3.22.15  Foreign Partnership Withholding

Manual Transmittal

November 14, 2013

Purpose

(1) This transmits revised (IRM) 3.22.15, International Error Resolution - Foreign Partnership Withholding.

Material Changes

(1) Various editorial corrections were made throughout the IRM. All dates were updated.

(2) IRM 3.22.15.1.1 (1) -- Revised the wording and added the percent of 39.6.
(5) Revised the wording
Removed (7) and (8) per Counsel because the information is outdated.

(3) IRM 3.22.15.1.1.3 (3) -- Updated the line numbers for Form 8804.

(4) IRM 3.22.15.6 (1) -- Added instructions to the If/Then table for line 6a (45-day Manual Refund)

(5) IRM 3.22.15.7.1 (1) -- Removed the Note referring to prior year.
(3) Removed the first (1st) sentence referring to 2012.
(4) Added The IMF transaction values for DD.

(6) IRM 3.22.15.12 (1b) -- Removed Philadelphia address location for Accounts Management.

(7) IRM 3.22.15.13.1 (2) -- Updated the years for an early-filed Form 8804.

(8) IRM 3.22.15.13.2 (5) -- Added new (5) for Notice 2013-30.

(9) IRM 3.22.15.13.4 (2) -- Updated the line numbers in the second (2nd) row of the table.

(10) IRM 3.22.15.20 (1) -- Section 01: Form 8804 table (Field Title):
Added Town to City
Added Province to State
Added Foreign Postal Code to Zip Code

(11) IRM 3.22.15.20.13 (6) -- Removed the reference to IRM 3.0.2.73 (Administrative Reference Guide).

(12) IRM 3.22.15.20.21 (6) -- Updated Field 02-P to Field 02-T.

(13) IRM 3.22.15.21. (1) -- Updated the Table with New Field References, Field Titles and Field Locations for Form 8804.

(14) IRM 3.22.15.21.1 -- Changed the title for Field 02-A and updated the Field References.

(15) IRM 3.22.15.21.2 -- Changed the title for Field 02-B

(16) IRM 3.22.15.21.3 -- Changed the title for Field 02-C.

(17) IRM 3.22.15.21.4 -- Changed the title for Field 02-D and the Field References.

(18) IRM 3.22.15.21.5 -- Added a new Subsection for Field 02-E (Total ECTI allocable to non-corporate partners other than on lines 4i, 4m and 4q).

(19) IRM 3.22.15.21.6 -- Added a new Subsection for Field 02-F (Reduction to line 4e for State and Local taxes under Regulations section 1.1446-6(c)(1)(iii))

(20) IRM 3.22.15.21.7 -- Added a new Subsection for Field 02-G (Form 8804-C, Certification Reduction).

(21) IRM 3.22.15.21.8 -- Added a new Subsection for Field 02-H (Taxable Inc Non-Corporate Adjusted (±))

(22) IRM 3.22.15.21.9 -- Changed Field 02-E to Field 02-I and updated the Field References and Line Numbers.

(23) IRM 3.22.15.21.10 -- Changed Field 02-F to Field 02-J and updated the Field References and Line Numbers.

(24) IRM 3.22.15.21.11 -- Changed Field 02-G to Field 02-K and updated the Field References and Line Numbers.

(25) IRM 3.22.15.21.12 -- Changed Field 02-H to Field 02- L.

(26) IRM 3.22.15.21.13 -- Changed Field 02-I to Field 02-M.
Added a new (7) for when there is a positive entry.

(27) IRM 3.22.15.21.14 -- Changed Field 02-J to Field 02-N and updated the Field References and Line Numbers.

(28) IRM 3.22.15.21.15 -- Changed Field 02-K to Field 02-O and updated the Field References and Line Numbers.

(29) IRM 3.22.15.21.16 --Changed Field 02-L to Field 02- P

(30) IRM 3.22.15.21.17 -- Changed Field 02-M to Field 02- Q

(31) IRM 3.22.15.21.18 -- Changed Field 02-N to Field 02-R and updated the Field References and Line Numbers.

(32) IRM 3.22.15.21.19 -- Changed Field 02-O to Field 02-S and updated the Field References and Line Numbers.

(33) IRM 3.22.15.21.20 -- Changed Field 02-P to Field 02-T and updated the Field References and Line Numbers.

(34) IRM 3.22.15.21.21 -- Changed Field 02-Q to Field 02- U.

(35) IRM 3.22.15.21.22 -- Added a new Subsection for Field 02-V (Gross 1446 Tax at 39.6%).

