3.22.19  Foreign Trust System

Manual Transmittal

October 24, 2014

Purpose

(1) This transmits revised IRM 3.22.19, International Error Resolution - Foreign Trust System.

Material Changes

(1) IRM 3.22.19 All Figures and Exhibits updated.

(2) IRM 3.22.19 Various editorial changes throughout the IRM.

(3) IRM 3.22.19.1.2(2) Updated paragraph.

(4) IRM 3.22.19.1.2(5) Added form name to Form 7004 reference.

(5) IRM 3.22.19.1.5 “BMF Identification (ID) Theft”, For BMF Consistency - Added information pertaining to BMF Identification (ID) Theft.

(6) IRM 3.22.19.1.8 Updated section for Individual Taxpayer Identification Number (ITIN).

(7) IRM 3.22.19.1.16(3) Updated paragraph, titled forms.

(8) IRM 3.22.19.1.16(4) Note revised for clarity.

(9) IRM 3.22.19.1.16.1(1) Added missing Paragraph.

(10) IRM 3.22.19.1.16.1(1) Changed Note to Exception.

(11) IRM 3.22.19.1.16.1(2) Revised 1st Note; Deleted 2nd Note, information not required.

(12) IRM 3.22.19.1.17(1) Second Note bullet list, first bullet revised.

(13) IRM 3.22.19.1.17(2) Revised bullet list.

(14) IRM 3.22.19.1.17.1(1)b Revised for clarification.

(15) IRM 3.22.19.1.18.2(3) Bullet list revised to remove OVDI/FAQ18 and add information for Reasonable Cause Statements.

(16) IRM 3.22.19.1.18.2(4) Revised to include information for automatic extension for those residing overseas.

(17) IRM 3.22.19.2.2.4(1) Revised for clarity.

(18) IRM 3.22.19.6 Updated Chart with new field "Tax Form Filed" .

(19) IRM 3.22.19.6.1(5) Revised for correction.

(20) IRM 3.22.19.6.1(5) Caution Removed.

(21) IRM 3.22.19.6.7(3) Added Note to table reference to Computer Condition Code 9.

(22) IRM 3.22.19.6.11(3) If/Then Chart reworded for clarity.

(23) IRM 3.22.19.6.14(4) Added paragraph listed valid Form numbers for this field. All subsequent paragraphs renumbered.

(24) IRM 3.22.19.6.14(5) Bullet list updated to reflect new information in (4).

(25) Updated the Field Designators in the following sections:
IRM 3.22.19.6.14
IRM 3.22.19.6.15
IRM 3.22.19.6.16
IRM 3.22.19.6.17
IRM 3.22.19.6.18
IRM 3.22.19.6.19
IRM 3.22.19.6.20
IRM 3.22.19.6.21
IRM 3.22.19.6.22
IRM 3.22.19.6.23
IRM 3.22.19.6.24
IRM 3.22.19.6.25

(26) IRM 3.22.19.6.19(1) Note Revised for clarification.

(27) IRM 3.22.19.16(1) Note corrected list of field names.

(28) IRM 3.22.19.22.11 Section updated with gift amount for 2014 from $15,102 to $15,358.

(29) IRM 3.22.19.25(1) Added title to IRM 3.12.38 reference.

(30) IRM 3.22.19.27.1(2) Revised for clarification.

(31) IRM 3.22.19.27.2(4) Note removed and information added to paragraph for clarity.

(32) IRM 3.22.19.27.6(2) Updated to include Computer Condition Code 3 and 9.

(33) IRM 3.22.19.27.6.5 New subsection added for Computer Condition Code N information.

(34) IRM 3.22.19.27.6.9 New subsection added for Computer Condition Code 3.

(35) IRM 3.22.19.27.6.10 New subsection added for Computer Condition Code 9.

(36) IRM 3.22.19.27.7 New section added for Field 01-CRD, Correspondence Received Date.

(37) IRM 3.22.19.35.1(1) Updated for clarity.

(38) IRM 3.22.19.35.2(1) Updated for clarity.

(39) IRM 3.22.19.35.3(1) Updated for clarity.

(40) IRM 3.22.19.35.4(1) Updated for clarity.

(41) IRM 3.22.19.35.5(1) Updated for clarity.

(42) IRM 3.22.19.35.6(1) Updated for clarity.

(43) IRM 3.22.19.35.7(1) Updated for clarity.

(44) IRM 3.22.19.35.8(1) Updated for clarity.

(45) IRM 3.22.19.35.9(1) Updated for clarity.

(46) IRM 3.22.19.35.11 New subsection added for new Error Code 034. Subsequent subsections renumbered.

(47) IRM 3.22.19.35.12 New subsection added for new Error Code 073. Subsequent subsections renumbered.

(48) IRM 3.22.19.35.13 New subsection added for new Error Code 995. Subsequent subsections renumbered.

