3.34.4  S Corporation Tax Returns - Document Analysis & Data Entry

3.34.4.1  (12-01-2006)
Introduction

  1. This IRM section provides instructions for the functions and processes of document analysis and perfection of input returns, forms and schedules; and for input of return information to the National Research Program (NRP) BMF Data Entry Application.

  2. The 2003 NRP BMF Data Entry Application is a desktop/network application using a combination of Microsoft Access 2000 and Excel 2000 as the data input application. Access and Excel 2000 will serve as the interface application, utilizing "form screens" for data entry operations and spreadsheets. Excel performs a similar function for Forms 4562, 4797 and 8825. Data Conversion Branch will enter required data via the application.

  3. These instructions cover return information, and supporting forms and schedules of the Form 1120S tax return not transcribed or having limited transcription in traditional campus pipeline processing. While most returns will be for calendar year tax periods, some may be for fiscal tax years ended.

  4. Although these returns will be transcribed much more extensively a second time, the return and data will not be processed through the pipeline or to taxpayers’ accounts a second time. Transcribed data and examination results will be used by IRS research analysts to measure taxpayer compliance with reporting requirements and design new workload identification systems.

  5. Instructions in this section apply to both paper and electronically filed tax returns.

  6. Following is a list of tax forms and schedules used in the application. These forms will be part of a NRP study case file.

    • NRP BMF Edit Sheet

    • Form 1120S, U.S. Income Tax Return for an S Corporation, and Schedules A, B, K, L, M-1 and M-2. (Pages 1 through 4 inclusive).

    • NRP Form 1120S, Line 19 Edit Sheet.

    • Schedule D, Capital Gains & Losses & Built-In Gains.

    • Schedule K-1, Shareholder’s Share of Income, Credits, Deductions, etc.

    • Schedule N, Foreign Operations of U.S. Corporations.

    • Form 3800, General Business Credit.

    • Form 4562, Depreciation and Amortization.

    • Form 4797, Sales of Business Property.

    • Form 8825, Rental Real Estate Income & Expenses of a Partnership/S Corporation.

    • Form 8846, Credit for Employer Social Security & Medicare Taxes.

  7. Not all forms in the above list were processed through original pipeline data entry. The following listed forms had no ISRP data capture performed for them.

    • NRP BMF Edit Sheet

    • NRP Form 1120S, Line 19 Edit Sheet

    • Form 1120S, Schedule M-1

    • Schedule D

    • Form 3800

    • Form 4562

    • Form 4797

    • Form 8846

3.34.4.2  (12-01-2006)
Document Analysis of S Corporation Tax Returns

  1. This subsection provides procedures for document analysis of S Corporation Tax Returns.

3.34.4.2.1  (12-01-2006)
General Concepts

  1. The following parts of this IRM section provide instructions for analyzing and editing documents to ready them for entry into the application’s database. To the extent possible, these instructions use the same procedures, rules and techniques as current document analysis operations.

  2. Analysis and editing will be done using photocopies of previously processed tax returns. Do not edit original returns. Editing will not impact return data of the original return.

  3. All work received for document perfection will be part of a major case file. Each case file is comprised of photocopied Forms 1120S, schedules and forms attached to it, and related Forms K-1. Forms for data entry must be identified, counted for use on the NRP BMF Edit Sheet, and then analyzed and perfected.

  4. Instructions in this guide may not cover all situations you encounter. Refer questionable items or conflicts with instructions to your manager or work leader. They will obtain clarification from the NRP Headquarters staff.

  5. For the most part, math calculations and verification of taxpayer computations are not part of this process; however, compute the total percentage of shareholder ownership for Schedules K-1, and add up deductions on NRP Form 1120S Line 19 Edit Sheets.

  6. Some forms and schedules will already have edit marks on them. They would have been edited in "orange, brown, red or green." Because the tax returns to be analyzed will be photocopies, the prior editing won't be readily recognized. NRP wants to capture what the taxpayer reported, prior editing marks should be ignored.

  7. Do not edit names, entities, and received dates. There will be some tax period editing. NRP will not provide any special processing or condition codes. All this was done during original processing of the return and is not required for this application.

  8. Use the NRP Document Analysis job aid with this IRM to better understand editing documents. It illustrates editing concepts and rules by presenting examples in the form of figures and quick references.

3.34.4.2.2  (12-01-2006)
Editing Concepts

  1. All editing marks will be made using a Red pencil/erasable ink pen.

  2. Forms and schedules do not need to be reorganized. There is generally a standard order for the forms and schedules. The returns should be left in the order found and is usually stapled.

    1. The return should be left in the order found. There is no need to rearrange forms and schedules into a specific order for data entry.