(36) IRM 3.22.15.21.23 -- Changed Field 02-R to Field 02-W and updated the Field References and Line Numbers.

(37) IRM 3.22.15.21.24 -- Changed Field 02-S to Field 02-X and updated the Field References and Line Numbers.

(38) IRM 3.22.15.21.25 -- Changed Field 02-T to Field 02-Y and updated the Field References and Line Numbers.

(39) IRM 3.22.15.21.26 -- Changed Field 02-U to Field 02-Z updated the Field References and Line Numbers.

Effect on Other Documents

IRM 3.22.15 ,dated October 25, 2012 (effective January 1, 2013), is superseded. The following Interim Procedural Updates (IPUs) issued from January 31, 2013 through September 30, 2013 have been incorporated into this IRM: 13U0512 and 13U0063,

Audience

Wage and Investment Error Resolution employees (Ogden Submission Processing Center (OSPC) Only)

Effective Date

(01-01-2014)

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

3.22.15.1  (01-01-2014)
Overview

  1. This IRM provides error resolution instructions for correcting Form 8804, "Annual Return for Partnership Withholding Tax (Section 1446)" to the Business Master File (BMF). See Figure 3.22.15-1.

  2. Form 8804 is processed under:

    • File Location Code 98 Philadelphia Submission Processing Campus (PSPC) or 60 Ogden Submission Processing Campus (OSPC)

    • Tax Class 1

    • Doc. Code 29

    • Blocking Series 000-999

    • MFT Code 08

    • Program Code 11340

    Figure 3.22.15-1
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    U.S. Address on Form 8804

3.22.15.1.1  (01-01-2014)
Form 8804 Background - Annual Return for Partnership Withholding Tax under (Section 1446)

  1. Form 8804 was modified as a result of the Internal Revenue Code (IRC) 1446 (26 CFR 1446) Regulations modified Form 8804. This modification branched out the types of Effectively Connected Taxable Income (ECTI) allocable to a foreign partner from the highest rate applicable to the type of foreign partner to the highest rate applicable to the type of income allocable to that type of foreign partner. For corporate partners the rate remained unchanged at 35%. For partnership taxable years beginning in 2013 for non-corporate partners the rates are 39.6 % to , 35%, 28%, 25% and 15% as long as the foreign partners provides the partnership with valid documentation (e.g. a Form W-8BEN -Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) showing they qualify for the preferential rates.

  2. Under 26 CFR 1446 or Treasury Regulation 1446, there are two categories of income allocable to a foreign partner:

    • Income that is effectively connected with a trade or business in the United States, and

    • Income that is not effectively connected with a trade or business in the United States

      Note:

      The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at the same rates that apply to U.S. citizens and resident aliens. Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate, and reported on Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons).

  3. A partnership (not publicly traded) must make installment payments of withholding tax on its foreign partners' share of effectively connected taxable income whether or not distributions are made during the year.

  4. The rules for making payments of amounts withheld under 26 CFR 1441 for Fixed, Determinable, Annual, Periodical (FDAP) income apply to the amount of 26 CFR 1446 or Treasury Regulation 1446 tax withheld by publicly traded partnerships.

  5. The withholding tax rate on a partner’s share of ECTI is generally the highest marginal tax rate applicable to that type of taxpayer. The highest rate is currently 35% for all types of foreign corporate partners, as established by the Jobs and Growth Tax Relief Reconciliation Act (JGTRR) of 2003 Omnibus Reconciliation Act of 1993 and 39.6% for all other foreign partners, as established by the American Tax Relief Act of 2012.

  6. Recent IRC § 1446 Regulations modified Form 8804 so withholding tax is determined by applying to the partner’s allocable share of ECTI the highest tax rate applicable to the partnership's four types on income, if the partnership receives valid documentation (e.g., a Form W-8BEN) from a partner to which these rates apply. They are:

    • Net Ordinary Income, which is taxed at 35%

    • Gains allocated to non-corporate partners, which is taxed at 28%

    • Unrecaptured section 1250 gains allocated to non-corporate partners, which is taxed at 25%

    • Qualified dividend income and net long-term capital gains (including net section 1231 gains) allocable to non-corporate partners, which is taxed at 15%

  7. Form 8804 is due on or before the 15th day of the fourth month after the close of the partnership's taxable year. However, if the partnership keeps its books and records outside of the United States and Puerto Rico (This is indicated by a checkbox in the upper right corner of Form 8804), then the Return Due Date (RDD) is the 15th day of the sixth month after the close of the partnership's taxable year. Therefore, a calendar year return would be due April 15th, or June 15th, respectively.