Effect on Other Documents

IRM 3.22.19 dated November 8, 2013 (effective 01-01-2014) is superseded. This IRM also incorporates the following Interim Procedural Updates (IPU): 14U0386 issued 02-27-2014; 14U0284 issued 2/7/2014; 14U0292 issued 2/10/2014.

Audience

Wage and Investment Error Resolution employees of OSPC Only

Effective Date

(01-01-2015)

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

3.22.19.1  (01-01-2015)
Overview

  1. This IRM provides error resolution instructions for correcting Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts on the Error Registers and Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner on the Error Resolution System (ERS).

  2. Form 3520 is processed under:

    • File Location Code (FLC) 60 (Ogden Submission Processing Campus (OSPC))

    • Tax Class 3

    • Document (Doc). Code 83

    • Blocking Series is 000-999

    • Master File Tax (MFT) Code 68

    • Program Code 12310

  3. Form 3520-A is processed under:

    • File Location Code 60 (OSPC)

    • Tax Class 3

    • Doc. code 82

    • Blocking Series 000-999

    • MFT Code 42

    • Program Code 12320

3.22.19.1.1  (01-01-2015)
Form 3520 Background

  1. Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is the annual return used to report:

    • Transactions with foreign trusts ( i.e., transfers to or distributions from foreign trust)

    • Ownership of a foreign trust by a U.S. person and/or

    • Gifts or bequests received from foreign persons

  2. Form 3520 is required to be filed by a "U.S. Person." The term "U.S. Person" includes not only individuals (U.S. citizens or resident aliens), as the term implies, but also corporations, partnerships, trusts, estates, foundations, etc.

  3. Form 3520 is generally required when a U.S. Person:

    • Created a foreign trust during the tax year.

    • Transferred money or other property to a foreign trust during the tax year.

    • Held a qualified obligation (loan) with a foreign trust which was issued after August 20, 1996.

    • Was a U.S. owner of all or part of a foreign trust during the tax year.

    • Received a distribution from a foreign trust during the tax year.

    • Borrowed money from a foreign trust during the tax year.

    • Received the uncompensated use of trust property from a foreign trust after March 18, 2010.

    • Received a gift or inheritance from a foreign person after August 20, 1996.

  4. Form 3520 is filed and processed at the OSPC.

  5. There is no separate extension request for Form 3520. An extension is automatically granted for Form 3520 when the taxpayer files an extension for the income tax return.

  6. Any Form 3520 filed for tax periods ending before 199812 will be forwarded to the Document Retention Branch. Attach Form 4227 to the front of the return with the notation "Tax Year prior to 199812" .

3.22.19.1.1.1  (01-01-2015)
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.

3.22.19.1.2  (01-01-2015)
Form 3520-A Background

  1. Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner is the annual information return of a foreign trust with a U.S. owner. It is used to set forth a full and complete accounting of the:

    • Trust's activities

    • Trust's operation

    • Other relevant information

  2. In addition to filing Form 3520, the U.S. owner is responsible for ensuring that the trust files a Form 3520-A to the IRS and provides certain relevant information annually to the U.S. Owners(s) if any, and U.S. beneficiaries of the trust who receive a distribution in that year. Additionally, the U.S. owner is responsible for filing a substitute Form 3520-A if the foreign trust does not file Form 3520-A. A substitute Form 3520-A would be attached to the U.S. Owner's Form 3520.

  3. Form 3520-A is filed and processed at the OSPC.

  4. The due date for Form 3520-A is the 15th day of the third month following the end of the foreign trust's tax year. The return can be a Fiscal or Calendar year return.

  5. Unlike the Form 3520, there is a separate extension request for Form 3520-A. Form 7004,Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, must be filed to request an extension of time to file for Form 3520-A.

  6. Any tax arising from an inclusion of an item of income reported on Form 3520-A must be paid with the tax return of the owner (i.e., Form 1040, Form 1120, Form 1041, Form 1065, etc.).

3.22.19.1.3  (01-01-2015)
♦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

    • Integrated Data retrieval System (IDRS), letter system, or identification (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.

3.22.19.1.4  (01-01-2015)
♦Taxpayer Advocate Service (TAS)♦

  1. Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, TAS Case Criteria) or has Form 911 attached and you can't resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. "Same Day" cases include cases you can completely resolve 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 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.

3.22.19.1.4.1  (01-01-2015)
♦TAS Service Level Agreements (SLA)♦

  1. The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage and Investment (W I) Division, Small Business and Self-Employed (SB/SE) Division, Tax Exempt and Government Entities (TE/GE) Division, Criminal Investigation (CI), Appeals and Large Business and International (LBI) 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."

3.22.19.1.5  (01-01-2015)
♦BMF Identification (ID) Theft♦

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

3.22.19.1.6  (01-01-2015)
♦Use of FAX for Taxpayer Submissions♦

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

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

  3. 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/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.

