3.11.14 Income Tax Returns for Estates and Trusts (Forms 1041, 1041-QFT, and 1041-N)

Manual Transmittal

November 7, 2023

Purpose

(1) This transmits revised IRM 3.11.14, Returns and Documents Analysis, Income Tax Returns for Estates and Trusts, (Form 1041, Form 1041-QFT, and Form 1041-N).

Material Changes

(1) IRM 3.11.14.2.1, Schedules/Forms Associated with Form 1041 - Added in (2) Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts and Form 8936 (Schedule A), Clean Vehicle Credit Amount to list.

(2) IRM 3.11.14.2.4.1, TAS Service Level Agreements (SLA) - Changed the web link address to https://irsgov.sharepoint.com/sites/TAS/SitePages/SLA.aspx.

(3) IRM 3.11.14.3.1, Examination of Attachments - Moved from IRM 3.11.14.7.

(4) IRM 3.1114.3.2 (old 3.11.14.3.1), Edit Marks - Changed "Correspondence Imaging System (CIS)" to "Correspondence Imaging Inventory (CII)." (IPU 23U0038 issued 01-03-2023)

(5) IRM 3.11.14.3.3, Sequence - Form 1041 - Added Form 8936 (Schedule A) to list.

(6) IRM 3.11.14.3.3 (old 3.11.14.3.2), Sequence - Form 1041 - Updated the sequence order for Form 8997 and 8960. (IPU 23U0475 issued 03-30-2023)

(7) IRM 3.11.14.3.3 (old 3.11.14.3.2), Sequence - Form 1041 - Deleted in (2) 3rd bullet statement "through November 30th." In the example corrected IRM reference to "IRM 3.0.101.5, Code and Edit." (IPU 23U0188 issued 01-27-2023)

(8) IRM 3.11.14.3.5, Editing Dollars and Cents - Deleted in (1) from list, Line 16a, Schedule G, Part II, Regulated Investment Company Credit, Line 17, Schedule, Part II - Credit For Qualified Sick and Family Leave Wages Taken Before April 1, 2021, Line 18, Schedule G, Part II - Credit For Qualified Sick and Family Leave Wages Taken After March 31, 2021, and before October 1, 2021. Added in (2) to list Line 16, Schedule G, Part II - Payments from Form 2439. Deleted in (2) from list, Line 15 - Net Investments Income Tax. Added in (2) list, Line 16, Total Tax, Line 18 - Elective Payment Election Amount from Form 3800. Deleted in (3) from list, Line 16 - Net Tax and added to list Line 16, Total Tax, Line 19 - Elective Payment Election Amount from Form 3800.

(9) IRM 3.11.14.6.3.3, Correspondence Imaging Inventory (CII) Returns - Changed "Correspondence Imaging System (CIS)" to "Correspondence Imaging Inventory (CII)." Changed "CIS" to "CII." (IPU 23U0038 issued 01-03-2023)

(10) IRM 3.11.14.9, Return Processing Code (RPC) - Updated new Return Processing Code (RPC) "J" , "K" , for Elective Deemed Payment Election and Credit Transfers per IRA 2022. (IPU 23U0535 issued 04-24-2023)

(11) IRM 3.11.14.9, Return Processing Code (RPC) - Added "For tax periods 202212 - 202311" to RPC "J" and "K."

(12) IRM 3.11.14.9, Return Processing Code (RPC) - Added new Return Processing Code (RPC) "J" , "K" , "L" and "M" for Deemed Payment Election and Credit Transfers per IRA 2022. (IPU 23U0495 issued 04-10-2023)

(13) IRM 3.11.14.10.1, Amended Returns - Changed "CIS" to "CII." (IPU 23U0038 issued 01-03-2023)

(14) IRM 3.11.14.10.2, Bankruptcy Returns - Added in (2) the standard deduction amount for single or married filing separately.

(15) IRM 3.11.14.10.2.2, Individual Bankruptcy - Added in (3)a) table Elective Payment Election Amount from Form 3800 Line 13c, Schedule 3 and Line 18a, Sch G. Added Other Credits or Payments Line 13z, Schedule 3 and Line 18b Sch G. Deleted Credit For Qualified Sick and Family Leave Wages Taken Before April 1 2021 Line 13z, Schedule 3 and Line 17, Sch G. Deleted Credit For Qualified Sick and Family Leave Wages Taken After March 31, 2021 and before October 1, 2021. Added in (3)a) 2023 Standard deduction amount.

(16) IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY 2017 - Changed in (3) and (4) Tax Period "202012 - 202111" to "202012 and later."

(17) IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041) - Changed "CIS" to "CII." (IPU 23U0038 issued 01-03-2023)

(18) IRM 3.11.14.10.15.5, Historic Structure Code - Added 2023 and later instructions when to edit code 7-3. Changed in (2) "2010 and subsequent" to "2010 - 2022."

(19) IRM 3.11.14.10.16, Elective or Deemed Payment Election (DPE) and Credit Transfers - Updated the new section procedures for Elective Deemed Payment Election and Credit Transfers per Inflation Reduction Act of 2022 (IRA) and CHIPS and Science Act of 2022. (IPU 23U0535 issued 04-24-2023)

(20) IRM 3.11.14.10.16, Elective or Deemed Payment Election (DPE) and Credit Transfers - Added to the beginning of (2) and (4) "For Tax Periods 202212 - 202311,"

(21) IRM 3.11.14.10.16, Elective or Deemed Payment Election (DPE) and Credit Transfers - Added new section procedures for Deemed Payment Elections and Credit Transfers per Inflation Reduction Act of 2022 (IRA) and CHIPS and Science Act of 2022. (IPU 23U0495 issued 04-10-2023)

(22) IRM 3.11.14.11, Received Date - Changed "Correspondence Imaging System (CIS)" to "Correspondence Imaging Inventory (CII)." (IPU 23U0038 issued 01-03-2023)

(23) IRM 3.11.14.13.3, Fiduciary and Trust Code Editing - Added in (5) 2023 Exemption Amount.

(24) IRM 3.11.14.14.3, Entity Perfection – Name Control - Added in (4) EIN prefix "92" to the referenced list. (IPU 23U0320 issued 02-28-2023)

(25) IRM 3.11.14.17.2.1, Lines 10 - 15b - Changed in (2) note "Tax Years 2022" to "Tax Years 2022 and later" . Changed in (3) "Allocating Deductions" to "Allocating Deductions from an Attachment" .

(26) IRM 3.11.14.17.2.7, Line 21 - Exemption - Updated in (2) Qualified Disability Exemption Amount for 2023.

(27) IRM 3.11.14.17.3.5, Line 27 - Estimated Tax Penalty - Changed Form 2210 "Line 17 or Line 28" to "Line 19" . (IPU 23U0621 issued 05-11-2023)

(28) IRM 3.11.14.19, Signature - Changed "Correspondence Imaging System (CIS)" to "Correspondence Imaging Inventory (CII)." Changed "CIS" to "CII." (IPU 23U0038 issued 01-03-2023)

(29) IRM 3.11.14.21.5, E-File Waiver Indicator (Form 8948) - Changed in (1) "P.L. 111-92 H.R. 3548 Sec. 17" to "IRC 6011(e)(3)" .

(30) IRM 3.11.14.22.6, Line 6a, Schedule G - Recapture Tax From Form 4255 - Added new sub-section procedures.

(31) IRM 3.11.14.22.7, Line 6b, Schedule G - Recapture Tax From Form 8611 - Added new sub-section procedures.

(32) IRM 3.11.14.22.8, Line 6c, Schedule G - Other Recapture Taxes - Moved Form 4255 procedures to IRM 3.11.14.22.6. Moved Form 8611 procedures to IRM 3.11.14.22.7.

(33) IRM 3.11.14.22.12.7 (old 3.11.14.22.10.7), Line 16, Schedule G - Payments From Form 2439 - Updated Line 16a, Schedule G procedures instructions for Elective Deemed Payment Election and Credit Transfers per IRA 2022. (IPU 23U0535 issued 04-24-2023)

(34) IRM 3.11.14.22.12.7, Line 16, Schedule G - Payments from Form 2439 - Moved the Elective or Deemed Payment Election (DPE) and Credit Transfers to IRM 3.11.14.22.12.9.

(35) IRM 3.11.14.22.12.8, Line 17, Schedule G - Payments from Form 4136 - Added new procedures for when Form 4136 is missing, attached, and 2022 and prior procedures.

(36) IRM 3.11.14.22.12.9, Line 18a, Elective or Deemed Payment Election Amount Form 3800 - Added new procedures.

(37) IRM 3.11.14.22.12.9 (old 3.11.14.22.10.7), Line 18a, Elective or Deemed Payment Election Amount Form 3800 - Added to Line 16a, Schedule G procedures instructions for Deemed Payment Elections per IRA 2022. (IPU 23U0495 issued 04-10-2023)

(38) IRM 3.11.14.22.12.10, Line 18b, Schedule G - Other Credits or Payments - Moved procedures from IRM 3.11.14.22.10.9, Line 17, Schedule G - Credit for Qualified Sick and Family Leave Wages Taken Before April 1, 2021, and IRM 3.11.22.10.10, Line 18, Schedule G - Credit For Qualified Sick and Family Leave Wages Taken After March 31, 2021, and before October 1, 2021. Added new (5) for Tax Periods 202012 through 202411 Qualified Sick and Family Leave Wages Taken Before April 1, 2021, and Credit for Qualified Sick and Family Leave Wages Taken After March 31, 2021, and before October.

(39) IRM 3.11.14.23.4, Line 13 - Digital Asset Checkbox - Added new procedures.

(40) IRM 3.11.14.26.2, Line 1a (2020 and later) and Line 1 (2019 and later) - Total Social Security Wages - Added in (1) table the Schedule H minimum reportable amount for tax Period 2021312 - 202411.

(41) IRM 3.11.14.26.7, Line 3 - Total Medicare Wages - Added in (1) table the Schedule H minimum reportable amount for tax Period 2021312 - 202411.

(42) IRM 3.11.14.26.28.1, Loose Filed Calendar Year Schedule H (with Remittance) - Corrected paragraph (2)3. referenced lines when editing Lines 7, 17, and 18, Schedule G and Form 1041, Line 26. (IPU 23U0636 issued 05-16-2023)

(43) IRM 3.11.14.32, Form 965-A - Individual Report of Net 965 Tax Liability - Changed in (2) "Tax Period 202112 through 202211" to "Tax Period 202112 and later" and "Tax Year 2021" to Tax "Year 2021 and later." Changed in (4) "Tax Period is 202012 - 202111" to "Tax period 202012 and later" . Added in (5) procedures for Tax Period 202012 - 202211.

(44) IRM 3.11.14.34, Reserved - Moved Form 5884-B, New Hire Retention Credit to IRM 3.11.14.35.33, Line zz - Other Credits.

(45) IRM 3.11.14.35, Form 3800 - General Business Credit - Deleted (3), procedures when amount is present on Form 3800, Part III, Line 1a, Column (c), through Line 4z. These procedures are covered under the individual line for the specific form credit. starting at IRM 3.11.14.5.1.

(46) IRM 3.11.14.35.1, Line 1a - Form 3468 Part II - Revised the existing exception for TY 2022 and prior.

(47) IRM 3.11.14.35.2, Line 1b - Form 7207 - Added new procedures.

(48) IRM 3.11.14.35.3, Line 1c - Form 6765 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(49) IRM 3.11.14.35.4, Line 1d - Form 3468, Part III - Added new procedures.

(50) IRM 3.11.14.35.5, Line 1e - Line 1e - Form 8826 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(51) IRM 3.11.14.35.6, Line 1f - Form 8835, Part II - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(52) IRM 3.11.14.35.7, Line 1g - Form 7210 - Added new procedures,

(53) IRM 3.11.14.35.8, Line 1h - Form 8820 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(54) IRM 3.11.14.35.9, Line 1i - Form 8874 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(55) IRM 3.11.14.35.10, Line 1j - Form 8881, Part I - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(56) IRM 3.11.14.35.11, Line 1k - Form 8882 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(57) IRM 3.11.14.35.12, Line 1l - Form 8864 (diesel) - Revised the existing exception for TY 2022 and prior.

(58) IRM 3.11.14.35.13, Line 1m - Form 8896 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(59) IRM 3.11.14.35.14, Line 1n - Form 8906 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(60) IRM 3.11.14.35.15, Line 1o - Form 3468, Part IV - Added new procedures, Moved Form 8907 procedures to IRM 3.11.14.35.33, Line 1zz - Other Credits.

(61) IRM 3.11.14.35.16, Line 1p - Form 8908 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(62) IRM 3.11.14.35.17, Line 1q - Reserved - Moved Form 8929, Energy Efficient Appliance procedures to IRM 3.11.14.35.33.

(63) IRM 3.11.14.35.18, Line 1r - Form 8910 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(64) IRM 3.11.14.35.19, Line 1s - Form 8911, Part II - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(65) IRM 3.11.14.35.20, Line 1t - Form 8830 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(66) IRM 3.11.14.35.21, Line 1u - Form 7213, Part I - Added new procedures,

(67) IRM 3.11014.35.22, Line 1v - Form 3468, Part V - Added new procedures,

(68) IRM 3.11.14.35.23, Line 1w - Form 8932 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(69) IRM 3.11.14.35.24, Line 1x - Form 8933 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(70) IRM 3.11.14.35.25, Line 1y - Form 8936, Part II - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later. Added new (3) for Tax Year 2011 and later and Form 8936 is attached. Added to (4) "For Tax Year 2010 and 2009" .

(71) IRM 3.11.14.35.26, Line 1z - Reserved - Moved Form 8834, Qualified Plug In Electric Vehicle procedures to IRM 3.11.14.35.33.

(72) IRM 3.11.14.25.27, Line 1aa - Form 8936, Part V - Added new procedures. Moved Form 5884-A, Employee Retention procedures to IRM 3.11.14.35.33.

(73) IRM 3.11.14.35.28, Line 1bb - Form 8904 - Added new procedures. Moved General Credits from an Electing Large Partnership to IRM 3.11.14.35.33.

(74) IRM 3.11.14.35.29, Line 1cc - Form 7213, Part I - Added new procedures.

(75) IRM 3.11.14.35.30, Line 1dd - Form 8881, Part II - Added new procedures.

(76) IRM 3.11.14.35.31, Line 1ee - Form 8881, Part III - Added new procedures.

(77) IRM 3.11.14.35.32, Line 1ff - Form 8864, Line 8 - Added new procedures.

(78) IRM 3.11.14.35.33, Line 1zz - Other Credits - Changed (1) to read "Line 1zz is used to report other credits with no line designations on Form 3800." Changed (2) to read "For Tax year 2022 and prior - If the following do not have a line designation on Form 3800 Part III, edit the credit amounts to Line 1zz, Form 8300 Part III:" Added in (2) list, General credits from an electing large partnership, Low-Income Housing, Employee Retention (Form 5884-A), Qualified Electric Vehicle Credit (Form 8834), Indian Employment (Form 8845), Nonconventional Source Fuel (Form 8907), Energy Efficient Appliance (Form 8909), Rescue Team Training Credit (Form 8923), and Agricultural Chemicals Security (Form 8931). Added exceptions for Tax Year 2022 and prior and Tax Year 2023 and later.

(79) IRM 3.11.14.35.34, Line 3 - Form 8844 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(80) IRM 3.11.14.35.35, Line 4a - Form 3468, Part VII - Revised the existing exception for TY 2022 and prior.

(81) IRM 3.11.14.35.36, Line 4b - Form 5884 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(82) IRM 3.11.14.35.37, Line 4c - Form 6478 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(83) IRM 3.11.14.35.38, Line 4d - Form 8586 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(84) IRM 3.11.14.35.39, Line 4e - Form 8835, Part II - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(85) IRM 3.11.14.35.40, Line 4f - Form 8846 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(86) IRM 3.11.14.35.41, Line 4g - Form 8900 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(87) IRM 3.11.14.35.42, Line 4h - Form 8941 - Revised the existing exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(88) IRM 3.11.14.35.43, Line 4i - Form 6765 ESB Credit - Added exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(89) IRM 3.11.14.35.44, Line 4j - Form 8994 - Added exception for TY 2022 and prior. Added a second exception for Tax Year 2023 and later.

(90) IRM 3.11.14.35.45, Line 4k - Form 3468, Part VI - Added new procedures.

(91) IRM 3.11.14.35.46, Lines 1-30, Column (b), Part V (Form 3800) - Elective Payment or Transfer Registration Number - Added new procedures.

(92) IRM 3.11.14.38, Form 8936 (Schedule A), Clean Vehicle Credit Amount - Added new procedures.

(93) IRM 3.11.14.39.1, Correspondence Procedures for Decedent Returns - Changed in (3) a) the return due date of April 15, 2023, to April 15, 2024.

(94) IRM 3.11.14.39.2, Conversion Procedure for Decedent Returns - Changed in (2)c) receive date 041823 to 041524.

(95) IRM 3.11.14.39.3, Transferring Tax Data for Decedent Return - Form 1040 to Form 1041 - Added in (3) a note to see prior year conversion charts found in job aid (Number 2505-002). Added in (3)a) table 2023 Form 1040 line numbers.

(96) IRM 3.11.14.40.1.3.6 (old 3.11.14.39.1.3.6), Line 17 - Payments (Form 1041-QFT) - Updated Line 17 Payments instructions for Elective Deemed Payment Election and Credit Transfers per IRA 2022. (IPU 23U0535 issued 04-24-2023)

(97) IRM 3.11.14.40.1.3.7, Line 18 - Elective Payment Election Amount from Form 3800 (Form 1041-QFT) - Added new procedures.

(98) IRM 3.11.14.40.1.3.7 (old 3.11.14.39.1.3.6), Line 18 - Elective Payment Election Amount from Form 3800 (Form 1041-QFT) - Added to Line 17 Payments instructions for Deemed Payment Elections per IRA 2022. (IPU 23U0495 issued 04-10-2023)

(99) IRM 3.11.14.40.1.3.7, Line 18 - Elective Payment Election Amount from Form 3800 (Form 1041-QFT) - Updated Line 20 Payments instructions for Elective Deemed Payment Election and Credit Transfers per IRA 2022. (IPU 23U0535 issued 04-24-2023)

(100) IRM 3.11.14.40.1.3.7, Line 18 - Elective Payment Election Amount from Form 3800 (Form 1041-QFT) - Added to Line 20 Payments instructions for Deemed Payment Elections per IRA 2022. (IPU 23U0495 issued 04-10-2023)

(101) IRM 3.11.14.41.1.2.1, Lines 6 - 11 (Form 1041-N) - Updated in (5) table the Qualified Disability Trust exemption amount.

(102) IRM 3.11.14.41.1.3.2, Line 14 - Tax (Form 1041-N) - Deleted procedure "1) Delete the Line 14 amount."

(103) IRM 3.11.14.41.1.3.7, Line 19 - Elective Payment Election Amount from Form 3800 (Form 1041-N) - Added new procedures.

(104) IRM 3.11.14.43, Routing Guide for Attachments - Added in (3) table Form 7207, Advanced Manufacturing Production Credit, Form 7210, Clean Hydrogen Production Credit, Form 7213, Nuclear Power Production Credit, Form 8936 (Schedule A), Clean Vehicle Credit Amount

(105) IRM 3.11.14.43, Routing Guide for Attachments - Added to Routing Guide for attachments Form 7204, Consent To Extend the Time to Assess Tax Related To Contested Foreign Income Taxes - Provisional Foreign Tax Credit Agreement and Form 7205, Energy Efficient Commercial Building Deduction, - New forms developed per PL 117-169, Inflation Reduction Act. (IPU 23U0495 issued 04-10-2023)

(106) IRM 3.11.14.43, Routing Guide for Attachments - Corrected Form 8897 to Form 8997 and moved the instructions in be in form order. Corrected "Form 5471, Schedule G" to "Form 5471, Schedule G-1" and "Attangment" to "Arrangement" in the title. (IPU 23U0188 issued 01-27-2023)

(107) Exhibit 3.11.14-10, Due Date Chart - Updated the due dates.

(108) Exhibit 3.11.14-10, Due Date Chart - Changed "Correspondence Imaging System (CIS)" to "Correspondence Imaging Inventory (CII)." Changed "CIS" to "CII." (IPU 23U0038 issued 01-03-2023)

(109) Various editorial changes have been made throughout this IRM (e.g., IRM titles, subsections, graphics, tax year references, line numbers, grammar, spelling, punctuation, unspan cells, links, plain language, etc.).

Effect on Other Documents

IRM 3.11.14 dated November 15, 2022 (effective 01-01-2023) is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs): 23U0038 January 03, 2023, 23U0188 January 27, 2023, 23U0320 February 28, 2023, 23U0475 March 30, 2023, 23U0495 April 10, 2023, 23U0535 April 24, 2023, 23U0621 May 11, 2023, and 23U0636 May 16, 2023.

Audience

Wage and Investment (W&I) Code and Edit Tax Examiners

Effective Date

(01-01-2024)

James L. Fish
Director, Submission Processing
Wage and Investment Division

Program Scope and Objectives

  1. The purpose of Document Perfection is to code and perfect (edit) documents being input to the Automated Data Processing (ADP) System to make them adaptable to computer processing and to recognize and properly dispose of accompanying attachments. Special codes are entered into the computer to perform specific functions.

  2. Instructions in this IRM are for a typical return. Apply the instructions as far as possible when a situation is not explained.

  3. In case of a conflict of instructions between this general sub-section and the subsequent specific sub-section, the specific sub-section will govern.

  4. Numerical listings (e.g., (1), (2)) show paragraph numbers to be followed in order.

  5. Alpha and bullet listings (e.g., a., b., c.) show instructions or information that is important but the order in which they are to be considered is not important.

  6. This IRM cannot address every possibility that may arise while correcting returns or documents. Taxpayer intent must be taken into consideration. In some cases, it may be necessary to refer the issue to your Subject Matter Expert (SME), lead and/or manager to decide the proper editing.

  7. IRM 3.11.14 gives Code & Edit (C&E) procedures for the following returns and their related Schedules and Forms:

    • Form 1041 (U.S. Income Tax Return for Estates and Trusts).

    • Form 1041-QFT (U.S. Income Tax Return for Qualified Funeral Trusts).

    • Form 1041-N (U.S. Income Tax Return for Electing Alaska Native Settlement Trusts (ANST)).

  8. Form 1041 is used by a fiduciary of a domestic estate, trust, or bankruptcy estate to report the following:

    • Income received and expenses incurred during the taxable period by the estate or trust.

    • Income that is either accumulated or held for future distribution or distributed currently to the beneficiaries.

    • Any applicable tax liability of the fiduciary.

  9. Audience - These IRM procedures apply to employees responsible for coding and editing returns:

    • Clerks

    • Lead Clerk

    • Supervisory Clerk

    • Tax Examining Technicians

    • Lead Tax Examining Technicians

    • Supervisory Tax Technicians.

  10. Policy Owner - The Director of Submission Processing.

  11. Program Owner - The Paper Processing Branch, Business Master File (BMF) section.

  12. Primary Stakeholders - Accounts Management (AM), Small Business/Self-Employed (SBSE), Large Business and International (LB&I), Chief Financial Officer (CFO), Taxpayer Advocate (TAS), Chief Counsel, Information Technology programmers, Statistics of Income (SOI), Tax Exempt/Government Entities (TEGE), Compliance, Modernized E-file (MeF), Submission Processing (SP)

  13. Form 1041-QFT was added to the Internal Revenue Code by the Taxpayer Relief Act of 1997 to permit certain trusts which previously filed Form 1041 as Grantor Trusts to elect Qualified Funeral Trust status. See IRM 3.11.14.40, Form 1041-QFT, U.S. Income tax Return for Qualified Funeral Trusts, for detailed instructions.

    • All Domestic Forms 1041-QFT will be processed at the Kansas City Submission Processing Campus (KCSPC) and all International Forms 1041-QFT will be processed at the Ogden Submission Processing Campus (OSPC).

      Exception:

      Domestic Forms 1041-QFT that are erroneously sent to Ogden will be processed in Ogden.

  14. Form 1041-N was added by IRC 671 of the Economic Growth and Tax Relief Reconciliation Act of 2001. AllForm 1041-N will be processed at the Ogden Submission Processing Campus (OSPC) only. See IRM 3.11.14.41, Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlements, for detailed instructions.

Background

  1. The purpose of Document Perfection is to code and edit (perfect) returns and other documents for input to the Master File (MF) through the Integrated Submission and Remittance Processing System (ISRP) or the Service Center Recognition Image Processing System (SCRIPS). In addition, Document Perfection forwards any other documents or attachments not related to the processing of the returns to the function responsible for handling them.

  2. It is not the purpose of Code and Edit to mathematically verify or to check the validity of the returns and other documents being processed unless otherwise specified in the applicable section. The computer and/or Error Correction (Resolution) will perform these functions if the returns and other documents are co ded and edited as prescribed in the applicable subsections of this section.

  3. While working assigned cases, Submission Processing (SP) employees may come across some that are blocked on IDRS and is shown by an IDRS security violation message, "Unauthorized Access to This Account". Forward the return to your manager. Managers will notify the local Planning and Analysis (P&A) Staff who will scan the case and send encrypted information to the "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡" mailbox requesting access to the account. Managers will retain the original case in a file awaiting access (can take up to 5 business days). Once notified access was granted, the case is worked following applicable procedures.

Authority

  1. The Internal Revenue Code of 1986 or more commonly known as the Internal Revenue Code (IRC) is the authority for these procedures. Treasury/IRS rules and regulations interpret the law. The IRC was amended by acts and public laws such as the following:

    • The Protecting Americans from Tax Hikes (PATH) Act

    • Hiring Incentives to Restore Employment (HIRE) Act

    • Consolidated Appropriations Act (Extenders)

    • American Taxpayer Relief Act (ATRA)

    • Health Care and Education Reconciliation Act

    • Patient Protection and Affordable Care Act (ACA)

    • Foreign Account Tax Compliance Act (FATCA)

    • Revenue Reconciliation Act of 1998 (RRA 98)

    • Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law (PL) 114-41, changed the return due dates for returns of partnerships, and C corporations.

    Note:

    The above list may not be all inclusive of the various updates to the IRC.

  2. All Policy Statements for Submission Processing are contained in IRM 1.2.12, Servicewide Policies and Authorities, Policy Statements for Submission Processing Activities.

Responsibilities

  1. The Director of the Submission Processing Campus (SPC) is responsible for monitoring operational performance for that SPC.

  2. The Operations Manager is responsible for monitoring operational performance for their operation.

  3. The team manager/lead is responsible for performance monitoring and ensuring employees have the tools to perform their duties.

  4. The team employees are responsible to follow the instructions contained in this IRM and maintain updated IRM procedures.

Program Management and Review

  1. Ensure documents are coded and edited ready for transcription.

  2. Program Reports - Batch Block Tracking System (BBTS) Report.

  3. Program Effectiveness - is measured by the following:

    • Embedded Quality Submission Processing (EQSP)

    • Balanced Measures

    • Managerial reviews

  4. Annual Review: is done by the Federal Managers Financial Integrity Act (FMFIA) review.

Program Controls

  1. Quality Review conducts a statistically valid sample size review of completed work to ensure IRM guidelines are followed.

Terms/Definitions/Acronyms

  1. The following is a table of interpretation words that need clarification:

    Word Definition Example of using a word that is open to interpretation (This column is for illustration purposes only)
    Fair Give accurate and professional service to all persons without regard to personal bias. Treat the customer in a fair manner when working with FOIA requests.
    T/C In form exhibits a T/C shows the line as transcribed and computed during processing. See Exhibit 3.11.14-1, Form 1041 Transcription Lines, Line 9.
    Timely Give the time frame to consider what is or is not timely. Process all IMF adjustments in a timely fashion.
    Usually Give the exceptions when something is not required or what would create the unusual circumstance. Pay adjustments will be accomplished within a reasonable amount of time, usually within two (2) pay periods.
  2. There are specific terms used when dealing with estates and trusts. See below:

    Description Definition
    Beneficiary A person designated as the recipient of funds or other property under a trust or an estate.
    Corpus The principal sum or capital of a trust or an estate, as distinguished from interest or income.
    Decedent Estate A legal entity created as the result of a person's death. The estate consists of the real and/or personal property of the deceased person. The estate pays any debts owed by the decedent and then distributes the balance of the estate's assets to the beneficiaries of the estate.
    Exemption Amounts Decided based on whether the fiduciary is filing for a decedent's estate or trust. Exemption amounts are claimed on Line 21 of Form 1041.
    Fiduciary Trustee of a trust; or executor, executrix, administrator, administratrix, personal representative, or person in possession of property of a decedent's estate.
    Maker, Grantor, etc. The person/organization to the extent such person /organization either creates a trust, or directly or indirectly makes a gratuitous transfer to the trust.
    Trust A legal entity created under state law and taxed under federal law. The trust is created either under a will or inter vivos action.

  3. There are many types of trusts as shown in the following:

    Description Definition
    Simple Trust When the trust instrument requires that all income be distributed currently, with no authority to make charitable contributions, and the trust doesn’t distribute amounts allocated to the corpus of the trust.

    Note:

    A trust is a Simple Trust only for the year in which it distributes income and makes no other distributions to beneficiaries. For a year when the trust doesn't meet these requirements, it is a "Complex Trust."

    Complex Trust A trust which, for the taxable year, doesn't qualify as a Simple Trust.
    Grantor Trust A trust in which the grantor retains certain powers of ownership or benefits. In general, a grantor trust is ignored for tax purposes and all income, deductions, etc., from the trust is taxable Income of the grantor.
    Grantor Trusts (Non-Taxable) Report Income, Deductions, and Credits on Form 1040.
    Grantor Trusts (Partially Taxable) Report Income, Deductions, and Credits on Form 1041.
    Ancillary and Domiciliary Trust A trust which exists in a foreign state because the grantor is domiciled (resides) in another state.
    Clifford Trust A grantor type trust where the assets are placed in a trust but there is still some ownership taxable to the grantor.
    Conservatorship A trust (not an estate) which is usually set up for an incompetent person (Not necessarily a trust for tax purposes).
    Generation Skipping Trust A trust with beneficiaries who are more than one generation younger than the grantor's generation.
    Guardianship/Custodianship A trust usually set up for a minor (Not necessarily a trust for tax purposes).
    Inter Vivos Trust Established by a grantor during the grantor's lifetime.
    Irrevocable Trust The grantor or non-adverse party doesn't have power to revoke the trust. The trust will pay all taxes unless the grantor retains other powers of ownership or benefit. The trust cannot be revoked or amended.
    Non-Explicit Trust An arrangement that has substantially the same effect as a trust will be treated as a trust even though it is not an explicit trust. Examples of such arrangements are insurance and annuity contracts, arrangements involving life estates and remainders. Non-Explicit Trusts do not add Decedent's Estate.
    Pooled Income Fund A fund maintained by a public charity which gives contributors to the fund with an income interest for life with remainder to the public charity.
    QTIP Trust A trust established, whether during life or at death, for the benefit of the grantor's or decedent's spouse that qualifies for the gift or estate tax marital deduction as qualified terminable interest property described in IRC 2523(f) (gift tax) or IRC 2056(b)(7) (estate tax).
    Qualified Disability Trust A qualified disability trust is normally a trust set up for a person that qualifies under the Social Security Act as being 100% disabled. The trust is entitled to a larger exemption than a simple or complex trust.
    Qualified/Pre-Need Funeral Trust A trust which has elected to be taxed as a qualified funeral trust. Normally, one Form 1041-QFT will be filed in lieu of one or more Form 1041. However, if Form 1041 is received with the notation "QUALIFIED FUNERAL TRUST" , "PRE-NEED FUNERAL TRUST" , etc., process as a Form 1041 filed for a Grantor Trust.
    Residual Trust Established under the terms of the will to receive that part of an estate that remains after the payment of all debts, charges, devises, and specific and pecuniary bequests.
    Revocable Trust The grantor or a non-adverse party has power to revoke the trust. The grantor of the trust will pay the taxes of the trust on their Form 1040 return. The trustee will file Form 1041 return for Information Only purposes unless they select an optional filing method.
    Testamentary Trust Set forth or contained in a Will or a formal declaration of a person's wishes as to the disposition of the property after their death. A paper, instrument, document, gift, appointment, etc., is said to be testamentary when it is written or made so as not to take effect until after the death of the person making it, and to be revocable and retain the property under their control during their life, although they may have believed that it would operate as an instrument of a different character.
    Trust Under the Will The same as a Testamentary Trust.