    2. These returns were previously arranged in the order specified for data entry during original pipeline processing. Because the original has been photocopied, some may not be in the order specified in pipeline processing.

    3. The original Document Perfection sort order was:

      Form 1120S, Pages 1 through 4
      Schedule N
      Form 4136
      Form 8825
      Form 8050
      All others submitted with return, followed by pages of statements that are generally well organized and numbered.

  3. Final order of forms after analysis and edit is complete is:

      NRP BMF Edit Sheet
      NRP Form 1120S Line 19 Edit Sheet, (only if prepared)
      Form 1120S return and attachments as received in the case file, Schedule(s) K-1 (loosely)

  4. Do not edit tax periods for calendar year returns. Edit fiscal year and short period returns for the beginning and ending year and month. These edits are for Form 1120S, page one only. Don’t edit the periods for other forms and schedules.

  5. Taxpayers should list beginning and ending periods for short period or fiscal year returns. If the taxpayer lists beginning and ending periods as 05/01/2002 and 04/31/2003, underline complete beginning and ending periods in red.

  6. Some forms or schedules require assignment of sequence numbers for certain schedules. Sequence multiple forms or schedule of the same type should be sequenced in a specific case file.

    1. Taxpayers may include more than one copy of certain forms or schedules. The following forms or schedules and additional ones should be marked with a sequence number, starting with number 1. They are:

        Schedule K-1
        Form 4562
        Form 4797

    2. Additional forms or schedule of a particular type (for example Schedule K-1) will be numbered 2, 3, 4 etc., depending on the number of them in the case file. Enter the sequence marks in the upper right hand corner. The first copy will be marked S=1, the second S=2, etc.

    3. Even though there could be multiple Forms 8825, each form will not be sequenced.

  7. Many of the forms have decision or yes/no type boxes. This is a new process for Data Conversion and the boxes must be edited for entry. The data input concept for boxes is they are checked or not checked. Edit only those boxes that are checked as only these boxes will be entered into the application. Edit these with a Circle around the box.

    1. The boxes are generally within the body of the form or part of a line. Other times they are not really a box and are the line item itself. These are usually yes/no types. Schedule N is an example of this type.

    2. Some boxes are yes/no type entries. Generally yes or no will be checked, but it is possible taxpayers will check both boxes. If so, edit both.

    3. Circle any box that is checked.

    4. Other boxes are single check types in which taxpayers check the box only if it applies to them. It may be listed as "Final Return" and will be checked if the return is a final one. If not, it will be left alone. Circle these boxes only if checked.

  8. Illegible or missing information such as TINs, numbers, etc. may need correction. Almost all returns will be prepared and printed using computer software. The occurrence of illegible information should be minimal.

    1. If an EIN needs to be corrected or is missing, check the return to see if the information is on another form or schedule. If not, no editing of the number will be done. Data Entry will capture it as it appears on the form. SSN information related to Schedule K-1s will not be validated.

    2. Illegible numbers or money amounts should be corrected. Use your best judgment to determine the correct number and edit it.

    3. Some lines may have two different entries on them. If so, combine the amounts and edit them as one amount to the right of the amount column.

    4. Because these documents are photocopies, parts of a page may be missing because a page did not go through a feeder properly. Refer these cases to the manager for follow up with the NRP staff to obtain proper copies of pages.

  9. Dollars and cents amounts do not need editing. NRP wants to capture whole dollar amounts. Most returns will use dollars and exclude cents. Data Conversion will enter whole dollars, and ignore any cents amounts.

  10. Negative numbers.

    1. Some lines of forms are negative by design. They are preprinted on forms and taxpayers normally write in a number. No editing of these lines is required. These lines are listed in the document analysis sections for each specific form.

    2. Taxpayers may also provide negative numbers on lines normally considered to be positive. This rarely happens. In those cases, bracket the line as part of your editing.

    3. Some lines may be positive or negative depending on income losses or gains and losses on sales of property, etc. If these lines were original pipeline "T" lines, they were bracketed during original processing. These brackets will show up as black. Trace over them in red.

  11. Other edit markings may be used, but not as frequently as others.

    1. Some forms have information on one line that must be input as separate items. Use a red underline to separate the information as discussed for editing tax periods.

    2. Some taxpayer prepared statements may be edited rather than using continuation sheets. Informational columns will be separated as input fields by use of a vertical line.

  12. Do not edit dates to a particular format. Data Conversion will enter dates as MM/DD/YYYY, regardless how they appear on documents.