3.22.19.1.7  (01-01-2015)
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 Command Code (CC) CFINK for a 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,Disclosures Involving Trust Fund Recovery Penalty Assessments .

3.22.19.1.8  (01-01-2015)
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.

3.22.19.1.9  (01-01-2015)
♦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.

3.22.19.1.9.1  (01-01-2015)
♦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.

    Note:

    The CADE Master File, as it existed from 2004 – 2011, will transition from Production and be retired at the end of 201152.

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

  3. With CADE 2 there will be changes to campus cycles which will begin with cycle 201201. 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. BMF transaction posting time-frames are outlined as follows:

    1. Transactions will be viewable using CFOL 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.

3.22.19.1.10  (01-01-2015)
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 Error 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.

3.22.19.1.11  (01-01-2015)
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.

3.22.19.1.12  (01-01-2015)
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.

3.22.19.1.13  (01-01-2015)
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 IRM 3.22.19.1.13 for an explanation.

3.22.19.1.14  (01-01-2015)
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 that ends 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 will 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 will be found in the IRM under each specific field explanation.

3.22.19.1.15  (01-01-2015)
Error Register Action Codes

  1. Action codes are used to indicate that specific information is missing or that 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 that section. The Action Codes valid for this program are, 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.

    Action Code # Action Purpose Location May use more than one code
    2 Rejects use only Used with Reject Designators D, R or N To the left of Section 01 No
    3 To reject a record from the Error Resolution System To reject a document that is unprocessable To the left of Section 01 No
    4 To delete a section from the error register Whenever a section is not needed To the left of the section being deleted Yes with AC
    5 To add a section to the Error Register When data is present for a section but has not been entered To the left of the section being added Yes with AC
    6 To correct data fields with a section When data is missing or incorrect in a field To the left of the section being corrected Yes with AC
    7 To clear the Error Register Whenever there is a validity check and no correction is necessary To the left of Section 01 No
    9 Rejects use only To put a Loop Register into Re-reject (RAW) Status To the left of Section 01 on a reject loop No

3.22.19.1.15.1  (01-01-2015)
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)

      Note:

      If it is necessary to re-number a return on LOOP, it will be necessary to 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.

3.22.19.1.15.2  (01-01-2015)
Action Code "3"

  1. Action Code "3" to reject a document that is unprocessable or Non-ADP (Automated Data Processing).

    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.

3.22.19.1.15.3  (01-01-2015)
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 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 Computer Condition Code (CCC) "G."

    • The section will be automatically deleted when the record post.

      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 will result in an invalid correction attempt (AA) on the Loop.

3.22.19.1.15.4  (01-01-2015)
Action Code "5"

  1. Action Code "5" is used to:

    1. Add a missing section to the record.

    2. Therefore, use it to add a missing section that is 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.

3.22.19.1.15.5  (01-01-2015)
Action Code "6"

  1. Action Code "6" is used to indicate that at least one field in that 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 will affect 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,

    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.

3.22.19.1.15.6  (01-01-2015)
Action Code "7"

  1. Action Code "7" is used to indicate that the data on the Error Register is correct and that 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 will appear as an error on the Error Register. When the "AA" appears, examine the fields in the record and if no error is seen, use Action Code "7."

3.22.19.1.15.7  (01-01-2015)
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. 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.

3.22.19.1.16  (01-01-2015)
General Correspondence Procedures

  1. Note:

    Only correspond to resolve primary EIN issue (question 1b)
    EXCEPTION: When corresponding for returns held in processing or tax payer reply, use the Letter 23C with the following open paragraph. (We are pleased to tell you that your information return(s) has been processed. No action is needed on your part. If you have any questions, please call Customer Service at 267-941-1000 between the hours of 6:00 a.m. and 11:00 p.m. EDT. This is not a toll-free number. )

    • "Exceptionalness" LB& I has approved correspondence with the taxpayer in areas other than primary EIN, use paragraphs B7gI in the 3653C Letter. All verbiage must be approved by LB&I. Letters to provide the taxpayer with a message that we have received prior correspondence and everything is well with their account, the following verbiage has been approved:≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. 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, including that which may accompany tax returns

    • Annotated notice responses

    • Other correspondence providing additional information or disputing a notice

  3. In all instances where you are instructed to correspond for missing information on Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, or 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner, completely examine the return to ensure that all missing information is requested in the same letter. Initiate correspondence one time only.

  4. Form 3520 only: Always correspond on IDRS Letter 3653C 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 and report their ownership of the foreign trust 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 and confirms 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.