  4. There are many types of estates, as shown below:

    Description Definition
    Ancillary and Domiciliary Estate An estate which exists in a foreign state because the taxpayer resided in another state at the time of death.
    Bankruptcy Estate A separate and distinct taxable entity from the individual debtor created when an individual debtor files for bankruptcy under Chapter 7 or 11. This creates a separate estate consisting of property that belongs to the debtor prior to the filing date.
    Decedent's Estate Estate of a deceased person that is a taxable entity separate from the decedent. It exists until the final distribution of the assets are made to the heirs and other beneficiaries.
    Probate Estate The same as an Estate Entity. Probating an estate in court is done to establish that the Will is authentic or valid.

  5. See Exhibit 3.11.14-10, Acronyms and Abbreviations, for a list of common acronyms.

Related Resources

  1. Here are other websites used in accomplishing the work:

    • Servicewide Electronic Research Program (SERP)

    • Submission Processing Design Center (SPDC)

    • Integrated Data Retrieval System (IDRS)

General Information

  1. This IRM can’t address every possibility that occurs while perfecting returns or documents. Take taxpayer intent into consideration. Refer issues not addressed in this IRM to the subject matter expert (SME), Lead or manager to decide the proper editing.

Schedules/Forms Associated with Form 1041

  1. The following schedules are found within Form 1041:

    • Schedule A (Charitable Deductions) - Used by a trust that claims a contribution deduction under IRC 642(c), or by a trust described in IRC 4947(a)(2).

    • Schedule B (Income Distribution Deduction).

    • Schedule G (Tax Computation).

  2. Listed below are other schedules and forms which may be filed with Form 1041:

    • Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship)

    • Form 1040 Schedule E, Supplemental Income and Loss

    • Form 1040 Schedule F, Profit or Loss from Farming

    • Form 1040 Schedule H, Household Employment Taxes

    • Form 1041 Schedule D, Capital Gains and Losses

    • Form 1041 Schedule D-1, Continuation Sheet for Schedule D for 201212 and prior years only.

    • Form 1041 Schedule I, Alternative Minimum Tax-Estates and Trusts

    • Form 1041 Schedule J, Accumulation Distribution for Certain Complex Trusts

    • Form 1041 Schedule K-1, Beneficiary's Share of Income, Deductions, Credits, etc., - Used to report each beneficiary's share of the Income, Deductions, Credits, and Alternative Minimum Taxable Income from the estate or trust.

    • Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Accounts - Used by a trust that claims a contribution deduction under IRC 642(c), or by a trust described in IRC 4947(a)(2).

    • Form 1041-ES, Estimated Tax for Estates and Trusts - Used to figure and pay estimated tax for fiduciaries.

    • Form 1041-T, Transmittal of Estimated Tax Credited to Beneficiaries - Used by an estate or trust to make an election under IRC 643(g) to allocate an estimated tax payment to beneficiaries.

    • Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts

    • Form 3800, General Business Credit

    • Form 4136, Credit for Federal Tax Paid on Fuels

    • Form 4797, Sale of Business Property

    • Form 4952, Investment Interest Expense Deduction

    • Form 5884-A, Credits for Affected Disaster Area Employers (for Employers Affected by Hurricane Harvey, Irma, or Maria or Certain California Wildfires)

    • Form 5884-B, New Hire Retention Credit

    • Form 8938, Statement of Specified Foreign Financial Assets

    • Form 8941, Credit for Small Employer Health Insurance Premiums

    • Form 8948, Preparer Explanation for Not Filing Electronically

    • Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF)

    • Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts

    • Form 8936 (Schedule A), Clean Vehicle Credit Amount

♦Business Master File (BMF) Consistency♦

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

  2. Topics for BMF Consistency have been shown and developed as a coordinated effort between Ogden, Kansas City, and Paper Processing Branch BMF C&E / Error Resolution Systems (ERS).

  3. BMF Consistency subsections are shown by a ♦ (diamond) in front of 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.

♦IRM Deviation Procedures♦

  1. IRM deviations must be submitted in writing following instructions from IRM 1.11.2.2.4, When Procedures Deviate from the IRM, and elevated through proper channels for executive approval.

♦Taxpayer Advocate Service (TAS)♦

  1. The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS), led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and knows and understands their rights under the Taxpayer Bill of Rights (TBOR). TAS offers free help to taxpayers, including when taxpayers face financial difficulties due to an IRS problem, when they are unable to resolve tax problems, they haven’t been able to resolve on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning as it should. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

  2. TAS uses Form 12412, Operations Assistance Request (OAR), to start the OAR process of referring a case to the Wage and Investment (W&I) Division, to affect the resolution of the taxpayer’s problem. For more information, refer to IRM 13.1.19, Taxpayer Advocate Service, Taxpayer Advocate Case Procedures, Advocating with Operations Assistance Requests (OARs).

  3. Refer taxpayers to TAS when the contact meets TAS criteria or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order) is attached and steps can’t be taken to resolve the taxpayer's issue the same day.

  4. The definition of “same day resolution” is within 24 hours. The following two situations meet the definition of “same day resolution”:

    • The issue is resolved within 24 hours.

    • IRS takes steps within 24 hours to resolve the taxpayer’s issue.

  5. When making a TAS referral, use Form 911, and forward to TAS following your local procedures.

  6. IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria, for more information.

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

  2. The SLAs are found at https://irsgov.sharepoint.com/sites/TAS/SitePages/SLA.aspx.

♦Business Master File (BMF) Identification (ID) Theft♦

  1. BMF Identification (ID) Theft is increasing. If a case is found with attachments or correspondence showing the taxpayer is a victim of ID Theft, give the entire case to the manager/lead.

  2. The manager/lead will expedite the case to the Planning and Analysis (P&A) staff for referral to one of the Submission Processing (SP) BMF ID Theft liaisons. The taxpayer must show that they are a victim of "ID Theft" ; do not send cases that are subject to Criminal Investigation (CI), Examination (Exam) or Fraud review.

  3. Effective January 1, 2017, Computer Condition Code "E" will be edited on Form 1041, Form 1041-QFT, and/or Form 1041-N, (any year) after the SP BMF ID Theft Liaison finds a potential identity theft filing.

♦Foreign Currency♦

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

♦Protective Claims♦

  1. Returns marked as "Protective Claim" , "Protective Refund" , "Protective Claim for Refund" , or similar statement will be removed from the batch and routed to Accounts Management (AM). Notate "Protective Claim" in the remarks box of Form 4227, Intra-SC Reject or Routing Slip.

    Note:

    If the return is amended, do not remove from batch. Edit Computer Condition Code "G" and follow normal processing procedures.

♦Criminal Investigation (CI) Referrals♦

  1. Criminal Investigation (CI) investigates potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes. Criminal violations of the IRC are willful attempts to evade or defeat the income tax. Flagrant criminal activity is, but is not limited to, the failure to pay taxes due and/or taxes collected or withheld and false claims for refunds based on bogus return information.

  2. For returns with refund claims of ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more, do the following:

    Refund Claim Kansas City, and Ogden
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Make a copy of the first two pages of the tax return along with any pages of the return that appears suspicious.

    2. Attach Form 4227, Intra-SC Reject or Routing Slip, to the copy.

    3. Route the copy to: Ogden, Mail Stop 9001, Criminal Investigation (CI).

    4. Staple a post-it notes with the notation of "Copy to CI" , or "CI Referral" , or similar language in the lower left corner side of the return. See IRM 3.11.14.10.7, Refund Returns (45 Day Jeopardy and High Dollar Refunds).

    5. Edit AC 341 on the return.

    6. Continue processing the return.

  3. Because of the repetitive nature of the Code and Edit (C&E) function, C&E Tax Examining technicians often recognize income tax return data which is outside of the norm for data found on similar returns for each income tax return type. If C&E finds return characteristics not meeting Audit Code or Exam referral criteria it deems suspicious, CI is available to review the referral.

  4. If a suspicious return is found, do the following:

    • Make a copy of the first two pages of the tax return along with any page of the return that appears suspicious.

    • Attach Form 4227, Intra-SC Reject or Routing Slip, to the copy.

    • Route the copy as shown in the table below.

      Ogden Kansas City
      Mail Stop 9001,
      Criminal Investigation (CI)

      Internal Revenue Service
      1973 North Rulon White Blvd.
      Mail Stop 9001
      Criminal Investigation (CI)
      Ogden, UT 84404

    • Edit "Copy to CI" , or "CI Referral" , or similar language in the lower left corner going vertically up the side of the return.

    • Continue processing the return.

  5. If the return fits other criteria (e.g., Frivolous Argument), edit the return properly.

♦Examination (Exam) "Funny Box" ♦

  1. The primary objective in identifying tax returns for examination is to promote the highest degree of voluntary compliance. Examination will give support and assist Submission Processing (SP) with any questionable return shown during processing. Exam has a vast multitude of programs and tolerance criteria already shown in various IRM sections. Exam doesn't restrict SP with the flexibility to refer questionable returns other than what is currently shown in various IRMs.

  2. Some returns will need special care. If the withholding is≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, attach Form 4227 and place in the locally designated basket for Examination, Frivolous Return Program (FRP) for review. Pay particular attention to returns with Form 1099-OID attached.

General Editing Guidelines

  1. The general editing guidelines in this section are used to edit:

    • Form 1041, U.S. Income Tax Returns for Estates or Trusts.

    • Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts. See IRM 3.11.14.40, Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts, paragraphs (1) through (8) for more information prior to editing the return.

    • IRM 3.11.14.41, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts, paragraphs (1) through (5) for more information prior to editing the return.

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

  3. Do not edit brackets or parentheses around amounts clearly shown to be negative by the presence of a minus sign (-).

    Reminder:

    It will be necessary to bracket negative amounts when editing negative entries on transcription lines (i.e., computing and entering a line entry, entering a missing line entry, etc.,)

  4. Instructions for editing Schedules K-1 are in IRM 3.0.101, Schedule K-1 Processing.

  5. Received date is edited in MMDDYY format.

  6. If a return is filed on a tax form for other than the correct tax year, convert the tax return to the current year format. See IRM 3.11.14.42, Prior Year Returns - Form 1041.

  7. If a current year (2023) return is filed on a 2000 - 2022 tax form, renumber the prior year return to comply with current year line numbers. If the prior year return is filed on the correct/incorrect tax form, renumber the prior year form to current year format (2000 and subsequent).

  8. If a current year (2023) form is used to report prior year tax information, edit the tax period to reflect the prior year.

Examination of Attachments

  1. All attachments to the return being processed will be examined and edited as required by the attachment.

  2. When an attachment influences the document being processed, it will remain attached unless a specific instruction requires that it be detached.

    1. Notate any editing on Form 1041, Form 1041-QFT, and/or Form 1041-N regarding attachments, photocopying, etc., to leave a working trail. Edit the Working Trail(s) in the lower left corner going vertically up the side of the return.

    2. Refer to the Campus Mail Routing Guide for proper disposition of attachments not found in the Routing Guide for Attachments. See IRM 3.11.14.43, Routing Guide for Attachments.

  3. If the document to be detached has any information that is pertinent to the return being processed, photocopy or transfer the data to a blank piece of paper and attach it to the return.

  4. Forward any attachment requesting an adjustment or correspondence to Accounts Management Branch via Form 4227.

♦Edit Marks♦

  1. Edit marks are edited on the return for transcription to the Automatic Data Processing (ADP) System through the Integrated Submission and Remittance Processing (ISRP) system. Enter edit marks in brown, red, orange, purple, or green.

  2. Only edit items on the return that are for transcription except where specific instructions require editing of a non-transcribed item. Leave lines blank if the entry would be a zero amount unless otherwise instructed.

  3. Do not obliterate, alter, or erase the original entry on a return when deleting or correcting an entry. Always exercise care to ensure that the original entry remains legible. Perfected entries give a legible "edit trail" for anyone who may work with the return later.

  4. Do not re-edit edit marks entered by other areas, such as Collections, Entity or Accounts Management, except to place the marks in the correct area or perfect for legibility. Do not edit (or write) over another area's edit marks.

    Exception:

    Photocopied Returns.

  5. Photocopied Returns - Re-edit or underline any valid, black edit marks. See IRM 3.11.14.6.3.3, Correspondence Imaging Inventory (CII) Returns and IRM 3.11.14.10.6, Re-Entry Document Procedures.

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

    Edit Marks Description
    "X" Deletes tax data or shows do not transcribe an item. For example, if deleting an original entry, edit an "X" to the left of the entry to delete. Edit the correct entry to the left or above the "X."
    "/" Shows do not transcribe a form or schedule.
    "//$" Finds the beginning and ending of a foreign country code in the entity area. For example, "/EI/$" is edited for "Ireland" or "/GM/$" is edited for "Germany."
    "c/o" or "%" Shows an "in-care-of-name" for transcription.
    Circle Shows do not transcribe an entry. Also, deletes entity data or a Received Date.

    Note:

    If the taxpayer circles an entry, edit the entry.

    Underline Finds an entry for transcription (e.g., Name Control, Tax Period, etc.).
    Arrow Shows the correct placement of a misplaced entry. Use an arrow if the misplaced item is close to the correct line and there is no question where the entry belongs.

    Note:

    Use a double arrow to identify the same figure for transcription in two different places (along with any required transcription data between the two arrows).

    Check Mark Shows that an entry was manually math verified and is correct, or that the Fiduciary's Employer Identification Number (EIN) needs to be transcribed.
    Bracket/Parenthesis Shows a negative numerical amount.

    Note:

    Code and Edit (C&E) is not required to bracket negative amounts when brackets are preprinted on the form or schedule or when the taxpayer clearly shows a negative amount with brackets () or "-" sign. Bracket negative amounts when editing negative entries on transcription lines (e.g., computing and entering a line entry, entering a missing line entry, etc.).

    Vertical Line or Decimal Point Shows the separation of dollars and cents.

    Note:

    C&E is no longer required to edit a vertical line, 00, dash, or decimal point to show dollar and cents.

    Zero, Dash, None or N/A "ZERO" , "DASH" , "NONE" or "N/A" are valid entries except when specific instructions require editing of an entry.
    Rocker Shows the amount paid when drawn under a remittance amount.

Sequence - Form 1041

  1. Document Perfection is responsible for arranging Form 1041 in the following order when transcription line entries are present:

    • Pages 1, 2, and 3

    • Schedule I (Form 1041)

    • Form 4952

    • Schedule H (Form 1040)

    • Schedule D (Form 1041)

    • Form 8949 valid for 2017 and later.

    • Form 8995 or Form 8995-A valid for 2019 and later.

    • Form 4136

    • Form 8978 valid for 2017 and later.

    • Form 965-A valid for 2017 and later.

    • Form 8941

    • Form 5884-B not valid for 2012 and later.

    • Form 3800

    • Form 8997 valid for 2021 and later.

    • Form 8960

    • Form 8936 (Schedule A) valid for 2023 and later.

      Note:

      It is not necessary to sequence the forms and/or schedules if there are no transcription line entries, including forms with the entity section only filled in. There’s no need to X forms and/or schedules not in sequence order.

  2. Below are more instructions:

    • Form 1041 Schedule D-1, Pages 1 and 2 should be moved out of the sequence order for Form 1041 on 201212 and prior year returns only. Schedule D-1 is no longer valid.

    • "X" any prior year Schedule I that supports Form 8801 (Schedule G, Line 2c*). See IRM 3.11.14.22.2.3(2), Line 2c, Schedule G - Credit for Prior Year Minimum Tax (Form 8801).
      *(Line 2d for 2009 and prior see IRM 3.11.14.22.2.4, Line 2d, Schedule G - Bond Credits).

    • Place all Form 1041 Schedule K-1, filed as attachments to Form 1041, as the last attachment in the package or follow local agreement. Detach current year and prior two year's Schedules K-1 and all future year Schedules K-1.

      Example:

      Tax years 2021 and later, Form 1041 Schedule K-1.

      See IRM 3.0.101.5, Code and Edit, for Schedule K-1 procedures.

Dollar Tolerances

  1. Taxpayers must give documentation to support claims for most gains, losses, debits, and credits ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡

    1. Unless otherwise instructed, correspond for documentation to support any claims ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

Editing Dollars and Cents

  1. Form 1041 - Edit forms and schedules as dollars only, except for the following lines which are dollars and cents:

    • Line 24 - Total Tax

    • Line 25 - Net 965 Tax Liability Paid

    • Line 26 - Total Payments

    • Line 27 - Estimated Tax Penalty

    • Line 28/29 - Tax Due/Overpayment

    • Line 30a - Credit Elect

    • Line 30b - Refund

    • Line 10, Schedule G, Part II - Estimated Tax Payments

    • Line 11, Schedule G, Part II - Credit to Beneficiaries

    • Line 13, Schedule G, Part II - Tax Paid With Extension

    • Line 14, Schedule G, Part II - Federal Income Tax Withheld

    • Line 15, Schedule G, Part II - Net 965 Tax Liability Amount

    • Line 16, Schedule G, Part II - Payments from Form 2439

    Note:

    For a display of Form 1041 transcription lines see Exhibit 3.11.14-1, Form 1041 Transcription Lines.

  2. Form 1041-QFT - Edit forms and schedules as dollars only, except for the following lines which are dollars and cents:

    • Line 12 - Tax

    • Line 13 - Credits

    • Line 16, Total Tax

    • Line 17 - Payments

    • Line 18 - Elective Payment Election Amount from Form 3800

    • Line 20 - Overpayment

    • Line 21a - Credit Elect

    • Line 21b - Refund

    Note:

    For a display of Form 1041-QFT transcription lines see Exhibit 3.11.14-2, Form 1041-QFT Transcription Lines.

  3. Form 1041-N - Edit forms and schedules as dollars only, except for the following lines which are dollars and cents:

    • Line 14 - Tax

    • Line 15 - Credits

    • Line 16, Total Tax

    • Line 17 - Net 965 Tax Liability Paid

    • Line 18 - Payments

    • Line 19 - Elective Payment Election Amount from Form 3800

    • Line 20/21 - Tax Due/Overpayment

    • Line 22 - Credit Elect

    • Line 22b - Refund

    Note:

    For a display of Form 1041-N transcription lines see Exhibit 3.11.14-3, Form 1041-N Transcription Lines.

Significant Entries

  1. Reference is made throughout this IRM to "significant entries." A significant entry is defined as any amount other than zero.

    Note:

    Blank, Dash, "None," "N/A," or zero are not significant entries unless otherwise specified.

♦Action Codes♦

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

  2. When necessary, a three-digit action code will be assigned by the tax examiner.

  3. Edit the action code in the bottom left margin of the return.

  4. Assign action codes in the following priority order:

    1. Action Code 310 (Statute Control)

    2. Action Code 320 (Entity Control)

    3. Action Code 4XX.

    4. Action Code 6XX.

    5. Action Code 3XX.

    6. Action Code 2XX (Correspondence).

  5. Use the following table if more than one Action Code is needed:

    If ... Then ...
    Action Codes are 211, 215, 225 or 226 and Action Code 341,
    1. Edit the Action Code 211, 215, 225 or 226 on the Form 1041.

    2. Edit Action Code 341 on the Form 4227, Intra-SC Reject or Routing Slip.

    Action Codes have the same priority,
    1. Edit the Action Code with the shorter suspense period on the Form 1041.

    2. Edit the second Action Code on the Form 4227, Intra-SC Reject or Routing Slip.

    3. See IRM 3.11.14.4 (8), Action Codes for suspense periods.

    Action Codes have different priorities,
    1. Edit the Action Code with the higher priority on the Form 1041.

      Exception:

      Use Action Code 211, 215, 225 or 226 before Action Code 341 to ensure the return is complete before a manual refund is issued.

    2. Edit the second Action Code on the Form 4227, Intra-SC Reject or Routing Slip.

  6. Edit the following action codes when a return cannot be perfected:

    Action Code Description
    211 (First Correspondence) or 215 (International Correspondence)
    • Return is illegible, incomplete or contradictory and therefore cannot be processed.

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

    225 (Missing Signature Correspondence)
    • Unsigned return (only issue for correspondence).

    226 (Missing Signature International Correspondence)
    • Unsigned foreign return (only issue for correspondence).

    460 (Management Suspense) Section 965, Treatment of Deferred Foreign Income upon Transition to Participation Exemption System of Taxation.
    480 (Early Filed Suspense)
    • Early filed return.

    610 (Renumbered non-remittance) or
    611 (Renumbered with remittance)
    • A return is mis-blocked (e.g., Form 1065 found in a Form 1041 batch of work).

    640 (Void)
    • To delete the assigned Document Locator Number (DLN) on the return (e.g., re-entry returns).

    650 (International)
    • An international return that must be forwarded to Ogden Submission Processing Center (OSPC).

  7. Continue perfecting the return after editing the action codes.

  8. Valid action codes are listed below:

    Action Code Description Workday Suspense Period
    211 First Taxpayer Correspondence 40
    212 Second Correspondence 25
    215 International Correspondence 45
    225 Taxpayer Correspondence (signature only) 40
    226 International Correspondence (signature only) 40
    310 Statute Control 10
    320 Entity Control 10
    331 Frivolous Review 3
    341 Manual Refund 10
    342 Credit Verification 10
    343 Black Liquor 10
    352 Name Research 3
    360 Other-in-House Research 10
    420 Management Suspense A 5
    440 Management Suspense C (Large Business and International (LB&I) review of 1120-F in OSPC only) 15
    450 Management Suspense D 20
    460 Management Suspense E

    Note:

    Used for Section 965 identification.

    25
    480 Early Filed Suspense 150
    610 Renumber Non-remit 0
    611 Renumber Remit 0
    640 Void 0
    650 International 0

Centralized Authorization File (CAF)

  1. Editing of CAF codes is no longer required.

  2. The Centralized Authorization File (CAF) has the type of authorization that the taxpayer gives a representative regarding the taxpayer's account. Representatives may submit Form 2848, Power of Attorney (POA) and Declaration of Representative or Form 8821, Tax Information Authorization (TIA).

    If ... Then ...
    Form 2848 or Form 8821 attached,
    1. Detach the Form 2848 or Form 8821 from the Form 1041.

    2. Edit the taxpayer's name and EIN on Form 2848 or Form 8821, if missing.

    3. Edit received date on Form 2848 or Form 8821.

    4. Route Form 2848 or Form 8821 to CAF function.

    5. Edit "Action Trail" in the lower left corner going vertically up the side of the return.

    A General POA or Durable POA or TIA is submitted on any document other than a Form 2848 or Form 8821,
    1. Do not edit.

    2. Leave POA or TIA attached to the return.

    3. Do not route to the CAF unit.

Unprocessable Conditions and Correspondence Action

  1. This section details the editing to be taken to resolve unprocessable conditions on Form 1041, Form 1041-QFT and Form 1041-N.

Unprocessable Conditions

  1. A return must have specific items before it is considered processable. Perfect all documents to the extent possible from schedules and other attachments. The specific items needed are:

    • An Employer Identification Number (EIN),

    • A legible name (for name control),

    • Valid tax period,

    • Legible tax data, if tax liability is shown, and

    • A signature attesting to the perjury statement Jurat shown on the document.

  2. Conditions which make a return unprocessable are:

    • Name so illegible or incomplete that the name control cannot be decided.

    • The EIN or Taxpayer Identification Number (TIN) is other than nine numeric digits and cannot be perfected from information on the return or attachments.

    • The document has two or more different EIN's.

    • Taxpayer has stated that he/she has combined liability for more than one tax period or more than one type of tax.

    • Tax data entries are so incomplete, illegible or contradictory that the tax liability cannot be decided.

    • The return is mis-blocked.

    • The return is unsigned.

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

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

  3. If a return has no entity data, or the signature on the return is illegible and the alpha letter of the last name cannot be decided, and the only entries are money amounts, then give the return to the manager.

  4. Use the following guidelines for disposition of returns that cannot be perfected from schedules and other attachments and necessary data was not gotten through research. If you cannot correspond or send the return back to the taxpayer because of illegible entity data, consider the return unprocessable:

    If ... Then ...
    Unnumbered Returns,
    1. Remove Form 1041 from the batch.

    2. Give the return to the manager.

    Numbered Returns,
    1. Edit Action Code 640 (Void).

    2. Prepare a Form 4227 instructing the Rejects function to void the DLN.

    3. Forward the return to the Rejects function.

  5. If a Form 1041 is received with a second Form 1041 attached and the second return has the same EIN, Tax Period, and money amounts:

    • Leave the second return attached to the first.

    • "X" the first page of the second return and treat as an attachment to the first return.

      Exception:

      Do not "X" if an amended return. Detach amended return and process separately. The amended return will show on IDRS as a duplicate and be worked by Accounts Management.

Perfecting Unprocessable Conditions

  1. Perfect all documents if possible. Examine schedules and other attachments for the information necessary to make the document processable.

    1. When found, edit on Form 1041.

    2. When perfection is not possible, prepare Form 4227 and notate the reason for rejection. Attach Form 4227 to the face of the document in a position that will leave the entity data, Condition Codes and Remittance Amount visible for transcription.

    If ... Then ...
    Numbered Returns,
    1. Edit to extent possible.

    2. Edit Action Code 640 (Void).

    3. Leave the document in the block.

    Unnumbered Returns,
    1. Do not continue editing the return.

    2. Withdraw the document from the batch and continue to below.

  2. If liability for two or more Form 1041 forms for the same tax class have been reported on one numbered return and the information necessary for the preparation of the individual returns is present:

    • Adjust the line entries on the multiple periods return to reflect the liability for the earliest period.

    • Edit Action Code 610/611 (Renumber/Remittance Renumber) and leave the original return in the block.

    • Prepare the other period returns.

    • Route the newly prepared returns for processing.

  3. If liability for two or more Form 1041 forms for the same tax class have been reported on one unnumbered return and the information necessary for the preparation of the individual returns is present:

    1. Adjust the line entries on the multiple periods return to reflect the liability for the earliest period.

    2. Prepare other period returns.

    3. Retain all these unnumbered returns in the batch.

  4. Reject all non-remittance Form 1041 forms showing taxable income but no tax computation and the taxpayer notates that the return is for an exempt organization (e.g., EXEMPT, NONTAXABLE, NONPROFIT, etc.):

    1. Prepare Form 4227 and notate "TAX EXEMPT STATUS PENDING" .

    2. Forward the return for shipment to the proper Key Area Examination function.

  5. For all other conditions, start correspondence action when the document cannot be perfected from attachments or schedules. The only exceptions are when the Name and Address are missing or are so illegible that correspondence is impossible, and when a document is being re-input after correspondence has already been conducted but the document still is unprocessable.

♦Correspondence♦

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

    • Correspondence received from taxpayers, and

    • Correspondence issued to taxpayers.

♦Definition of Correspondence from Taxpayers♦
  1. Correspondence is all written communications from a taxpayer or his/her representative, excluding tax returns, whether solicited or unsolicited. Such as:

    • Written communications in response to IRS requests for information or data.

    • Written communications, including annotated notice responses, which give more information or dispute a notice.

    • A telephone call that results in a written referral or research (Form 4442, Inquiry Referral).

  2. The key to identifying taxpayer correspondence is to ask the following questions:

    • Is taxpayer waiting for a response from us?

    • Is taxpayer waiting for an action to be taken by us?

    • Is taxpayer asking a question?

    Note:

    A Post-It-Note, Sticky Note, or some other type of note stuck on the return by another function doesn't constitute correspondence from the taxpayer.

♦Issuing Correspondence♦
  1. Issue correspondence to resolve any conditions causing the return to be unworkable or unprocessable.

    Exception:

    Section 965 Returns - Do not issue correspondence on the return. ERS will correspond for missing information.

    Exception:

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

  2. If the return is incomplete and appears to be a duplicate, give the return to the lead. The lead will start research for a Transaction Code (TC) 150 and/or any other research necessary to decide if the return should continue to be processed or other editing is needed. A duplicate return are any of the following:

    • A one-page return, with or without a signature.

    • Incomplete returns showing "Payment Only" .

    • Incomplete returns showing they have previously e-filed.

    Note:

    This list is not all inclusive. Tax examiners may see other unusual documents that are not addressed in this subsection or in other areas of the IRM.

  3. Correspond for back up forms and schedules≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡
    Exceptions:

    Caution:

    If a letter is attached, signed by Competent Authority, Accept the letter as proof of Form 1042-S withholding and do not correspond for the missing Form 1042-S.

  4. Examine the return so all conditions are added in the same correspondence.

    If ... And ... Then ...
    Correspondence is needed, Requires a response,
    1. Complete an approved Correspondence Action Sheet showing the letter number (86C, 854C, 177C, 1355C, 3875C, etc.), Master File Tax (MFT) code, and the appropriate paragraphs.

      Note:

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

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

    3. Edit Action Code 211 (First Correspondence) or 215 (International Correspondence) on the return.

    4. Finish editing the return and leave in the batch.

    Correspondence is needed, doesn't require a response,
    1. Complete an approved Correspondence Action Sheet showing the letter number (86C, 854C, 177C, 1355C, 3875C, etc.), MFT code, and the appropriate paragraphs.

      Note:

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

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

    3. Forward the copy to the Correspondence area.

    4. Edit an Action Trail (e.g., "3875C SENT" ) in the lower left corner going vertically up the side of the return.

    5. Finish editing the return and leave in batch.

    Note:

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

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

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

  3. Verify all edit marks and ensure placement is correct on a "CII" return.

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

  4. Follow the correspondence instructions below for "CII" returns:

    If ... And ... Then ...
    The CII return has a Form 13596, Reprocessing Returns, attached, The return is incomplete (e.g., missing signature, schedules, or forms),
    1. Do not correspond.