  13. Some percentage amounts will need to be edited.

    1. Taxpayers may provide these amounts as a decimal, percentage, or a fraction.

    2. b) Forms and Schedules that have percentages are:

        Schedule A Line 9d
        Schedule B Line 3b
        Schedule K-1 Line A
        Form 4562 Lines 26, 27 and 42

    3. Percentages should be edited to 3 decimal places. As an example, if the taxpayer writes:

        1/2 edit it to .500
        50 percent edit it to .500
        one third edit it to .333
        .66 edit it to .666

    4. d) The exception to the rule is Schedule K-1 in which taxpayers report the percentage of ownership. See IRM 3.24.4.2.14 for processing instructions.

  14. Corporate tax returns tend to have statements to explain or expand entries on a line, or to list items whose number exceeds available lines. Statements are usually numbered, referenced on related forms, attached in sequence and easy to locate.

    1. Some forms may have multiple entries for a line. A line may have room for only 3 items, but the taxpayer needs to report 50 items. They may fill up the 3 lines and report remaining items on an attached statement. Schedule D serves as an example of this type of reporting. Line 1 of the schedule allows up to 4 line items for short-term gains. A corporation may have more than 4, especially if it owns stocks. To the extent possible, using the statement as an edit document is preferred over preparing a Schedule D1 which allows many items.

    2. If the statement is prepared the same as the tax form, the statement might be edited to be used as an input document. Be sure it looks as much like a form or schedule as possible to allow input of information easily. A technique may be to highlight column titles and drawing vertical lines between columns.

    3. If not, prepare a "continuation sheet" that allows multiple entries for the line. For Schedule D, use Schedule D-1 as a continuation sheet. All others will have specifically designed sheets. Forms that fall into this category are:

        Schedule D Part I Line 1
          Part II Line 7
        Schedule N   Line 1
        Form 4562 Part I Line 6
          Part III Line 19
          Part III Line 20
          Part V Line 26
          Part V Line 27
          Part VI Lines 30 - 36
          Part V Line 42
        Form 4797 Part I Line 2
          Part II Line 10
          Part III Lines 19-29b
        Form 8825   Lines 1-14
            Line 15
            Line 20b

    4. Continuation sheets are designed to duplicate only the lines of the form needed. Transfer the information from the statement or attachment to the sheet. Move only the items on the statement, not those on the actual form or schedule.

3.34.4.2.3  (12-01-2006)
Initial Screening of Case Files

  1. Check to ensure the correct taxpayer, EIN and year are in the case file.

  2. Ensure the tax returns is a Form 1120S only. Other types of corporate returns are not part of this study. Refer non-1120S returns to a supervisor for further review. A fiscal year return may actually be another preprinted form i.e., 200403 on a 2003 form.

  3. Schedules K-1 should be present in the case file, but might not be stapled to the return itself. Check to ensure they are for the correct taxpayer. The "Corporation Identifying Number" should match that of the return. Verify the Form 1120S DLN with that of the first K-1. They should match also. If not, refer the case to a manager for research.

  4. Make note of the occurrence of forms or schedules and how many there are in the case file. It is necessary to use this to prepare the NRP BMF Edit Sheet.

3.34.4.2.4  (12-01-2006)
NRP BMF Edit Sheet Preparation

  1. This edit sheet will assist Data Entry in determining what forms and schedules have entries needing to be captured in the application. First, enter the EIN of the Form 1120s and the tax period as YYYYMM (E.g. 200312).

  2. For each schedule or form, write the number of times it appears in the "Count" column of the edit sheet. For example, if the taxpayer has entries on Schedule A, then a 1 goes in the Count column in the Schedule A row.

  3. Most forms and schedules will appear only once. Those that receive a sequence number will appear once or multiple times. For these, the " Count" column entry should agree with the last (highest) sequence number assigned to it.

  4. Come back to this edit sheet later to record information about the percent of ownership from Schedule K-1.

    Note:

    Percentage of ownership figures can help to determine if we have all the necessary K-1's.

  5. Place the edit sheet (loosely) in the front of the case file.

3.34.4.2.5  (12-01-2006)
Form 1120S, Page 1

  1. Edit the tax period if the return is for a fiscal year ended or short period year ended.

  2. Line F has 5 check boxes. Edit any that are checked by circling them.

  3. If Line 19 has an amount entered, it will usually have " See Statement #."

    1. Check the case file for the statement that explains the line entry.

    2. Prepare the NRP Form 1120s Line 19 Edit Sheet in all cases that Line 19 has an entry.

    3. If the statement is not present, notate that on the Line 19 edit sheet in the box. See 3.34.4.2.6 for the Line 19 edit sheet instructions.