3.22.15.1.1.1  (01-01-2014)
Form 8813 Background - Partnership Withholding Tax Payment Voucher (Section 1446)

  1. Form 8813, Partnership Withholding Tax Payment (Section 1446) is the form used by the partnerships to make their quarterly installment payments. The four installment payments must be made with Form 8813 by the 15th day of the 4th, 6th, 9th and 12th months of the tax year, unless the payment is made through Electronic Federal Trust Payment System (EFTPS) or otherwise modified by published guidance. Effective 01/01/2004, all Form 8813 payments made for tax periods ending December 31, 2004, and subsequent, began to be processed to the Business Master File (BMF).

3.22.15.1.1.2  (01-01-2014)
Form 8804-C Background - Certificate of Partner-Level Items to Reduce Section 1446 Withholding

  1. A foreign partner must use Form 8804-C to provide a certification to a partnership under 26 CFR 1.1446-6 to reduce or eliminate the 1446 tax the partnership must withhold and pay on ECTI allocable to the foreign partner. The foreign partner uses Form 8804-C to certify to the partnership that it meets all the requirements of the regulations, and represents that the information provided, including filing requirements, is true, correct, and complete.

3.22.15.1.1.3  (01-01-2014)
Form 8804 (SCH A) Background - Penalty for Underpayment of Estimated Section 1446 Tax by Partnerships

  1. Partnerships that have effectively connected taxable income (ECTI) allocable to foreign partners use Schedule A (Form 8804) to determine:

    • Whether they are subject to the penalty for underpayment of estimated tax and, if so,

    • The amount of the underpayment penalty.

  2. Generally, the partnership does not have to file this schedule because the IRS will figure the amount of the penalty and notify the partnership of any amount due. However, if the partnership completes this form and attaches it to Form 8804, then the penalty calculated by the taxpayer will be assessed.

  3. Generally, a partnership is subject to the penalty if it did not timely pay in installments, at least the smaller of:

    1. The tax shown on line 5f of its 2013 Form 8804 or,

    2. The total section 1446 tax that would be due for 2012, computes using the ECTI allocable to foreign partners for 2012 , but without regard certificates to partners submitted on Form 8804-C. However, only on lines 4a, 4e, 4i, 4m, of its 2012 Form 8804 is at least 50 percent (%) of the sum of the amounts shown on lines 4a, 4e, 4j, 4m and 4q shown on its 2013 Form 8804 and the 2012 tax year was for a full 12 months.

3.22.15.1.1.4  (01-01-2014)
Form 8805 Background - Foreign Partner’s Information Statement of Section 1446 Withholding Tax

  1. Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, is filed for each foreign partner to show the amount of effectively connected taxable income allocated, and the total tax credit allowed to a foreign partner.

  2. Two types of Form 8805 may be attached to Form 8804.

    • Form 8805 attached to substantiate the withholding claimed on Form 8804 Line 6b. This type of Form 8805 shows the partnership entity information on Lines 1 and 2. See Figure 3.22.15-6a.

    • Form 8805 reflecting the payments generally claimed on Form 8804 Line 6a. This type of Form 8805 shows the partnership entity information on Lines 5 and 6. See Figure 3.22.15-6b.

  3. The Form 8805 matching the second description in paragraph (2) above (2nd bullet) is detached from Form 8804 by Code and Edit and forwarded to Batching and Numbering for assignment of its own Document Locator Number (DLN). See IRM 3.21.25.16 (2), International Returns and Documents Analysis - Miscellaneous Tax Returns.

3.22.15.2  (01-01-2014)
♦Restructuring and Reform Act of 1998, Section 3705(a) - IRS Employee Contacts♦

  1. Background: The Restructuring and Reform Act of 1998, Section 3705 provides identification requirements for all IRS employees working tax related matters.

  2. IRS employees are required to give their name and unique identification number during taxpayer telephone, face to face, and written 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. Contact Procedures are contained in the following eight paragraphs.

  4. All IRS employees, in the field, and national office, 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:

    • Your title (e.g., Mr., Mrs., Ms., Miss)

    • Your last name

    • Your Identification Card (badge) Number

  5. All correspondence must include a telephone number where the taxpayer’s question can be answered. In addition, manually generated and handwritten correspondence must include:

    • Your title (e.g., Mr., Mrs., Ms., Miss)

    • Your last name

    • IDRS, letter system, or ID card (badge) number

  6. 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 ID card (badge) number must be used.

  7. When a taxpayer requests to speak with a specific employee who previously handled the 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.

  8. 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.

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

  10. It is not necessary to repeat the ID card number (badge) 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) their ID card (badge) number on the first contact.