    2. Remove the return from the batch and route to AM.

    3. If the return comes back from AM with the information still incomplete, send the return to AM again to secure all the missing information. show "More information needed to process incomplete CII return," or similar language on Form 4227, Intra-SC Reject or Routing Slip) (or other appropriate routing slip).

    The "CII" return has a Form 13596, Reprocessing Returns, attached and the return is not complete (e.g., missing signature, schedules, or forms), There is an indication on the return that correspondence was sent (e.g., CCC 3 is edited on the return), Do not route the return to AM. Continue processing the return.
    The "CII" return doesn't have a Form 13596, Reprocessing Returns, attached, The return is incomplete (e.g., missing signature, schedules, or forms), Follow normal correspondence procedures.

♦IRS Employee Contacts♦
  1. The Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA98), 3705(a), gives identification requirements for all IRS employees working tax-related matters.

  2. All IRS employees who communicate by telephone, correspondence face-to-face, or any other method of correspondence with taxpayers or their personal representatives on tax-related matters must give (at a minimum) the following information:

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

    2. Face-to-Face Contact - Their title (e.g., Mr., Mrs., Ms., or Miss), and give during the conversation, their proper last name and badge identification (ID Card) number.

    3. Correspondence (sent to the taxpayer and authorized representatives) - A telephone number that taxpayers can call for answers to questions. In addition, manually generated correspondence must have the employee’s title (e.g., Mr., Mrs., Ms., or Miss), last name, IDRS (Integrated Data Retrieval System) number, and letter system number, which are systemically generated by IDRS. Treat faxes to taxpayers on tax-related matters as correspondence and add the required information.

    4. 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 more case-related information.

  3. When taxpayer requests to speak with a specific employee who previously worked their inquiry or request, or complains about the level of service previously given, make every attempt to resolve the taxpayer's inquiry. If unable to resolve the issue, refer the inquiry using established procedures to the manager.

  4. Secretaries, receptionists, or other people who answer the telephone in functional offices need to identify themselves and should give their badge identification (ID Card) number only if they are answering telephones which are routinely used to give tax or account information.

  5. It is not necessary to repeat the badge identification (ID Card) number on a subsequent contact, when the nature of an employee's work involves multiple contacts with the same taxpayer and the employee has given the taxpayer (either telephone or in-person) his or her badge identification (ID Card) number on the first contact.

♦Use of Fax for Taxpayer Submissions♦
  1. Taxpayers may send tax return information via fax as part of return perfection even when submitting a signature.

  2. In circumstances where contact with the taxpayer was made and documented, faxed signatures are acceptable. For more information about accepting signed taxpayer documents by fax, see the most recent revision of the IRS Policy for Use of Fax, available at http://imdtrack.web.irs.gov/IG_Uploads/IRS.gov_No/NHQ-01-1019-0001.pdf.

  3. Contact with the taxpayer may be by telephone or correspondence. Follow local procedures to decide which method of contact to use.

  4. Show the fax paragraph on the approved Correspondence Action Sheet to inform the taxpayer of the fax option.

  5. Use the following resources to make sure you are speaking with the taxpayer or authorized representative prior to disclosing any tax information:

    • IRM 21.1.3.2.3, Required Taxpayer Authentication

    • IRM 21.1.3.2.4, Additional Taxpayer Authentication

  6. Prior to leaving any messages on a taxpayer's answering machine, review:

    • IRM 10.5.1.6.7.2, Answering Machine or Voicemail

    • IRM 10.8.1, Information Technology (IT) Security, Policy and Guidance

♦Frivolous Arguments♦
  1. Businesses use frivolous arguments for expressing dissatisfaction with the substance, form, or administration of the tax laws by trying to illegally avoid or reduce tax liabilities. See IRM 25.25.10, Frivolous Return Program, and Exhibit 3.11.14-6, Potential Frivolous Arguments for Examination Review.

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

    If ... Then ...
    The return meets any of the conditions shown as a frivolous return, (See Exhibit 3.11.14-6, Potential Frivolous Arguments for Examination Review.

    Exception:

    If the return shows Action Code 331 and has a Form 4227, Intra-SC Reject or Routing Slip, attached with the remarks, "Refer to Examination 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 Program (FRP) for review.
    Examination has selected the return as frivolous, e.g., shown by Action Code 331 and a Form 4227, Intra-SC Reject or Routing Slip, 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 3.11.14, Returns and Documents Analysis, Income Tax Returns for Estates and Trusts, (Form 1041, Form 1041-QFT, and Form 1041-N). However, do not circle or void the Action Code showing a frivolous return.

  3. Do not consider the following returns as frivolous, unless there is other evidence of a frivolous argument:

    • Returns that have only zeros, blanks, or no entries.

    • Returns showing “None”, “Not Liable”, etc.

Audit Codes

  1. Edit Audit Codes in the left margin next to.:

    • Line 10, Form 1041.

    • Line 5, Form 1041-QFT.

    • Line 6, Form 1041-N.

      Note:

      The trust will notate the penalty and interest amount in the bottom margin of Form 1041-N. The amount is not to be added in the balance of tax due on Line 20. See IRM 3.11.14.41.2, Penalty and Interest Code Editing (Form 1041-N)

      .

  2. Edit a "1 -" followed by the correct code(s), e.g., "1 - 2" .

  3. Up to three Audit Codes may be edited. If more than three Audit Codes apply, edit only the first three Audit Codes using the following priority order:

    Priority Order Audit Code Description
    1 8 Form 1041-N
    2 3 Inconsistent Treatment
    3 2 Foreign Interest
    4 1 International
    5 4 Prompt Audit Request
    6 5 Ineligible Fiscal Year Filers
    7 6 Nonexempt Charitable and Split-Interest Trusts

  4. Decide the correct Audit Code as follows:

    Audit Code Description
    1 International - Edit Audit Code "1" if any of the following conditions are present:
    1. Line 2a of Schedule G (Form 1116) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Line 18 (Income Distribution Deduction) or Line 23 (Taxable Income) of Form 1041≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and any of the following conditions are present:

      • Form 5471 is attached.

      • Form 8865 is attached.

      • Form 1041 Schedule K-1 beneficiary has a non-US Address.

      • The Yes box is checked on Line 4 (Foreign Trust) of the Other Information section.

    2 Foreign Interest - Edit Audit Code "2" if the "Yes" box is checked and/or a foreign country is listed on Line 3 of the "Other Information" Section at the bottom of Page 2 of Form 1041.
    3 Inconsistent Treatment - Edit Audit Code "3" if any of the following conditions are present:
    1. Form 8082 is attached.

    2. Form 8275 is attached.

    3. Form 8275-R is attached.

    4. Form 8886 is attached.

    5. The taxpayer has notated that they are "COMPLYING WITH IR REGULATION 1.442.1(c)."

    Caution:

    Audit Code "3" takes precedence over all other Audit Codes except Audit Code 8.

    4 Prompt Audit Request - Edit Audit Code "4" if any of the following conditions are present:
    1. Form 4810 is attached.

    2. The return has an attachment or notation of a "REQUEST FOR PROMPT AUDIT ASSESSMENT" or by citing "IRC SECTION 6501(d))" and no TC 150 is posted. See IRM 3.11.14.10.3, Prompt Assessment/Prompt Determination (Form 4810).

    Note:

    Don’t edit Audit Code "4" for "Request for Prompt Determination under Section 505(b)" .

    5 Ineligible Fiscal Year Filers - Edit Audit Code "5" if the taxpayer is filing a Fiscal Year return unless it is the following:
    1. Estate,

    2. Non-Exempt Charitable Trust under IRC 4947(a)(1) or IRC 501(a).

    3. One of the following notations is shown on the return: IRC 671 (trust established in 1906), through IRC 678, and/or IRC 443(b)(2).

    4. Any return that shows it is a Final.

    5. Any return that shows it is an Initial return, which has a Tax Period ending date in December (Calendar Year filer).


    See Figure 3.11.14-1, Audit Code "5" - Ineligible Fiscal Year Filers.

    Note:

    The only Form 1041 entities that can file fiscal year returns are estates, charitable trusts and IRC 671 through IRC 678.

    6 Nonexempt Charitable and Split-Interest Trusts - Edit Audit Code "6" if either the first or third box is checked in Section E of Form 1041. See IRM 3.11.14.15, Box E - Nonexempt Charitable and Split-Interest Trusts.
    8 Form 1041-N - Edit Audit Code "8" to allForm 1041-N, Electing Alaska Native Settlement Trusts returns only.

    Caution:

    No other Audit Codes are valid with Audit Code "8" .

    Reminder:

    If Form 1041-N is received at any campus other than OSPC, transship the return to OSPC for processing.

    Figure 3.11.14-1

    This is an Image: 33490001.gif

    Please click here for the text description of the image.

Computer Condition Codes (CCC)

  1. Computer Condition Codes (CCC) are used to identify a special condition or computation for the computer. CCCs post to the Master File.

  2. Computer Condition Codes are edited in the center of Lines 1 and 2 of Form 1041, Form 1041-QFT and Form 1041-N.

CCC "B" - Section 965(i) Election to Defer Net Tax Liability

  1. For Tax Periods 201712 and later returns, CCC "B" is used to identify an Election to defer Net Tax Liability under Section 965(i).

  2. See IRM See IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY 2017 and later) for instructions on when to edit CCC "B" .

CCC "C" - Invalid Vehicle Year or Service Date

  1. CCC "C" is an invalid code which will force the return to error correction.

  2. Edit CCC "C" if Form 8834, Form 8910, and/or Form 8939 has an invalid vehicle year or an invalid in service date.

    For ... Valid Vehicle Year ... Valid In-Service Date ...
    Form 8834, see IRM 3.11.14.35.33, Line 1zz - Other Credits. 2009 After 2/17/2009 The last valid tax period for claiming this credit was 201211.
    Form 8936, see IRM 3.11.14.35.25, Line 1y - Qualified Plug-In Electric Drive Motor Vehicle (Form 8936). 2009 After 1/1/2009
    Form 8910, see IRM 3.11.14.35.18, Line 1r - Alternative Motor Vehicle (Form 8910). N/A After 2/17/2009

♦CCC "D" - Reasonable Cause for Failure to Pay Penalty♦

  1. Do not edit CCC "D" if the taxpayer requests abatement for "Failure to Pay Timely" when the return is submitted. Send Letter 1382C, Penalty Removal Request Incomplete, to inform taxpayer of the proper procedure to follow to request penalty abatement, if, and when a penalty is assessed.

  2. Edit CCC "D" if an internal use form or routing slip is attached and shows "DO NOT ASSESS FAILURE TO PAY PENALTY" .

    Note:

    Do not enter CCC "D" if the return was prepared by IRS under IRC 6020(b) and the return due date (without regard to extensions) is after July 30, 1996.

  3. Edit CCC "D" on a "Final" , Balance Due return if the Received Date is after the short period due date but on or prior to the regular full tax period due date ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡. See IRM 3.11.14.8.5, CCC "F" Final Return.

  4. Do not edit CCC "D" when pre-computed penalty is shown on the return.

  5. Edit CCC "D" on a complete Streamline return filing. See IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041).

CCC "E" - Potential Identify Theft Filing

  1. Effective January 1, 2017, Computer Condition Code "E" may be edited on Form 1041, Form 1041-QFT, and/or Form 1041-N for any year, after the SP BMF ID Theft Liaison verifies a potential identify theft filing.

  2. If a tax examiner in Submission Processing (SP) Code and Edit (C&E) finds a case with attachments or correspondence showing the taxpayer is a victim of ID Theft, give the entire case to your senior/lead. Your senior/lead will expedite the case to the Planning and Analysis (P&A) staff for referral to one of the SP BMF ID Theft liaisons. The taxpayer must show that they are a victim of "ID Theft" ; do not send cases that are subject to Funny Box or Fraud review.

  3. If the SP BMF ID Theft Liaison says the return is ID Theft, the tax examiner will edit CCC E.

♦CCC "F" - Final Return♦

  1. Edit CCC "F" when the "Final Return" box is checked, or the estate or trust shows it is not liable for future returns. Notations may include (but are not limited to):

    • Final

    • Out of Business

    • Liquidation

    • Exempt Under IRC 501(c)(3)

    • Dissolved

♦CCC "G" - Amended Return♦

  1. See IRM 3.11.14.10.1, Amended Return, for instructions.

CCC "I" - Form 6781, Regulated Futures Contracts and Tax Straddles

  1. Edit CCC "I" when Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles) is attached.

    Note:

    CCC "I" should be edited as a capital in block style to distinguish it from CCC 1.

CCC "J" - Section 965 Tax

  1. For Tax Periods 201712 and later returns, CCC "J" is used to show a Section 965 return.

  2. See IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY 2017 and later), for instructions when to edit CCC "J" .

CCC "K" - Qualifying Small Business Taxpayer

  1. Edit CCC "K" , for taxable periods ending in 2009 only, when Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, box "E" is checked in Part II.

CCC "M" - Sales and Other Dispositions of Capital Assets on Form 8949 with a Code "Z" or "Y" .

  1. Edit CCC "M," when tax period is 201712 and later, andForm 8949 (Sales and Other Dispositions of Capital Assets) has a code "Z" or "Y" in any line for column (f) of Part I and Part II.

    Note:

    Tax Cuts and Job Act of 2017 P.L. 115-97 (H.R. 1), Section 13823, Opportunity Zones, Taxpayers who elect to defer gain on the sale of an asset by investing in an Opportunity Zone Fund will show that they are deferring the gain by entering code "Z" or "Y" in column (f).

CCC "N" - Allocation of Increase in Basis for Property Received from a Decedent

  1. Edit CCC "N" when Form 8939, Allocation of Increase in Basis for Property Received from a Decedent, is attached to Form 1041.

CCC "O" - Manual Refund

  1. CCC "O" is edited when a Manual Refund will be issued and a Form 3753 or Form 5792 is attached. Verify that the Name Control, EIN, and Tax Period on the return are the same as the information on the attached form.

  2. When editing CCC "O" , research to decide if TC 840 (Manual Refund Transaction) has posted:

    If ... Then ...
    TC 840 has posted, Edit CCC "O" and continue processing the return.
    TC 840 has not posted, Edit Action Code 341 (Manual Refund).

CCC "P" - Return Submitted Under Streamlined Filing Compliance Procedures

  1. Edit CCC "P" on the return when "Streamlined" is written on the top of the return.

    Note:

    Ogden will process all returns submitted under the Streamline Program. See IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041).

♦CCC "R" - Reasonable Cause for Failing to File a Timely Return♦

  1. Do not edit CCC "R" when a reason is given by the taxpayer for a delay in filing a return. Issue Letter 1382C, Penalty Removal Request Incomplete, and continue editing the return.

  2. Edit CCC "R" on the return when any of the following conditions are present:

    • There is an indication such as "DO NOT ASSESS FAILURE TO FILE PENALTY" on a secured return annotated with TC "599" .

    • If an internal use form or routing slip is attached and shows do not assess failure to file penalty.

      Note:

      All "R" coded returns must have an IRS received date. If one is not present, edit the IRS Received Date in the middle of the return.

  3. Edit CCC R on final short-period if the received date is on or prior to the normal due date for a full-period return. See IRM 3.11.14.12.2 (2), Final Returns for possible editing of CCC R on short period.

  4. Edit CCC "R" on a complete Streamline return filing. See IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041).

    Caution:

    Never change the IRS Received Date when editing CCC R.

    Note:

    CCC "R" cannot be used with CCC "4" .

CCC "T" - Reportable Transaction Disclosure Statement

  1. Edit CCC "T" when Form 8886, Reportable Transaction Disclosure Statement is attached to a return.

CCC "V" - Qualified Therapeutic Drug Credit Claimed

  1. Edit CCC "V" when Form 3800, Part III, Lines 1a and/or 4a has a significant entry and Form 3468, Part II, Line 8 has an entry.

    Note:

    This is only valid for tax period 201001 to 201010.

♦CCC "W" - Return Cleared by Statute Control♦

  1. CCC "W" is used when the return was cleared by Statute Control. See IRM 3.11.14.10.11, Statute Returns.

CCC "X" - Refund/Settlement Freeze

  1. Edit CCC "X" when any of the following conditions occur:

    If ... Then ...
    The taxpayer has requested part of the refund be applied to another account,
    1. Edit CCC "X."

    2. Photocopy:

      • Pages 1 and 2 of Form 1041.

      • Page 1 of Form 1041-QFT.

      • Page 1 of Form 1041-QFT

    3. Prepare Form 3465, attach to the photocopy, and forward to Accounts Management.

    4. Notate Form 3465 PREPARED on the original Form 1041.

    See Figure 3.11.14-2, Editing suppression of credit interest.
    Form 1041-T is present with significant money amounts, See IRM 3.11.14.22.12.2, Line 11, Schedule G - Estimated Tax Treated as Paid by Beneficiary (Form 1041-T).

    Reminder:

    Subtract the tax, penalties and interest amounts from the remittance amount if available.

    Figure 3.11.14-2

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CCC "Y" - Short Period Return for Change of Accounting Period

  1. CCC "Y" is edited for a Change of Accounting Period. Enter only for short period returns due to change of accounting period not due to initial or final filing:

    • See IRM 3.11.14.12.5, Short Period Returns - Editing Proof of Entitlement

    • See IRM 3.11.14.12.6, Short Period Returns - Missing Proof of Entitlement

    • See IRM 3.11.14.12.7, Short Period Returns - Editing a Disapproved Application (Form 1128)

    • See IRM 3.11.14.12.8, Short Period Returns - Editing Form 1128 With No Indication of Approval or Disapproval

    • See IRM 3.11.14.12.9, Short Period Returns - with Prepaid Credits

  2. If a prepaid credit is claimed on a short-period Final return, see IRM 3.11.14.12.9, Short Period Returns - with Prepaid Credits.

  3. Don’t edit CCC "Y" for "Initial" or "Final" returns.

CCC "1" - Like-Kind Exchanges (Form 8824)

  1. Edit CCC "1" when Form 8824, Like-Kind Exchanges, is attached.

CCC "2" - Statement of Foreign Financial Assets (Form 8938)

  1. For Tax Year 2020 and later, Form 8938, Statement of Foreign Financial Assets, will be input into the General Purpose Programming (GPP) database. If attached process a TY 2020 Form 8938 and later, per the instructions below:

  2. Process Form 8938 with the following criteria:

    1. Tax Period on Form 1041 is 202012 or later, and

    2. Form 8938 is a 2020 and later revision and

    3. Form 8938 has significant entries.

      Note:

      A significant entry is defined as any amount other than zero.

  3. If Form 8938 is attached, but doesn't meet the above criteria, then continue normal processing of Form 1041. Edit CCC 2, do not sequence the form to the back of the return, or place the form in the designated basket.

  4. If the return meets the criteria in paragraph (2), process Form 8938 per the instructions below:

    1. Completely edit Form 1041.

    2. Edit CCC "2" .

    3. Detach Form 1041 Schedule K-1 and paper clip to return.

    4. Pull the Form 8938 from the return and sequence to the back of the last page of Form 1041 (after schedules and attachment pages), attaching the Form 8938 so that it is back- to- back with the parent return.

    5. Place the Form 1041 in a designated basket.

    6. Only one Form 8938, Pages 1 and 2, is processed. If multiple Form 8938 are attached, select the form that has the highest account value in Part V, Line 4; or highest asset value in Part VI, Line 4 and delete the others.

      Note:

      The Form 8938 can have multiple "Continuation Statements" . Do not confuse the multiple continuation statements with multiple Form 8938.

  5. Form 1041 with Form 8938 attached must be batched separately.

♦CCC "3" - No Reply to Correspondence♦

  1. Edit CCC "3" when the return is unprocessable and there is an indication that correspondence was sent, and no reply received.

♦CCC "4" - IRS Prepared Return Under IRC 6020(b)♦

  1. Edit CCC "4" when the IRS's Compliance Branch prepared a return and the Revenue Officer entered IRC 6020(b).

    Note:

    CCC "R" cannot be used with CCC "4" .

CCC "8" - Waiver of Estimated Tax Penalty

  1. Edit CCC "8" when any of the following conditions are present:

    If ... And ... Then ...
    The return is for a decedent estate (Fiduciary Code 1), See Figure 3.11.14-3, CCC "8" - Date Entity Created is Within 2 years for a decedent estate or testamentary trust. The date entity created is within two years of the tax year ending,

    Note:

    The date that a decedent’s estate is created is the date of death.

    Edit CCC "8" .
    The taxpayer notated Testamentary Trust, Tstmtry, Trust Under the Will, T.U.W, or TR/W in the entity part of return, The date entity created is within two years of the tax year ending, Edit CCC "8" .

    Example:

    If the filer has entered 3-17-2023 in Section D, edit CCC "8" for any return with a Tax Year Ending on or prior to 3-16-2023.

    Caution:

    Do not edit CCC "8" if the "Date Entity Created" is after the Tax Period Ending Date.

    If ... And ... Then ...
    The return is for a bankruptcy estate (Fiduciary Code 5 or 6), See Figure 3.11.14-4, CCC "8" for Bankruptcy Estate.   Edit CCC 8.
    If Form 2210 is attached, See Figure 3.11.14-5, Waiver of Estimated Tax Penalty on Form 2210 Any of the boxes in Part II, a through e is checked, Edit CCC 8.
    If Form 2210-F is attached, See Figure 3.11.14-5, Waiver of Estimated Tax Penalty on Form 2210. Part I, box a is checked, Edit CCC 8.

    Reminder:

    Also, edit CCC "K" if Form 2210 box "F" is checked in Part II on a 2009 return only.

    If ... And ... Then ...
    Form 1040 Schedule H is attached to the return, Form 1041 doesn't have withholding credit (Schedule G, Line 14), and Total tax without household employment tax is less than $1,000 (Schedule G, Line 9 minus Line 7, is less than $1,000), Edit CCC 8.

    Caution:

    Significant transcription amounts are needed on Schedule H.

  2. Edit CCC "8" on a complete Streamline return filing. See IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041).

    Figure 3.11.14-3

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    Figure 3.11.14-4

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    Please click here for the text description of the image.

    Figure 3.11.14-5

    This is an Image: 33490005.gif

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CCC "9" - Low-Income Housing Credit (LIHC)

  1. Edit CCC "9" when any of the following forms are attached and an entry is present on Line 2b*, Schedule G of Form 1041
    *(Line 2c for 2009 and prior):

    • Form 8586, Low-Income Housing Credit.

    • Form 8609, Low-Income Housing Credit Allocation and Certification, for year's 200412 and prior.

    • Form 8609-A, Annual Statement for Low Income Housing Credit.

    • Form 8693, Low-Income Housing Credit Disposition Bond.

    Caution:

    Do not edit CCC "9" if Form 8611, Recapture of Low-Income Housing Credit, is attached.

Return Processing Code (RPC)

  1. Description - Return Processing Code (RPC) is an alpha or numeric character used to identify a specific condition on the return.

  2. RPCs are edited on Page 1, to the right of line 1, in the margin area for Form 1041, Form 1041-QFT, and Form 1041-N.

    Note:

    RPCs do not need to be edited in any specific order.

  3. Edit the valid RPC when any of the following forms is attached and has data:

    RPC Form and Title
    A Form 5471, Schedule E, Income, War Profits, and Excess Profits Taxes Paid or Accrued
    B Form 5471, Schedule H, Current Earnings and Profits
    C Form 5471, Schedule I -1, Information for Global Intangible Low-Taxed Income
    D Form 5471, Schedule P, Previously Taxed Earnings and Profits of U.S. Shareholder of Certain Foreign Corporations
    E Form 8865, Schedule G, Statement of Application of the Gain Deferred Method Under Section 721 (c)
    F Form 8865, Schedule H, Acceleration Events and Exceptions Reporting Relating to Gain Deferral Method Under Section 721 (c)
    G Form 5471, Schedule G-1, Cost Sharing Arrangement
    J For tax periods 202212 - 202311 - Taxpayer writes "IRA22DPE" on Form 3800, an attachment, or on the top of return (Form 1041, Form 1041-QFT, Form 1041-N). See IRM 3.11.14.10.16, Elective or Deemed Payment Election and Credit Transfers:
    1. Completely edit the return.

    2. Edit RPC "J."

    3. Place a flag at the top of the return and attach the "IRA22 DPE/TRE Reminder" sheet to the return.

      Note:

      PA will provide the pre-printed half-sheets for CE to use.

    4. Give the return to the lead.

    5. The lead will have the returns re-batched with "DPE" in the batch ID.

    K For tax periods 202212 - 202311 - Taxpayer writes "IRA22TRE" on Form 3800, an attachment, or on the top of return (Form 1041, Form 1041-QFT, Form 1041-N). See IRM 3.11.14.10.16, Elective or Deemed Payment Election and Credit Transfers:
    1. Completely edit the return.

    2. Edit RPC "K."

    3. Place a flag at the top of the return and attach the "IRA22 DPE/TRE Reminder" sheet to the return.

      Note:

      PA will provide the pre-printed half-sheets for CE to use.

    4. Give the return to the lead.

    5. The lead will have the returns re-batched with "TRE" in the batch ID.

      Note:

      A return can have both an RPC "J" and an RPC "K."

    L Form 7204, Consent to Extend the Time to Assess Tax Related to Contested Foreign Income Taxes - Provisional Foreign Tax Credit Agreement
    M Form 7205, Energy Efficient Commercial Buildings Deduction
    1 Form 8991, Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts
    2 Form 8992, Global Intangible Low-Taxed Income (GILTI)
    3 Form 8993, Section 250 Deduction for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI)
    4 Form 8994, Employer Credit for Paid Family and Medical Leave
    5 Reserve for Future use
    6 Form 8996, Qualified Opportunity Fund
    7 Form 8990, Limitation on Business Interest Expense Under Section 163(j)
    8 Form 461, Limitation on Business Losses
    9 Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments

Special Conditions/Returns

  1. Follow the instructions in this section, unless otherwise instructed.

♦Amended Returns♦

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

    • The Amended box is checked.

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

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

      Note:

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

    • The return appears to be a duplicate and IDRS research shows a Transaction Code (TC) 150.

  2. If a Form 1041 is received with a second Form 1041 attached and the second return has the same EIN and Tax Period:

    • Leave the second return attached to the first.

    • "X" the first page of the second return and treat as an attachment to the first return.

      Exception:

      Do not "X" if an amended return. Detach amended return and process separately. The amended return will show on IDRS as a duplicate and be worked by Accounts Management.

  3. Examine the return for attachments:

    • Do not separate any related attachments submitted to explain the reason for the Amended return. Accounts Management may use the information.

    • Detach any unrelated documents and route them to the correct function using Form 4227 and edit the Working Trail on the return.

      Exception:

      Pull any amended Form 1041 that has "Qualified Cellulosic Biofuel Credit refund or CBR" notated and route to Accounts Management.

  4. Follow the instructions in the chart below when there is an indication of an amended return:

    If ... Then ...
    Compliance Services entered TC 59X or ICS on the return, Do not edit CCC "G" . Process the return as an original.
    Statute Control stamped the return "Delinquent Original Cleared for Processing," Do not edit CCC "G" . Process the return as an original.
    Form 3893, Re-Entry Document Control, orForm 13596, Reprocessing Return, is attached, Do not edit CCC "G" :
    • See IRM 3.11.14.10.6.1, Form 3893, Re-Entry Document Control.

    • See IRM 3.11.14.10.6.2, Re-Entry Document procedures.

    None of the above are present, Edit CCC "G" . Do not use any other codes with CCC "G" .

    Exception:

    CCCs "W" , "3" , and Error Resolution System (ERS) Action Codes may be used with CCC "G."

    Reminder:

    Do not edit a Fiduciary Code or Trust Code when editing CCC "G" for amended. See IRM 3.11.14.10.11, Statute returns.

  5. Do not edit CCC "G" on returns filed under Section 443(b)(2). See Exhibit 3.11.14-5, IRC Sections and Actions to be taken on Form 1041.

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

    1. EIN - See IRM 3.11.14.14.2, Entity Perfection - Employer Identification Number (EIN).

    2. Name Control - See IRM 3.11.14.14.3, Entity Perfection - Name Control.

    3. Tax Period - See IRM 3.11.14.12, Tax Period.

    4. CCC "G" - See IRM 3.11.14.8.6, CCC "G" - Amended Returns, and Reminder above.

      Exception:

      Don’t route to Statute Control Unit for clearance, edit CCC "W" and continue processing if any of the following conditions are present:
      Compliance IRC 6020(b) returns.
      Secured by Examination/Collections, Secured by TE/GE, Secured by TE/GE EP Exam
      Returns with "TC 59X" or "ICS" notated on the face of the return.
      Returns that are substitute returns prepared by Examination (SFR) in top margin of the form.
      Returns with a stamp showing a previous clearance by Statute Control within the last 90 days.

      Note:

      If corresponding for a signature on an amended return, you will still code with CCC G and CCC 3.

    5. IRS Received Date - See IRM 3.11.14.11, Received Date.

    6. Signature - See IRM 3.11.14.19, Signature.

    Note:

    Do not perfect the address on amended returns. see IRM 3.11.14.14.5, Entity Perfection - Domestic Addresses.

    Reminder:

    Do not edit E-file Waiver Code on amended returns.

  7. Detach Schedules K-1 for current year and prior two years. Process accordingly. See IRM 3.0.101, General, Schedule K-1 Processing. Watch for the Amended Box on Schedules K-1.

  8. Amended 1041 returns with "Streamline" written across the top will need special handling. Amended Streamlined 1041 returns will not be processed, give them to the lead. Instead, they will be scanned into CII in Austin and worked by Ogden's AM. If amended 1041 Streamlined returns are received in Ogden, they will be scanned into CIS with a special cover sheet assigned to a special employee number.

Bankruptcy Returns

  1. This subsection has instructions for processing bankruptcy returns.

  2. The bankruptcy trustee or debtor in possession must file Form 1041 for the estate of an individual involved in bankruptcy proceedings under Chapter 7 or 11 of title 11 of the United States Code if the estate has gross income that exceeds the amount of:

    Note:

    For Tax Year 2018 and later a personal exemption is not allowed.

    • $13,850 for Tax Year 2023 (standard deduction of single or married filing separately)

    • $12,950 for Tax Year 2022 (standard deduction of single or married filing separately)

    • $12,550 for Tax Year 2021 (standard deduction of single or married filing separately)

    • $12,400 for Tax Year 2020 (standard deduction of single or married filing separately)

    • $12,200 for Tax Year 2019 (standard deduction of single or married filing separately)

    • $12,000 for Tax Year 2018 (standard deduction of single or married filing separately)

    • $10,400 for Tax Year 2017 (personal exemption plus the standard deduction of single or married filing separately)

  3. Prompt identification should be made of a bankruptcy related "Request for Prompt Assessment" or a "Quick Determination" of tax liability to ensure that the crucial 60-day and 180-day deadlines is met timely by Compliance. See IRM 3.11.14.10.3, Prompt Assessment/Prompt Determination (Form 4810).

  4. Edit Fiduciary Code "5" on all Chapter 7 Bankruptcy Estate returns or "6" on all Chapter 11 Bankruptcy Estate returns. If no boxes are checked, edit Fiduciary Code "5" if the return shows it is a bankruptcy. See IRM 3.11.14.13.3, Fiduciary and Trust Code Editing.