  4. Edit Line 24 if the Form 2220 box is checked.

  5. Edit the Yes/No boxes in the "May IRS discuss…" area of the signature line if checked.

  6. Edit the "Self Employed box" on the " Paid Preparer’s Use Only" line if checked.

3.34.4.2.6  (12-01-2006)
NRP-Form 1120S Line 19 Edit Sheet

  1. Line 19 of Form 1120S is used to list other deductions. These deductions are further listed on a statement. They must be categorized and captured as deductions to allow Examination to recognize them properly during audits. Use and prepare the NRP – Form 1120S Line 19 Edit Sheet for this process.

  2. These deductions fall into special categories that reflect the type of deduction. Each category has a special number (referred to as SAIN, or Standard Audit Index Number) assigned to it that is used by Examination during audits.

    1. The deduction categories and their related numbers are:

        Number Category
        526-01 Administrative Fees
        526-02 Amortization
        526-03 Automobile Expense
        526-04 Bonus Expense
        526-05 Consulting Fees
        526-06 Contract Labor
        526-07 Commissions
        526-08 Computer Expense
        526-09 Dues and Subscriptions
        526-10 Education Expense
        526-11 Equipment Rental
        526-12 Fringe Benefits
        526-13 Salaries & Wages
        526-14 Repairs & Maintenance
        526-15 Insurance Expense
        526-16 Janitorial Services
        526-17 Leasing Expense
        526-18 Legal & Professional Fees
        526-19 Licenses/Permit Expenses
        526-20 Maintenance/Cleaning
        526-21 Management/Director Fees
        526-22 Meals & Entertainment
        526-23 Meetings, Seminars &Conventions
        526-24 Miscellaneous Expenses
        526-25 Other Expenses
        526-26 Outside Expenses
        526-27 Postage/Courier Expense
        526-28 Proposal/Bidding Expense
        526-29 Public Relations Expense
        526-30 Publications Expense
        526-31 Recruiting & Training
        526-32 Research & Development
        526-33 Royalty Expense
        526-34 Security Expense
        526-35 Shipping, Freight & Handling
        526-36 Stationary, Printing, Office Supplies
        526-37 Tools & Factory Supplies
        526-38 Telephone Expense
        526-39 Travel Expense
        526-40 Utility Expense

    2. Not all of these deductions will appear on the statement. In many cases only a few will appear on the statement. Which ones are used depends on the type of business that filed the return.

    3. The TY04 Line 19 sheet will have Fuel Expense and Gifts and Awards as number 526-13 and 526-14 respectively.

  3. Prepare the edit sheet whenever Line 19 has an entry.

    1. Enter in red, the Form 1120S EIN in the "EIN" boxes, and Form 1120S Line 19 amount on the dollar amount line at the top of the edit sheet.

    2. Then check the case file, locate the statement and use it to prepare the edit sheet. These statements will have two columns, one for description and the other for amount. The "descriptions" should match up to one of the categories on the edit sheet. The amounts will be the dollar amount of the deduction.

  4. Some category descriptions may differ from the edit sheet slightly and some statements may have 2 or more expenses related to the same category. They will be listed a little bit differently. For this reason, each category on the edit sheet has several lines to enter the amounts.

    1. Go through the statement and place the money amount of each deduction on the matching dotted lines of the edit sheet. Again, there usually will not be a deduction for every category. These entries can be in any color other than red, as they will not be captured by Data Conversion.

    2. Once all deductions have been matched to the edit sheet, add up the amounts for categories having more than one entry and place that total in the box next to the title of the category. This entry should be in red.

    3. As a final check to ensure that all deductions on the statement have been accounted for, add up the amounts in the boxes next to the category titles and compare the result to the Form 1120S Line 19 amount on the dollar amount line of the edit sheet. If the result matches (allowing for some difference due to rounding cents) by the taxpayer on line 19 and line 19 sub-totaled items finalize the edit sheet as provided in IRM 3.34.4.2.6 6. below.

  5. If the deductions statement can not be located, prepare the edit sheet with only the EIN Line 19 amount, and check the "Missing" box. Do not bother to circle the check box for this form.

  6. Place the edit sheet Line 19 (loosely) in the front of the case file and directly behind the NRP BMF Edit Sheet.

3.34.4.2.7  (12-01-2006)
Form 1120S, Schedule A

  1. Edit any of the Line 9a, 9b or 9c boxes if checked.

  2. Edit Line 9d as a 3 digit decimal amount if an entry if present. Leave blank if no entry exists.

  3. Edit the Yes/No boxes on Lines 9e and 9f if checked.

3.34.4.2.8  (12-01-2006)
Form 1120S, Schedule B

  1. This schedule has many decision boxes, plus several Yes/No boxes as part of actual line entries.

  2. Edit any of Line 1, 5, 6 or 8 boxes if checked.

  3. Edit the Yes/No boxes on Lines 3, 4 or 9 if checked. One of the boxes should be checked. If not, make no edit entries.