  11. When contacting taxpayers by telephone, you must be sure you are speaking with the taxpayer or authorized representative before disclosing tax information. See IRM 21.1.3.2.3, Required Taxpayer Authentication and IRM 21.1.3.2.4, Additional Taxpayer Authentication. Also, before leaving a message on a taxpayer’s answering machine, review IRM 11.3.2.6.1, Leaving Information on Answering Machines/Voice Mail.

3.22.15.3  (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.

3.22.15.3.1  (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 "Policy/Procedures/Guidance."

3.22.15.4  (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 tax 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/Voice Mail." 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.

3.22.15.5  (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 Power of Attorney (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,Introduction to Disclosure through IRM 11.3.40,Disclosure Involving Trust Fund Recovery Penalty Assessments.

3.22.15.6  (01-01-2014)
♦Refund Returns 180-Day Jeopardy/Million Dollar Refunds♦

  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 non-refund 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 Action Code "3" .

    2. Remove return from pack of work.

    3. Attach Form 4227, and check off "Rejects" . Write in the remarks area "Manual Refund."

    4. Place return in a red folder and then place the folder on top of the batch cart.

    There is an amount on Line 6a, it cannot be computed using the 180-day rule. If the processing date is more than 20 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 Action Code "341" .

    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" for numbered and unnumbered returns.

    3. Give the return to the manager.

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

    2. Edit CCC "Y" to send the return to ERS.

3.22.15.7  (01-01-2014)
♦BMF Consistency♦

  1. The purpose of this initiative is to achieve consistency in the Business Master File (BMF) Error Resolution System (ERS) 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 Section.

  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.

3.22.15.7.1  (01-01-2014)
♦CADE 2♦

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

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

  3. The new BMF campus cycles are:

    1. Campus Cycle: Thursday -- Wednesday

    2. Master File Processing: Friday -- Thursday

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

    4. Unpostables: New available Tuesday; Closing Tuesday

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

    1. 01 Friday

    2. 02 Monday

    3. 03 Tuesday

    4. 04 Wednesday

    5. 05 Thursday

    Note:

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

  5. BMF transaction posting time-frames are outlined as follows:

    1. Transactions will be viewable using CFOL (Computer Files Online) command codes on Saturday following the weekly Master File processing run on Thursday.

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

    Note:

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

3.22.15.8  (01-01-2014)
General Error Register Guidelines

  1. The following general information can be used when correcting Form 8804 returns.

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

  3. All money amounts must be entered in U.S. dollars only.

  4. Round the filer's dollar and cents entry to the nearest whole dollar and edit the "rounded" amount above or to the left of the deleted entry.

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

3.22.15.8.1  (01-01-2014)
Error Register

  1. A listing of documents on which the transcribed data failed one or more of the consistency, math verification, or validity tests in the computer program.

  2. The register is made up of sections and fields that are directly or indirectly related to the data sections and items transcribed and input to the computer.

3.22.15.8.2  (01-01-2014)
Loop Register

  1. An error or reject record that has had a correction record input but still contains an invalid or math error condition that requires correction.

3.22.15.8.3  (01-01-2014)
Section Error

  1. A portion or segment of a record containing data fields related to a specific schedule or portion of the source document.

  2. Each section is identified by a two digit numeric section number.

3.22.15.8.4  (01-01-2014)
Field Error

  1. A field is a specific item of information transcribed from a form, schedule, or other document.

  2. A section on the Error Register contains a certain number of fields which always appear, whether the field contains data or is blank.

  3. Each field is indicated by an Alpha Indicator (letter) which is located at the beginning of each field.

  4. A field is either FIXED (no field breaker) or VARIABLE (ends with a field breaker). See the next section for an explanation.

3.22.15.8.5  (01-01-2014)
Field Breaker

  1. A field breaker is a special symbol which indicates the end of a variable field.

    Note:

    A variable field is any field ending with a field breaker.

  2. The most common field breaker is a plus sign (+), although some fields can end with a minus sign (-), indicating a loss or a refund.

  3. The field breaker always appear at the end of the field whether it contains data or not.

  4. When changing the data in a field on the error register and you enter a positive field breaker, enter a comma (,) and not the plus sign (+).

  5. When changing the data in a field on the error register and you enter a negative field breaker, enter a pound (#) sign and not the minus sign (-).

  6. Do not line through a field breaker unless you are changing it to a different one.

    Example:

    You would not line through a plus sign and enter a comma above it; however, you would only line through the data in the field and leave the field breaker alone.

  7. When a section is added to the error register, only the fields which contain data are actually entered onto the register. The field breakers used would be the comma and/or pound sign, as required, but not the plus or minus sign.