3.22.19.1.16.1  (01-01-2015)
Processing Taxpayer Correspondence

  1. Initiate correspondence only for Primary EIN purposes (question 1b)

    Exception:

    Correspondence for returns held in processing or reply to taxpayer correspondence: Use 3563C Letter with the following open paragraph "We are pleased to tell you that your information return(s) has been processed. No action is needed on your part. If you have any questions, please call Customer Service at 267-941-1000 between the hours of 6:00 a.m. and 11:00 p.m. EDT. This is not a toll-free number."

  2. Enter a Correspondence Received Date (CRD) in the right margin next to "Service Center where U.S. persons income tax return is filed" question 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 that was lost during processing).

    Note:

    If there is no reply enter CCC "3" .

3.22.19.1.16.2  (01-01-2015)
♦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 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 or 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.

3.22.19.1.17  (01-01-2015)
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 will research IDRS, to locate the information in order to make the return processable.

    Note:

    All returns to be processed with CCC "R" until further notice.

    Note:

    If CCC "R" is missing from any rejected or held return it must be edited with CCC R before sending to post to suspend the CP 223 notice until further notice. We will force posting for anything else using not reply procedures.

    • An Employer Identification Number (EIN), SSN, or ITIN

    • A legible name (for the Name Control)

    • A valid Tax Period (199812 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, SSN, or ITIN 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 that 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

3.22.19.1.17.1  (01-01-2015)
Processing Attachments and Special Returns - Form 3520

  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. Before detaching, ensure that attachments contain a name, address, SSN, ITIN, or EIN and received date. Enter any missing information.

    3. Edit Action Trail(s) (e.g., 2848 DETACHED) in the lower left margin of the return.

  2. Form 3520 is:

    1. Required to be filed with the Ogden Submission Processing campus (OSPC) after December 31, 2006.

    2. Returns erroneously filed at other locations are to be forwarded to OSPC for processing.

  3. For procedures for processing unusual Form 3520 conditions, See IRM 3.22.19.1.18 on Special Returns.

3.22.19.1.18  (01-01-2015)
Special Returns

  1. Use the following instructions when processing special or nonstandard returns for Form 3520.

3.22.19.1.18.1  (01-01-2015)
Fiscal Year Returns

  1. Form 3520 can be filed as a fiscal or calendar year return. 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 Code (UPC 307).

  3. Follow instructions under Field 01D to resolve tax period errors. See IRM 3.22.19.6.4.

3.22.19.1.18.2  (01-01-2015)
Delinquent Returns

  1. A return is normally delinquent if it is not received on or before the return due date (including extensions, if an extension was filed for the taxpayer's income tax return).

  2. Accept a return as timely if received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Also accept a return as timely:

    • If the return was mailed in time to reach the IRS through normal handling within the legal period but, through no fault of the taxpayer, it was not delivered; or

    • If it appears that the Post Office might have sent it to another government agency in error (e.g., Social Security Administration (SSA)); or

    • If delinquent return is secured by Exam

    • If the return has a Reasonable Cause Statement attached to the return ≡ ≡ ≡ ≡ ≡

    • If the original envelope bears a timely postmark or a timely date stamp by the other government agency; or

      Note:

      If the return was erroneously addressed to another IRS office it will be date stamped with their date. Use that date as the earliest IRS received date.

    • If it is received or mailed on the next workday when the last day for filing falls on a Saturday, Sunday, or legal holiday.

  4. The due date for Form 3520 is the same as the due date for the filer's income tax return, including extensions (or in the case of a decedent, the estate tax return). If the filer is an individual, then the due date for Form 3520 is the same as Form 1040, generally April 15 but consider whether an extension was filed for Form 1040. Also consider whether the individual is residing overseas, if so, the individual is entitled to an automatic 2-month extension without requesting an extension. As a calendar year taxpayer, the individual may have until June 15 to file his or her income tax return.

    Reminder:

    There is no separate extension form for the timely filing of a Form 3520.

  5. The filing of an extension to file Form 3520 is dependent upon the U.S. taxpayer filing an extension for their US income tax return, which extends automatically to the Form 3520.

    Example:

    An individual filing a Form 1040 return can request an extension of time to file their Form 1040 with Form 4868. An approved Form 4868 extension to file Form 1040, is also valid for filing Form 3520. A Form 4868 cannot be used to file for an extension request, for the SOLE purpose of obtaining an extension for filing Form 3520.

    Reminder:

    Unlike a Form 3520, a separate extension form for the timely filing of a Form 3520-A does exist, the taxpayer responsible for filing a Form 3520-A must file Form 7004 in order to obtain an extension for the filing of Form 3520-A.

  6. The due date for Form 3520-A is the 15th day of the 3rd month after the end of the trust tax year, generally March 15.

  7. When an additional day is allowed for filing the return the normal due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  8. If a return is delivered to the IRS after the date prescribed for filing, then;

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

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

3.22.19.1.18.3  (01-01-2015)
♦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 Cycle. The "Delinquent Return" box on Form 13133 should be checked.