    Reminder:

    Edit CCC "8" for all bankruptcies. See IRM 3.11.14.8.24, CCC "8" - Waiver of Estimated Tax Penalty and IRM 20.1.3.1.5.3, Bankruptcy.

  5. All bankruptcy returns, except amended bankruptcy returns, must be routed to Entity. Completely edit the return except the name control prior to sending to Entity. See below for more editing instructions.

    Exception:

    Do not route to Entity if there is an indication Entity has already edited the return usually orange/purple editing of the EIN and name control.

  6. If Form 6252 is attached to a nontaxable Grantor Trust or Bankruptcy Estate return, do not edit an Installment Sale Indicator Code. Form 6252 information will be added on the individual tax return.

Identification of Bankruptcy Estate Returns
  1. A Bankruptcy return should have one of the following boxes in "Box A - Type of Entity" checked on Form 1041:

    1. Bankruptcy estate - Ch. 7

    2. Bankruptcy estate - Ch. 11

  2. If no box is checked, decide if the return is for a Bankruptcy Estate from the Name Line, or attachment and/or the applicable exemption is claimed on Line 21. See IRM 3.11.14.13.3 (5), Fiduciary and Trust Code Editing.

  3. Bankruptcy estate returns can only be filed for individuals.

    Note:

    If the Name Line shows Partnership or Corporation, see IRM 3.11.14.10.2.6, Corporation or Partnership Bankruptcy.

  4. If the determination is made that a Bankruptcy estate return exists, Form 1040must be attached. Form 1041 is used as a transmittal form for Form 1040. The top margin of Form 1040 should be notated ATTACHMENT TO FORM 1041. DO NOT DETACH.

Individual Bankruptcy
  1. If Form 1040 is attached, all income and deductions must be reported, and the tax computed on Form 1040. Only the tax liability should be reported on Lines 23 through 30 of Form 1041.

  2. If the taxpayer has entered amounts in any of Lines 1 through 22 of Form 1041, place an "X" across lines 1 through 22.

  3. The amounts on Form 1041 should equal the information given on Form 1040.

    1. If Form 1040 is attached, ensure that the amounts reported on Form 1041 equal the amounts reported on Form 1040 as follows: See Figure 3.11.14-6, Individual Bankruptcy Estate.

      Form 1040 Edit to Form 1041 Description
      Line 24 Line 24 Total Tax
      Line 26 Line 10, Sch. G Estimated Tax Payments
      Schedule 3, Line 10 Line 13, Sch. G Amount Paid with Extension
      Line 25d Line 14, Sch. G Federal Income Tax Withheld
      Schedule 3, Line 13a Line 16, Sch. G Credit from Form 2439
      Schedule 3, Line 12 Line 17, Sch. G Credit from Form 4136
      Schedule 3, Line 13c Line 18a, Sch. G Elective Payment Election Amount from Form 3800
      Schedule 3, Line 13z Line 18b, Sch. G Other Credits or Payments
           
      Line 33 Line 26 Total Payments
      Line 38 Line 27 Estimated Tax Penalty
      Line 37 Line 28 Tax Due
      Line 34 Line 29 Overpayment
      Line 36 Line 30a Credit Elect
      Line 35a Line 30b Refund

      Note:

      For prior year returns, match the Total Tax, Total Payments, Overpayment, and Tax Due to the same line descriptions on Form 1041.

    2. Process deviations to each line compared above as follows:

      If ... Then ...
      Form 1041 is blank, and Form 1040 is not attached, Correspond.
      Form 1041 equals Form 1040, Continue editing the return.
      Form 1041 has an entry, but Form 1040 is zero or blank, Continue editing the return.
      Form 1041 entry is zero or blank, and Form 1040 has an entry, Edit the amount from Form 1040 to the applicable Line on Form 1041.
      Entries are present on both Form 1041 and Form 1040, but the amounts on each form are different, Correspond with Letter 177C to decide the correct amount.
      Form 1040 is not attached and Lines 1 through 23 of Form 1041 are completed and Line 9 has Gross Income of less than the applicable tax year Exemption plus the Standard Deduction, see Exemption/Standard Deduction Chart in paragraph (3)c) below.
      1. Process as a nontaxable return.

      2. Correspond with Letter 177C to inform the taxpayer there is no need to file Form 1041.

      3. Do not suspend. (Follow local procedures).

      Form 1040 is not attached and Lines 1 through 23 are completed on Form 1041, and Line 9 has Gross Income of greater than the applicable tax year Exemption plus the Standard Deduction, see Exemption/Standard Deduction Chart in paragraph (3)c) below. Correspond with Letter 177C using the correct paragraph to request a copy of Form 1040 for the applicable Tax Period.
      Form 1040 is not attached and lines 24 through 30 of Form 1041 are present, Correspond.

    3. Exemption/Standard Deduction Chart:

      Note:

      For Tax Year 2018 and later a personal exemption is not valid.

      Tax Year Exemption Standard Deduction Combined Total
      2023 $0 $13,850 N/A
      2022 $0 $12,950 N/A
      2021 $0 $12,550 N/A
      2020 $0 $12,400 N/A
      2019 $0 $12,200 N/A
      2018 $0 $12,000 N/A
      2017 $4,050 $6,350 $10,400
      2016 $4,050 $6,300 $10,350
      2015 $4,000 $6,300 $10,300
      2014 $3,950 $6,200 $10,150
      2013 $3,900 $6,100 $10,000
      2012 $3,800 $5,950 $9,750
      2011 $3,700 $5,800 $9,500
      2010 $3,650 $5,700 $9,350
      2009 $3,650 $5,700 $9,350
      2008 $3,500 $5,450 $8,950
      2007 $3,400 $5,350 $8,750

    Figure 3.11.14-6

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Joint Filed Bankruptcy Estate Returns
  1. When a married couple file a joint bankruptcy petition, their estates are effectively consolidated for administrative purposes. However, these estates are treated as separate entities for tax purposes and must file separate bankruptcy returns.

  2. Correspond with Letter 177C when any of the following conditions exist:

    • Form 1041 is received with two Form 1040 attached.

    • Form 1041 is received with a Form 1040 Joint return (Married filing jointly box is checked in the "Filing Status" section at the top of Form 1040).

      Note:

      Taxpayers claiming "Administrative Consolidation" require correspondence.

    If ... Then ...
    Form 1041 is received with either two Form 1040 returns (married couple) or one "Joint" Form 1040,
    1. Correspond with Letter 177C (using the correct paragraph) to inform the taxpayer that they must file two separate Form 1041 returns.

    Two Form 1041 are received with one "Joint" Form 1040,
    1. Separate the two Form 1041 returns.

    2. Photocopy Form 1040.

    3. Attach the original Form 1040 to one Form 1041 and the photocopy to the other Form 1041.

    4. Process as filed.

Individual Bankruptcy Cases - Special Procedures
  1. Bankruptcy estates are created at the commencement of the bankruptcy case. Under Chapter 7, Liquidation, and 11, Reorganization, this estate is a new entity, separate from the individual taxpayer(s).

  2. The estate is represented by a court appointed trustee or by a debtor in possession who manages the estate for the benefit of any creditor.

  3. The taxes of the individual who filed bankruptcy have nothing to do with the taxes of the estate. However, if the individual chooses to file two short year returns, any balance due for the first short year return will be collected from the estate.

    1. If the Signature section of Form 1041 has the same name as the name in the Entity section, examine the return for the following:

    If ... Then ...
    Taxpayer notates "DEBTOR IN POSSESSION" , Chapter 11, Continue editing the return.
    Taxpayer notates "CHAPTER 7" or there is no indication of Debtor in Possession on a Numbered Return,
    1. Attach Form 4227

    2. and notate "POSSIBLE FILING DISCREPANCY" .

    3. Edit Action Code 320.

    4. Leave the return in the batch and continue editing.

    Taxpayer notates "CHAPTER 7" or there is no indication of Debtor in Possession on an Unnumbered Return,
    1. Do not continue editing the return.

    2. Withdraw the document from the batch.

    3. Attach Form 4227 and notate "POSSIBLE FILING DISCREPANCY" .

    4. Route the document to Entity Control.

Chapter 12 Bankruptcy Returns
  1. The Family Farmer Bankruptcy Act of 1986 was designed specifically to address the "debt plight" that farmers found themselves in after the inflationary period of the 1970s.

  2. When returns are received with an indication of "CHAPTER 12" or "FAMILY FARMER" :

    1. Send the return back to the taxpayer.

    2. Inform the taxpayer of their non-filing requirement using the following language:
      "FORM 1041 SHOULD NOT BE FILED. THERE IS NO REQUIREMENT TO PREPARE A FEDERAL INCOME TAX RETURN ON BEHALF OF THE BANKRUPTCY ESTATE AS THERE IS NO SEPARATE ENTITY FOR TAX PURPOSES."

Corporation or Partnership Bankruptcy
  1. Filing requirements for corporations and partnerships are as follows:

    • Corporations - Form 1120 (U.S. Corporation Income Tax Return).

    • Partnerships - Form 1065 (U.S. Partnership Return of Income).

  2. If either of the Bankruptcy boxes are checked in Section A (Type of Entity) and there is an indication that a Form 1120, or Form 1065 should have been filed (i.e., the form is attached or the name of the entity has terms such as "CORPORATION" , "CORP" , "PARTNERSHIP" , etc.), process as follows:

    If ... Then ...
    Numbered Returns,
    1. Continue editing the return.

    2. Attach Form 4227 and notate "POSSIBLE FILING DISCREPANCY" .

    3. Edit Action Code 320.

    4. Leave the return in the block.

    Unnumbered Returns,
    1. Do not continue editing the return.

    2. Attach a Form 4227 and notate "POSSIBLE FILING DISCREPANCY" .

    3. Withdraw the document from the batch.

    4. Route the document to Entity Control.

  3. Through research or correspondence with the filer, Entity will decide if the filer must file a Form 1041, Form 1120, or Form 1065.

    If ... Then ...
    Form 1041 is returned from Entity with a new EIN present (decided that Form 1041 should have been filed), Continue editing the return.
    Form 1041 is returned from Entity without an EIN present, Release return for processing. Form 1041 will go UPC 329 and be referred to Entity Unpostables.

Prompt Assessment (Form 4810)/Prompt Determination

  1. Identification should be made for "Prompt Assessment" or "Prompt Determination" of tax liability to ensure that the crucial 60 and 180 day deadlines is met timely by Compliance.

  2. A Prompt Assessment is requested either in the form of a letter or on Form 4810 Request for Prompt Assessment Under IRC 6501(d):

    If ... And ... Then ...
    A Prompt Assessment is not attached to a tax return,   Forward the Prompt Assessment request to Examination.
    A Prompt Assessment request is attached to a tax return,
    • A TC 150 has not posted for that return, or

    Process the return and forward the Prompt Assessment request to Examination with a copy of the tax return.

    Reminder:

    Edit Audit Code 4 and an Working Trail. See Figure 3.11.14-7, Request for Prompt Determination (Form 4810

    .
    A Prompt Assessment request is attached to a tax return,
    • A TC 150 has posted for that return,

      Note:

      The "Returns listed above" box on the Form 4810 should be checked if the TC 150 has posted.

    Stop editing and move Form 4810 to the front of the return and forward to Examination.

    Figure 3.11.14-7

    This is an Image: 33490007.gif

    Please click here for the text description of the image.

  3. If a request for Prompt Determination under Section 505(b) of the U.S. Bankruptcy Code is attached to the return and addressed to the Submission Processing Campus, decide if the request and return was processed through the Centralized Insolvency Operation Rev. Proc. 2006-24:

    If ... Then ...
    There is an indication that the request was processed through the Centralized Insolvency Operation (CIO), e.g., the return has a copy of a letter addressed to CIO, Continue editing the return.
    There is no indication that the request was processed through the CIO,
    1. Photocopy the return and attachments, mark the copy PHOTOCOPY DO NOT PROCESS and forward the copy to CIO at:
      2970 Market St. Stop 5-Q30.133
      Philadelphia, PA 19104-5016

    2. Edit working trail in the left-hand margin of the Form 1041"COPY SENT TO INSOLVENCY" ,

    3. Continue processing the original return.

    See Figure 3.11.14-8, Request for Prompt Determination (Under Section 505(b).

    Figure 3.11.14-8

    This is an Image: 33490008.gif

    Please click here for the text description of the image.

IRC 663(c) - Separate Share Tax Rule Trust (Form 1041)

  1. If Form 1041 is received with the notation "SEPARATE SHARE" and there are supporting returns shown as copies for information purposes:

    1. Research (following local procedures) to decide if TC 150 is present. It is possible that the original return has become detached during batching.

    If ... Then ...
    TC 150 has posted, Route the "Separate Share" Form 1041 to the Research function for association with the original return.
    TC 150 has not posted, and entries are present on entire Page 1,
    1. "X" through the supporting documents and leave them attached to the return,

    2. Continue normal processing of the return.

    TC 150 has not posted, and entries are present on Lines 20 through 27, Correspond for the original Form 1041.

Nontaxable Returns (No Line Entries)

  1. Process Form 1041 as an original return if it is received with all the following:

    • No tax data entries and no tax data information attached.

    • A notation on the return such as "NOT LIABLE."

    • A taxpayer signature.

♦Re-Entry Document Procedures♦

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

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

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

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

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

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

  5. Examine Form 3893 or Form 13596 to decide the editing needed to make the return processable.

    Caution:

    If the IRS Received Date is two year's and nine months or more from the Return Due Date, refer to Statute procedures prior to re-entering or reprocessing the return. See IRM 3.11.14.10.11, Statute Returns.

♦Form 3893 - Re-Entry Document Control♦
  1. Form 3893, Re-Entry Document Control, is used to re-input a return that has not posted to an account or module.

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

  3. Circle the CCC "G" if present.

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

  5. Do not send Letter 1382C if a request for reasonable cause is attached.

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

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

    If ... Then ...
    Box 14, Remarks, Ensure that the information is edited to the return.
    Box 15, Process as,
    1. Circle any green rocker and edit marks that may show a receipt of remittance.

    2. Do not change any tax due amounts.

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

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

  9. An IRS Received date must be present on all re-input returns.

    If ... Then ...
    IRS Received Date is not present, Edit an IRS received date to the middle of the return.
    Multiple IRS Received Dates are present, Circle all but the earliest date.

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

    Exception:

    Do not correspond for missing Schedules K-1. See IRM 3.11.14.17.2.4, Line 18 - Income Distribution Deduction (Schedule K-1).

  11. When perfection is not possible, edit Action Code 640 on the return and attach Form 4227 noting "PERFECTION NOT POSSIBLE" and leave in batch.

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

  2. Circle CCC "G" if present.

  3. Don’t edit CCC "G" on amended returns.

  4. Don’t send Letter 1382C, Reprocessing Returns, if a request for reasonable cause is attached.

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

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

    For ... Then ...
    TIN correction, Edit correct TIN on return.
    Tax Period correction, Edit correct Tax Period ending on return.
    Reasonable cause, Edit the correct Computer Condition Code:
    1. Edit CCC "R" if the "FTF" box is checked.

    2. Edit CCC "D" if the "FTP" box is checked.

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

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

  8. An IRS Received Date must be present on all reprocessed returns:

    If ... Then ...
    IRS Received date is not present, Edit an IRS Received Date to the middle of the return.
    Multiple Received rates are present, Circle all but the earliest date received by the IRS.

  9. Circle any green rocker and edit marks that may show a receipt of remittance.

  10. When more information is still needed to make the return processable, prepare approved Correspondence Action Sheet or Form 4227, Intra-SC Reject or Routing Slip, for the proper correction (e.g., correspondence, research, etc.).

    Exception:

    Do not correspond for missing Schedules K-1. See IRM 3.11.14.17.2.4, Line 18 - Income Distribution Deduction (Schedule K-1).

♦Refund Returns (45 Day Jeopardy and High Dollar Refunds)♦

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

    Note:

    Expeditious processing of refund returns is critical if the 45-day period is about to expire.

    If ... Then ...
    A refund return is batched in a non-refund batch,
    1. Completely edit the return.

    2. Pull the return from the non-refund batch and merge into a refund batch using local procedures.

    Note:

    Follow the instructions below when the processing date is more than 20 days after the Received Date or the return due date OR the refund is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

    The processing date is more than 20 days after the Received Date or the Return Due Date (whichever is later) and the refund is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡,

    Note:

    "Refund" in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods or amount to be credited to the next year's tax.

    Unnumbered Returns:
    1. Pull the return from the batch.

    2. Code and edit the return as completely as possible.

    3. Edit Action Code 341.

    4. Give the return to the manager for Expedite processing.

    Figure 3.11.14-9, Refund Return - 45 Day Jeopardy.


    Numbered Returns:
    1. Code and edit the return as completely as possible.

    2. Edit Action Code 341.

    The refund is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    "Refund" in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods or amount to be credited to the next year's tax.

    Unnumbered Returns:
    1. Pull the return from the batch.

    2. Code and edit the return as completely as possible.

    3. Edit Action Code 341.

    4. Make a copy of the first two pages of the tax return along with any page of the return that appears suspicious. See IRM 3.11.14.2.8, Criminal Investigation (CI) Referrals.

    5. Edit a working trail "Copy to CI" , or "CI Referral" , or similar language in the lower left corner going vertically up the side of the return

    6. Expedite processing.


    Numbered Returns:
    1. Code and edit the return as completely as possible.

    2. Edit Action Code 341.

    3. Make a copy of the first two pages of the tax return along with any page of the return that appears suspicious. See IRM 3.11.14.2.8, Criminal Investigation (CI) Referrals.

    4. Edit a working trail "Copy to CI," or "CI Referral," or similar language in the lower left corner going vertically up the side of the return.

    Figure 3.11.14-9

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    Please click here for the text description of the image.

♦Compliance Secured/Prepared Returns♦

  1. Compliance functions, Collection and Examination, secure returns from the taxpayer and also prepare returns if the taxpayer doesn't give them.

  2. Compliance notates:

    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 Collections System) or notated "Process as Original" with an attached Form 13133, Expedite Processing Cycle. The "Delinquent Return" box on Form 13133 should be checked.

    Note:

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

♦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 shown by the notation: "PREPARED AND SIGNED UNDER AUTHORITY OF SECTION 6020(b) OF THE INTERNAL REVENUE CODE" which is found in the center bottom of Page 1 of the return.

    1. Returns must have an IRS Received Date. If missing, follow the normal procedures for editing the IRS Received Date, see IRM 3.11.14.11, Received Date.

    2. Returns must be signed by Compliance Function representatives. If not signed, route to Compliance using Form 4227, Intra-SC Reject or Routing Slip.

      Note:

      Starting July 1, 2013, the Revenue Officer's (RO) electronic or typed signature will be accepted as a valid signature on the return.

    3. Edit CCC "4" . See IRM 3.11.14.8.23, CCC 4 - IRS Prepared Return Under IRC 6020(b).

      Note:

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

    4. Edit CCC "D" if the Compliance Function representative notates: "DO NOT ASSESS FAILURE TO PAY PENALTY" and the return due date (without regard to extensions) is July 30, 1996, or prior.

      Note:

      Do not edit CCC "D" if the return due date is after July 30, 1996 (without regard to extensions) even if the Compliance Function representative notates "DO NOT ASSESS FAILURE TO PAY PENALTY" .

    5. Don’t correspond with the taxpayer for unprocessable conditions. If the return is unprocessable, edit CCC "3" and continue processing.

    6. Edit CCC "W" if the IRS Received Date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control. See IRM 3.11.14.10.11, Statute Returns.

♦Collection Secured♦
  1. These returns are shown by the notations "TC 59X" or "ICS" .

    1. Don’t edit CCC "G" on these returns.

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

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

      Reminder:

      If there is indication a penalty or penalties should be suppressed, edit the correct Computer Condition Code(s). See IRM 3.11.14.8.17, CCC "W" - Return Cleared by Statute Control.

♦Examination Prepared♦
  1. These returns are shown by the notation "SFR" or "SUBSTITUTE FOR RETURN" on Page 1.

    1. Return must have an IRS Received Date. If no IRS Received Date is present, follow the normal procedures for editing the IRS Received Date. See IRM 3.11.14.11, Received Date.

    2. Do not correspond with the taxpayer for unprocessables conditions. If the return is unprocessable, edit CCC "3" and continue processing.

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

      Note:

      Do not enter CCC "D" unless the return due date (without regard to extensions) is July 30, 1996, or prior, even if the CCC “D” box is checked on Form 13133.

    4. Edit CCC "W" if the IRS Received Date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control. See IRM 3.11.14.10.11, Statute Returns.

♦Examination Secured♦
  1. These returns are shown 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. Do not edit CCC "G" on these returns.

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

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

      Note:

      Do not enter CCC "D" unless the return due date (without regard to extensions) is July 30, 1996, or prior, even if the CCC “D” box is checked on Form 13133.

    4. Edit CCC "W" if the received date is more than 2 years and 9 months after the Return Due Date. Do not send the return to Statute Control. See IRM 3.11.14.8.17, CCC "W" - Return Cleared by Statute Control.

      Reminder:

      If Form 13133 (or something similar) shows a penalty or penalties should be suppressed, edit the correct Computer Condition Code(s). See IRM 3.11.14.8, Computer Condition Codes (CCC).

Section 965 Returns Form 1041 and Form 1041-N (TY 2017 and later)

  1. Section 965 (Repatriation Provision), Treatment of deferred foreign income upon transition to participating exemption systems of taxation for U.S. Shareholders of Specified Foreign Corporations per Tax Cuts Jobs Act (Tax Reform), Provision Section 14103, Public Law 115-97 (H.R.1).

  2. Taxpayers reporting a 965 tax on their return can elect one of the following two elections:

    Section ... Description ...
    965(h) Election to pay tax liability in installments.

    Note:

    Taxpayers can only make a 965(h) election after 201911, if they made a 965(i) election during the inclusion period 201712 - 201911 and subsequently experienced a triggering event, then and only then can a 965(h) be made after 201911 (in the year of the triggering event) to pay the triggered liability in installments.

    965(i) Election to defer payment until triggering event.

    Note:

    Taxpayers cannot make a 965(i) election no later than 202012.

  3. Edit CCC "J" if the return shows a Section 965 as follows:

    If ... Then ...
    Tax Period is 202012 and later All of the following apply:
    1. Amount on Line 25, Form 1041 (Line 19, Form 1041-N).

    2. Amount on Line 15, Sch. G, Part II, Form 1041.

    3. Form 965-A attached Part 1 Line 4, Columns (a) tax year present, (b) through (e) no data, and (f) has an amount.

    Tax Period is 201912 - 202011 Any of the following apply:
    1. Amount on Line 25, Form 1041 (Line 19, Form 1041-N).

    2. Amount on Line 15, Sch. G, Part II, Form 1041.

    3. Form 965-A attached Part 1 Line 3, Columns (a) tax year present, (b) through (e) no data, and (f) has an amount.

    4. "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

    Tax Period is 201812 - 201911 Any of the following apply:
    1. Amount on Line 24, Form 1041 (Line 19, Form 1041-N).

    2. Amount on Line 25f, Form 1041.

    3. Form 965-A attached Part 1 Line 2, Columns (a) tax year present, (b) through (e) no data, and (f) has an amount.

    4. "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

    Tax Period is 201712 - 201811 Any of the following apply:
    1. Form 965-A attached and:

      • Amount on Line 1, Columns (a), (j) or (k).

      • Amount on Line 1, Columns (f), Part II.

    2. "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

  4. Edit CCC "B" if the return has a Section 965(i) election listed as follows:

    If ... Then ...
    Tax Period is 202012 - 202211, Form 965-A attached and both entries are present:
    • Line 4, Column (e), Part I.

    • Line 4, Column (f), Part III, yes box marked.

    Tax Period is 201912 - 202011, Form 965-A attached and both entries are present:
    • Line 3, Column (e), Part I.

    • Line 3, Column (f), Part III, yes box marked.

    Tax Period is 201812 - 201911, Form 965-A attached and both entries are present:
    • Line 2, Column (e), Part I.

    • Line 2, Column (f), Part II, yes box marked.

    Tax Period is 201712 - 201811, Form 965-A attached and both entries are present:
    • Line 1, Column (e), Part I

    • Line 1, Column (f), Part II, yes box marked.

  5. If CCC "J" or "B" (Section 965(i) Election) was edited on a Tax Period 201712 - 201811 return, edit as follows:

    If ... Then ...
    Form 965-A is attached and both entries are present:
    • Line 1, Column (f), Part I

    • Line 1, Column (g), Part 1, Yes box marked.

    • Edit Action Code 460 on the return.

    • Attach to return Form 4227 to route to ERS Rejects.

    • Notate on Form 4227 "Sec. 965 CCC B/J" .

Tax Period 202112 and later- Line 25 and Line 15, Schedule G, Form 1041 (Line 19, Form 1041-N)
  1. Line 25, Form 1041 (Line 19 Form 1041-N) edit as follows:

    If ... Then ...
    Amount is present on Line 25 (Line 19 Form 1041-N), Accept the data present and continue to process the return.

  2. Line 15 (Schedule G) edit as follows:

    If ... Then ...
    Amount is present on Line 15, Schedule G, Accept the data present and continue to process the return.

Tax Period 202012 - 202111 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19, Form 1041-N)
  1. Line 25, Form 1041 (Line 19 Form 1041-N) edit as follows:

    If ... And ... Then ...
    Amount is present on Line 25 (Line 19 Form 1041-N), Form 965-A is not attached, Correspond for Form 965-A.
    Amount is present on Line 25 (Line 19 Form 1041-N), Form 965-A is attached,
    1. If the amount is present on Form 965-A, Part II, Column (k):

      • If the amount is equal to Line 25 (Line 19 Form 1041-N) amount, do not edit and continue processing the return.

      • If the amount is not equal to Line 25 (Line 19, Form 1041-N) amount, correspond for explanation of the difference.

    2. If the amount is not present on Form 965-A, Part II, Column (k), correspond for discrepancy.

    Amount is not present on Line 25 (Line 19 Form 1041-N), Form 965-A is attached,
    1. If amount is present on Form 965-A, Part II, Column (k):

      • If the amount is in the total for Line 28, Form 1041 (Line 19 Form 1041-N), edit the Line 4 amount to Line 25, Form 1041 (Line 21, Form 1041-N).

      • If the amount is not in the total of Line 28, Form 1041 (Line 21, Form 1041-N), correspond for explanation.

  2. Line 15 (Schedule G) edit as follows:

    If ... And ... Then ...
    Amount is present on Line 15, Schedule G, Form 965-A is not attached, Correspond for Form 965-A.
    Amount is present on Line 15, Schedule G, Form 965-A is attached,
    1. If amounts are present on Line 4, Form 965-A, Part I, Column (f) and triggered liabilities on Lines 5-8:

      • If the amount is equal to Line 15, Schedule G amount, do not edit and continue processing the return.

      • If the amount is not equal to Line 15, Schedule G amount, correspond for explanation of the difference.

    2. If no amounts are present on Line 4, Form 965-A, Part I, column (f) or no triggered liabilities on Lines 5-8, correspond for discrepancy.

    Amount is not present on Line 15, Schedule G, Form 965-A is attached,
    1. If amounts are present on Line 4, Form 965-A, Part I, Column (f) and triggered liabilities on Lines 5-8:

      • If the amount is in the total for Line 26, Form 1041, edit the Line 4 amount to Line 15 Schedule G.

      • If the amount is not in the total of Line 26, Form 1041, correspond for explanation.

Tax Period 201912 - 202011 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19, Form 1041-N)
  1. Line 25, Form 1041 (Line 19 Form 1041-N) edit as follows:

    If ... And ... Then ...
    Amount is present on Line 25 (Line 19 Form 1041-N), Form 965-A is not attached, Correspond for Form 965-A.
    Amount is present on Line 25 (Line 19 Form 1041-N), Form 965-A is attached,
    1. If the amount is present on Form 965-A, Part II, Column (k):

      • If the amount is equal to Line 25 (Line 19 Form 1041-N) amount, do not edit and continue processing the return.

      • If the amount is not equal to Line 25 (Line 19, Form 1041-N) amount, correspond for explanation of the difference.

    2. If the amount is not present on Form 965-A, Part II, column (k), correspond for discrepancy.

    Amount is not present on Line 25 (Line 19 Form 1041-N), Form 965-A is attached,
    1. If amount is present on Form 965-A, Part II, column (k):

      • If the amount is in the total for Line 28, Form 1041 (Line 19 Form 1041-N), edit the Line 3 amount to Line 25, Form 1041 (Line 21, Form 1041-N).

      • If the amount is not in total of Line 28, Form 1041 (Line 21, Form 1041-N), correspond for explanation.

  2. Line 15 (Schedule G) edit as follows:

    If ... And ... Then ...
    Amount is present on Line 15, Schedule G, Form 965-A is not attached, Correspond for Form 965-A.
    Amount is present on Line 15, Schedule G, Form 965-A is attached,
    1. If amounts are present on Line 3, Form 965-A, Part I, Column (f) and triggered liabilities on Lines 5-8:

      • If the amount is equal to Line 15, Schedule G amount, do not edit and continue processing the return.

      • If the amount is not equal to Line 15, Schedule G amount, correspond for explanation of the difference.

    2. If no amounts are present on Line 3, Form 965-A, Part I, column (f) or no triggered liabilities on Lines 5-8, correspond for discrepancy.

    Amount is not present on Line 15, Schedule G, Form 965-A is attached,
    1. If amounts are present on Line 3, Form 965-A, Part I, Column (f) and triggered liabilities on Lines 5-8:

      • If the amount is in the total for Line 26, Form 1041, edit the Line 3 amount to Line 15 Schedule G.

      • If the amount is not in the total of Line 26, Form 1041, correspond for explanation.

Tax Period 201812 - 201911 - Line 24 and Line 25f, Form 1041 (Line 19, Form 1041-N)
  1. Line 24, Form 1041 (Line 19 Form 1041-N) edit as follows:

    If ... And ... Then ...
    Amount is present on Line 24, Form 1041 (Line 19 Form 1041-N), Form 965-A is not attached, Correspond for Form 965-A.
    Amount is present on Line 24, Form 1041 (Line 19 Form 1041-N), Form 965-A is attached,
    1. If the amount is present on Form 965-A, Part II, column (k):

      • If the amount is equal to Line 24, Form 1041 (Line 19 Form 1041-N) amount, do not edit and continue processing the return.

      • If the amount is not equal to Line 24, Form 1041(Line 19, Form 1041-N) amount, correspond for explanation of the difference.

    2. If the amount is not present on Form 965-A, Part II column (k)I, correspond for discrepancy.

    Amount is not present on Line 24, Form 1041 (Line 19 Form 1041-N), Form 965-A is attached,
    1. If amount is present on, Form 965-A, Part II, column (k):

      • If the amount is in the total for Line 28, Form 1041 (Line 21, Form 1041-N), edit the Line 2 amount to Line 24, Form 1041 (Line 21, Form 1041-N).