  4. If Line 3 is checked Yes, look for the statement that contains the explanatory information. Taxpayers usually write See "Statement #" on Line 3. If it is present, underline the name, address, EIN and percentage. Edit the percentage if necessary.

  5. Write ER (Entry Required) in the left margin next to Line 3. Flag the statement as Sch B L3. If a statement can not be located, no editing is necessary for the statement part of this line.

3.34.4.2.9  (12-01-2006)
Form 1120S, Schedule K

  1. Edit the Line 15g Paid and Accrued boxes if checked.

3.34.4.2.10  (12-01-2006)
Form 1120S, Schedule L

  1. Do not bracket amounts on Lines 26b or 26d as they are part of the form design.

3.34.4.2.11  (12-01-2006)
Form 1120S, Schedule M-1

  1. Schedule M-1 has no form specific editing.

3.34.4.2.12  (12-01-2006)
Form 1120S, Schedule M-2

  1. Do not bracket amounts on Lines 4(a), 5(a) or 5(b) as they are part of the form design.

3.34.4.2.13  (12-01-2006)
Schedule D

  1. Do not bracket amounts on Lines 5(f) and (g) or Lines 12(f) and (g) as they are part of the form design.

  2. Line 1, Short Term Gains/Losses and Line 7 Long Term Gains/Losses may requirement special editing. These two lines will also have a variety of positive and negative entries, depending on whether gains or losses are listed.

  3. These lines may have one or two entries on each of them. If so, edit negative amounts if necessary. However, they are limited to 4 entries. If a taxpayer has more (in some cases, many more), they will prepare and attach a statement. Or they may complete the 4 lines, and include the rest on a statement.

  4. If these lines have a notation of referencing where the additional Schedule D information is located within the return, etc. look for the page(s) that contains the explanatory information. Usually statements are numbered and easy to find. Taxpayers may also include a "total amount" on the line that rolls up all items from the statement. Red line out these total(s) so that only statement amounts will be entered.

  5. If the statement looks like the Schedule D lines or has column headings (a) through (b), use it as a data entry form. Underline the column heading for the Data Entry staff to follow, or to write them in. Try to use the statement as an entry form.

  6. If negative amounts need to be edited, do that on the statement itself. Flag the statement with a Tab, write Sch D L1 or Sch D L7 in the upper right of the statement, and also write ER (Entry Required) in the left margin next to Line 1 or 7, whichever one applies to it. If you don’t locate a statement, no editing is necessary for the statement part of this line.

  7. If the statement cannot be edited, prepare Schedule D-1 for each of the items listed on it.

3.34.4.2.14  (12-01-2006)
Schedule K-1

  1. Assign a sequence number to each Schedule K-1 in the case file. Make sure the last sequence number agrees with the total number of K-1's entered on the NRP BMF Edit Sheet.

  2. Entries on Line A are for the percentage of ownership of a shareholder. The percentage of each Schedule K-1 should add up to a total of 100 percent. Because ownership is not often assigned equally among shareholders, this line will have entries of two or many decimal places. One entry will be that of the taxpayer and the other a computed amount, if necessary for 2003 returns only.

  3. The percentage of ownership may appear in several different formats, such as 25 percent, 25.444444, etc. Usually taxpayers report it as a percent followed by a 6 place decimal. Do not edit this Line A entry.

    1. Validate the percent of ownership on a K-1 to ensure that the combines total for all shareholders equals 100 percent. Add the percentages for all K-1s together. If they total 100 percent, then edit Line A for each one.

    2. Edit in Red to the left of the Line A percentage a second percentage with 8 decimal places. Thus, if the K-1 is 25.888888%, the edit will be 25.88888800.

    3. If the combined do not equal 100%, perform the calculation a second time. If the amount still differs, all Schedule K-1's might not be present. Compare the count of Schedule K-1's to the number of shareholders on the front of Form 1120S. They should match. If not, one or some are missing. Refer the case to a manager for suspension until all are located.

    4. If all the Schedule K-1's are present and the percentages still differ, then compute the percentage for each Schedule K-1. Divide the Line 1 amount on K-1 by Line 21 of Form 1120S. Compute this amount to 10 decimal places (the percent plus 8 decimals as above. Edit in Red this computation to the left of the Line A taxpayer percentage. Compute each one separately; then add them to ensure they are 100 percent. If necessary adjust the last decimal to come up to 100 percent. Adjust the decimal of the first K-1. Even though the percentage calculations go out to eight decimal places, the sum of the percentages may not exactly equal 100 due to rounding. If this is the case, adjust the percentage of the first Schedule K-1.