3.22.19.1.18.4  (01-01-2015)
♦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 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 no Received Date is present per the Compliance Function, follow the normal procedures for editing the Received Date.

    2. Returns must be signed by Compliance Function representative. If not signed, 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 "U" and continue processing.

    5. Enter CCC "W" (Form 3520-A Only) 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.

  3. Perfect Form 3520 or Form 3520-A using the information on the return and its' attachments.

  4. If the return is otherwise unprocessable:

    1. Prepare Form 4227 to reject using Action Code "3," if Form 3520, or Action Code "360" (other routing) if Form 3520-A.

    2. Indicate the point of the error or unprocessable condition on Form 4227.

  5. Upon receipt, Rejects will contact the Collection function to identify the revenue officer/agent to be contacted, and then contact the responsible revenue officer/agent to acquire the information needed to complete the return.

3.22.19.1.18.5  (01-01-2015)
♦Collection Secured♦

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

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

    2. Correspond for conditions that cannot be processed (e.g., missing signatures, missing schedules, etc).

    3. Enter CCC "W" (Form 3520-A Only) 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.

  2. If the return is incomplete enter Action Code "3" (if Form 3520), or Action Code "360" (if Form 3520-A). Then delete the Document Locator Number (DLN) and route to Collection on a Form 3210 transmittal.

    If Then
    Form 3520 is incomplete
    1. Enter Action Code 3

3.22.19.1.18.6  (01-01-2015)
♦Examination Prepared♦

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

    Note:

    If return is noted as secured by exam, do not correspond Enter Action Code "3" for Form 3520 or Action Code "640" for Form 3520-A.

    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 enter CCC "3," attach Form 4227 and continue processing.

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

      Note:

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

    4. Enter CCC "W" (Form 3520-A Only) 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.

  2. If an unprocessable condition exists then:

    1. Prepare Form 4227

    2. Enter Action Code "3" for Form 3520 or Action Code "640" for Form 3520-A.

  3. Rejects will route the return back to Examination Branch after voiding the document using Action Code "2D for Form 3520 and Action Code 640 for F3520-A."

  4. When the return is a substitute return prepared by for Examination then Document 13133, Expedite Processing Cycle, will have been attached by Examination.

    1. These returns do not need to be cleared by the Statute Unit.

    2. Enter CCC "4" in Field 01G of Form 3520 or Field 01CCC for Form 3520-A.

3.22.19.1.18.7  (01-01-2015)
♦Examination Secured♦

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

    1. Enter the Computer Condition Codes that are checked on Form 13133.

    2. Enter CCC "W" (Form 3520-A Only) if the received date is more than 2 years 9 months after the Return Due Date. Do Not send to Statute Control function.

  2. If an unprocessable condition exists then:

    1. Prepare Form 4227.

    2. Enter Action Code "3" for Form 3520 or Action Code "640" for Form 3520-A.

  3. Rejects will route the return back to Examination Branch after voiding the document using Action Code "3." for Form 3520 or Action Code "640" for Form 3520-A.

3.22.19.1.18.8  (01-01-2015)
♦Frivolous Arguments♦

  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 Arguments.

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

    If... Then...
    The return meets any of the conditions identified as a frivolous return.

    Caution:

    If the return shows Action Code 331 or Action Code"3" and 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 or Action Code "3" in the lower left margin of the Form.
    Examination has selected the return as frivolous,

    Example:

    Indicated by an Action Code 331 or Action Code "3" 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:

    Returns having only zeros, no entries, are blank or indicate "None," "Not Liable," etc. with no evidence of a frivolous argument are not to be considered as frivolous returns.

3.22.19.1.19  (01-01-2015)
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    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

3.22.19.1.20  (01-01-2015)
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3.22.19.2  (01-01-2015)
Validity Errors

  1. Three general types of errors that will cause a record to print on the Error Register are:

    • Field Validity Errors

    • Section Validity Errors

    • Math/Consistency Errors

3.22.19.2.1  (01-01-2015)
Field Validity Errors

  1. These errors result when required data is missing, or when incorrect data is present.

  2. These errors are indicated by an asterisk (*) printed before the invalid field.

  3. An asterisk may also be printed before a field for verification purposes.

  4. Correction procedures:

    1. Compare the return entry with the Error Register field.

    2. Enter Action Code "6."

    3. Line out the incorrect field.

    4. Enter the correct data immediately above the lined-out data.

3.22.19.2.2  (01-01-2015)
Section Validity Errors

  1. These errors include:

    • Missing data

    • Extraneous data

    • Integrated Submission and Remittance Process (ISRP) errors

    • Terminus errors

3.22.19.2.2.1  (01-01-2015)
Missing Section Errors

  1. Missing Section Errors are caused by the transcription of an unnecessary section.

  2. These errors are indicated by one pound sign (#) preceding the section number.

3.22.19.2.2.2  (01-01-2015)
Extraneous Section Errors

  1. Extraneous Section Errors are caused by the transcription of an unnecessary section.

  2. These errors are indicated by one pound sign (#) preceding the section number.

3.22.19.2.2.3  (01-01-2015)
ISRP Errors

  1. ISRP Errors are caused when too many characters have been entered for a field.

  2. Extra characters are dropped when the data is converted to Error Register format.

  3. These errors are printed to the left of the Section Number and will be shown on the Error Register as described in (4), (5), (6) and (7) below:

  4. "#1" : Split screen transmission:

    • The Key Verifier attempted to change Check Digit.