      • If the amount is not in total of Line 28, Form 1041 (Line 21, Form 1041-N), correspond for explanation.

  2. Line 25f, Form 1041 edit as follows:

    If ... And ... Then ...
    Amount is present on Line 25f, Form 1041, Form 965-A is not attached, Correspond for Form 965-A.
    Amount is present on Line 25f, Form 1041, Form 965-A is attached,
    1. If amounts are present on Line 2, Form 965-A, Part I, Column (f) and triggered liabilities on Lines 5-8:

      • If the amount is equal to Line 25f, Form 1041 amount, do not edit and continue processing the return.

      • If the amount is not equal to Line 25f, Form 1041 amount, correspond for explanation of the difference.

    2. If no amounts are present on Line 3, Form 965-A, Part I, column (f) or no triggered liabilities on Lines 5-8, correspond for discrepancy.

    Amount is not present on Line 25f, Form 1041, Form 965-A is attached,
    1. If amounts are present on Line 2, Form 965-A, Part I, Column (f) and triggered liabilities on Lines 5-8:

      • If the amount is in the total for Line 26, Form 1041, edit the Line 2 amount to Line 25f, Form 1041.

      • If the amount is not in the total of Line 26, Form 1041, correspond for explanation.

Tax Period 201712 - 201811 - Section 965 Tax or 965 Election (Form 1040 and Form 1041-N)
  1. Edit as follows:

    If ... Then ...
    Any of the following apply:
    • Form 965-A is attached, or

    • "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

    • "Section 965(i) Election" (or similar language) notated on the return, attachments, or statements, or

    • A significant entry is present on page 1, Line 8, with notation "Section 965" (or similar).

      Exception:

      A significant entry is defined as any amount other than zero.

    • Completely edit the return.

    • Edit Action Code "460" .

    • Attach Form 4227 to return.

    • Notate "Sec 965" on Form 4227.

    • Do not issue correspondence on the return. ERS will correspond for missing information.

Qualified Settlement Fund Tax Returns (Form 1041)

  1. The trustee of a Designated or Qualified Settlement Fund (QSF) generally must file Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B), instead of Form 1041.

  2. If a QSF has only one transferrer, the transferrer may elect to treat the QSF as a grantor type trust. To make the grantor trust election, the transferrer must attach an election statement to a timely filed Form 1041. At the top of the election statement, should be the notation "SECTION 1.468B-1(K) ELECTION" and has the transferrer’s:

    • Name,

    • Address,

    • TIN, and

    • A statement that he or she will treat the QSF as a grantor type trust.

  3. If the filer notates that Form 1041 is for a "QUALIFIED SETTLEMENT FUND" or "SETTLEMENT FUND" , but lacks all the information listed in the preceding paragraph, decide if the document is numbered or unnumbered:

    If ... Then ...
    Numbered Returns,
    1. Do not continue editing the return.

    2. Edit Action Code 320.

    3. Attach Form 4227 and notate "POSSIBLE FILING REQUIREMENT DISCREPANCY" .

    4. Leave the return in the block.

    Unnumbered Returns,
    1. Don’t continue editing the return.

    2. Attach Form 4227 and notate "POSSIBLE FILING REQUIREMENT DISCREPANCY" .

    3. Withdraw the document from the batch.

    4. Route the return to Entity. See Figure 3.11.14-10, Settlement Fund Return - Possible filing discrepancy.

    Figure 3.11.14-10

    This is an Image: 33490010.gif

    Please click here for the text description of the image.

♦Statute Returns♦

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

    Note:

    Even amended returns.

  2. Route Statute returns to the Statute Control Unit daily or more often if needed.

  3. If any of the conditions listed below are present, do not route to Statute Control Unit for clearance. Instead, edit CCC "W" , and continue processing:

    • Compliance IRC 6020(b) returns.

    • Secured by Examination/Collections, secured by TE/GE, secured by TE/GE Employee Plan (EP) Exam.

    • Returns with Transaction Code (TC) 59X or "ICS" notated on the face of the return see IRM 3.11.14.43, Routing Guide for Attachments, for more information.

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

    • Returns with a stamp showing a previous clearance by Statute Control within the last 90.

  4. If a return has any of the following computer paragraphs (CPs) or letters attached, do not route to Statute Control Unit for clearance. Edit CCC "W" if the return needs processing. See

    • CP 259, Master File Generated 1st TDI Notice

    • CP 959, Master File Generated 1st TDI Notice (Spanish version)

    • CP 518, Final Notice - Return Delinquency

    • Letter 112-C, Payment/Overpayment/Credit Applied; No Record of Return Filed

    • Letter 282-C, Return Not Received: Copy Requested/Received

    • Letter 2255-C, Delinquent Return (Forms 720, 1041, 1065, 1120)

    • Letter 2284-C, Delinquent Return (Form 940, 941, 942, 943)

  5. If a return has a Form 12412, Operations Assistance Request (OAR), from TAS and the return is a potential statute control return but is not stamped cleared by Statute, give the return to your lead. The lead contacts the TAS employee listed on the OAR for rejection of the OAR back to TAS for clearance by the Statute Control Unit.

    Note:

    If the return is within 90 days of the statute expiration date, advise the TAS employee of such and route the return directly to Statute Control for clearance.

  6. Statute returns are unprocessable until cleared by Statute Control.

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

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

    The return is unnumbered,
    1. Don’t continue processing,

    2. Pull the return from the batch.

    3. Attach Form 4227, Intra-SC Reject or Routing Slip, and route to Statute Control Unit.

  7. Edit CCC "W" if the Statue Control Unit stamps or shows clearance on the front of the return. See Figure 3.11.14-11, Statute Return.

    Figure 3.11.14-11

    This is an Image: 33490011.gif

    Please click here for the text description of the image.

  8. Follow the chart below to decide if CCC "W" is needed:

    If ... And ... Then ...
    The return Received Date is 2 years and 9 months or more after the Return Due Date, The return is stamped "No Statute Issue" , "Statute N/A," or a similar statement showing there is no statute issue, Edit CCC "W."
    The return Received Date is less than 2 years and 9 months from the Return Due Date, The return is stamped "No Statute Issue," "Statute N/A," or a similar statement showing there is no statute issue, Do not edit CCC "W."

Foreign Address Returns (International)

  1. Ogden Submission Processing Campus (OSPC) will process all foreign address returns.

  2. A foreign address is any address other than the 50 states and the District of Columbia.

  3. An Army Post Office (APO), Diplomatic Post Office (DPO) or Fleet Post Office (FPO) is not considered a foreign address. See IRM 3.11.14.14.5, Entity Perfection - Domestic Addresses.

  4. The determination of an International foreign address is based only on the address of the estate or trust found on Page 1 of the return. Don’t consider a Form 1041 or Form 1041-QFT that has schedules or attachments showing that the beneficiary, trustee or shareholder has a foreign address.

  5. U.S. Possessions/Territories - The following U.S. Possessions/Territories are considered foreign addresses and must be shipped to OSPC for processing:

    • American Samoa

    • Federal States of Micronesia

    • Guam

    • Marshall Islands

    • Northern Mariana Islands

    • Palau

    • Puerto Rico

    • Virgin Islands (US)

  6. Consider a Form 1041 with any of the following attachments or indications to be an international return:

    • Form 1040 with Form 2555 or Form 2555-EZ (Foreign Earned Income)

    • Form 1040 with Form 4563 (Exclusion of Income for Bona Fide Residents of American Samoa)

    • Form 1040 with Form 5074 (Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands)

    • Form 8288B (Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests)

    • Form 1040GUAM

    • Form 1040 (PR)

    • Form 1040-SS or Form 1040-SS(NMI)

    • Exemption or exclusion of the Tax or Income due to an international treaty (not an American Indian Treaty)

      Note:

      An American Indian Treaty is not considered International.

    • Section 911, 913, 931, or 933 of the Internal Revenue Code

    • Treaty Trader or Fulbright Grantee

  7. Route all returns with a foreign address to OSPC for processing. Prepare Letter 86C to inform the fiduciary or trustee that the return was sent.

    1. When an international return is shown, discontinue perfection.

    2. Prepare Form 4227 and notate "PREPARE LETTER 86C IN DUPLICATE" . If there is a credit on the return, also, notate "CREDIT TRANSFER" on Form 4227.

    If ... Then ...
    Numbered Returns,
    1. Edit the Name Control.

    2. Edit Action Code 650.

    3. Leave the return in the block.

    Unnumbered Returns, Withdraw the return from the batch and forward for transshipment.

    Reminder:

    If the return is not date stamped, edit the Received Date.

Blind Trust Returns (Form 1041)

  1. Taxpayers who are presidential appointees are permitted to file their individual tax returns through a trustee of a blind trust.

  2. If there is any indication on the return or attachment, a General Power of Attorney, or Form 2848 attached that shows "Blind Trust" , see IRM 3.28.3, Individual Income Tax Returns.

  3. The POA, Form 2848 must be processed to the CAF to reflect the Blind Trust Indicator on Master File to ensure that no correspondence is generated to the taxpayer.

Streamlined Filing Compliance Process (Ogden Only) (Form 1041)

  1. Effective July 1, 2014, the IRS started a new enhanced Streamlined Program for individual taxpayers who are voluntarily disclosing offshore accounts. Returns postmarked on or after July 1, 2014, will follow these Streamlined processing instructions.

    Caution:

    This only applies to 1041 returns for decedent estates in BMF

  2. To be considered for the Streamlined Program, the package of returns must have any or all the following characteristics:

    • Package of returns addressed to Mail Stop 6063 AUSC.

      Note:

      Austin will transship Form 1041 returns to Ogden.

    • "Streamlined" is written on return,

    • Form 14653, Certification by US Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, or Form 14654, Certification by US Person Residing I the United States for Streamlined Domestic Offshore Procedures, is attached.

    • Taxpayer specifically mentions the "Streamlined" process in a letter.

      Note:

      If multiple tax years are batched together and doesn’t have one of the above criteria, do not treat as streamlined. Re-batch, if necessary.

    Note:

    Only complete packages of Form 1041 original and amended will be transshipped to Ogden and if they need to correspond Ogden will do it. If the complete package has Form 1040 and Form 1041 returns, then Austin will do the required correspondence and add a copy of the reply with the Form 1041 return when it is transshipped.

  3. If the items below are not submitted, correspond using the 177C letter:

    Note:

    Only complete packages of Form 1041 original and amended will be transshipped to Ogden and if they need correspondence, Ogden will do it.

    • The taxpayer is required to submit delinquent tax returns for the year's listed on the certification when a U.S. tax return is due. They can submit more than 3 year's returns.

      Exception:

      It the taxpayer attaches copies of returns or a statement showing that the other years were already filed, do not correspond.

    • A completed Streamlined Form 14653, Form 14654, or an attachment containing the information must be signed under penalty of perjury.

  4. The completed certification (Form 14653, Form 14654, or substitute certification) must have the following:

    • Original signature(s) of taxpayer(s) under the jurat.

    • Statement certifying that taxpayer meets the eligibility requirements for the Streamlined Filing Compliance.

    • Information related to the taxpayer's financial interests in foreign financial accounts.

    • Explanation of the specific reasons for the failure to comply with tax and financial account reporting obligations, this only applies to Form 14654.

  5. If the items are not submitted with a Streamlined package, correspond using Form 13459, Correspondence Action Sheet:

    • Attach Form 13459 below the entity area.

    • Check all proper boxes.

    • Edit correct action code, i.e., AC 211 or AC 215.

    Note:

    Only complete packages of Form 1041 original and amended will be transshipped to Ogden and if they need correspondence, Ogden will do it.

  6. If one return needs to be cleared by Statute, send all Streamline returns received from the taxpayer, do not separate.

  7. Follow normal coding instructions and normal Attachment Guide procedures.

    Caution:

    If the first page of each FBAR, Form TDF 90-22.1, doesn't have a received date, edit in MMDDYYYY format. Don’t detach FBARs from the tax return.

  8. If correspondence is necessary for any return submitted as part of the “Streamlined” process, it is important to ensure that all returns submitted by each taxpayer be kept together. This means that if one return needs correspondence, that all returns in the submission must be kept with the suspended return and held together in the Suspense area.

  9. Once it was decided that a Streamlined Package is complete, the package is separated.

    Note:

    Each tax year must have a copy of the certification. If only the original certification is in the package, photocopies must be made to place with each return.

  10. When a completed Streamlined filing is received, edit the following Computer Condition Codes (CCC) and edit an audit trail on the return showing that the package was complete:

    • D

    • P

    • R

    • 8

      Caution:

      Do not edit CCC D, R, and 8 if corresponding for a Streamline issue.

  11. Amended Streamlined Form 1041 returns will not be processed. Instead, they will be scanned into CII in Austin and worked by Ogden's AM. If amended 1041 Streamlined returns are received in Ogden, they will be scanned into CII with a special cover sheet assigned to a special employee number.

Additional Perfection - Form 1041, Form 1041-QFT, and Form 1041N

  1. This section has instructions for coding other entries to Form 1041, Form 1041-QFT, and Form 1041-N.

  2. These entries are edited in the left margin next to:

    • Line 10, Form 1041.

    • Line 5, Form 1041-QFT.

    • Line 6, Form 1041-N.

  3. Each entry will be preceded by the numeric for the applicable line.

  4. Edit entries in numeric order, such as "1 - 4" , "6 - 2" , and "7 - 3" .

    If ... Then ...
    Audit Code, Edit "1" followed by the correct Audit Code, e.g., "1 - 6" . See IRM 3.11.14.7, Audit Codes.
    Electing Small Business Trust Indicator (ESBT)
    (Form 1041),
    Edit "2" followed by the ESBT Indicator "1" , e.g., "2 - 1" . See IRM 3.11.14.10.15.1, Electing Small Business Trusts (ESBT).
    Pooled Income Fund
    (Form 1041),
    Edit "3" followed by the Pooled Income Code "1" , i.e., "3 - 1" . See IRM 3.11.14.10.15.2, Pooled Income Fund.
    Penalty and Interest Code, Edit "4" followed by the Penalty and Interest Code "1" , i.e., "4 - 1" . See IRM 3.11.14.10.15.3, Penalty/Interest Code.
    Installment Sale Indicator
    (Form 1041),
    Edit "6" followed by the correct Installment Sale Indicator, e.g., "6 - 2" . See IRM 3.11.14.10.15.4, Installment Sale Indicator.
    Historic Structure Code
    (Form 1041),
    Edit "7" followed by the Historic Structure Code "3" , e.g., "7 - 3" . See IRM 3.11.14.10.15.5, Historic Structure Code.

Electing Small Business Trusts (ESBT)
  1. Edit "2 - 1" in the left margin next to Line 10 of Form 1041 for the Electing Small Business Trust (ESBT) Indicator if the "ESBT" box (in Section A) on page 1 of Form 1041 is checked or there is an indication of ESBT. See Figure 3.11.14-12, ESBT Indicator.

    Note:

    When two Form 1041 returns are received, staple up the ESBT part only Form 1041 return along with its attachments, unless the Form 1041 has entity information only. Then put the ESBT part Form 1041 return on top.

    Figure 3.11.14-12

    This is an Image: 33490012.gif

    Please click here for the text description of the image.

  2. Delete any Schedule D with annotations such as alternative minimum tax, AMT, S-Corp part, EBST part, etc. Move deleted Schedule D out of the sequence order.

Pooled Income Fund
  1. Edit "3 - 1" in the left margin next to Line 10 of Form 1041 1 if the "Pooled Income Fund" box (in Section "A" ) on page 1 of Form is checked. See IRM 3.11.14.13.3, Fiduciary and Trust Code Editing.

    Exception:

    Code return with Fiduciary Code "9" and do not edit "3 - 1" in the left margin if the "Pooled Income Fund" box in Section A and "the Described in Section 4947(a)(2)" box in Section E are both checked.

Penalty/Interest Code
  1. Edit "4 - 1" , when precomputed delinquency penalty and/or interest is shown on a return with a received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ as follows:

    • In the left margin next to Line 10 of Form 1041, See IRM 3.11.14.18, Penalty and Interest Code Editing.

    • In the left margin next to Line 6 of Form 1041-N. See IRM 3.11.14.41.2, Penalty and Interest Code Editing (Form 1041-N)

    .

Installment Sales Indicator
  1. Form 6252, Installment Sale Income, is used to report the sale of property on the Installment plan.

  2. Codes are based solely on the taxpayer response to Question "3" on Form 6252.

  3. Edit the Installment Sales Indicator in the left margin next to Line 10 of Form 1041 in "6 - N" format. See Figure 3.11.14-13, Installment Sales Indicator Code.

  4. Valid codes for Installment Sales Indicator are as follows:

    Code One Form 6252 Multiple Forms 6252
    1 "YES" response to Question 3. At least one form has a "YES" response.
    2 "NO" response to Question 3. All "NO" responses or a combination of "No" and/or blank responses.
    3 "YES" and "NO" are both checked or Question 3 is blank. Question 3 is blank on all forms.

  5. Do not edit an Installment Sales Indicator Code if Form 6252 is attached to a nontaxable Grantor Trust or Bankruptcy Estate return. The Form 6252 information will be added on the individual tax return.

    Figure 3.11.14-13

    This is an Image: 33490013.gif

    Please click here for the text description of the image.

Historic Structure Code
  1. Edit Code "7 - 3" in the left margin next to Line 10 of Form 1041 if Form 3468, Investment Credit, is attached, and there are entries present on any of the following lines that are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡: See Figure 3.11.14-14, Editing Historic Structure Code for Form 3468.

    1. TY 2023 and later: If there are entries under Part VII, Line 1; specifically, Lines h, i or j.

    2. TY 2010 - 2022: If there are entries under Part III, Line 11; specifically, Lines e, f, or g.

    3. TY 2008 and 2009: If there are entries under Part III, Line 10; specifically, Lines e, f, g, h, i or j.

    4. TY 2006 and 2007: If there are entries on Line 1; specifically, Lines e, f, g, or h.

    5. TY 1996 - 2005: If there are entries on Line 1, specifically, Lines b or c.

    Figure 3.11.14-14

    This is an Image: 33490014.gif

    Please click here for the text description of the image.

Elective or Deemed Payment Election (DPE) and Credit Transfers

  1. Under the Inflation Reduction Act (IRA) of 2022 and CHIPS and Science Act of 2022, the taxpayer can elect to:

    • Take certain credits as an "Elective or Deemed Payment Election."

    • Transfer a credit to another taxpayer.

    • Claim the credit as a General Business Credit.

  2. For Tax Periods 202212 - 202311 - Identify an Elective or Deemed Payment Election when the taxpayer writes "IRA22DPE" on Form 3800, an attachment or on any of the following lines:

    Form 2022 Lines
    Form 1041 Schedule G, Part II, Line 16a
    Form 1041-N Part II, Line 20
    Form 1041-QFT Part II, Line 17

  3. When a return is identified with an "Elective or Deemed Payment Election," do the following:

    1. Completely edit the return.

    2. Edit RPC "J."

    3. Place a flag at the top of the return and attach the "IRA22 DPE/TRE Reminder" sheet to the return.

      Note:

      P&A will provide the pre-printed half-sheets for C&E to use.

    4. Give the return to the lead.

    5. The lead will have the returns re-batched with "DPE" in the batch ID.

  4. For Tax Periods 202212 - 202311 - Identify a "Credit Transfer" when the taxpayer writes "IRA22TRE" on Form 3800, an attachment, or at the top of the return or on an attachment. Do the following:

    1. Completely edit the return.

    2. Edit RPC "K."

    3. Place a flag at the top of the return and attach the "IRA22 DPE/TRE Reminder" sheet to the return.

      Note:

      P&A will provide the pre-printed half-sheets for C&E to use.

    4. Give the return to the lead.

    5. The lead will have the returns re-batched with "TRE" in the batch ID.

    Note:

    A return can have both an RPC "J" and an RPC "K."

  5. Treat taxpayers who claim the credit on Form 3800 with no other indication of claiming the "Elective or Deemed Payment Election" or "Credit Transfer" as normal. See IRM 3.11.14.22.2.2, Schedule G, Line 2b - General Business Credit Form 8300).

♦Received Date♦

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

  2. All Form 1041, Form 1041-QFT, and Form 1041-N returns require an IRS Received Date.

    If ... Then ...
    The return is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or extended due date, See Exhibit 3.11.14-4, Due Date Chart. The return is considered timely.
    The due date falls on a weekend or legal holiday, The return is timely if postmarked by the first business day following the weekend or legal holiday.
    The IRS Received Date stamp is after ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the legal or extended due date and the postmark or shipment date is on or prior to the legal or extended due date, Edit the IRS Received Date to agree with the postmark date.

    Note:

    The postmark or shipment date is returns delivered by:

    • U.S. Postal Service,

    • Private Delivery Services, e.g., Federal Express Corporation (FedEx) or United Parcel Service (UPS), "designated" by the IRS. See IRM 3.10.72, Receiving, Extracting and Sorting for a list of designated private delivery services, or

    • Returns with a Foreign Postmark.

     

    Caution:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    For certified mail only- If a postmark is not present, look for a "USPS.com Track & Confirm" record was attached to the return (should be in front of the envelope). Use the "Acceptance" date on the record to decide timeliness and follow normal editing procedures. See Exhibit 3.11.14-9, USPS. Track & Confirm
    If the record is not attached, do not edit

  3. When a return is delinquent and the taxpayer explains the return is late due to the rejection of a timely filed electronic return, check the return for a MeF rejection notification.

    Note:

    Taxpayers are instructed to notate in red in the top margin of the return REJECTED ELECTRONIC RETURN to show the timely filed return cannot be filed electronically. The notation can be anywhere on the return and is not required, but they should attach a copy of the MeF rejection notification.

  4. If a MeF rejection notification is not attached, perfection of the Received Date is not necessary. If a notification is attached, edit the IRS Received Date as follows:

    Note:

    The taxpayer has 10 days to resubmit an electronically filed return after being rejected and 10 days to submit a paper return after the last rejection.

    If ... And ... Then ...
    The postmark date is within 10 days of the date of the rejection,   Edit the IRS Received Date to be the date of the rejection.

    Example:

    Postmark date is 03-22-2024 and first rejection is 03-12-2024. Change Received Date to 03-12-24.

    The postmark date is more than 10 days after the date of the rejection,   Leave the IRS Received Date as is.

    Example:

    Postmark date is 03-23-2024 and first rejection is 03-12-2024. Leave the Received Date as is.

    Exception:

    Change the Received Date to the postmark date if the postmark date makes the return timely.

    There are two rejections, Within 10 days of one another and one is within 10 days of the postmark date, Edit the IRS Received Date to be the date of the first rejection.

    Example:

    Postmark date is 03-22-2024, the second rejection is 03-12-2024. The first rejection is 03-09-2024 Change the Received Date to 03-09-24.

    There are two rejections with the time between the first rejection and the second rejection greater than 10 days, The second rejection is within 10 days of the postmark date, Edit the IRS Received Date to be the date of the second rejection.

    Example:

    Postmark date is 03-22-2024, the second rejection is 03-12-2024. The first rejection is 03-01-2024 Change the Received Date to 03-12-24.

    There are two rejections, Not within 10 days of one another and not within 10 days of the postmark date, Leave the IRS Received Date as is.

    Example:

    Postmark date is 03-23-2024, the second rejection is 03-12-2024. The first rejection is 03-01-2024. Leave the Received Date as is.

    Exception:

    Change the Received Date to the postmark date if the postmark date makes the return timely.

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

  6. A valid IRS Received Date Stamp may consist of the following:

    • The word "Received."

    • Month (alpha or numeric)

    • Day (for example), "1" or "01"

    • Year - four digits

    • "Area Office," Campus, "Field Office," "Taxpayer Assistance Center (TAC)" plus the city location or a functional area within one of these sites (e.g., Compliance Services Collection Operations (CSCO), Examination, Image Control Team (ICT). Correspondence Imaging Inventory (CII), Accounts Management (AM), etc.).

      Exception:

      Not all IRS offices are designated places for filing, and not all IRS employees are authorized to accept a tax return for processing. If a return has a Received Date stamp from other than a Taxpayer Assistance Center (TAC), Lockbox, or IRS campus (Compliance, Accounts Management (AM), or Submission Processing (SP)), circle out the invalid Received Date and edit the correct Received Date according to instructions below. For example, returns received by the Taxpayer Advocate Service (TAS) or the IRS Office of Chief Counsel are not properly filed and a Received Date by that office is not the "IRS Received Date" .

  7. If the IRS Received Date stamp is not present or the date is illegible or invalid, edit the IRS Received Date in MMDDYY format in the middle of page 1 of the return. Edit the IRS Received Date according to the following priority:

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

      If ... Then ...
      An envelope is not attached, Use the postmark date stamped on the face of the return.
      A document was returned for insufficient postage, Use the postmark date that coincides with the correct delivery of the return.
      The postmark is missing, and the envelope is certified,
      • Look for the "USPS.com Track & Confirm" record has been attached to the return (should be in front of the envelope).

      • Use the acceptance date on the record to decide timeliness and follow normal editing procedures. See Exhibit 3.11.14-9, USPS Track & Confirm

      • If the record is not attached, do not edit.

      An envelope has a USPS and private metered postmark, Always use the USPS postmark.
      An envelope has a foreign and private metered postmark, Always use the foreign postmark.
      An envelope has two private metered postmarks, Always use the latest private metered postmark.
      An envelope has only one private metered postmark, Use the private metered postmark.

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

    3. Revenue Officer's Signature date.

    4. Signature date only if within current year.

    5. Julian control date minus 10 days.

    6. Current date minus 10 days.

  8. Edit the IRS Received Date as follows:

    If ... Then ...
    A timely IRS Received Date is the only received date stamped on the return, Do not edit.
    Two or more dates are stamped on the return,
    1. Use the earliest IRS Received Date stamped on the return.

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

    Note:

    Treat Received Dates that are circled out by another function as if they are not present.

    A Federal return is addressed to the IRS, but delivered to a state agency, Use the postmark date as the IRS Received Date.
    A Federal return is addressed to a state agency, Use the IRS Received Date stamp as the Received Date.
    The only Received Date on the return is a TAS or Chief Counsel Received Date, Circle out the TAS or Chief Counsel received date and edit the IRS Received Date according to instructions.

    Reminder:

    Check any envelope attached to the return for remittance. If found, hand carry remittance to manager.

  9. If a return was faxed to another area of IRS and then sent to Submission Processing for processing, do not edit the EEFax Date as the IRS Received Date. Edit a Received Date according to normal procedures.

    Caution:

    Do not use the EEFax Date as the IRS Received Date.

Tax Period

  1. This subsection addresses the editing of the period for which the tax return is being filed.

Tax Period - General

  1. All returns must have a tax period.

  2. Edit the Tax Period to the right of the preprinted calendar year in YYMM format.

    If ... Then ...
    The return is for the current processing calendar year, (e.g., 202312) No editing is necessary.
    The return is for a prior year, Edit the Tax Period.
    The taxpayer has notated a Tax Period other than the preprinted year on the return, Edit the Tax Period based on the taxpayer's indication, per paragraph (3). See Figure 3.11.14-15, Tax Period Editing.
    The tax period is missing, incomplete or illegible,
    1. Review the return or attachments for the correct period.

    2. If found, edit the Tax Period to the right of the preprinted Calendar Year in YYMM format.

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

  3. A Tax Period should end on the last day of a month. Ignore a minor discrepancy such as October 30 instead of October 31. The exceptions are a 52/53-week filer, and final and/or short period returns. The table below shows examples of tax periods:

    If ... Then ...
    Oct. 3, 2023 (52-53-week return) 2309
    Oct. 3, 2023 (Final short period return) 2310
    Oct. 25, 2023 (52-53-week return) 2310
    Oct. 25, 2023 (Final short period return) 2310
    Nov. 30, 2023 2311
    Dec. 31, 2023 2312
    (No editing required for current calendar year returns)
    Feb. 28, 2023 2302

  4. Tax periods reported under the 52/53-week rule may not end more than 6 days prior to, and not more than 3 days after, the end of a month. In the edit format, use the numeric designation of the month, the last day of which is closest to the actual ending date. See Figure 3.11.14-16, 52–53 Week Tax Periods.

    If ... Then ...
    The Tax Period ending is not more than 3 days after the beginning of the month, Edit the previous month.

    Example:

    October 3, use the numeric designation for September, YY09.

    The Tax Period ending is not more than 6 days prior to the end of the month, Edit the month shown on the return.

    Example:

    October 25, use the numeric designation for October, YY10.

    Tax Period ending is more than 6 days prior to the end of the month or 3 days after the beginning of the month and is not a Final return,
    1. Correspond to decide the correct Tax Period ending.

    2. If no reply, edit CCC "3" and the latest tax period with no TC150 posted.

  5. If the Tax Period is more than 12 months or 53 weeks, correspond.

  6. On a "Final" return if the Tax Period's month and year is equal to or later than the Received Date's month and year (future return), edit the Tax Period to be one month prior to the Received Date.

  7. On a "Final" return, if the Received Date is after the short period due date but on or prior to the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, edit CCCs "R" and "F."

    Note:

    Also, edit CCC "D"

    if the return is a Balance Due.

  8. Check all Tax Periods for the Statute of Limitation (2 years and 9 months from the normal due date of the return). See IRM 3.11.14.10.11, Statute Returns.

  9. A taxpayer is qualified to file a fiscal year return, when the return is for one of the following filers:

    1. Estate.

    2. Non-Exempt Charitable Trust under IRC 4947(a)(1) or IRC 501(a).

    3. One of the following notations is shown on the return IRC 671 through IRC 678 and IRC 443(b)(2).

      Note:

      Edit Audit Code "5" if the taxpayer is filing a Fiscal Year return and the return is not for one of the filers which are qualified to file on a Fiscal Year basis: Don’t edit Audit Code "5" on any Final Return or on a shown Initial Return that has a Tax Period ending date in December (Calendar Year filer).

    Figure 3.11.14-15

    This is an Image: 33490015.gif

    Please click here for the text description of the image.

    Figure 3.11.14-16

    This is an Image: 33490016.gif

    Please click here for the text description of the image.

"Final" Returns

  1. If the month of the Tax Period is equal to or later than the month of the Received Date (an early-filed return), edit the Tax Period using the month preceding the month of the Received Date. See Figure 3.11.14-17, Early Filed Final Return, and follow the table below:

    Tax Period Ending Received Date Edit As
    5/31/2024 5/8/2024 2404
    6/30/2024 6/3/2024 2405
    9/30/2024 7/21/2024 2406

    Figure 3.11.14-17

    This is an Image: 33490017.gif

    Please click here for the text description of the image.

  2. If the Received Date is after the short-period due date but on or prior to the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡:

    • Edit CCC "R" and "F" . See Figure 3.11.14-18, Short-Period "Final" Balance Due Return.

      Note:

      Also, edit CCC "D" if the return is a Balance Due.

    Figure 3.11.14-18

    This is an Image: 33490018.gif

    Please click here for the text description of the image.

"Initial" Short Period Returns

  1. Initial returns are decided by one of the following:

    • The taxpayer has checked the "Initial Return" box, below the address information of Form 1041.