    5. Even though the percentage calculations go out to eight decimal places, the sum of the percentages may not exactly equal 100 due to rounding.

    6. If this is the case, adjust the percentage of the first Schedule K-1.

  4. Edit Line D Final/Amended decision boxes if checked.

  5. Edit Line 15g Paid/Accrued decision boxes if checked.

3.34.4.2.15  (12-01-2006)
Schedule N

  1. This schedule should not appear very often. This schedule is mostly comprised of Yes/No decision boxes. Edit Lines 1, 3, 4a, 5, 6a and 7a boxes if checked.

  2. If Line 1 is checked Yes, look for the statement that contains the explanatory information. Taxpayers usually write "See Statement #" on Line 3. If it is present, edit the name, country and EIN onto Schedule N in the area between Lines 1 and 2. If more than one country is listed, choose the first one.

  3. No editing is necessary for the statement part of this line of a statement is not present.

3.34.4.2.16  (12-01-2006)
Form 3800

  1. Form 3800 has no form specific editing.

3.34.4.2.17  (12-01-2006)
Form 4562

  1. Assign a sequence number to each Form 4562 in the case file.

  2. Edit Line 18 assets decision box if checked.

  3. Edit Lines 24a and 24b Yes/No boxes if checked.

  4. Edit the percentage amounts on Lines 26(c) and 27(c) if necessary.

  5. Edit any of Lines 34 and Lines 37 – 40 Yes/No boxes that are checked.

  6. Lines 6, 19a, 20a, 26, 27, and 42 all report amortization and have a limited number of lines available for taxpayer entries. They may require special editing.

  7. In most cases these lines will have more than one entry on each of them. If so, edit negative amounts if necessary. However, if entries exceed available lines, taxpayers will prepare and attach a statement. They may also complete some lines, and include the rest on a statement.

  8. If these lines have a notation of referencing where the additional information is located within the return, look for the statement that contains the explanatory information. Usually statements are numbered and easy to find. Taxpayers may also include a "total amount" on the line that rolls up all items from the statement. Red line out these total(s) so that only statement amounts will be entered.

  9. If the statement looks like the related Form 4562 lines or has column headings like the lines, we can use it as a data entry form. Underline the column heading for the Data Entry staff to follow, or write them in if necessary. Try to use the statement as an entry form.

  10. If negative amounts need to be edited, do that on the statement itself. Flag the statement with a Tab, write F4562 L6, F4562 L19, F4562 L20, F4562 L26, F4562 L27 or F4562 L42 in the upper right of the statement, and Write ER (Entry Required) in the left margin next to the related line. No editing is necessary for the statement part of this line if no statement is present.

  11. Prepare Form 4562 Continuation Sheet (there is a separate one for each line) for the items listed on it if the statement can not be edited. Staple the continuation sheet(s) to the back of Form 4562.

  12. Lines 30 through 36 report information about taxpayers’ vehicles. The form is limited to 6 vehicles. It is unlikely the number will exceed the six spaces available on the form. In the case, taxpayers will usually attach a statement, which most likely cannot be edited. If so, prepare Form 4562 Continuation Sheet for Lines 30-36 and attach it to the back of Form 4562.

3.34.4.2.18  (12-01-2006)
Form 4797

  1. Assign a sequence number to each Form 4797 in the case file.

  2. Do not bracket amounts on Line 11 as they are part of the form design.

  3. Lines 2 and 10 report gains and losses for business property sales, and have a limited number of lines available for taxpayer entries. They may require special editing.

  4. In most cases these lines will have one or two entries on each of them. If so, edit negative amounts if necessary. However, if entries exceed available lines, taxpayers will prepare and attach a statement. They may also complete some lines, and include the rest on a statement.

  5. If these lines have a notation of referencing where the additional information is located within the return, look for the page(s) that contains the explanatory information. Usually statements are numbered and easy to find. Taxpayers may also include a "total amount" on the line that rolls up all items from the statement. Red line out these total(s) so that only statement amounts will be entered.

  6. If the statement looks like the related Form 4797 lines or has column headings like the lines, we can use it as a data entry form. Underline the column heading for the Data Entry staff to follow, or if necessary write them in. Try to use the statement as an entry form.

  7. If dates or negative amounts need to be edited, do that on the statement itself. Flag the statement with a Tab, write F4795 L2 or F4797 L10 in the upper right of the statement, and Write ER (Entry Required) in the left margin next to the related line. No editing is necessary for the statement part of this line if no statement is present.