    • The Key Verifier changed four or more digits of TIN.

    • The Original Entry operator entered required Section as "missing" .

  5. "#3" : Invalid Section ending point.

  6. "#4" : Invalid field length.

  7. "#5" : Questionable section. A section was entered twice or entered out of sequence by ISRP.

3.22.19.2.2.4  (01-01-2015)
Terminus Errors

  1. Terminus Errors are caused when a non-numeric character is entered in a numeric field or when the format of a section is incorrect.

  2. These errors are identified by two asterisks (**) printed to the left of the section number.

3.22.19.2.2.5  (01-01-2015)
Correcting Section Validity Errors

  1. Compare the section(s) entry with the Error Register fields.

  2. Line out each incorrect field and enter the correct data immediately above the lined-out data.

  3. Enter Action Code "6."

  4. If no error is found, use Action Code "7" to clear the Error Register.

  5. For Terminus Errors, if a return entry is truly larger than the maximum size field that is acceptable for computer processing.

    1. Reject the return record with Action Code "3."

    2. Attach Form 4227 with an explanation.

3.22.19.2.3  (01-01-2015)
Math/Consistency Errors

  1. These errors are caused when the computer computation differs from the taxpayers' computation or the transcribed amount.

  2. Math Errors occur when:

    • There is a transcription error.

    • The taxpayer reports more entries than can be transcribed.

    • The taxpayer makes a mistake in a calculation.

  3. When a Math Error occurs,

    1. The computed amount in question will underprint with the computer's calculation.

    2. If the taxpayer has more entries than there are fields, the total will be entered in to the appropriate "verified field."

  4. Use the "verified" field to bypass the math check on loop.

  5. If the transcription is correct, use Action Code "6" to enter the computer's calculation in the "verified" field.

  6. If the computer cannot compute the amount correctly (because there are more taxpayer entries than can be transcribed),

    • Verify the taxpayer's computation.

    • Enter Action Code "6" to enter the verified total into the "verified" field. Only use the verified fields when there are more entries that what is transcribed.

  7. To correct math/consistency errors:

    • Compare the transcribed amount listed above the underprinted figure on the Error Register to the Form 3520 to ensure that the information was transcribed accurately.

    • If the transcription is correct, and the error is within tolerance, bring up the underprinted amount into the verified field.

    • If the transcription is correct, and the error is not within tolerance, use Action Code "6" to enter the manual calculation into the "verified" field.

    • Always leave a working trail to ensure that any correction made on the Error Register is also made to the return itself.

3.22.19.3  (01-01-2015)
Error Correction

  1. Error Register fields are identified by a letter designation in the left most position of the field.

  2. The designations are:

    • Fields A through V in Section 01

    • Fields A through FF in Section 02

    • Fields A through V in Section 03

    • Fields A through T in Section 04

    • Fields A through X in Section 05

    • Fields D through I in Section 06

    • Fields A through BB in Section 07

    • Fields A through Y in Section 08

    • Fields A through L in Section 11

    • Fields A through O in Section 12

    • Fields A through U in Section 13

    • Fields A through U in Section 14

    • Fields A through M in Section 15

    • Fields A through H in Section 16

    • Fields A through N in Section 17

    • Fields A through F in Section 18

    • Fields A through K in Section 19

    • Fields A through Z in Section 20

    • Fields A through Q in Section 21

  3. The length of each field, as indicated in the following paragraphs, is the maximum number of data characters and does not include the field's letter designation.

  4. On the Error Register, an asterisk "*" designates an invalid field.

  5. Any field may, however, be corrected even if not designated invalid.

  6. When making corrections to the Error Register, the correction must also be made to the corresponding area on the return.

  7. When an invalid or math error condition is indicated, determine whether correction of the transcription errors resolve the situation.

3.22.19.3.1  (01-01-2015)
Correcting Invalid Correction Attempts

  1. An invalid correction attempt error is caused by:

    • an incorrect entry on the Error Register

    • a ISRP error when transcribing data from the Error Register

  2. A complete description of invalid attempts may be found in IRM 3.12.38, BMF General Instructions for Campus Error Resolution.