    • The "Date Entity Created," Section "D" is the same as the "Fiscal Year Beginning," top of Form 1041.

    If ... Then ...
    The taxpayer is filing an initial short period Fiscal Year return which begins and ends in the same year, Continue normal editing.

    Note:

    This is only done if it is not a "Final" return.

Early Filed Returns - Full Year and Short Period

  1. Never send an Early-Filed return back to the taxpayer.

    Note:

    When correspondence issues are present on an Early Filed return (FUT or Future), edit the Correspondence code to the return and edit the Suspense AC 480 on Form 4227.

  2. If the month of the Tax Period Ending (TPE) is the same or after the month of the Received Date, decide how early the return was filed:

    If ... Then ...
    The received date and the Tax Period Ending (TPE) are the same month, i.e., the Received Date and the TPE are both April, OR
    The received date is prior to the TPE by four months or less, i.e., the Received Date is in April, but the TPE is May, June, or July,
    1. Edit Action Code 480 (Early Filed - Suspense).

      Note:

      This is only done if it is not a "Final" return.

      See IRM 3.11.14.12.2, Final Returns.

    2. Completely edit the return.

    The received date is prior to the Tax Period Ending (TPE) by more than four months, i.e., the Received Date is April, but the TPE is August or later, and the tax period on BMFOLI agrees with the TPE on the return,
    1. Edit Action Code 211 (First Correspondence),

    2. Attach an approved Correspondence Action Sheet to request confirmation of the Tax Period Ending, and

    3. Completely edit the return. Edit the future tax period shown by the taxpayer.

Short Period Returns - Editing Proof of Entitlement

  1. A Short Period Return is one which covers a period of less than 12 months or 52 weeks.

  2. Do not process "Initial" or "Final" returns as a Change of Accounting.

  3. Process all other Short Period Returns as a Change of Accounting Period. In such cases, proof of entitlement to the change is required.

  4. Use the table below to identify and edit proof of entitlement.

    If ... And ... Then ...
    “Approved” Form 1128, Application to Adopt, Change, or Retain a Tax Year, 1. Command Code BMFOLE shows a Transaction Code (TC) 053 or TC 054, this is an indication that the Form 1128 was approved. Edit CCC "Y" and continue processing. See Figure 3.11.14-19, Proof of Entitlement.
    “Approved” Form 1128, Application to Adopt, Change, or Retain a Tax Year, 2. Command Code BMFOLE shows a Transaction Code (TC) 059, this is an indication that the Form 1128 has not been approved. The return is unprocessable. Follow the instructions for “Short Period Returns - Editing a Disapproved Application”. See IRM 3.11.14.12.7, Short Period Returns - Editing a Disapproved Application (Form 1128).
    A statement the trust is changing tax period under IRC 1.442.1(c),  
    1. Edit CCC "Y" .

    2. Edit Audit Code "3" .

    A copy of Form 1128 is attached citing Rev. Proc. 68-41   Edit CCC "Y" .
    Taxpayer has notated that the return was filed in compliance with IRC 1.1502-76,   Edit CCC "Y" .
    Taxpayer has cited one of the following:
    • Rev. Proc. 76-10,

    • Rev. Proc. 85-58,

    • Rev. Proc. 87-32,

    • Rev. Proc. 2003-38, or

    • Rev. Proc. 2006-46.

      Edit CCC "Y" .
    Proof of entitlement cannot be decided,   See IRM 3.11.14.12.6, Short Period Returns - Missing Proof of Entitlement

    Figure 3.11.14-19

    This is an Image: 33490019.gif

    Please click here for the text description of the image.

Short Period Returns - Missing Proof of Entitlement

  1. If proof of entitlement is missing or the taxpayer states on the return or an attachment that an application was filed, but has not received a response, research IDRS using BMFOLE for approval or disapproval information and proceed as follows:

    If ... Then ...
    BMFOLE shows a Transaction Code 053 or 054, this is an indication that the Form 1128 was approved, Edit CCC "Y"
    BMFOLE shows Transaction Code 059, this is an indication that the Form 1128 was disapproved, The return is unprocessable. Follow the instructions for Short Period Returns - Editing a Disapproved Application. See IRM 3.11.14.12.7, Short Period Returns - Editing a Disapproved Application (Form 1128).
    BMFOLE doesn't show a Transaction Code: 053, 054, or 059, Correspond requesting confirmation of the Tax Period Ending.

Short Period Returns - Editing a Disapproved Application (Form 1128)

  1. If Form 1128 is disapproved, the return is considered unprocessable:

    1. Edit Action Code 211 and correspond.

    2. In the correspondence, instruct the taxpayer to file a return for the next regular full period due. Request a disposition of any remittance paid with the return or other credits which have posted to the short period module.

Short Period Returns - Editing Form 1128 with No Indication of Approval or Disapproval

  1. When a Form 1128 with no indication of approval or disapproval is attached and no proof of entitlement is present, research IDRS using BMFOLE for approval or disapproval and proceed as follows:

    If ... Then ...
    BMFOLE shows a Transaction Code 053 or 054,
    this is an indication that Form 1128 was approved,
    Do not Edit CCC Y and continue processing.
    BMFOLE shows a Transaction Code 059,
    this is an indication that Form 1128 was disapproved,
    The return is unprocessable. See Short Period Returns - Editing a Disapproved Application. See IRM 3.11.14.12.7, Short Period Returns - Editing a Disapproved Application (Form 1128).
    BMFOLE doesn't show Transaction Code 053, 054, or 059, Follow correction in (2) below.
  2. A Form 1128 with no approval or disapproval, discontinue processing Form 1041. Route Form 1041 and Form 1128 to Entity as directed in the paragraphs below:

    1. If Form 1128 is attached to a numbered return, enter Action Code 320. Attach Form 4227 and check the box for Entity Control. Edit the Form 1041 Received Date on Form 1128. (Do not detach Form 1128).

    2. If Form 1128 is attached to an unnumbered return, edit the Form 1041 Received Date on Form 1128, attach Form 4227 and route the return to Entity Control. (Do not detach Form 1128).

Short Period Returns - with Prepaid Credits

  1. Route to Accounting for possible adjustment correction any return meeting both conditions below:

    1. A prepaid credit is claimed.

      Form Type Line Number(s)
      Form 1041, Schedule G, Lines 10, 11, 13, or 14
      Form 1041-QFT Line 17
      Form 1041-N Line 18

    2. The return is a short period (not an initial or final return).

  2. Do the following when routing these returns to accounting:

    1. Edit Action Code "342" on return.

    2. Attach Form 4227, check the "Accounting" box and notate "Short period return with ES Credits" .

    3. Continue editing the return. Leave the return in the block.

    4. If the return shows a refund, see IRM 3.11.14.10.7, Refund Returns (45-Day Jeopardy and High Dollar Refunds).

Type of Entity - Box A (Form 1041)

  1. The fiduciary checks the proper "Type of Entity" in Box "A" that describes the entity for the return being filed. In addition, they are instructed to check the ESBT (S-CORP part Only) box when ESBT (Electing Small Business Trusts) tax applies. The Fiduciary and Trust Code is to be decided from the box checked, other than the ESBT box.

    Note:

    If the ESBT box is checked, edit "2-1" in the left margin next to Line 10, Form 1041. See IRM 3.11.14.10.15.1, Electing Small Business Trusts (ESBT)

    .

  2. Every Form 1041 except amended returns, must be edited with a Fiduciary Code, and may be edited with a Trust Code. These codes identify for the Business Master File (BMF) the type of return being filed and generates the correct exemption amount to which the taxpayer is entitled.

Fiduciary Codes

  1. Fiduciary Codes (FID Code) are based on taxpayer entry in any of the following:

    • Box A of Form 1041, Type of Entity.

    • Check mark in Described in Section 4947(a)(2) box, Section E of Form 1041.

    • Check mark in Yes box on Line 9, Other Information, page 2 of Form 1041.

    Reminder:

    If the ESBT box is the only one checked in Section A, treat it as blank when determining Fiduciary Code.

  2. The Fiduciary Code consists of a single numeric digit. The valid FID Codes are 1, 2, 3, 4, 5, 6, 8, and 9.

  3. Edit the Fiduciary Code to the right of the Simple Trust box. See Figure 3.11.14-20, Editing Fiduciary Code.

    Figure 3.11.14-20

    This is an Image: 33490020.gif

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Trust Codes

  1. Trust Codes are based on entries made by taxpayers in Section A of Form 1041, Type of Entity.

  2. The Trust Code consists of a single numeric digit. The valid Trust Codes are 1 and 3.

  3. Edit the Trust Code to the right of the Pooled Income Fund box. See Figure 3.11.14-21, Editing Trust Code.

    Figure 3.11.14-21

    This is an Image: 33490021.gif

    Please click here for the text description of the image.

Fiduciary and Trust Code Editing

  1. On most returns, the Fiduciary and Trust Codes will be decided from the box checked in Section A, Type of Entity.

  2. When editing the Fiduciary and Trust Codes,

    • Decide if the filer has notated Bankruptcy or GNMA (Government National Mortgage Association) on Name Line, or

    • The Described in Section 4947(a)(2) box is checked in Section E of Form 1041.

    If ... Fiduciary Code Trust Code
    Bankruptcy is notated on the Name Line and the bankruptcy boxes are not checked, 5 None
    GNMA is present on the Name Line, 4 3
    The Described in Section 4947(a)(2) box is checked, See Figure 3.11.14-22, Edit Fiduciary Code "9" .

    Reminder:

    Edit Audit Code "6" .

    9 None

    Note:

    If the choice of multiple entities has the box for Section 4947(a)(2) Trusts, Fiduciary Code "9" takes priority.

    Figure 3.11.14-22

    This is an Image: 33490022.gif

    Please click here for the text description of the image.

  3. Edit the following Fiduciary and Trust Codes when there is a single entry other than the ESBT box in Section A:

    Reminder:

    If the ESBT box is checked, edit the ESBT indicator as "2-1" in the left margin next to Line 10, Form 1041. See IRM 3.11.14.10.15.1, Electing Small Business Trusts (ESBT).

    Type of Entity ... Fiduciary Code Trust Code
    Decedent's Estate 1 None
    Simple Trust 2 None
    Complex Trust 3 None
    Grantor Trust (taxable)

    Note:

    Entries other than 0 (zero) present on any of Lines 1 - 22

    Reminder:

    Detach and process Schedules K-1.

    2 3
    Grantor Trust (nontaxable)

    Note:

    No entries present on any of Lines 1 - 22

    Caution:

    DO NOT detach Schedules K-1.

    4 3
    Bankruptcy Estate - Chapter 7 5 None
    Bankruptcy Estate - Chapter 11 6 None
    Qualified Disability Trust

    Note:

    If "Section 642(b)(2)(C)" is notated on Line 20 of a TY 2001 Form 1041, edit Fiduciary Code "8" .

    8 None
    Pooled Income Funds

    Note:

    Also, edit "3 - 1" in the left margin next to Line 10 of Form 1041. See IRM 3.11.14.10.15.2, Pooled Income Funds.

    3 None
    The Pooled Income Fund and the "Described in Section 4947(a)(2)" , Section E, boxes are both checked.

    Note:

    Edit Audit Code "6" but DO NOT edit a Pooled Income Fund Indicator.

    9 None
    The Pooled Income Fund box and GNMA is present on the name line. 4 3
  4. If no boxes or multiple boxes are checked in Section A, examine the return and attachments to decide if the Described in Section 4947(a)(2) box is checked in Section E of Form 1041 or if there is an indication the return is for either a Generation Skipping Trust or Grantor Trust. Decide the Fiduciary and/or Trust Code:

    If no boxes or multiple boxes are checked in Box A ... And ... Edit FID Code Edit Trust Code
    The Described in Section 4947(a)(2) box is checked in, Section E,

    Reminder:

    Edit Audit Code "6" in "1-6" format to the left of Line 10, Form 1041.

      9  
    There is an indication of a Generation Skipping Trust,

    Note:

    Indications of a Generation Skipping Trust are:

    • The Yes box is checked on Line 9 of the Other Information Section (Page 2 of Form 1041), or

    • Hand-drawn check box showing the return is for a GENERATION SKIPPING TRUST, or

    • Notations on the Name Line such as Generation Skipping Trust, GST, Gen Skip, or similar statement. See Figure 3.11.14-23, Identifying and coding a Generation Skipping Trust return.

      3 1
    The Grantor Trust and Simple Trust boxes are both checked,   2  
    The Grantor Trust and Complex Trust boxes are both checked, No other indication of entry. 3  
    There is an indication of a Grantor Trust, No entry present on any Lines 1 - 23

    Note:

    Delete Sch I and/or D when transcription line entries are present on those Schedules.

    4 3
    There is an indication of a Grantor Trust, Entry is present on any of Lines 1 - 23 and taxpayer, has noted IRC 671 - 678 on the return.

    Note:

    "X" any amount shown on Lines 1 - 23. Delete Sch I and/or Sch D when transcription lines are present on those Schedules.

    4 3
    There is an indication of a Grantor Trust, Entry is present on any of Lines 1 - 23 and taxpayer has not made any other indication. 2 3

    Note:

    Indications of a Grantor Trust may also have the following notations on the return: IRC 671 - 678, pre-need Funeral Trusts, Rabbi Trusts, Receivership, Substantial Owner, Revocable Living Trust, Qualified Settlement Fund.

    Figure 3.11.14-23

    This is an Image: 33490023.gif

    Please click here for the text description of the image.

  5. If no boxes or multiple boxes are checked in Section A and Form 1041doesn't meet any of the conditions listed in paragraph (4) above, decide the proper Fiduciary and/or Trust Code based on the Exemption amount claimed on Line 21 of Form 1041 in the following priority order:

    If Line 21 Equals ... Edit Fiduciary Code ...

    $4,700 - TY 2023
    $4,400 - TY 2022
    $4,300 - TY 2021
    $4,300 - TY 2020
    $4,200 - TY 2019
    $4,150 - TY 2018
    $4,050 - TY 2017
    $4,050 - TY 2016
    $4,000 - TY 2015
    $3,950 - TY 2014
    $3,900 - TY 2013
    $3,800 - TY 2012
    $3,700 -TY 2011
    $3,650 - TY 2009 - 2010
    $3,500 - TY 2008
    $3,400 - TY 2007
    8
    $600 1
    $300 2
    $100 3
    $0, blank, or any entry that doesn't equal one of the allowable exemption amounts (listed above)

    Reminder:

    See paragraph (4) above, when the Described in Section 4947(a)(2) box is checked in Section E or if there is an indication the return is for a Generation Skipping Trust.

    3

Determining Taxable vs. Nontaxable Grantor Trusts

  1. Filers should report only the part of the income, deductions, and credits which are taxable to the trust on Form 1041.

  2. If the taxpayer has filed a Form 1041 claiming to be a Grantor Trust, decide if part of the trust is taxable or nontaxable.

    1. Taxable Grantor Trust - Code as a taxable Grantor Trust if entries are reported on any of Lines 1 through 23 of Form 1041, even if Line 24, Total Tax, is a zero or negative amount.

    2. Nontaxable Grantor Trust - If the entire trust is a grantor trust, only the entity part of the return should be filled out. No entries should be present on any of Lines 1 through 23.

    If ... Edit ...
    Entries are present on any of Lines 1 - 23, Fiduciary Code 2 and Trust Code 3
    No entries are present on any of Lines 1 - 23, Fiduciary Code 4 and Trust Code 3

    Exception:

    Edit the return as a nontaxable Grantor Trust if the taxpayer has filed a GNMA Pool return but has erroneously entered Income and Deduction amounts that result in a zero or negative amount on Line 23. X Lines 1 through 23 and attachments to the return that support the line items, i.e., Schedule I and D.

Grantor Trusts
  1. In addition to the Grantor Trust box checked in Box "A" , Form 1041, other indications that the trust is a grantor trust would be if the taxpayer has notated "Pre-Need Funeral Trust, Receivership, Substantial Owner, Revocable Trust, Revocable Living Trust, Rabbi Trust, or IRC Section 671 - 678" in the Entity Section, as well as a Grantor Letter.

  2. Taxable Grantor Trust - Only part of the trust is treated as a Grantor Trust. The income, deductions, etc., that are taxable to the trust are reported on Form 1041. The amounts that are taxable directly to the grantor are shown on an attachment to the return.

    Note:

    The attachment should state the name, taxpayer identification number and the address of the person to whom the income is taxable, and setting forth the income, deductions and credits.

    • Edit amounts from attached schedules or attachments to Lines 1 through 9, Form 1041 if necessary.

    • Do not delete or X, Schedules I and/or D.

    • Edit Installment Sale Indicator code if Form 6252 is attached.

    • Edit any applicable CCC, Audit, etc., as shown by attachments to Form 1041.

    • Edit E-File Waiver Indicator Code if Form 8948 is attached.

    • Detach and process Schedules K-1 if attached to a Taxable Grantor Trust ("2-3" ). Correspond if missing and required. See IRM 3.11.14.17.2.4, Line 18 - Income Distribution Deduction (Schedule K-1).

  3. Nontaxable Grantor Trust - The entire trust is a Grantor Trust. Only the entity part of Form 1041 will be completed. Lines 1 through 23 should be blank or zero. The amounts that are taxable to the grantor are shown on an attachment to the return.

    Note:

    The attachment should state the name, taxpayer identification number and the address of the person to whom the income is taxable, and setting forth the income, deductions, and credits.

    • Don’t edit amounts from attached schedules or attachments to Lines 1 through 9, Form 1041.

    • "X" Schedules I and/or D if transcription line entries are present.

    • Don’t edit Installment Sale Indicator code if Form 6252 is attached.

    • Don’t detach, process or correspond for Schedules K-1 that may be attached to a Nontaxable Grantor Trust ("4-3" ).

    • Edit E-File Waiver Indicator Code if Form 8948 is attached.

    • Edit any applicable CCC and Audit codes as shown by attachments to Form 1041.

♦Entity Perfection - General♦

  1. The entity of Form 1041, Form 1041-QFT and Form 1041-N tax returns finds the taxpayer on the Business Master File. The entity area of the return has the following:

    1. Employer Identification Number (EIN)

    2. Name

    3. "In-care-of" Name

    4. Address

♦Bankruptcy♦

  1. If the Form 1041 shows bankruptcy, e.g., shows RECEIVER, TRUSTEE, or DEBTOR IN POSSESSION, in the entity area or on an attachment, route to Entity Control using local procedures (e.g., Form 13934, Entity Document / C&E Merge Transmittal).

  2. Edit return prior to routing to Entity Control. See IRM 3.11.14.10.2, Bankruptcy Estates.

♦Entity Perfection – Employer Identification Number (EIN)♦

  1. The EIN is a nine-digit number (XX-XXXXXXX) assigned to identify the estate or trust.

  2. The EIN is found in the upper right of the return:

    • Box "C" of Form 1041.

    • Box "2" of Form 1041-QFT.

    • Box "2" of Form 1041-N.

  3. Decide if the EIN is correct as follows:

    If ... And ... Then ...
    EIN is missing, You can decide the correct EIN from the attachments and schedules, Edit the EIN to the correct location. See Figure 3.11.14-24, EIN Found Elsewhere on Return.
    The EIN is either a Preparer Tax Identification Number (PTIN) or Individual Tax Identification Number (ITIN), Unnumbered,
    1. Remove return from batch.

    2. Route to Entity Control following local procedures using Form 13934, Entity Document / C&E Merge Transmittal, for EIN assignment.

    The EIN is either a PTIN or ITIN, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    Multiple EINs are present, Unnumbered,
    1. Remove return from batch.

    2. Route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal for EIN assignment.

    Multiple EINs are present, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    The EIN has any of the following conditions and cannot be decided from attachments and/or schedules:
    • Illegible.

    • Missing.

    • Other than 9 digits.

    • All zeroes; or,

    • All nines. Any consisting of all repeating numbers.

    Unnumbered,
    1. Circle out all illegible EINs, zeroes, and/or nines.

    2. Research IDRS.

    3. If found, edit to the proper location.

    4. If not found, route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

    The EIN has any of the following conditions and cannot be decided from attachments and/or schedules:
    • Illegible.

    • Missing.

    • Other than 9 digits.

    • All zeroes; or,

    • All nines. Any consisting of all repeating numbers.

    Numbered,
    1. Circle out all illegible EINs, zeroes and/or nines.

    2. Edit Action Code 320.

    3. Leave return in batch.

    "PENDING" , "APPLIED FOR" , etc., is shown in the EIN area, Unnumbered,
    1. Research Integrated Data Retrieval System (IDRS).

    2. If found, edit to the proper location.

    3. If not found, route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

    "PENDING" , "APPLIED FOR" , etc., is shown in the EIN area, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    Reminder:

    Fully edit return prior to routing.

    Figure 3.11.14-24

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♦Entity Perfection – Name Control♦

  1. The Name Control consists of four characters or less.

    1. Valid characters are alpha, numeric, ampersand (&), hyphen (-), and blank. However, blanks are only valid in the last three positions.

    2. Disregard the word "THE" in the Name Control, only when followed by more than one word. Disregard the word TRUST. See Document 7071-A, Name Control Job Aid.

  2. Decide if the Name Control is correct from the "Name of Estate or Trust" line at the top-center of Form 1041 or the "Name of Trust" line on Form 1041-N and Form 1041-QFT. If no indication in the name line, use box A or if no box is checked use exemption amount to decide whether it’s an estate or trust. If no indication, follow trust rules.

  3. See Job Aid Document 7071A, Name Control Job Aid - For Use Outside of the Entity Area, to decide the Name Control.

    Example:

    John Wren Trust, name control is WREN.
    Trust for Sparrow Lake, (Name control is SPAR.
    Special Needs Trust FBO John Doe, name control is DOE.

  4. Name controls for EINs assigned by the MODI-EIN program are different. If the EIN prefix begins with 20, 26, 27, 45, 46, 47, 81, 82, 83, 84, 85, 86, 87, 88, or 92 and it is a TRUST return, then the name control will be the first four characters of the first name of the individual, in the Primary Name Line. The name control for an estate will still be the first four characters of the person's last name. See Document 7071A for instances where no name is present and more name control examples.

    Example:

    John Wren Trust, name control is JOHN
    J R Wren Trust, name control is JRWR.
    Trust for Sparrow Lake, name control is SPAR.
    Estate of John Smith, Deceased, name control is SMIT.
    Special Needs Trust FBO John Doe, name control is JOHN.
    John Paul Estate Special Needs Trust, name Control is JOHN, unless there are other indicators, a date of death or exemption for an estate, would be indications that it is an estate, then the Name Control of an estate would be PAUL.

  5. Edit the Name Control as follows:

    If ... And ... Then ...
    Able to decide the Name Control,   Underline the Name Control.
    Unable to decide the correct Name Control, Unnumbered
    1. Research IDRS.

    2. If found, edit to the proper location.

    3. If not found, route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

    Unable to decide the correct Name Control, Numbered
    1. Edit Action Code 352.

    2. Leave return in batch.

    A return shows the taxpayer has filed bankruptcy, e.g., shows, "RECEIVER" , Bankruptcy"TRUSTEE" , or "DEBTOR IN POSSESSION" in the entity area or on an attachment, unless amended return,   Route to Entity Control following local procedures. Do not edit Name Control.
    See IRM 3.11.14.10.2, Bankruptcy Estates.

  6. A Fiduciary or Fiduciary name change will be shown by a mark in the Change in fiduciary or Change in fiduciary name box(es) in Section F of Form 1041.

    If ... Then ...
    The Change in fiduciary or Change in fiduciary name box(es) is/are checked, or the Name and title of Fiduciary line was altered, i.e., crossed out and updated,
    1. Notate "TC 016" in the upper-left margin of Form 1041.

    2. Input TC 016 to update the Fiduciary information, using local procedures.

    Only the Change in fiduciary address box is checked, No editing needed.

    Note:

    ISRP will input the new address.


    See IRM 3.11.14.14.5, Entity Perfection - Domestic Addresses, if an In-Care-Of Name is also present.
  7. A Trust name change will be shown by a mark in the Change in trust's name box in Section F of Form 1041.

    If ... Then ...
    The Change in trust's name box is checked, Route to Entity using local procedures using Form 13934, Entity Document/C&E Merge Transmittal, after editing.

♦Entity Perfection – "In-Care-of" Name♦

  1. An "in-care-of" name can be shown by the words "in-care-of" or the symbols "c/o" or "%" (percent). See Figure 3.11.14-25, Valid In-Care of Name.

  2. Ensure the "in-care-of" name is in the proper location, above the street address.

    If … Then …
    The "in-care-of" name is found on the street address line preceding the street address, No editing is required.
    The "in-care-of" name is found above the first name line or below the street address, Arrow the "in-care-of" above the street address.
    The "in-care-of" name is shown on an attachment,
    1. Edit the "in-care-of" name above the street address beginning with the "%" or "c/o" in the first position.

    The street address for the "in-care-of" name is different from the street address of the Fiduciary,
    1. Arrow the "in-care-of" street address below the "in-care-of" name or edit the "in-care-of" street address below the "in-care-of" name if found on an attachment.

    2. Circle the Fiduciary street address and input "TC 014" . See IRM 3.11.14.14.5, Entity Perfection - Domestic Addresses.

    Note:

    Always circle the "in-care-of" symbol ("%" or "c/o" ) if it is present with an address. Do not use the ampersand (&) and the percent sign (%) when editing address information.

  3. A change in the "in-care-of" name is decided by any of the following:

    • A check mark in the "Change in the trust's name" box, or

    • A check mark in the "Change in fiduciary's address" box, or

    • An indication that the "in-care-of" name is changed, e.g., the taxpayer crossed out the original "in-care-of" name and added the new name or has entered a new "in-care-of" name in brackets.

    If ... Then ...
    An "In-care-of" name is changed but there is no indication of an address change,
    1. Edit the "In-care-of" name as shown above.

    2. Continue editing the return.

    An "In-care-of" name is present and the "Change in fiduciary's address" box is checked or there is an indication of an address change,
    1. Edit the "In-care-of" name as shown above.

    2. Correct the address.

    3. Continue editing the return.

    Figure 3.11.14-25

    This is an Image: 33490025.gif

    Please click here for the text description of the image.

♦Entity Perfection - Domestic Addresses♦

  1. Perfection of the address is necessary when the mailing address, Street or P.O. Box, is not easily shown.

    Exception:

    Do not perfect the address on amended returns (CCC "G" ).

  2. The procedures for perfection of addresses are as follows:

    If ... And ... Then ...
    There is an indication on an attachment that the address was changed,   Edit the new address in the Entity section of the return. See Figure 3.11.14-26, Address Change.
    Form 8822, Change of Address or Form8822-B, Change of Address or Responsible Party - Business is attached, All the following applies:
    • Mailing address information is the same,

    • No location address is listed on Form 8822/8822-B, Line 7,

    • No entry on Form 8822-B, Lines 8 or 9,

    Do not edit.
    Form 8822, Change of Address or Form8822-B, Change of Address or Responsible Party - Business is attached, Any of the following applies:
    • Mailing address information is different,

    • Location address is listed on Form 8822/8822-B, Line 7,

    • An entry is listed on Form 8822-B, Lines 8 or 9,

    Detach Form 8822 /Form 8822-B and route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.
    Both a P.O. box and a street address are shown,  
    1. Notate "TC 014" in the upper-left margin.

    2. Input "TC 014" .

    See Figure 3.11.14-27, Both a P.O. Box and a Street Address.
    Two street addresses are shown, An "in-care-of" name can have a street address other than the Fiduciary's street address
    1. Circle the Fiduciary's street address.

    2. Notate "TC 014" in the upper left margin.

    3. Input TC 014.

    Two street addresses are shown,  
    1. Underline the second Street Address.

    2. Notate "TC 014" in the upper-left margin.

    3. Input TC 014.

    One street address is shown, The estate or trust changed the address to a P.O. Box,
    1. Notate "TC 014" in the upper-left margin.

    2. Input TC 014.

    The city and state are not shown on the return, but are shown on an attachment,   Edit the city and state in the Entity section of the return.
    The Zip Code is missing or illegible, Is not available from the return or attachments, See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), Zip Codes and Countries, to decide the Zip Code.

    Note:

    Edit the 3 digits followed by "01" of the first zip code listed for the applicable state, e.g., "99501" for Alaska).

    Only the first three digits of the Zip Code is decided,   Edit "01" for the fourth and fifth digits.
    The "Change In fiduciary's address" box is checked, An "in-care-of" Name is present.
    1. Edit the "%" (percent sign) or "c/o" to the left of the "in-care of" name (in the first position) followed by the correct name.

    It is necessary to edit the street address,   See Document 7475, for current Address/Street Abbreviations.

    Note:

    Always circle the "in-care-of" symbol ("c/o" or "%" ) if it is present with an address. Do not use the ampersand (&) and the percent symbol (%) when editing address information.

    Figure 3.11.14-26

    This is an Image: 33490026.gif

    Please click here for the text description of the image.

    Figure 3.11.14-27

    This is an Image: 33490027.gif

    Please click here for the text description of the image.

  3. The USPS established new address requirements for APO/DPO/FPO addresses. If the old address appears, convert to the new state code abbreviation based on the Zip Code, e.g., APO New York, NY 091XX would be converted to APO AE 091XX. See Figure 3.11.14-28, Editing Return with an APO Address. APO/DPO/FPO addresses are considered domestic addresses. Refer to APO/DPO/FPO Conversion Chart below:

    ZIP Code State Code
    340 AA
    090 - 098 AE
    962 - 966 AP

    Figure 3.11.14-28

    This is an Image: 33490028.gif

    Please click here for the text description of the image.

♦Entity Perfection - Foreign Address♦

  1. A foreign (international) address is any address that is not in the 50 states or the District of Columbia.

  2. Returns with APO/DPO/FPO addresses are considered domestic addresses. See IRM 3.11.14.14.5, Entity Perfection - Domestic Addresses.

  3. Route returns with a foreign address to Ogden Submission Processing Campus (OSPC) for processing. Prepare Letter 86C, Referring Taxpayer Inquiring/Forms to Another office, to inform the taxpayer that the return was sent to Ogden.

    Exception:

    All 1040-NR Fiduciary returns filed using an EIN instead of an SSN are processed in Kansas City as Non-Master File (NMF). Fiduciary Form 1041, that has a Form 1040-NR attached for an individual (SSN) will be forwarded to Ogden for processing.

  4. Returns with addresses in the following U.S. Possessions/Territories are considered foreign for processing purposes but are edited in the same way as domestic addresses.

    1. A two-character alpha code must be edited for the Possession/Territory name:

      U.S. Possession/Territory Abbreviation
      American Samoa AS
      Federated States of Micronesia FM
      Guam GU
      Marshall Islands MH
      Northern Mariana Islands MP
      Palau PW
      Puerto Rico PR
      Virgin Islands (U.S.) VI

    2. A ZIP code must be present for U.S. Possessions/Territories. Edit the correct ZIP code if one is not given. See Exhibit 3.11.14-7, U.S. Possessions ZIP Codes.

  5. All other foreign addresses are edited the same as a domestic address with the following exceptions:

    • Ensure the foreign country is the last entry in the address.