  8. A few fields on the error register do not end with a field breaker, or any other indication of the end of the field. These are known as "Fixed" fields. Information for these fields are found in the IRM under each specific field explanation.

3.22.15.8.6  (01-01-2014)
Error Register Action Codes

  1. Action Codes are used to indicate that specific information is missing or the record is to be rejected from processing. The Action Code must contain sufficient detail to indicate if correspondence is to be sent to the taxpayer or the specific in-house research or action required.

  2. Only one Action Code may be entered in any one section of the Error Register to correct the section. The Action Codes valid for this program are, 0, 1, 2, 3, 4, 5, 6, 7, and 9.

    • If two incompatible action codes are required, the return must "loop" .

    • The definitions and rules of usage for the following Action Codes apply to the Error Register Correction Procedures

3.22.15.8.6.1  (01-01-2014)
Action Code "0"

  1. Action Code "0" accepts the taxpayers or tax examiners figures.

  2. Enter to the left of Section "01" when the record is correct and the computer computation should be disregarded.

  3. Never use Action Code "0" unless the error register already contains the correct tax data.

  4. When Action Code "0" is used, no other Action Code is valid.

3.22.15.8.6.2  (01-01-2014)
Action Code "1"

  1. Action Code "1" indicates the taxpayer's math error is above tolerance.

  2. Action Code "1" is entered to the left of Section 01 with a Taxpayer Notice Code (TPNC) to indicate a math error made by the taxpayer.

    • Enter Action Code "1" when the data in a record has been transcribed correctly, but the taxpayer made an error on the return and the computer's tax computation should be accepted by the Master File

    • All taxpayer entries have been transcribed correctly but the total tax due or overpayment is in error

  3. Action Code "1" must be followed by a valid TPNC for the type of return and correctly advises the taxpayer of the reason for the error. Use a two-digit numeric code (See IRM 3.22.15.20.16) when a math error is present which affects the tax liability or settlement (Balance Due or Refund) amounts. Enter this code to the right of AC "1" , preceded by a hyphen (e.g. 1 - 01).

    Note:

    The maximum number of TPNCs allowed to be entered are three (3). For example: 01, 02, 03.

3.22.15.8.6.3  (01-01-2014)
Action Code "2"

  1. Action Code "2" is used only in the Rejects Unit.

    Reminder:

    No other action code can be with Action Code "2" .

  2. Enter to the left of Section "01" .

  3. Action Code "2" must be used with reject designator;

    • D – Delete (voids) record

    • N – Re-number

    • R – Re-input (with Form 3893 - Re-entry Document Control)

      Note:

      If it is necessary to re-number a return on LOOP, use Action Code "9" to bring the record back to RAW (reject) status, then have it re-numbered.

  4. "D" and "R" can be used on Rejects Loop Register.

3.22.15.8.6.4  (01-01-2014)
Action Code "3"

  1. Use Action Code "3" to reject an unprocessable or Non-ADP document.

    Reminder:

    When using Action Code "3" , do not use any other Action Code.

  2. Enter to the left of Section "01."

  3. This code can be used only by the Service Center Replacement System (SCRS) Unit to send a return to the Rejects Unit. It cannot be used on the rejects register.

3.22.15.8.6.5  (01-01-2014)
Action Code "4"

  1. Use Action Code "4" to delete any section of a record when the section is not required.

    Example:

    DO NOT USE Action Code "4 " in Section "01" of a record.

  2. Enter it to the left of the section that needs to be deleted.

  3. Action Codes "4" , "5" and "6" may be used on the same Error Register, but only in different sections.

  4. If a section appears on the Error Register but contains no significant data:

    • It is not necessary to delete the section, unless entering CCC "G" .

    • The section automatically deletes when the record posts.

      Note:

      Do not use Action Code "4" to delete a (computer-generated) section with all fields blank, which shows an asterisk (*) before the section number. If no data is to be added to a field in this section, ignore it. If no other correction is required to the record, use Action Code "7" to clear it. Using Action Code "4" with such a section results in an invalid correction attempt (AA) on the Loop.