  3. When an invalid correction attempt is detected, "AA" is printed to the right of the Batch Number on the Document Identification Line of the Loop Error Register.

  4. If the cause of the invalid correction attempt can be determined, correct the Loop Error Register as if no attempt had been made to correct it before.

    Note:

    It may be necessary to examine the correction made on the prior Error Register.

  5. If the cause of the invalid correction attempt cannot be determined, enter Action Code "7."

3.22.19.4  (01-01-2015)
Unprocessable Returns

  1. When perfection of a return is not possible, it will be necessary to reject the return.

  2. Review the following unprocessable conditions and their respective corrective actions.

3.22.19.4.1  (01-01-2015)
Illegible or Missing Data

  1. To correct illegible or missing data:

    1. Enter Action Code "3."

    2. Charge out the return.

    3. Prepare Form 4227 to Rejects.

    If... Then...
    the error condition involves an Illegible or Missing Name and/or Address, and the required data cannot be perfected through research of the document, prepare Form 4227, and attach it to the return.
  2. Rejects will input a Notice of Action on the Master File as discussed below by using IDRS Command Code REQ77 / FRM77 when:

    1. An unprocessable return is rejected and sufficient information is available: enter TC 599 and enter Closing Code 17 to defer the normal delinquency check.

    2. The EIN, Name Control, MFT, and Tax Period are present; enter TC 599 and enter Closing Code 17.

3.22.19.5  (01-01-2015)
Processing Form 3520 - Error Register and General Information

  1. Use the following instructions when correcting Form 3520 which appear on the Error Register. See Exhibit 3.22.19-1.

  2. The Form 3520 Error Register contains Sections 01 through 21.

  3. The DLN for Form 3520 must have a "File Location Code of 60."

  4. Do not renumber to "66, 78 or 98" if a U.S. Possession address or a foreign address is present on the Form 3520.

  5. If any return was mistakenly assigned a DLN beginning with "29, 66, 78 or 98" then that return must be re-numbered to "60 (OSPC)."

  6. The Form 3520 can only be filed on paper (no electronic filings) and will be posted as:

    • File Location Code "60"

    • Tax Class "3"

    • Doc Code "83"

    • Blocking Series "000-999"

    • MFT Code "68"

    • Program Code "12310"

  7. Form 3520 is only processed at the OSPC.

  8. All money amounts must be entered in dollars only.

3.22.19.6  (02-27-2014)
Section 01 - Form 3520

  1. Section 01 alpha field designators, maximum field lengths, titles and return locations are as follows:

    Alpha Designator Field Length Title Location on Return
    01-A 4 Name Control Line 1a
    01-B 1 TIN Type Line 1b, edited after TIN
    01-C 9 TIN Line 1b
    01-D 6 Tax Period First taxpayer data line
    01-E 8 Received Date Front of Return
    01-F "Reserved"
    01-G 10 CCC In the right margin next to "Amended" checkbox on Line A.
    01-H 8 Correspondence Received. Date Right margin, above Line 1b
    01-I 1 Filer Entity Checkbox In the right margin next to "Executor" checkbox on Line B.
    01-J 1 U.S. Transferor Checkbox Checkbox 1
    01-K 1 U S Owner Checkbox Checkbox 2
    01-L 1 U S Distribution Recipient Checkbox Checkbox 3
    01-M 1 U S Gift Recipient Checkbox Checkbox 4
    01-N 6 Tax Form Filed Line k; after extension checkbox;
    01-O 4 Filer Service Center Above Line 1b
    01-P 1 Spouse TIN Type Line 1d, edited after spouses TIN
    01-Q 9 Spouse TIN Line 1d
    01-R 35 In Care of Name Line Line 1a or 1c
    01-S 35 Foreign Address Line 1c
    01-T 35 Street Address Line 1c
    01-U 22 City Line 1e
    01-V 2 State Line 1f
    01-W 12 ZIP Code Line 1g
    01-X 2 Country Code Line 1h
    01–Y 1 Entity Underprint Code  

3.22.19.6.1  (01-01-2015)
Field 01-A - Name Control/Check Digit (Line 1a)

  1. Field 01-A is a 4-position field that must be present.

  2. Valid characters are alpha (a-z), numeric (0-9), ampersand (&), hyphen (-), and blank.

    Exception:

    Alpha characters "E," "G," and "M" are not valid Check Digit characters.

  3. Change a slash (/) or decimal point (.) in the Name Control to a hyphen (-). Use the hyphen when performing research.

    Example:

    Change "RE/MAX" to "RE-M"

  4. The name control is derived from the name on Line 1a.

  5. A filer may be:

    • An individual (Form 1040, generally due 04/15)

    • A trust (Form 1041, generally due 04/15)

    • An estate (Form 1041 generally due 04/15, Form 706 generally due 9 months from the date of death)

    • A partnership (Form 1065 generally due 04/15)

    • A corporation (Form 1120 series generally due 03/15)

    • A foundation (Form 990 series generally due 04/15, 05/15 or 09/15)

  6. If the check digits in Field 01-A are invalid (not underprinting), check the TIN and TIN indicator field to see if they were transcribed correctly in Field 01-C and Field 01-B. If not, then correct the TIN number and enter the name control in Field 01-A.