    • Circle the foreign country and edit the country code preceded by a "/" and followed by "/$," e.g., "/GM/$" is edited for Germany. See Document 7475, State and Address Abbreviations, Major City codes (MCCs), ZIP Codes and Countries, for official foreign Country Codes.

    • Edit a unique country code will be edited for returns filed with an address in Canada. See IRM 3.11.14.14.6.1, Country Code - Canada.

      Note:

      Code & Editing BMF Foreign Address Job Aid (Number 2324–002) gives examples for editing foreign addresses.

    • Check if the address contains a province, state or territory from Australia, Brazil, Canada, Cuba, Italy, Mexico, or The Netherlands, check if the address has a province, state or territory. See Exhibit 3.11.14-8, Province, State and Territory Abbreviations.

      Note:

      There may be other countries with provinces, states, and territories not listed above, see Coding and Editing BMF Tax Returns, Foreign Addresses Job Aid (Number 2324-002) for more information.

    If .. Then ...
    A province, state or territory is present,
    1. Circle the province, state, or territory name.

    2. Edit the correct abbreviation. See Exhibit 3.11.14-8, Province, State and Territory Abbreviations.

    Province, state, or territory is shown in abbreviated format, Continue editing the return.
    A province, state, or territory is not present, Continue editing the return.

  6. A ZIP code or state is not required on a foreign address. Foreign addresses use a postal code that is entered prior to the city or foreign country and is part of the address.

♦Country Code - Canada♦
  1. To assist Compliance with workload assignment, returns filed with an address in Canada will be edited using a unique country code based on the province/territory.

    If ... Then ...
    The foreign address has a Canadian Province/Territory name or abbreviation shown in the table below,
    1. Circle the country name.

    2. Edit the correct Country Code based on the province/territory preceded by a "/" and followed by a "/$" as the last entry in the address.

    The foreign address doesn’t have a Canadian Province/Territory name or abbreviation shown in the table below,
    1. Circle the country name.

    2. Edit the Country Code "/CA/$" as the last entry in the address.

    Canadian Province Province Abbreviation Postal Code beginning Country Code
    Alberta AB T XA
    British Columbia BC V XB
    Manitoba MB R XM
    New Brunswick NB E XN
    Newfoundland and Labrador NL A XL
    Northwest Territories NT X XT
    Nova Scotia NS B XS
    Nunavut NU X XV
    Ontario ON K, L, M, N, or P XO
    Prince Edward Island PE C XP
    Quebec QC G, H, or I XQ
    Saskatchewan SK S XW
    Yukon YT Y XY

  2. The rest of the foreign address is edited using procedures in IRM 3.11.14.14.6, Entity Perfection - Foreign Address.

Number of Qualified Funeral Trusts (QFT) - Line 4 (Form 1041-QFT)

  1. Taxpayers are instructed to enter the Number of QFTs, added on Line 4 (Part I) of Form 1041-QFT.

    If ... Then ...
    An entry is present on Line 4, Continue editing the return.
    Line 4 is blank or zero, Edit a "1" to Line 4 of Form 1041-QFT.

Box E - Nonexempt Charitable and Split-Interest Trusts

  1. Nonexempt charitable and split-interest trusts are found in the upper-right corner Box E, Form 1041.

  2. Edit Audit Code "6" in the left margin next to Line 10 in "1 - 6" format, if either box is checked:

    If ... Then ...
    The Described in section 4947(a)(1) box is checked, Edit Audit Code "6" .
    The Described in section 4947(a)(2) box is checked Edit Audit Code "6" and Fiduciary Code "9"

Box F - Return Indicator Checkbox

  1. Return Indicator Checkbox is found:

    • Box F, Form 1041.

    • Part 1 box 5, Form 1041-QFT.

    • Part 2 box 6, Form 1041-N.

  2. The taxpayer will check boxes to show any of the following:

    If ... Then ...
    Initial Return, See IRM 3.11.14.12.3, Initial Short Period Returns.
    Final Return, See IRM 3.11.14.12.2, "Final" Returns.
    Amended Return. See IRM 3.11.14.10.1, Amended Returns.
    Change in Fiduciary
    (Form 1041),
    See IRM 3.11.14.14.3, Entity Perfection - Name Control.
    Change in Fiduciary's Name
    (Form 1041 and Form 1041-N),
    See IRM 3.11.14.14.3, Entity Perfection - Name Control.
    Change in Fiduciary or Fiduciary's Name
    (Form 1041-QFT),
    See IRM 3.11.14.14.3, Entity Perfection - Name Control.
    Change in Fiduciary's Address, See IRM 3.11.14.14.3, Entity Perfection - Name Control.
    Change in Trust's Name
    (Form 1041),
    See IRM 3.11.14.14.3, Entity Perfection - Name Control.

Editing of Income, Deductions, and Tax and Payments (Form 1041, Form 1041-QFT, and Form 1041-N)

  1. The editing procedures specific for Form 1041, 1041-QFT and Form 1041-N start as follows:

    • See IRM 3.11.14.17.1, Lines 1 through 9 - Income Section (Form 1041).

    • See IRM 3.11.14.40, Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trust.

    • See IRM 3.11.14.41, Form 1041-N, Income Tax Return for Electing Alaska native Settlement Trust (ANST).

    • See IRM 3.11.14.42, Prior Year Returns - Form 1041.

Lines 1 - 9 - Income Section (Form 1041)

  1. This subsection has instructions for editing Lines 1 through 9 of Form 1041. Edit Lines 1 through 9 in dollars only.

  2. Do not bracket any entry, unless editing or computing a negative amount.

  3. Perfect all illegible or misplaced entries, when possible.

  4. Delete misplaced entries and edit to the correct lines.

  5. If a Nontaxable Grantor Trust, do not edit amounts from schedules or attachments to Lines 1 through 9, Form 1041. "X" Schedules I and/or D if transcription entries are present.

Line 1 - Interest Income
  1. Accept taxpayer's entry.

Line 2a - Total Ordinary Dividends
  1. Accept taxpayer's entry.

Line 2b(2) - Qualified Dividends
  1. Qualified Dividends Allocable to Estate or Trust are reported on Line 2b (2) of Form 1041.

  2. If present, Line 2b (2) must be a positive amount. Never bracket a Line 2b (2) amount as a loss.

    Note:

    Though transcribed, Line 2b (2) is not used in the computation of Total Income (Line 9). Instead, Line 2b (2) is combined with Line 2b (1), Qualified Dividends Allocable to Beneficiaries, to equal the amount reported on Line 2a.

  3. If Line 2b(2) is blank or illegible and the Qualified Dividends Allocable to Estate or Trust are reported on attachments to the return, decide the correct amount and perfect Line 2b (2). If the correct amount cannot be decided, do not perfect Line 2b (2) or correspond for Qualified Dividend information.

  4. If an amount is present on Line 23 of Schedule D and Line 2b (2), page 1, of 1041 is blank, edit the amount from Line 23 to Line 2b(2) of 1041.

    Exception:

    If the ESBT box is checked on Form 1041, don’t edit the amount to Line 2b(2) of Form 1041.

Line 3 - Business Income (or Loss)
  1. A Schedule C/C-EZ (Form 1040) or equivalent (computer printouts, written attachments, etc.) must be attached to Form 1041 if an amount ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 3 of Form 1041. See Figure 3.11.14-29, Line 3 - Business Income or Loss (Sch C or C EZ (Form 1040))

  2. Edit Line 3 as follows:

    If ... And ... Then ...
    Line 3 has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Schedule C/C-EZ (Form 1040) or equivalent is blank or missing, Correspond for the missing schedule.
    If Line 3 is blank or illegible, Schedule C/C-EZ (Form 1040) or equivalent is present,
    1. Edit amount from Line *31, Schedule C to Line 3 of Form 1041.

    2. Bracket Line 3 if a loss.


    *(Line 3, Schedule C-EZ)

    Note:

    Line 31 of Schedule C reflects the Business Income (or Loss) and Line 3 of Schedule C–EZ reflects Business Income only.

    Figure 3.11.14-29

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    Please click here for the text description of the image.

Line 4 - Capital Gain or Loss/Schedule D
  1. The total gain or loss from the sale or exchange of capital assets is reported on Line 4 of Form 1041.

  2. Line 4 cannot have an amount more than ($3,000.) If the taxpayer enters more than ($3,000), X the entry and edit ($3,000) to Line 4.

    Exception:

    On a final return, allow losses exceeding $3,000 but only if it is entered by the taxpayer on Line 4. Tax examiners should not enter a loss greater than $3,000 on Line 4, if blank.

  3. Form 8824 must be attached if Schedule D (Form 1041) or Form 4797, Sales of Business Property, is attached to Form 1041 and the filer has notated "RELATED PARTY LIKE-KIND EXCHANGE" on Schedule D or Form 4797.

  4. Schedule D must be attached if an amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 4 of Form 1041.

    Note:

    Page 1 must be attached, correspond if missing if the return is for TY 2013 and later.

    If Schedule D is not attached and ... Then ...
    Line 4 of Form 1041 has an entry≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Correspond.
    Form 8824 is attached with an amount greater than zero on Line 22, Correspond, regardless of the entry on Line 4 of Form 1041.

    Reminder:

    Edit CCC "1" when Form 8824 is attached.

    Form 4952 is attached and an amount is present on Line 4g (Form 4952), See IRM 3.11.14.25, Form 4952 - Investment Interest Expense Deduction. Correspond, regardless of the entry on Line 4 of Form 1041.

  5. Don’t edit Line 4 if corresponding.

  6. Only a Schedule D (Form 1041) is acceptable. If the taxpayer substitutes a Schedule D from any other tax return, i.e., Form 1040, Form 1065, Form 1120, etc., correspond.

    Note:

    Slash the incorrect Schedule D.

Line 5 - Rents, Royalties, Partnerships, Other Estates and Trusts, etc.
  1. All income or losses from rents, royalties, partnerships, other estates and trusts, except dividends, certain interest, and capital or ordinary gains and losses and depreciation, are reported on Line 5 of Form 1041.

    Note:

    Effective TY 2007 and subsequent, farm rental is no longer reported on Form 4835, and should be reported on Schedule E, line 40.

  2. A Schedule E, Form 1040, or equivalent, e.g., computer printouts, written attachments, etc., must be attached to Form 1041 if an amount ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ is present on Line 5 of Form 1041.

  3. Edit Line 5 as follows:

    If ... And ... Then ...
    Line 5 has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Schedule E (Form 1040) or equivalent is blank or missing, Correspond for the missing schedule.
    If Line 5 is blank or illegible, Schedule E (Form 1040) or equivalent is present, Edit amount from Line 41, Schedule E to Line 5 of Form 1041. See Figure 3.11.14-30, Line 5 - Rents, royalties, (Sch E, Form 1040).

    Figure 3.11.14-30

    This is an Image: 33490030.gif

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Line 6 - Farm Income (Loss)
  1. All farm income or losses are reported on Line 6 of Form 1041.

  2. A Schedule F (Form 1040) or equivalent, e.g., computer printouts, written attachments, etc., must be attached to Form 1041 if an amount ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ is present on Line 6 of Form 1041.

  3. Edit Line 6 as follows:

    If ... And ... Then ...
    Line 6 has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Schedule F (Form 1040) or equivalent is blank or missing, Correspond for the missing schedule.
    Line 6 is blank or illegible, Schedule F (Form 1040) or equivalent is attached, Edit amount from Line 34, Schedule F to Line 6 of Form 1041. See Figure 3.11.14-31, Line 6 - Farm Income and Loss (Sch F, Form 1040).

    Figure 3.11.14-31

    This is an Image: 33490031.gif

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Line 7 - Ordinary Gain (or Loss) from Form 4797
  1. A Form 4797 or equivalent, e.g., computer printouts, written attachments, etc., must be attached to Form 1041 if an amount is present on Line 7 ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡.

  2. Edit Line 7 as follows:

    If ... Then ...
    Line 7 has an entry ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ but Form 4797, or equivalent, is not attached, Correspond.
    Form 4797 is attached, compare Line 7, of Form 1041 with Line 17* of Form 4797, If different, edit Form 4797 amount to Form 1041, Line 7.

  3. Form 8824, Like-Kind Exchanges, must be attached if Form 4797, Sales of Business Property or Schedule D is attached to Form 1041 and the filer has notated "RELATED PARTY LIKE-KIND EXCHANGE" on Form 4797 or Schedule D. Correspond for Form 8824 if missing.

    Reminder:

    Edit CCC "1" if Form 8824 is attached.

Line 8 - Other Income (or Loss)
  1. Other income or loss not shown on lines 1 through 7 is reported on Line 8 of Form 1041.

  2. If a significant entry is present on line 8 with the notation “Section 965” (or similar language), See IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY 2017 and later).

    Note:

    Do not edit Action Code "460" on Tax Period 202112 and later returns.

  3. An amount on Line 8 may be supported by an attached statement:

    If ... Then ...
    If an amount from Form 982 or Form 4972 is present on Line 8, Treat as a misplaced entry. Decrease the Line 8 amount by the amounts from Form 982 or Form 4972.

    Note:

    Form 4972 amount will be edited to Line 1b on Schedule G.

    Other Income items are on Lines 1 - 7, Add all the "Other Income" items and edit amount to Line 8. Bracket if negative.
    A statement is not attached, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    The attachment shows the type of income to be the same as that reported on any of Lines 1 through 7, Decrease the Line 8 amount by that amount and increase the correct Income line (Lines 1 through 7). See Figure 3.11.14-32, Line 8 - Other Income.
    Line 8 is blank, or illegible and "Other Income" is reported on an attachment to Form 1041, Decide if the amount was reported elsewhere on the return. If unable to decide, edit the amount to Line 8 of Form 1041.
    The amount on Line 8 doesn't match the amount on the attachment and there are entries leading to the correct amount, Edit the correct amount on Line 8 of Form 1041.
    An amount for Form 461 is present to the left of line 8,
    1. Adjust line 8 amount by decreasing the amount by the write in Form 461 amount left of line 8.

    2. Edit the Form 461 written in amount entered to the left on line 8 for non-transcription. See IRM 3.11.14.17.1.9.1, Left Line 8 - Form 461 Business Losses Amount.

    Caution:

    The Net Operating Loss (NOL) must be reported on Line 15b. If reported on any other line, "X" the amount, edit to Line 15b as a positive amount only, and adjust the correct Total line(s).

    Figure 3.11.14-32

    This is an Image: 33490032.gif

    Please click here for the text description of the image.

Left Line 8 - Form 461 Business Losses Amount
  1. This amount is a write-in for Form 461 Business Losses Amount entered by the taxpayer to left of line 8.

  2. This amount is positive and dollars only.

  3. If an amount is present for any Tax Year prior and current, edit the write-in amount for non-transcription.

Line 9 - Total Income (Loss)
  1. The total income or loss (sum of Lines 1 through 8) is reported on Line 9 of Form 1041.

  2. Edit Line 9 as follows:

    If ... Then ...
    Line 9 is blank or illegible but there are entries on Lines 1 through 8 and/or attachments, Compute and edit amount to Line 9 of Form 1041.
    Line 9 is the only entry in the Income Section, Edit the Line 9 amount to Line 8 of Form 1041.

    Note:

    Don’t recompute Line 9 if editing amounts from attached schedules or attachments to Lines 1 - 8, unless Line 9 is blank, zero, dash, none, or N/A, then compute Line 9.

Lines 10 - 22 - Deductions Section (Form 1041)

  1. This subsection has instructions for editing Lines 10 through 22 on Form 1041. Edit Lines 10 through 22 in dollars only.

  2. Do not bracket any entry, unless editing or computing a negative amount.

  3. Perfect all illegible or misplaced entries, when possible.

  4. Delete misplaced entries and edit to the correct lines.

Lines 10 - 15b
  1. All authorized deductions on Page 1 of Form 1041 are to be reported on Lines 10 through 15b.

  2. Lines 10 through 15b consist of the following items:

    • Line 10 - Interest Deduction.

      Note:

      For Tax Years 2022 and later, the Qualified Mortgage Insurance Premium deduction is not allowed. If the amount on line 10, Form 1041 has an amount for Qualified Mortgage Insurance Premium deduction, edit line 10 not to include the deduction amount.

    • Line 11 - Taxes.

    • Line 12 - Fiduciary Fees.

    • Line 13 - Charitable Deductions.

    • Line 14 - Attorney, Accountant and Return Preparer Fees.

    • Line 15a - Other Deductions not Subject to the 2% Floor.

    • Line 15b - Net Operating Loss Deduction.

  3. After perfecting Lines 10 through 14, from taxpayer entry on return, edit the balance to Line 15(a). See Figure 3.11.14-33, Allocating Deductions.

    Figure 3.11.14-33

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  4. Lines 10 through 15b will normally be positive.

  5. If a negative amount is present on any of Lines 10 through 15b, don’t bracket or move the entries in Lines 10 through 15b.

  6. If a negative amount is on Line 15b and the taxpayer shows a NOL (net operating loss), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. Don’t bracket or move the entry.

    Exception:

    If a negative entry is present on Lines 15a, or 15b and the taxpayer shows the negative amount is for a Tax Exempt Allocation, See IRM 3.11.14.17.2.9, Tax-Exempt Entries.

  7. The Net Operating Loss (NOL) must be reported on Line 15b. If reported on any other line, delete the amount, edit to Line 15b as a positive amount only, and adjust the correct Total line(s). See Figure 3.11.14-34, Net Operating Loss (NOL) and Line 15(b).

    Figure 3.11.14-34

    This is an Image: 33490034.gif

    Please click here for the text description of the image.

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

Line 16 - Total of Lines 10 through 15b
  1. Line 16 is the total of Lines 10 through 15b on Form 1041.

  2. If Line 16 is blank, add the entries on Lines 10 through 15b and edit amount to Line 16.

  3. Line 16 will normally be positive. However, taxpayers, particularly on computer-generated tax returns, may enter negative amounts on Lines 10 through 15b (which are positive), resulting in a negative amount on Line 16.

    If ... Then ...
    Line 16 is positive,
    1. "X" the negative amounts on Lines 10 through 15b.

    2. Move the deleted amounts from Lines 10 through 15b to Line 8 as a positive amount.

    3. If an amount was already present on Line 8, delete the existing Line 8 amount and recompute Line 8 adding the amounts moved from Lines 10 through 15b.

    4. Recompute the amount on Line 9. See Figure 3.11.14-35, Negative Deductions and Line 16 is Positive.

    Line 16 is negative, and Line 17 is less than Line 9,

    Note:

    Taxpayers (particularly on computer-generated tax returns) may enter negative amounts on Lines 10 through 15b which are positive.

    Do not bracket or move the entries in Lines 10 through 15b.
    Line 16 is negative, and Line 17 is greater than Line 9,
    1. Delete the negative amounts on Lines 10 through 15b.

    2. Move the deleted amounts from Lines 10 through 15b to Line 8 as a positive amount.

    3. If an amount was already present on Line 8, delete the existing Line 8 amount and recompute adding the amounts moved from Lines 10 through 15b.

    4. Recompute the amount on Line 16.

    Figure 3.11.14-35

    This is an Image: 33490035.gif

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  4. If an entry is present on Line 16 but all Lines 10 through 15b are blank, decide if an attachment or schedule is present which clarifies the deduction.

    • If documentation is present, edit the amount to the correct Line 10 through 15b.

    • If documentation is not present, correspond to decide the proper deduction amount, if any.

Line 17 - Adjusted Total Income
  1. Line 17 is derived by subtracting Line 16 from Line 9.

  2. This line is not transcribed and doesn't require perfection. However, any changes made in the Income or Deductions sections may require recomputing Line 17. This may then affect the perfection of subsequent compute lines, i.e., Lines 22 and 23.

Line 18 - Income Distribution Deduction (Schedule K-1)
  1. Line 18 of Form 1041 is the Total Income Distribution Deductions reported from Line 15 of Schedule B, Page 2 of Form 1041.

  2. Line 18 must be positive only unless it is the final return of the trust or estate.

    • If Line 18 is negative (bracketed), decide the correct amount for Line 18 as follows:

      Caution:

      Do not follow the table if you are working a final return with a negative entry on Line 18. Allow the negative amount to remain.

    If ... Then ...
    Line 18 is negative, and Line 17 is blank,
    1. Compute Line 17.

    2. Use the next two If/Then boxes to decide editing to take next.

    Line 18 is negative, but Line 17 is positive,
    1. X out the negative amount and rewrite as a positive amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Continue editing the return.

    Line 18 is negative, and Line 17 is negative or zero,
    1. Delete the Line 18 amount.

    2. Continue editing the return.

      Caution:

      Do not recompute Lines 22 and 23.

    A Form 1041 (usually prior year) with pre-printed brackets on Line 18,
    1. Remove the brackets ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Continue editing the return.

  3. If Line 18 is blank process as follows:

    Exception:

    If Line 18 is blank and the amount entered on Line 22 is the total of Lines 18 through 21, don’t perfect Line 18.

    1. If Line 16 is greater than Line 9 and Line 18 is blank, do not edit an amount on Line 18.

    2. If Line 9 is greater than Line 16, decide the correct amount for Line 18 of Form 1041 from Line 15 of Schedule B, Page 2 of Form 1041:

    If ... Then ...
    Line 15 of Schedule B is present or is computed from the lesser of Lines 13 or 14 of Schedule B, Edit this amount to Line 18 of Form 1041. See Figure 3.11.14-36, Line 18 From Schedule B.
    Line 15 of Schedule B is blank and cannot be computed, and there is only 1 Schedule K-1 attached.

    Exception:

    If there are multiple Schedules K-1 attached, then correspond with taxpayer for the correct amount.

    1. Compute lines 1, 2a, 3, 4a, 5, 6, 7 and 8 of Schedule K-1.

    2. Edit the amount to Line 18 of Form 1041. See Figure 3.11.14-37, Line 18 From Schedule K–1.

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Figure 3.11.14-36

    This is an Image: 33490036.gif

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    Figure 3.11.14-37

    This is an Image: 33490037.gif

    Please click here for the text description of the image.

  4. A Schedule K-1, Form 1041 must be attached to a current year and prior two years, Form 1041 if an entry ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 18 of Form 1041 Correspond if missing.
    Do not correspond on the following types of returns:

    • IRC 6020(b),

    • Examination Prepared Substitute (SFR),

    • Re-entry,

    • Amended (“G” coded),

    • ESBT,

    • Nontaxable Grantor Trust (FID Code 4/Trust Code 3),

    • Bankruptcy Estate,

    • Payee is a foreign entity,

    • Section 642(i) Trust (Maintenance of Cemetery Property or Number of Gravesites), or

    • Funeral Trusts.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. For Schedule K-1 editing instructions, see IRM 3.0.101, General, Schedule K-1 Processing.

Line 19 - Estate tax deduction
  1. Only positive entries are valid for Line 19. If negative, remove the brackets and continue editing the return.

Line 20 - Qualified Business Income Deduction (TY 2019 and later)
  1. Only a positive entry is valid for Line 20. If negative, edit the amount as positive and continue editing the return.

  2. Valid for Tax Period 201912 and later. If the Tax Period 201911 and prior edit the entry for non-transcription.

  3. If an amount is present on line 20, and no Form 8995 or 8995-A is attached the return will systemically go to ERS, do not edit the line and continue processing the return.

Line 21 - Exemption
  1. Accept taxpayer's entry for exemption as in paragraph (2) below.

    1. If an amount is claimed on Line 21, allow the amount equal to an exemption amount for one individual.

    2. See IRM 3.11.14.10.2.2, Individual Bankruptcy, paragraph (3)c for the individual exemption amount.

  2. Exemption amounts are:

    Type of Return Exemption Amount Fiduciary Code Trust Code
    Decedent's Estate $600 1
    Simple Trust $300 2
    Grantor Trust (Partially Taxable) $300 2 3
    Complex Trust $100 3
    Qualified Disability Trust - IRC 642(b)(2)(C) $4,700 8
    Non-Exempt Charitable or Split Interest Trust $100 9

Line 22 - Total Deductions
  1. Line 22 of Form 1041 is the total of Lines 18 through 21.

  2. Line 22 is positive or negative.

  3. If Line 22 is blank or illegible:

    1. If entries are present on any of Lines 18 through 21, add these amounts and edit the total to Line 22.

      Exception:

      If a Line 18 entry was deleted based on the instructions, see IRM 3.11.14.17.2.4, Line 18 - Income Distribution Deduction (Schedule K-1) and do not recompute Lines 22 and 23.

    2. If Lines 18 through 21 are blank, decide if entries are present on Lines 13, 14 or 15 of Schedule B, Page 2 of Form 1041:

    If ... Then ...
    Line 15 of Schedule B is present or is computed from the lesser of Lines 13 or 14 of Schedule B,
    1. Edit this amount to Line 18 of Form 1041.

      Reminder:

      If Line 18 is blank and the amount entered on Line 22 is the total of Lines 18 through 21, do not perfect Line 18

    2. Perfect Line 22 of Form 1041 correctly.

    Line 15 of Schedule B is blank and cannot be computed,
    1. Compute Lines 1, 2a, 3, 4a, 5, 6, 7 and 8 of Schedule K-1.

    2. Edit the amount to Line 18 of Form 1041.

    3. Perfect Line 22 of Form 1041 correctly.

  4. If an entry should have been placed on Line 23, Taxable Income, but was inadvertently placed on Line 22 and Line 23 is blank or zero:

    1. Delete Line 22 amount and edit that amount to Line 23.

Tax-Exempt Entries
  1. Taxpayers cannot claim deduction against Tax Exempt Income on a Form 1041.

    • If deductions against Tax Exempt items are notated on Form 1041 or attachments, don’t add those items in any entries on Lines 10-22. See Figure 3.11.14-38, Tax Exempt Entries.

    Figure 3.11.14-38

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  2. If the taxpayer shows all negative amounts on Line 15a, and 15b, is for a Tax Exempt Allocation, there is only one other deduction claimed within Lines 10 through 14, and Line 1 in the "Other Information" Section, Page 2 of Form 1041, is marked "Yes" or is blank and no computation is present, process as follows:

    • Delete any negative amounts reported on Line 15a, or 15b.

    • Reduce the remaining Deduction line amount (positive) by the negative amount the taxpayer entered on Line 15a, or 15b.

    • Perfect Line 16, if necessary.

      Example:

      If $461.00 is entered on Line 14 (positive amount), Line 15a or 15b is a negative $120.00, and Lines 10 through 13 are blank, delete the negative $120.00 from Line 15a or 15b and reduce the Line 14 amount from $461.00 to $341.00 ($461.00 – $120.00 = $341.00). Also, perfect Line 16 (if necessary) as a positive ($341.00) amount. See Figure 3.11.14-39, Tax Exempt Allocation.

    Figure 3.11.14-39

    This is an Image: 33490039.gif

    Please click here for the text description of the image.

    Note:

    Although this example shows the one positive deduction amount on Line 14, the procedure applies to a positive entry on any of the Lines 10 through 14.

  3. If an entry should have been placed on Line 23, Taxable Income, but was inadvertently placed on Line 22 and Line 23 is blank or zero:

    1. Delete the Line 22 amount and edit that amount to Line 23.

  4. If unable to decide the correct deduction amount and there are negative entries on Lines 10 through 15c:

    1. "X" the negatives entries.

    2. Add these entries to Line 8 of Form 1041.

    3. Continue normal processing.

Lines 23 - 30 - Tax and Payments Section (Form 1041)

  1. This subsection has instructions for editing Lines 23 through 30 on Form 1041.

  2. Perfect all illegible or misplaced entries, when possible.

  3. Delete misplaced entries and edit to the correct lines.

Line 23 - Taxable Income
  1. If Line 23 is blank, subtract Line 22 from Line 17 and edit on Line 23.

  2. If Line 23 is blank and it is decided that an entry that should have been placed on Line 23 was inadvertently placed on Line 24.

    • "X" the Line 24 amount and edit the amount to Line 23.

Line 24 - Total Tax
  1. Line 24 of Form 1041 is derived from Line 9 of Schedule G.

    Note:

    For instructions for editing Form 1041 with an entry present on Line 9 of Schedule G, see IRM 3.11.14.22.11, Line 9, Schedule G - Total Tax.

  2. If Line 24 has a negative amount (a loss), edit Line 24 from Line 9 of Schedule G, Page 2:

    If ... Then ...
    Line 9, Schedule G, is positive, Edit the Line 9 amount to Line 24.
    Line 9, Schedule G, is negative, "X" the Line 24 amount.

  3. If Line 24 is blank or illegible:

    If ... Then ...
    Entries are present on Lines 3 through 8, Schedule G Adding Lines 3 through 8, Schedule G and edit the result to Line 24, Form 1041.
    No entries present on:
    • Lines 3 through 8, Schedule G, and

    • Lines 10 through 16, Schedule G, and

    • Lines 25 through 27, Form 1041,

    Edit the amount from Line 28 to Line 24, Form 1041.

  4. If it is decided that an entry was inadvertently placed on Line 24, decide if the entry should be edited to Line 23:

    If ... Then ...
    The Line 24 entry should be on Line 23 and Line 23 is blank, "X" the Line 24 amount and edit the amount to Line 23.
    The Line 24 entry should be on Line 23, but an entry is already present on Line 23,
    1. "X" the Line 24 amount.

      Note:

      Do not edit the amount to Line 23.

    2. Continue editing the return.

    If unable to decide where the Line 24 entry belongs,
    1. "X" the Line 24 amount.

      Note:

      Do not edit the amount to Line 23.

    2. Continue editing the return.

    Note:

    For instructions for editing Schedule G, see IRM 3.11.14.22.1, Lines 1a - 1d, Schedule G - Tax, through IRM 3.11.14.22.11, Line 9, Schedule G - Total Tax.

  5. Taxpayers may report a special tax for Electing Small Business Trusts (ESBT) on Line 9 of Schedule G. Taxpayer should check the "ESBT" box in Section "A" , of Form 1041 or may notate on the dotted part of Line 9, Schedule G:

    • ELECTING SMALL BUSINESS TRUST

    • ESBT

    • IRC Section 641(c)

    1. If one of the above notations is written on the dotted part of Lines 9, process as follows:

      If ... Then ...
      The ESBT amount was added on Line 9, Schedule G, and Line 24, Form 1041, Continue editing the return.
      The ESBT amount on Line 9, Schedule G, was not added on Line 24, Form 1041, Increase Line 24 (Form 1041) by the ESBT amount written in on Line 9 of Schedule G.
      The ESBT amount is written separate from the Line 9, Schedule G, amount, Increase Line 24, Form 1041, by the ESBT amount written in separately from the Line 9 Schedule G, amount (if the taxpayer has not already done so).

    Reminder:

    Edit the ESBT indicator "1" in the left margin next to Line 10, in "2 - 1" format when the ESBT box in Section "A" is checked or there is an indication of ESBT.

Line 25 - Net 965 Tax Liability Paid from Form 965-A (TY2017 and later)
  1. The amount for Line 25, Form 1041 is from Form 965-A, Corporate Report of Net Tax Liability Part II, column (k), line 2.