  8. Prepare Form 4797 Continuation Sheet (there is a separate one for each line) for the items listed on it if the statement can not be edited. Staple the continuation sheet(s) to the back of Form 4797.

  9. Lines 19 through 29b report information about taxpayers’ properties and work much the same way as Line 30 items of Form 4562. The form is limited to 4 properties. If the return has more than that, taxpayers will usually attach a statement, which most likely cannot be edited. If so, prepare Form 4797 Continuation Sheet for Lines 19 – 29b and attach it to the back of Form 4797. Multiple copies of this page may be present rather than a statement. It can be used by Conversion without use of a continuation sheet.

3.34.4.2.19  (12-01-2006)
Form 8825

  1. Even though there may be multiple Form 8825, there is no sequence numbers for the form but, there are sequence numbers for the properties across the form.

  2. Assign a property ID number to each property represented by Lines 1 through 15. Edit in Red a sequential number starting with 1 to the left of each Line 1 A, B, C, etc. property. Check Page 2 of the form as there may be other properties listed on it.

  3. Do not bracket amounts on Line 18 as they are part of the form design.

  4. Lines 1 through 14 report information about taxpayers’ rental properties. They also work much the same way as Line 30 items of Form 4562. The form is limited to 4 properties on Page 1 and another 4 on Page 2. This should be sufficient, but if the return has more than that, taxpayers will usually attach a statement, which most likely cannot be edited. If so, prepare Form 8825 Continuation Sheet for Lines 1–14 and attach it to the back of Form 8825. Multiple copies of this page may be present rather than a statement. It can be used by Conversion without use of a continuation sheet.

  5. Lines 15 and 20b (1) and (2) have a limited number of lines available for taxpayer entries. They may requirement special editing.

  6. These lines may have one or two entries on each of them. If so, edit negative amounts if necessary. However, if entries exceed available lines, taxpayers will prepare and attach a statement. They may also complete some lines, and include the rest on a statement.

  7. If these lines have a notation of referencing where the additional information is located within the return, look for the page(s) that contains the explanatory information. Usually statements are numbered and easy to find. Taxpayers may also include a "total amount" on the line that rolls up all items from the statement. Red line out these total(s) so that only statement amounts will be entered.

  8. If the statement looks like the related Form 8825 lines or has column headings like the lines, it can be used as a data entry form. Underline the column heading for the Data Entry staff to follow, or you may need to write them in. Try to use the statement as an entry form.

  9. If negative amounts need to be edited, do that on the statement itself. Flag the statement with a Tab, write F8825 L1, F8825 L15 or F8825 L20 in the upper right of the statement, and Write ER (Entry Required) in the left margin next to the related line. No editing is necessary for the statement part of this line if no statement is present.

  10. Prepare Form 8825 Continuation Sheet (there is a separate one for each line) for the items listed on it if the statement can not be edited. Staple the continuation sheet(s) to the back of Form 8825.

  11. If the EIN is missing or illegible on Line 20, do not try to locate it or perfect it.

3.34.4.2.20  (12-01-2006)
Form 8846

  1. Edit Line 4 tipped employees decision box if checked.

3.34.4.3  (12-01-2006)
Data Entry of S Corporation Tax Returns

  1. This part of the manual provides instructions for using the NRP BMF Data Entry Application and entering data from documents.

3.34.4.3.1  (12-01-2006)
Data Entry - General

  1. For TY03 the following "forms" (screens) relate to an Access application. The form 4562, 4797 and 8825 will be entered directly into an Excel spreadsheet. Inputs are made "to forms" (screens) that present the computer’s view of the tax returns and schedules. The "white background" area of the forms represents a field that may require entry of data to it. The images on the computer screen look like the actual tax returns and schedules. Various selections "buttons " appear within each form or schedule. The "buttons" activate via a mouse click. Key verification will be part of the TY04 application not for TY03.

  2. All work received for data input will be part of a major case file. The term case refers to a Form 1120S and its schedules, etc. for a specific taxpayer with a specific Entity Identification Number (EIN). Each required input document in a case file should be previously identified and edited, and are photocopies of returns and schedules. The original return and case file will be reviewed and examined by Examination employees.

  3. These instructions will not cover all possible situations. Refer questionable items or conflicts with instructions to a manager or work leader.

  4. Math calculations and verification of taxpayer computations will not be part of the data entry process for TY03. The TY04 application will perform internal math calculations that will not be available from the data transcription. For the most part, data will be entered as the taxpayer submitted it or edited by the document analysis function during original processing of the return.

  5. The prevailing rule is Data Conversion will transcribe information and numbers the taxpayer originally provided on the return and/or " red pen" corrections made during the original processing of the return.