3.22.15.8.6.6  (01-01-2014)
Action Code "5"

  1. Action Code "5" is used to:

    1. Add a missing section to the record.

    2. Use it to add a missing section required to be present, but which has not printed on the Error Register.

      Exception:

      DO NOT USE Action Code "5" in Section "01" of a record

  2. Enter to the left of a section that needs to be added.

  3. When adding a section,

    1. Enter only the fields which have significant data

    2. Enter the Alpha Field Designation and the appropriate field breakers for each field entered (e.g.: "5 06A1000," Action Code "5" , Section 06, field A, positive amount 1000)

  4. Action Codes "4" , "5" and "6" may be used on the same Error Register, but only in different sections.

3.22.15.8.6.7  (01-01-2014)
Action Code "6"

  1. Use Action Code "6" to indicate that at least one field in the section requires correction.

  2. This code is entered to the left of the section number.

  3. There is no limit to the number of sections which can accept Action Code "6" on an error record, or to the number of fields in a section that can be corrected.

    Note:

    Correct as many fields as possible with Action Code "6" on each correction run.

  4. When Action Code "6" is used on the error register, at least one field in the section must be corrected (if the "6" is found not to be needed, erase it from the register).

    1. Line through the erroneous data following the field designator.

    2. Enter the correct data above the lined-through data, changing the field breaker only if it is to be changed also (if not do not line through the field breaker).

    3. Because a Fixed field has no field breaker, unused spaces must be accounted for. This affects only the name control (other fixed fields either must be present in full or cannot be corrected). See the instructions under the various fixed fields for more information.

  5. If any transcription entry is wrong, illegible, on the wrong line, or on an attachment, do the following:

    1. Enter the information on the applicable line on the return (or arrow up or down to the correct line, if possible)

    2. Enter the information into the correct field on the Error Register.

      Note:

      If the section containing the field is already on the register, use Action Code "6" to enter the data into the field. If the section containing the required field is not on the register, use Action Code "5" to add the section to the record and enter the data into the required field. Action Codes "5" and "6" cannot be used for the same section on the same correction run.

  6. Action Codes "4" , "5" and "6" can all be used on the same record, but only in different sections.

3.22.15.8.6.8  (01-01-2014)
Action Code "7"

  1. Use Action Code "7" to indicate that the data on the error register is correct and no action is necessary.

    Reminder:

    When Action Code "7" is used, no other Action Code is valid.

  2. Enter to the left of Section "01."

  3. The most common use of Action Code "7" is on Loop when there is the "AA" (invalid correction attempt) on the top line of the error record. Not every invalid correction attempt made by Transcription appears as an error on the error register. When the "AA" appears, examine the fields in the record and if no error is seen, use the Action Code "7" .

  4. Action Code "7" will not clear a math error condition.

    Note:

    If the computer cannot do the computation, use Action Code "0" .

3.22.15.8.6.9  (01-01-2014)
Action Code "9"

  1. Action Code "9" is used only on Loop reject registers. It is not valid on RAW rejects registers or on SCRS error registers at all.

    Reminder:

    No other action code can be used with Action Code "9" .

  2. This code is entered to the left of Section 01.

  3. The Action Code "9" is used to bring a loop reject record back to the RAW (called re-reject) status. This is required because some operations cannot be done on a loop register, such as having a document re-numbered, sending a document to another area in the campus or corresponding to a taxpayer.

    Note:

    It is possible to void (2-D) or re-input (2-R/Form 3893) on Loop. The Action Code "9" is not needed in these circumstances.

3.22.15.9  (01-01-2014)
Unprocessable Conditions

  1. A return must contain the following specific items before it is considered processable. If they are not present and cannot be found on the return or its' attachments, then ERS must research IDRS, to locate the information in order to make the return processable.

    • An Employer Identification Number (EIN)

    • A legible name (for the Name Control)

    • A valid Tax Period (200412 and subsequent)

  2. Conditions which make a document unprocessable are:

    • The name is so illegible or incomplete that the Name Control cannot be determined

    • The EIN contains other than nine numeric characters and cannot be perfected from information on the return or attachments

    • The document has more than one ElN

    • The filer has stated they have combined information for more than one tax period or more than one type of return

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

    • The document has been mis-blocked

    • The return is unsigned

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

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

  3. When required, use IDRS letter 3104C (FIRPTA and Foreign Partnership Withholding Tax Return Processing and Unsubstantiated Refundable Cr) to correspond for the information.

3.22.15.9.1  (01-01-2014)
Pre-Master File Processing of Form 8804

  1. Reject any Form 8804 filed for tax period ending November 30, 2004, (200411) and prior.

  2. Rejection Action:

    1. Prepare Form 4227, Intra-Campus Reject or Routing Slip , indicating the reason for rejection.

    2. Attach Form 4227 with explanation "Non Master File (NMF) Form 8804 Return Tax Period 200411 and Prior" to the face of the document.

