "01012013."

    2. If present, circle out the stamped Received Date on the return.

  8. No editing is necessary if Form 3520 and Form 3520-A is received after January 1 and the received date is stamped.

3.21.19.16.1  (01-01-2014)
Quarterly Received Date Chart

  1. The table below provides quarterly generic return due date information for Form 3520.

    Quarterly RECEIVED DATE CHART
    SUBJECT TO LOCAL ADJUSTMENTS FOR STATE/D.C. HOLIDAYS
    Ending Date Due Date Weekends and Holidays considered Delinquent Ext Due Date Weekends and Holidays considered
    Form 3520
    12-31-2013 04-15-2014 ≡ ≡ ≡ ≡ ≡ 10-15-2014
    04-01-2014 07-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ 01-15-2015
    07-10-2014 10-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ 04-15-2015
    09-30-2014 01-15-2015 ≡ ≡ ≡ ≡ ≡ ≡ 07-15-2015
    RECEIVED DATE CHART
    SUBJECT TO LOCAL ADJUSTMENTS FOR STATE/D.C. HOLIDAYS
    Ending Date Due Date Weekends and Holidays considered Delinquent Ext Due Date Weekends and Holidays considered
    Form 3520-A
    12-31-2013 03-17-2014 ≡ ≡ ≡ ≡ ≡ 09-15-2014
    04-01-2014 06-16-2014 ≡ ≡ ≡ ≡ ≡ 12-15-2014
    06-02-2014 09-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ 03-17-2014
    09-30-2014 12-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 06-16-2014

3.21.19.16.2  (01-01-2014)
Monthly Received Date Chart

  1. The table below provides monthly generic return due date information for Form 3520.

    Ending Date Due Date Weekends and Holidays considered Delinquent Ext Due Date Weekends and Holidays considered
    Form 3520
    MONTHLY RECEIVED DATE CHART
    SUBJECT TO LOCAL ADJUSTMENTS FOR STATE/D.C. HOLIDAYS
    12-31-2013 04-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 10-15-2014
    01-31-2014 05-15-2014 ≡ ≡ ≡ ≡ ≡ 11-15-2014
    02-28-2014 06-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ 12-15-2014
    03-31-2014 07-15-2015 ≡ ≡ ≡ ≡ ≡ ≡ 01-15-2015
    04-30-2014 08-15-2013 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 02-18-2015
    05-31-2014 09-16-2013 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 03-17-2015
    06-30-2013 10-15-2013 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 04-15-2015
    07-31-2013 11-15-2013 ≡ ≡ ≡ ≡ ≡ 05-15-2015
    08-31-2013 12-16-2013 ≡ ≡ ≡ ≡ ≡ ≡ 06-16-2015
    09-30-2013 01-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 07-15-2015
    10-31-2013 02-18-2014 ≡ ≡ ≡ ≡ ≡ ≡ 08-15-2015
    11-30-2013 03-17-2014 ≡ ≡ ≡ ≡ ≡ 09-15-2015
    Monthly RECEIVED DATE CHART
    SUBJECT TO LOCAL ADJUSTMENTS FOR STATE/D.C. HOLIDAYS
    Ending Date Due Date Weekends and Holidays considered Delinquent Ext Due Date Weekends and Holidays considered
    Form 3520-A
    12-31-2013 03-30-2014 ≡ ≡ ≡ ≡ ≡ ≡ 10-15-2014
    01-31-2014 04-15-2013 ≡ ≡ ≡ ≡ ≡ 11-17-2014
    02-28-2014 05-15-2013 ≡ ≡ ≡ ≡ ≡ 12-15-2014
    03-31-2014 06-16-2014 ≡ ≡ ≡ ≡ ≡ 01-15-2015
    04-30-2014 07-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ 02-16-2015
    05-31-2014 08-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 03-16-2015
    06-30-2014 09-15-2014 ≡ ≡ ≡ ≡ ≡ 04-15-2015
    07-31-2013 10-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 05-15-2015
    08-31-2013 11-17-2014 ≡ ≡ ≡ ≡ ≡ ≡ 06-15-2015
    09-30-2013 12-15-2014 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 07-15-2015
    10-31-2013 01-15-2015 ≡ ≡ ≡ ≡ ≡ ≡ 08-17-2015
    11-30-2013 02-16-2015 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 09-15-2015

3.21.19.17  (01-01-2014)
Computer Condition Codes (CCC)

  1. Up to five (5) Computer Condition Codes (CCC) may be edited.

  2. Edit the "CCC" at the end of Line A on Page 1, which is after the Amended return checkbox. See Exhibit 3.21.19-1.

  3. Only the following entries are valid: " 3" , "4" , "C" , "F" , "I (Initial)" ,"R" , " U" , "N" and "blank" .

3.21.19.17.1  (01-01-2014)
CCC "C" - Initiate CP 223 to PAM for civil penalty assessment under IRC § 6677

  1. Computer Condition Code (CCC) "C" is to be used by the Error Resolution / Rejects (ERS/REJ) section when the taxpayer does not respond to IDRS Letter 3653C requesting additional information to process Form 3520.

    Note:

    CCC "C and 3" can be used together. Each serves their purpose and has their conditions.

  2. CCC "C" will generate Internal Service Center Notice CP 223 to Philadelphia Accounts Management for assessment of Civil Penalty under IRC § 6677. The Penalty Reference Number (PRN) is 659, Failure to Report Transactions with Foreign Trusts or Receipt of Certain Foreign Gifts (Form 3520).

3.21.19.17.2  (01-01-2014)
CCC "F" - Final Return

  1. Edit CCC "F" when:

    1. The "Final return" checkbox is checked, or

    2. There is a clear indication on the return itself or on an attachment that returns will not be required to be filed for future years.

3.21.19.17.3  (01-01-2014)
CCC "I" (i) - Initial Return

  1. Edit CCC "I" (i) when the " Initial return" checkbox is checked.

    • remove the return from the batch to have filing requirements set through BNCHG

    • Hold the return for one week and then return to normal processing

  2. If an SSN or ITIN is present on Line 1b, forward the return to Entity Control Unit (ECU).

3.21.19.17.4  (01-01-2014)
CCC "R" Suspend Initiation of CP 223 notice

  1. Reference 3.21.19.8(1)

  2. Edit CCC "R" when OVDI or OVDI FAQ 18 is notated across the top of the return

3.21.19.17.5  (01-01-2014)
CCC "U" - Unprocessable Return

  1. Edit CCC "U" to reject unprocessable returns. See IRM 3.21.19.10 (Unprocessable Conditions ).

  2. Do not edit CCC "U" on amended Form 3520 returns. See IRM 3.21.19.13.1 (5)


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