  6. The tax forms and schedules to be transcribed are listed in Section 3.34.4.1 of this manual.

3.34.4.3.2  (12-01-2006)
Data Entry Guidelines

  1. For the most part, enter what the taxpayer provided on the return. Input forms will be edited to assist in data entry. Items such as decision/check boxes, etc. will be edited to allow easy and standardized entry of data. Schedules/forms to be input will be identified in advance by a NRP BMF Edit Sheet that will be in each case file. That edit sheet will show the number of each type of form necessary for transcription.

3.34.4.3.2.1  (12-01-2006)
Document Analysis Editing

  1. Document Analysis will edit input documents in red. Not a lot of editing will occur, nor will all documents be edited. The NRP BMF Edit Sheet will provide guidance as to which forms and schedules require input. In most cases this will be one (1) or zero (0). In some cases more than one form of the same type must be input. This is limited to Forms 4562, 4797 and Schedule K-1.

  2. Documents will be placed, loosely, in the order of:

    • NRP BMF Edit Sheet

    • Forms 1120S Line 19 Edit Sheet

    • Form 1120S and supporting schedules/forms

    • Schedules(s) K-1

  3. The NRP BMF Edit Sheet and Form 1120S should always be present. Usually, but not always, the Line 19 edit sheet will be present. Schedule(s) K-1 usually will be present, and there may be several.

  4. Document Analysis will use a minimal number of edit markings. Generally these edit markings will include circles, underlines, brackets and sometimes vertical lines on statements. There may be an occasional "X " to mark data that is not to be input.

3.34.4.3.2.2  (12-01-2006)
Taxpayer Statements and Continuation Sheets

  1. Continuation sheets contain "extended" information for certain lines of documents may be present. These sheets will be stapled directly behind the document and identify the line number. A red " ER" will be placed in the left margin to the left of the related line.

  2. IRM 3.34.4.2.2, Editing Concepts lists those forms that may be supplemented by statements or continuation sheets.

3.34.4.3.2.3  (12-01-2006)
Sequence Numbers

  1. Sequence numbers will be assigned to documents of the same type (number/title) that appear more than once in a case file. For example, the file may have 5 Forms 4562. They will be numbered 1 through 5 with a red S=1, S=2, etc. in the upper right corner of the document.

  2. This rule applies only to Forms 4562, 4797 and Schedule K-1. The sequence number will be the first input field for these forms. Enter the numeric number assigned to the form (1, 2, 3, etc.).

3.34.4.3.2.4  (12-01-2006)
Money Amounts

  1. Enter all money amounts as whole dollars without cents. Do not input amounts as 10.00, enter 10 as the amount.

  2. Truncate or cut off the cents amount. The use of cents occurs rarely for this type of tax return. Do not enter the dollar sign, commas or decimals.

      Enter $10,405.85 as 10405
      Enter $2.99 as 2

  3. Enter all amounts as positive numbers unless Document Analysis brackets a line with red brackets <>. A limited number of lines have brackets built into the form design itself. Document Analysis will not edit these brackets in red. Enter them as positive numbers.

  4. If an amount on a line has a negative sign in front of it, and Document Analysis did not edit it with brackets, enter it as a positive number.

3.34.4.3.2.5  (12-01-2006)
Decision and Check Boxes

  1. Taxpayers will check or "X" boxes of some forms. Some boxes ask them to check yes or no to questions related to tax information about the form. Taxpayers may check one, both or none at all. Other boxes require a check if certain conditions apply (i.e. is this your last return?). These boxes may or may not be checked.

  2. Document analysis will edit only those boxes that are checked. They will "red circle" each one checked. If a taxpayer checks both a yes and no box, both will be edited for input as such.

  3. Input to these fields is done without entering any data. When cursor is in the box, the "check mark" can be turned on and off by left single clicking your mouse or pressing the space bar on the keyboard. If a checkbox on a Form 4562,4797 or 8825 is checked it should be entered as a -1 into the spreadsheet.

3.34.4.3.2.6  (12-01-2006)
Date Entries

  1. Enter all dates as MM/DD/YYYY. Document Analysis will not edit dates for input. Dates will generally be encountered in the format specified above. If a document shows a date as June 10, 1995, it must be entered as 06101995. The months of January through September must have the leading zero as part of the entry.

  2. For TY03 in the Access forms once the first number in a date field is typed, a date mask will appear in the form of ##/##/####. The date above would show as 0#/##/####. Finish typing the date; the slashes are not required to enter in Access. The Excel forms will need the slashes entered.

  3. Some dates may be stated as only month and year, and the day of month is missing. For this type of date, enter the full date as provided above using 01 as the day of month.


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