    3. Complete Form 3499, "Informational Transmittal," and transship to the Accounting Branch at the Cincinnati Submission Processing Center (CSPC):

      Internal Revenue Service
      Cincinnati, Ohio 45999-0005

3.22.15.9.2  (01-01-2014)
Disposition of Unnumbered Edited Returns

  1. Forward any unnumbered Forms 8804 found in a block to Receipt and Control for batching and numbering. Documents withdrawn from processing:

    • Must be forwarded to the appropriate Campus activity for the required action, when necessary.

    • This includes items detached from other processable documents which require correspondence, accounting or other action.

3.22.15.10  (01-01-2014)
General Correspondence Procedures

  1. All taxpayer correspondence is governed by the guidelines in IRM 21.3.3, Incoming and Outgoing Correspondence/Letters . Correspondence includes all written communication from a taxpayer or their representative, excluding tax returns, whether solicited or unsolicited, and includes:

    • Responses to IRS requests for information or data

    • Requests for information accompanying tax returns

    • Annotated notice responses

    • Other correspondence providing additional information or disputing a notice

  2. In all instances where you are instructed to correspond for missing information on Form 8804, completely examine the return to ensure all missing information is requested in the same letter. Initiate correspondence one time only.

3.22.15.10.1  (01-01-2014)
Processing Taxpayer Correspondence

  1. Enter a Correspondence Received Date (CRD) on the 4th line of the "For IRS Use Only" box on Form 8804 when correspondence is received. Enter the "CRD" date (in YYYYMMDD format) except in the following situations:

    • The reply from the taxpayer was received before the due date of the return

    • The correspondence was required because of an IRS processing error (e.g., a request for an attachment lost during processing)

    Note:

    If there is no reply enter CCC 3.

3.22.15.10.2  (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. Follow the instructions below for processing "CIS" returns:

    If... And... Then...
    The "CIS" return has a Form 13596 (Reprocessing Returns) 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.

3.22.15.11  (01-01-2014)
Attachments Related to Form 8804

  1. Use the following instructions to process Form 8804.

    Note:

    Examine all attachments to the return being processed and take action as required by the attachment.

  2. When an attachment has an affect on the document being processed leave it attached, unless a specific instruction requires it to 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.

  3. Leave any approved extensions (Form 7004 - Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns ) to the filer's income tax return attached to the return.

  4. If a Form 8813 (Partnership Withholding Tax Payment Voucher -- Section 1446) is attached to Form 8804, then place an "X" on the entire Form 8813, and leave it attached to Form 8804.

  5. Form 8804 is also used to transmit Form 8805 to the IRS. Form 8805 is sometimes detached from the Form 8804 and forwarded to Batching and Numbering for processing. See IRM 3.22.15.1.1.4 before detaching any Form 8805.

    Reminder:

    When required, Code and Edit detaches the Form 8805. However, there will be an occasion or two when Service Center Replacement System (SCRS)/Rejects will have to detach Form 8805 and route it to Batching and Numbering for processing under program code 11340.

  6. If Form 8804 is received with remittance attached, immediately forward the return and the remittance to the work leader.

  7. Leave a tax deposit "MEMORANDUM RECEIPT" attached to the return.

  8. However, if the taxpayer has requested an attachment be returned, then photocopy the attachment and attach the photocopy to Form 8804.

  9. Enter Computer Condition Code "F" and send the attachment to the Entity Control function if the taxpayer indicates on an attachment that Form 8804 is not required to be filed for future tax years.

  10. If the taxpayer submits a return other than Form 8804 , but indicates Form 8804 should be filed, research IDRS using CFOL Command Codes or ENMOD

    Note:

    If a Form 8804 filing requirement is not found, send the return to the Entity Control function for update of the filing requirement.

  11. When the corrected return is received from Entity Control:

    1. Convert the return to the proper form.

    2. Process as required.

  12. If the taxpayer attaches a Form 2220 (Underpayment of Estimated Tax by Corporations) , Form 8804-W (Installment Payments of Section 1446 Tax for Partnerships) , or a Form 8804 Schedule A to their Form 8804 tax return to pay an estimated tax penalty, leave it attached.

3.22.15.12  (01-01-2014)
Attachments Unrelated to Form 8804

  1. Requests for adjustment of another return:

    1. Remove any attachment requesting an adjustment (ADP or non-ADP)

    2. Forward to the BMF International Accounts Management Department for action.

      Note:

      "If the taxpayer inquiry meets TAS criteria and you cannot resolve it the same day, complete Form 911 and refer to your local Taxpayer Advocate." See IRM 3.22.15.3.

  2. If the attachment does not include the taxpayer's name, address or Taxpayer Identification Number (TIN), enter this information.