  7. A check digit must have blanks in the first 2 positions and a letter other than "E" , "G" or "M" in the last 2 positions.

  8. Never re-enter check digits, even if they seem correct. When Field 01-A must be corrected, you must enter the name control.

  9. If Field 01-A underprints, verify Field 01-B contains the proper indicator:

    • "0" (zero) if the TIN is a SSN

    • blank if the TIN is an EIN

  10. To delete an entry in Field 01-B,

    1. Line thru the entry in Field 01-B.

    2. Enter "1" in a circle above Field 01-B (fixed field).

      Note:

      Even though you corrected Field 01-B, you must enter "1" in Field 01-X (Entity Underprint Code) to clear the underprint.

  11. If the field underprints with a different name control (not "XXXX" ):

    1. Verify the Name Control, and TIN (Field 01-C) are entered correctly.

    2. If transcribed incorrectly, enter the correct name (or TIN) in the corresponding field(s) using Action Code "6."

      Reminder:

      When correcting the TIN, enter a "1" in Field 01-X (Entity Underprint Code) to clear the Name Control underprint. Make sure the correct TIN was entered (e.g., a SSN for an individual or an EIN for anything else).

    3. If the correct name control is different from the underprint, enter a "1" in Field 01-X (Entity Underprint Code).

    4. If the name control (and EIN) are transcribed correctly, research for a correct TIN using NAMEE and/or NAMEB. If no record, SCRS will reject the return and Rejects will send it to Entity.

  12. If the Name Control underprints with "XXXX" :

    1. Be sure that the name control/name and TIN are transcribed correctly.

    2. Research CC NAMEE and NAMEB for a correct TIN on INOLE to determine how the name and name control appear on Master File.

    3. If the TIN is in orange ink (meaning that it was assigned by Entity), be sure it was transcribed correctly.

    4. Enter "1" in Field 01-X.

      Note:

      If the return is processed after the due date, enter the Entity Assignment Date (located next to the TIN in orange ink) in Field 01-H.

    5. If in your research you find a good TIN, enter it, and issue IDRS Letter 3875C. Ensure the correct name control is entered in Field 01-A, and Field 01-X contains a "1."

      Note:

      All notices and correspondence will be suspended until further notice except for correspondence needed to post the primary EIN. Please use no reply procedures to force posting using no reply procedures.

      Exception:

      Do not send IDRS Letter 3875C, if less than 3 digits of the EIN were incorrect, or if the EIN is transposed, different or missing.

  13. Whether the EIN / SSN is written in orange or not (e.g., it is a taxpayer or Code and Edit (C and E) entry), verify that the Name Control and EIN / SSN were transcribed correctly.

    1. If the transcription was incorrect, correct the data with Action Code "6."

      Reminder:

      When correcting the TIN, enter "1" in Field 01-X (EUC) to clear the Name Control underprint.

    2. If the transcription was correct, research by entering Action Code "3."

  14. Research to determine the correct Name Control and/or TIN in the following order:

    • Command Code "NAMEB, NAMEE, NAMEI or NAMES."

    • Ensure that the TIN is correct.

    • Command Code "ENMOD and INOLE."

    • Ensure that the TIN is present.

  15. If a change has been made to the first or second name line on a pre-addressed label, with no change to the TIN (e.g., No TC 013 appears in the upper left corner of the return):

    1. Prepare Form 4227 to reject using Action Code "3."

    2. Rejects will send to Entity.

  16. If the taxpayer has changed the TIN on a pre-addressed label,

    1. Prepare Form 4227 to reject using Action Code "3."

    2. Rejects will send to Entity, notating "TAXPAYER CHANGED THE TIN" on the Form 4227.

  17. If it is ever necessary to use BMFOL to input a TC 013 for a name change, Form 3520 will not take a joint name (Husband and Wife) as the primary name on BNCHG. It must be one or the other, depending on who filed the return If both names are on the return, use the first name shown.

3.22.19.6.1.1  (01-01-2015)
Name Control Underprint

  1. The Name Control Underprint is a 4-position field that is used when the transcribed name control requires correction.

  2. Enter a "1" in Field 01-X (EUC) with Action Code "6" if:

    • The Name Control is underprinted with four Xs ("XXXX" ).

    • The TIN is written on the return in orange (TIN assigned by Entity).

    • The TIN on the Error Register agrees with the one on Form 3520. See Figure 3.22.19-1.

      Figure 3.22.19-1

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

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