  3. If the taxpayer writes a question or requests assistance on the return itself, check with your manager.

  4. If the attachment requests a Form 8813, Partnership Withholding Tax Payment Voucher (Section 1446), and its the only issue mentioned:

    1. Remove the attachment requesting the form.

    2. Forward to the BMF International Accounts Management Branch. Refer to paragraph (1) b) above for address.

    3. lMPORTANT: Leave an " Action Trail" on the Form 8804, annotating the attachments removed from the Form 8804.

  5. If a tax authorization is attached to correspondence (Form 2848 or Form 8821), 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. Other Unrelated Attachments:

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

    2. Route to the proper function for necessary action.

  7. Always include the following information when forwarding documents to other functions:

    • Name and address of the taxpayer

    • Taxpayer Identification Number

    • Received Date or the words "TIMELY FILED "

    • Tax Period, type of document, and DLN from which detached

    • Action required to be taken

  8. If an attachment is removed because the majority of the information is unrelated to the Form 8804 being processed:

    1. Photocopy the attachment,

    2. Attach it to Form 8804,

    3. Leave an "Action Trail," and

    4. Route the attachment to the appropriate function.

3.22.15.13  (01-01-2014)
Special Returns

  1. Use the following instructions when processing special or nonstandard returns for Form 8804.

3.22.15.13.1  (01-01-2014)
Early-Filed Returns

  1. Early-filed returns must be held for processing at the beginning of the appropriate processing year.

  2. An early-filed Form 8804 for Tax Period 201312 (filed before January 1, 2014), must be held for processing in 2014.

3.22.15.13.2  (01-01-2014)
Fiscal Year Returns

  1. Form 8804 can be filed as a fiscal or calendar year return. Generally, the tax period ending for Form 8804 will be the same as the tax period ending for Form 1065, U.S. Return for Partnership Income. A fiscal year return will have the dates written at the top of page 1.

  2. If the tax period ending month does not agree with the month ending on INOLE, then:

    • The tax period will underprint, or

    • The return will go unpostable (UPC 307)

  3. If the Fiscal year ends prior to 200412, the return must be renumbered to NMF. See IRM 3.22.15.9.1.

  4. Follow instructions under Field 01-B to resolve tax period errors. See IRM 3.22.15.20.2.

  5. Partnerships whose fiscal years began in 2012 apply the tax rates in effect in 2012 for purposes of determining the amount of section 1446 withholding tax that the partnerships must pay. This rule applies even if the partnership fiscal year ends in 2013. See Notice 2013-30.

3.22.15.13.3  (01-01-2014)
Delinquent Returns

  1. A return is normally delinquent if it is not received on or before the return due date.

    Note:

    However, accept the return as timely if received within the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM 3.10.72, Receiving, Extracting, and Sorting or IRM 3.22.15.20.13, in this IRM for additional instructions.

  2. Accept a return as timely if:

    1. The return was mailed in time to reach the Service through normal handling within the legal period.

    2. Through no fault of the taxpayer, it was not delivered.

  3. Consider a return timely:

    1. If it appears the Post Office might have sent it to another government agency in error (i.e., SSA - Social security Administration)

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

    3. However, if the return was erroneously addressed to another agency, it will be date stamped with the current date when the IRS receives it

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

  5. See IRM 3.22.15.20.13 (3) for information on the due date of Form 8804.

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

    • The postmark date stamped on the envelope as the date of delivery

    • The document as timely if the postmark date falls on or before the prescribed date for filing the return

  7. If the return is truly delinquent, check the return for attachments for an explanation of late filing, unless a pre-computed delinquency penalty has been shown. If reasonable cause for late filing is found, enter the appropriate Computer Condition Code "D or R" .

3.22.15.13.3.1  (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 "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. If Form 13133 is attached, enter the Computer Condition Codes (CCC) that are checked on the form for Form 8804.

      Note:

      Enter CCC "R" when there is an indication on the return, such as "DO NOT ASSESS FAILURE TO FILE PENALTY" and the appropriate checkbox is not marked.

3.22.15.13.3.2  (01-01-2014)
♦IRC § 6020(b) - Prepared by Collection♦

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

  2. These returns are identified by the notation: "PREPARED AND SIGNED UNDER THE AUTHORITY OF IRC § 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 no Received Date is present per the Compliance Function, follow the normal procedures for editing the Received Date.

    2. The returns or an attached Form 13496, "IRC § 6020(b) Certification Form " must be signed by Compliance. If not, route to Compliance using Form 4227.

    3. Enter CCC "4" .

      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, enter CCC "3" and continue processing.

    5. Enter 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.


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