  2. For editing procedures for Line 25, Form 1041 (Line 19 Form 1041-N) see:

    • IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY2017 and later)

    • IRM 3.11.14.10.9.1, Tax Period 202112 through 202211 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19 Form 1041-N).

    • IRM 3.11.14.10.9.2, Tax Period 202012 through 202111 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19 Form 1041-N).

    • IRM 3.11.14.10.9.3, Tax Period 201912 through 202011 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19 Form 1041-N).

    • IRM 3.11.14.10.9.4, Tax Period 201812 through 201911 - Line 24 and Line 25f, Schedule G, Form 1041.

    • IRM 3.11.14.10.9.5, Tax Period 201712 through 201811 - Section 965 Tax or 965 Election (Form 1041 and Form 1041-N).

Line 26 - Total Payments
  1. If Line 26 is blank or illegible, edit the combined total from Schedule G, Lines 12 through 18b to Line 26, Form 1041.

  2. If Line 26 has an entry, but there are no entries on Schedule G Lines 12 through 18b, edit line 26 amount to Line 10, Schedule G.

  3. Do not correct the taxpayer's entry on Line 26 unless it’s a misplaced entry or Line 18b credits are being brought forward.

Line 27 - Estimated Tax Penalty
  1. Estimated Tax Penalty must be edited when either:

    1. Other penalty is precomputed on the return, or

    2. Form 2210 is attached to return and shows liability for estimated tax penalty.

      Reminder:

      Also, edit CCC "K" if Form 2210, box "F" is checked in Part II on a 2009 tax return. See IRM 3.11.14.8.9, CCC "K" - Qualifying Small Business Taxpayer.

  2. If Line 27 is blank, edit the amount from Line 19 of Form 2210 to Line 27, Form 1041.

    Reminder:

    See IRM 3.11.14.8.24, CCC "8" - Waiver of Estimated Tax Penalty.

Lines 28 and 29 - Tax Due/Overpayment
  1. Lines 28 and 29 are edited as positive only. If the entry is a negative amount, do not bracket.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. If an entry is present on Line 28 and no entries are present on Lines 24 through 27, edit the amount from Line 28 to Line 24.

  3. If no entry is present on Line 28, and no entries are present on Lines 24 through 27, edit the amount from Schedule G, Line 9 to Line 24 and Line 28.

  4. If Lines 28 and 29 are blank and entries are present on lines 24 through 27, do both of the following:

    1. Add Lines 24 and 27. Subtract Line 26.

    2. Edit the positive result on Line 28 or the negative result (do not bracket) on Line 29. See Figure 3.11.14-40, Calculation of Overpayment.

  5. If precomputed interest or delinquency penalty is evident, ensure that it has not been added in Line 28 or reduced Line 29.

    If ... Then ...
    The amount on Line 28 has precomputed interest or penalty,
    1. "X" Line 28 amount.

    2. Delete the interest, penalty or other charge from the amount owed.

    3. Edit the correct amount owed to the left of the original entry.

    See Figure 3.11.14-41, Line 28 has Late Filing Penalty.
    The amount on Line 29 is reduced by precomputed interest or penalty,
    1. "X" Line 29 amount.

    2. Compute the Overpayment amount without the interest or penalty.

    3. Edit the correct Overpayment to the left of the original entry.

    Figure 3.11.14-40

    This is an Image: 33490040.gif

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    Figure 3.11.14-41

    This is an Image: 33490041.gif

    Please click here for the text description of the image.

Lines 30a and 30b - Credit Elect/Refund
  1. If an entry is present on Line 29, an entry must be present on Line 30a or 30b.

    If ... And ... Then ...
    Lines 30a and 30b are both blank or zero, Return is not final, Edit the amount from Line 29 to Line 30a.
    Lines 30a and 30b are both blank or zero, Final Return, Edit the amount from Line 29 to Line 30b.
    Lines 30a and 30b are the same, and the total of the two do not equal Line 29, Return is not final, Delete the amount on Line 30b.
    Lines 30a and 30b are the same, and the total of the two do not equal Line 29, Final Return, Delete the amount on Line 30a.
    Line 30a has an entry, and Line 30b is blank or zero, Return is not final, Do not edit.
    Line 30a has an entry, and Line 30b is blank or zero, Final Return, Arrow entry from Line 30a to Line 30b,

    Note:

    An entry on Line 30b is an indication of a refund return. For refund return processing instructions, see IRM 3.11.14.10.7, Refund Returns (45 Day Jeopardy and High Dollar Refunds).

Penalty and Interest Code Editing

  1. The Penalty and Interest Code (P&I) will be edited in the left margin next to Line 10 of Form 1041 as "4 -1" format. See IRM 3.11.14.10.15.3, Penalty/Interest Code.

  2. Edit the Penalty and Interest Code as follows:

    • If penalty and/or interest is added on Line 28 of Form 1041, delete the Line 28 amount, and edit the true Tax Due, minus the penalty and/or interest, to the left of the "X" .

    If ... Then ...
    Form 1041 is received by the Return Due Date, Do not edit a Penalty and Interest Code when the taxpayer has notated penalty and/or interest on the return.
    Form 1041 is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, but only interest is shown, Edit Penalty and Interest Code "1" in the left-hand margin next to Line 10 in "4 - 1" format. See Figure # 3.11.14-42 #, Penalty and Interest Code.
    Form 1041 is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, but only precomputed penalty, or precomputed penalty and interest, is given, Edit Penalty and Interest Code "1" in the left-hand margin next to Line 10 in "4 - 1" format.
    The Received Date is not stamped on Form 1041 and a penalty and/or interest code is shown, Edit the Received Date in the center of Form 1041.

    Figure 3.11.14-42

    This is an Image: redimage.gif

♦Signature♦

  1. A signature and jurat are required for all returns except the following:

    • Returns prepared under IRC 6020(b). These returns must be signed by a Compliance Function representative. See IRM 3.11.14.10.8.1, IRC 6020(b) - Prepared by Collection.

      Note:

      Starting July 1, 2013, the Revenue Officer's (RO) electronic or typed signature will be accepted as a valid signature on the return.

    • Returns prepared by Examination. For example, "SFR" (Substitute for Return) or "SUBSTITUTE RETURN" .

    • Dummy returns prepared by IRS.

    • Returns filed under IRC 501(d) (Religious or Apostolic Organization).

    • Correspondence containing a signature and jurat is attached showing that the taxpayer is responding to an IRS letter. See paragraph (5) below.

    • Re-entry returns originally filed electronically ("E-File" ). These returns may be shown by the presence of Mod E-File printouts or "TRPRT Print Do Not Process" in lieu of an actual return.

      Note:

      If the TRPRT print states "TRPRT Print Do Not Process" in the top margin, circle the words "Do Not Process."

    • Returns received with a Request for Prompt Assessment under IRC 6501 (d).

  2. Do not correspond for a signature on "CII" returns that have Form 13596, Reprocessing Returns, attached. See IRM 3.11.14.6.3.3, Correspondence Imaging Inventory (CII) Returns, for processing instructions.

  3. If a signature is missing, correspond:

    Exception:

    Do not issue correspondence on a Section 965 return. ERS will correspond for missing information. See IRM 3.11.14.10.9, Section 965 Returns (Form 1041 and 1041-N) (TY 2017 and later), for more information.

    Note:

    See IRM 3.11.14.6.3.2, Issuing Correspondence, for returns that are incomplete and appear to be duplicate filings.

    If ... Then ...
    • The return is not signed on the line designated for the fiduciary or trustee signature, or

    • The jurat is not present on the line designated for the estate or trusts signature (non-standard return), or

    • Only the Entity information is present and there are no attachments containing tax data.

    1. Edit Action Code 225, Correspondence for Signature only, or 226, International Correspondence for signature only.

    2. Leave in batch and continue editing or follow local procedures.

      Exception:

      If the fiduciary’s signature is on the preparer’s line and you can verify that it is the fiduciary arrow the signature up, e.g., the fiduciary’s name is in the entity section of the return.

    Note:

    Paper returns sent in by the filer that states their return was rejected through the E-file system require a signature. Form 8879-F is not an acceptable substitute for a paper return.

  4. If the jurat is altered or crossed-out, see IRM 3.11.14.6.3.6, Frivolous Arguments, for frivolous return instructions.

  5. Accept a "signature declaration" , a signature with jurat received through IRS correspondence, if attached to the return.

    1. If the "signature declaration" is altered or crossed-out, see IRM 3.11.14.6.3.6, Frivolous Arguments.

    2. If the taxpayer responds with a self-prepared "signature declaration" , it must have the same language as the jurat on the tax return: e.g., "UNDER PENALTIES OF PERJURY, I DECLARE THAT I HAVE EXAMINED THIS RETURN, INCLUDING ACCOMPANYING SCHEDULES AND STATEMENTS, AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, IT IS TRUE, CORRECT AND COMPLETE."

  6. Tax examiners are not handwriting experts, 26 Code of Federal Regulations (CFR) 301.6064-1 allows the Service to presume that the signature on a return, statement, or other document is the true signature of the person who signed the document.

    Note:

    A "?" or "X" used to designate where the taxpayer should sign the return is not considered a valid signature.

  7. Facsimile Signature - Rather than signing each return, a Fiduciary may use a Facsimile or stamp of the signature. If a facsimile is used, the person filing the return must retain a letter signed by the Fiduciary with a statement that the facsimile represents their signature; a statement that the signature was placed there by their direction; and a list of each return (Name and TIN) being covered by the letter.

  8. If the fiduciary’s signature is on the preparer’s line and you can verify it is the fiduciary, arrow the signature up. E.G., the fiduciary’s name is in the entity section of the return.

  9. Only one correspondence attempt is required for a signature.

Fiduciary's EIN (Trusts Only)

  1. The Fiduciary's EIN box is found to the right of the Signature area and above the Tax Preparer's box on Form 1041.

  2. A Fiduciary's EIN must be present when certain criteria is met. Edit a "Check mark" to the right of the Fiduciary EIN when all the following apply: See Figure 3.11.14-43, Fiduciary’s EIN.

    1. There is a positive entry on Line 23.

    2. There is an entry on Line 10, Schedule G, Estimated Tax Payments.

    3. Fiduciary Code "2" or "3" is edited.

    4. The Fiduciary's EIN is different than the Trust's EIN, Section C.

    5. The return is not an amended return.

    6. The fiduciary is a trust or financial institution, i.e., bank, credit union, savings and loan, N.A. This information will be documented in the Entity section on either the "Name of Estate or Trust" line or on the "Name and Title of Fiduciary" line and may follow in care of or %.

      Exception:

      Do not edit the EIN if the taxpayer has notated TRUST COMPANY, if other than part of a financial institution name, e.g., bank, credit union, savings and loan, N.A., etc., in the Entity area or Signature area. N.A. stands for National Association.

      Example:

      "Pike Bank & Trust Company" or "Pike Trust Company, N.A." would be indicators for editing a Fiduciary EIN while "Pike Trust Company" would not.

  3. If the return meets all the above criteria, process as follows:

    If ... Then ...
    The Fiduciary's EIN is present in the Fiduciary's EIN box,
    1. Edit a check mark to the right of the Fiduciary's EIN box.

    2. Continue editing the return.

    The Fiduciary's EIN is blank, illegible, or less than nine digits, but is decided from the return or attachments,
    1. Edit the Fiduciary's EIN to the right of the Fiduciary's EIN box.

    2. Continue editing the return.

    The Fiduciary's EIN is blank, illegible, or less than nine digits. but cannot be decided from the return or attachments, Correspond for the missing information.

    Figure 3.11.14-43

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    Please click here for the text description of the image.

♦Paid Preparer Section♦

  1. The Paid Preparer Section is found below the Fiduciary's Signature area near the bottom of Form 1041, Form 1041-QFT, and Form 1041-N.

♦Paid Preparer Checkbox Indicator♦

  1. The Paid Preparer Checkbox is found next to the taxpayer signature area. It shows if the taxpayer has chosen to allow the Paid Preparer to answer questions about the return as it is processed.

  2. No editing is required on amended returns.

  3. Do the following when an entry is present in the Paid Preparer Checkbox:

    If ... Then ...
    Only the "Yes" box is checked, Do not edit.
    The "No" box is checked; or both boxes are not checked; or both boxes are checked, Circle the Paid Preparer's Telephone Number, if present. See Figure 3.11.14-44, Paid-Preparer Checkbox Indicator.

    Figure 3.11.14-44

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♦Paid Preparer Tax Identification Number (PTIN)♦

  1. The Preparer's Social Security Number (SSN) (2009 and prior revisions) or Preparer's Tax Identification Number (PTIN) is found to the right of the Preparer's Signature in the PTIN box (Preparer's SSN or PTIN box for 2009 and prior revisions) at the bottom-right corner of Form 1041, Form 1041-QFT and Form 1041-N.

  2. No editing is required on amended returns.

  3. A valid PTIN begins with the alpha "P" followed by an eight-digit number (e.g., PXXXXXXXX). Circle the SSN/PTIN if it is invalid, all zeros or all nines.

♦Paid Preparer Employer Identification Number (EIN)♦

  1. The Firm's EIN (Paid Preparer EIN - 2009 and prior revisions) is found below the Preparer's PTIN box at the bottom-right corner of Form 1041, Form 1041-QFT and Form 1041-N (Page 1).

  2. No editing is required on amended returns.

  3. The Firm's EIN (Paid Preparer's EIN - 2009 and prior revision) is a nine-digit number. Circle the EIN if all zeroes, all nines, or illegible.

♦Paid Preparer Phone Number♦

  1. The Paid Preparer's Phone Number is found below the Paid Preparer's EIN at the bottom right corner of Form 1041, 1041-QFT and 1041-N.

    If ... Then ...
    The return is amended, Do not edit.
    The Preparer’s Phone Number is more than 10 digits, Do not edit.
    The Preparer’s Phone Number is illegible or less than 10 digits, Circle the Phone Number. See Figure 3.11.14-45, Editing Paid Preparer Phone Number.

    Figure 3.11.14-45

    This is an Image: 33490045.gif

    Please click here for the text description of the image.

E-File Waiver Indicator (Form 8948)

  1. IRC 6011(e)(3) requires preparers of more than ten Form 1041 returns to file electronically. Form 8948, Preparer Explanation for Not Filing Electronically, gives certain exclusions from that requirement.

  2. All 1041 returns with a completed Form 8948 attached will be edited with the E-File waiver indicator. The valid indicators are 1, 2, 3, 4, 5 and 6. Only one indicator is edited.

  3. If Form 8948 is attached, edit the E-File Waiver Indicator at the bottom center margin of page 1, Form 1041 by following the instructions in the table below:

    If the box marked on Form 8948 is ... Then Edit E-File Waiver Indicator ...
    Box 1 "1"
    Box 2 "2"
    Box 3 "3"
    Box 4 "4"
    Box 5 "5"
    Box 6 a, b or c "6"

    Caution:

    If editing E-File Waiver Indicator Code "6," DO NOT edit any following alpha characters, such as "a" , "b" , or "c" . Do not edit E-File Waiver Indicator Code on amended returns.

  4. If multiple boxes are checked, edit only one E-File Waiver Indicator, according to the following priority order:

    Priority Order E-File Waiver Indicator
    Box 6a "6"
    Box 6b "6"
    Box 3 "3"
    Box 2 "2"
    Box 1 "1"
    Box 4 "4"
    Box 5 "5"
    Box 6c "6"

  5. If no box is checked on Form 8948, but a notation is written near a box, go with filer intent. If completely blank, do not edit E-File Waiver Indicator.

Schedule G - Tax Computation and Payments Lines 1 - 17 (Form 1041)

  1. Schedule G, Form 1041, is found in the middle of Page 2 of Form 1041.

Lines 1a - 1d, Schedule G - Tax

  1. This sub section has the tax procedures for lines 1a - 1d.

Line 1a, Schedule G - Tax on Taxable Income (Tax Rate or Schedule D)
  1. The taxpayer must enter the Tax from the Tax Rate Schedule or Line 45 of Schedule D, Form 1041, to Line 1a, Schedule G.

  2. The taxpayer should enter the lesser of the Tax from the Form 1041 Tax Rate Schedule or the amount from Line 45 in Part V of Schedule D, Form 1041 to Line 1a of Schedule G. Edit Line 1a as follows:

    If Line 1a is blank ... Then ...
    Part V, Schedule D is attached with a positive entry on Line 45, Edit the amount from Line 45, Schedule D to Line 1a, Schedule G.
    There is no entry or a negative entry on Line 45, Schedule D, Continue editing.
    Schedule D is not attached, Continue editing.

  3. Form 8824 must be attached if Schedule D. Form 1041, or Form 4797, Sales of Business Property is attached to Form 1041 and the filer has notated "RELATED PARTY LIKE-KIND EXCHANGE" on Schedule D or Form 4797.

    If ... And ... Then ...
    Form 8824 is attached with an amount greater than zero on Line 22, Schedule D is not attached.
    1. Edit CCC "1" .

    2. Correspond.

    Form 8824 is not attached, "RELATED PARTY LIKE-KIND EXCHANGE" is notated on Schedule D or Form 4797. Correspond for the missing Form 8824.

  4. For Schedule D editing instructions, see IRM 3.11.14.17.1.5, Line 4 - Capital Gain or Loss/Schedule D.

  5. For prior year editing instructions, see IRM 3.11.14.42, Prior Year Returns - Form 1041, and IRM 3.11.14.42.2.3, Prior Year Returns - Schedule D (Form 1041).

Line 1b, Schedule G - Tax on Lump-sum Distributions (Form 4972)
  1. Form 4972 must be attached to Form 1041 if an entry ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 1b, Schedule G.

  2. Edit Line 1b of Schedule G as follows:

    If ... Then ...
    Line 1b has an entry ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 4972 is not attached, Correspond for the missing form.
    Line 1b of Schedule G and Line 30 of Form 4972 are not equal, Edit the lesser amount to Line 1b of Schedule G.

Line 1c, Schedule G - Alternative Minimum Tax (Schedule I)
  1. Only one Schedule I is processed. If more than one is attached, decide the correct Schedule I and "X" those schedules not used.

  2. Schedule I (Form 1041) must be attached to Form 1041 if an entry ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Schedule G, Line 1c. See IRM 3.11.14.24, Schedule I (Form 1041) - Alternative Minimum Tax.

    If ... Then ...
    Line 1c has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Schedule I is not attached, Correspond for the missing schedule.
    Line 1c entry and Schedule I, Line 54 entry do not equal, Edit the lesser amount to Schedule G, Line 1c.
    Line 1c is blank and Schedule I, Line 54 has an entry, Edit the amount from Line 54 Schedule I to Line 1c, Schedule G.

Line 1d, Schedule G -Total Schedule G Tax
  1. If Line 1d is blank and an entry is present on any of Lines 1a through 1c, edit the total of these three lines to Line 1d.

Lines 2a - 2e, Schedule G - Credits

  1. This subsection has instructions for editing Lines 2a through 2e of Schedule G Form 1041.

Line 2a, Schedule G - Foreign Tax Credit (Form 1116)
  1. Form 1116 must be attached to Form 1041 if an entry ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 2a, Schedule G.

    If ... Then ...
    Line 2a has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡but Form 1116 is not attached, Correspond.
    Line 2a has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Edit Audit Code "1" .

Line 2b, Schedule G - General Business Credits (Form 3800)
  1. Line 2b of Schedule G is used by taxpayers to claim General Business Credits (GBC).

  2. If Form 3800, General Business Credit, is required but missing, correspond. Form 3800 is required when a 2008 and subsequent tax return has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ on Schedule G, Line 2b.

  3. When a business credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is not supported by the applicable form, correspondence may be required.

    • If supporting documentation is missing for credits ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, correspond.

    • If supporting documentation is missing for an unidentified amount on Schedule G, Line 2b, correspond.

  4. Review Schedule G, Line 2b for the following conditions:

    If ... And ... Then ...
    Line 2b, Schedule G is blank, Form 3800 has an entry on Line 38, Edit the Line 38 amount to Line 2b of Schedule G.
    Line 2b, Schedule G has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 3800 is not attached, Correspond
    Line 2b, Schedule G and Line 38 of Form 3800 do not match, The difference is not supported by another credit, Edit the lessor amount to Schedule G, Line 2b.

Line 2c, Schedule G - Credit for Prior Year Minimum Tax (Form 8801)
  1. Form 8801, Credit for Prior Year Minimum Tax, must be attached if an entry ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 2c* of Schedule G, Form 1041.
    *(Line 2d for 2009 and prior)

    Note:

    Form 8801, Credit for Prior Year Minimum Tax, cannot be claimed on Form 3800.

    If ... Then ...
    Form 8801 is attached,
    1. Compare the amount claimed on Form 1041, Schedule G, Line 2c* to Line 25* of Form 8801.
      *(Line 27 for 2009, Line 28 for 2008, Line 25 for 2007 and prior).

    2. If the amounts on Form 1041 and Form 8801 are not equal and if the difference is not supported by another credit, edit the lesser amount to Line 2c of Schedule G.

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡Form 8801 is not attached, Correspond.

  2. X any prior year Schedule I that supports Form 8801.

Line 2d, Schedule G - Bond Credits
  1. Form 8912, Credit to Holders of Tax Credit Bonds, must be attached if an entry ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 2d* of Schedule G:
    *(Line 3 for tax year 2009 and prior as a write-in entry).

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡Form 8912 is not attached, Correspond.

Line 2e, Schedule G - Total Credits
  1. Line 2e of Schedule G is computed by adding Lines 2a through 2d.

  2. For TY 2009 and prior year returns, new Line 2e (old Line 3) was used to claim bond credits. The following notations can be written on the dotted part of line 3 along with the credit amount. The bond credit was added to the total of Lines 2a and 2d.

    Tax Year ... Notation ...
    2009 - 2008 "Form 8912" , Credit to Holders of Tax Credit Bonds
    2007 - 2006
    • QZAB (Qualified Zone Academy Bond Credit) from Form 8860

    • CREB (Credit for Clean Renewable Energy), from Form 8912

    • GTCB (Gulf Tax Credit Bonds) from Form 8912

    Note:

    Form 8912 or Form 8860 must be attached if the credit claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. Correspond if missing.

Unclaimed Credits
  1. Taxpayers sometimes file a credit form, e.g., Form 1116, Form 2439, attached to their Form 1041 but do not claim the credit on Form 1041 itself.

    • Check Line 13 of Schedule K-1 to see if the credit was used as a distribution to the beneficiaries.

      Caution:

      It is not necessary to math verify that all the credit was distributed on Schedule K-1.

    If ... Then ...
    A distribution is shown on Schedule K-1, Do not edit the amount to Form 1041.
    A distribution is not shown on Schedule K-1, Follow the specific instructions for processing the credit form received.

Line 3, Schedule G - Net Tax (Subtract Line 2e from Line 1d)

  1. Accept taxpayer's entry. This line is calculated by the computer.

Line 4, Schedule G - Tax on ESBT

  1. This amount is from ESBT Tax Worksheet Line 17.

  2. Accept taxpayer's entry.

Line 5, Schedule G - Net Investment Income Tax

  1. Form 8960, Net Investment Income Tax, is required to be attached to the Form 1041 return when any amount is on Line 5, Schedule G. If missing, correspond.

    Note:

    X out any amount on 201311 and prior year revisions.

  2. If Line 5, Schedule G is blank and Form 8960 is attached with significant entries, enter the amount from Line 21, Form 8960 to Line 5, Schedule G. See IRM 3.11.14.37, Form 8960, Net Investment Income Tax.

  3. If there is a negative amount on Line 5, make it a positive amount.

Line 6a, Schedule G - Recapture Tax From Form 4255

  1. If Line 6c, Schedule G, has an amount or Form 4255 is attached, edit as follows:

    If ... Then ...
    Line 6a of Schedule G and Line 13 of Form 4255 entries are not equal, Edit the lesser amount to Line 6, Schedule G.
    The amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 4255 is not attached, Correspond.
    Form 4255 is attached and the tax is not added to Line 6a, Schedule G, Edit the amount from Form 4255 to Line 6a, Schedule G.

    Exception:

    Don’t edit the Form 4255 amount to Line 6a, Schedule G if the amount on Form 4255 is also entered on Schedule K–1, Line 13 (Code "T" ) as a distribution to the beneficiary.

Line 6b, Schedule G - Recapture Tax From Form 8611

  1. If Line 6b, Schedule G, has an amount or Form 8611, Recapture of Low-Income Housing Credit, is attached:

    If ... Then ...
    Line 6b, Schedule G and Line 8 of Form 8611 entries are not equal, Edit the lesser amount to Line 6b, Schedule G.
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡Form 8611 is not attached, Correspond.
    Form 8611 is attached and the tax is not added to Line 6b, Schedule G, Edit the amount from Form 8611 Line 8 to Line 6b, Schedule G.

    Exception:

    Don’t edit the Form 8611 amount to Line 6b, Schedule G if the amount on Form 8611 is also entered on Schedule K–1, Line 13 (Code "T" ) as a distribution to the beneficiary.

Line 6c, Schedule G - Other Recapture Taxes

  1. Line 6c, Schedule G is used to report Recapture Taxes for the following write-in notations:

    • Recapture of Qualified Electric Vehicle Credit "QEVCR"

    • Recapture of Indian Employment Credit "IECR" from Form 8845

    • Recapture of New Markets Credit "NMCR"

    • Recapture of the Credit for Employer-provided Child Care Facilities "ECCFR"

  2. If Line 6c, Schedule G, has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

    Note:

    ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ notated "QEVCR" , "IECR" , "NMCR" , or "ECCFR" on the dotted line to the left of the entry space on Line 6, Schedule G. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Line 7, Schedule G – Household Employment Taxes (Schedule H, Form 1040)

  1. Schedule H, (Form 1040), Household Employment Taxes, must be attached to Form 1041 if a significant entry is present on Line 7 of Schedule G. If Schedule H is not attached, correspond. See Figure 3.11.14-46, Schedule H (Reported on Line 7 of Schedule G).

  2. Edit CCC "8" if ALL the following conditions are met:

    1. Schedule H is attached to the return with significant entries.

    2. Form 1041 doesn't have federal withholding, Line 14, Schedule G and

    3. Total tax without household employment tax is less than $1,000. (Schedule G, Line 9 minus Line 7 is less than a $1,000)

    See IRM 3.11.14.26.1, Schedule H - General Information.

  3. Per the Social Security Domestic Employee Reform Act of 1994 (SSDERA), certain taxpayers may legally file Schedule H (Form 1040) without a corresponding Form 1040 or Form 1041. For procedures for processing loose filed Schedule H's, see IRM 3.11.14.26.28, Loose Schedule H.

    Figure 3.11.14-46

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Line 8, Schedule G - Other Taxes

  1. This entry is only valid for tax period 202112 and later. If the Tax Period is 202111 and prior, then edit the entry for non-transcription.

  2. This amount is positive or negative and dollars only.

Line 9, Schedule G - Total Tax

  1. Line 9 of Schedule G is the total of Lines 3 through 8 of Schedule G. The taxpayer is instructed to carry the amount from Line 9 to Line 24 of Form 1041. Line 9 may have the following "write-in" notations and the amount of tax, on the dotted part of line:

    • "Section 641(c)" Tax on electing small business trusts (ESBT)

    • "Section 453(l) interest" or "Section 453A(c) interest" Interest on deferred tax attributable to installment sales of certain timeshares and residential lots and certain nondealer real property installment obligations

    • "From Form 4970" , Tax on Accumulation Distribution of Trusts

    • "From Form 8697" , Interest Computation Under the Look-Back Method for Completed Long-Term Contracts

    • "From Form 8866" , Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method

    • "Section 1260(b)" Interest on deferral of gain from certain constructive ownership transactions

    • "From Form 5329" , Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts

    • "Section 1291" Tax on qualifying electing fund (QEF

    • "Section 1291 Interest" , Interest on QEF - which will be notated on Form 1041 at the bottom of the front page.

  2. If the taxpayer writes one of the above notations on the dotted part of Line 9, edit as follows:

    If ... Then ...
    The notated amount is added to Line 9, Schedule G, and Line 24, Form 1041, Continue editing the return.
    The notated amount was not added to Line 24, Increase Line 24, Form 1041 by the amount written in on Line 9, Schedule G.
    The notated amount is written separate from the Line 9 amount, Increase Line 24 Form 1041 by the amount written in separately from the Line 9 amount if the taxpayer has not already done so.
    "Section 965" (or similar language) is notated (TY 2017 only), See:
    • IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY 2017 and later)

    • IRM 3.11.14.10.9.5, Tax Period 201712 through 201811 - Section 965 Tax or 965 Election (Form 1041 and Form 1041-N).

    .
  3. If Section 1291 Interest is notated on Form 1041, at the bottom of the front page, increase Line 24, by the amount notated for Section 1291 interest.

  4. Effective for TY 2002, the taxpayer should check the "ESBT" box in Section A, Type of Entity of Form 1041 or they may notate "ELECTING SMALL BUSINESS TRUST" , "ESBT" , or "IRC 641(c)" on the dotted part of Line 9, Schedule G and the ESBT amount added to Line 4, Schedule G.

    Reminder:

    Edit ESBT Indicator "1" in the left margin next to Line 10 on Form 1041 in "2 - 1" format. See IRM 3.11.14.10.15.1, Electing Small Business Trusts (ESBT).

Lines 10 - 16c, Schedule G - Payments (Refundable Credits)

  1. This subsection has instructions for editing Lines 10 through 16c, Schedule G (Form 1041).

  2. If a return has a short Tax Period and any of Lines 10 through 16c have an entry, process as instructed in IRM 3.11.14.12.9, Short Period Returns - with Prepaid Credits.

Line 10, Schedule G - Estimated Tax Payments
  1. Only Form 1041-ES Tax Payments are to be reported on Line 10.

    1. "X" any amounts decided to be other than ES Tax Payments and edit these amounts to the proper line. See Figure 3.11.14-47, Estimated Tax Payments.

    Figure 3.11.14-47

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    Please click here for the text description of the image.

  2. Estimated tax paid by an individual during the year of death should not be claimed on a Form 1041. These ES Credits should be claimed on the deceased taxpayer's Form 1040.

    1. If the Estate has an incorrect amount, which is shown as Form 1040-ES Credits, delete the Form 1040 Credit.

Line 11, Schedule G - Estimated Tax Treated as Paid by Beneficiary (Form 1041-T)
  1. Line 11 of Form 1041, Schedule G will reflect the part of Line 10 that the fiduciary is electing to be treated as paid by a beneficiary. The fiduciary makes this election by filing a Form 1041-T.

  2. A Form 1041-T should be attached to Form 1041 if an entry is present on Line 11, Schedule G. Edit Line 11, Schedule G as follows:

    If ... Then ...
    Form 1041-T is attached and Line 11, Schedule G is blank,
    1. Edit CCC "X" on Form 1041. See IRM 3.11.14.8.18, CCC "X" - Refund/Settlement Freeze.

    2. If Form 1041-T, Lines 1 and 4 have entries, edit Form 1041-T, Line 1 amount to Line 11, Schedule G.

    3. Detach Form 1041-T and notate "FORM 1041-T DETACHED" on Form 1041.

    4. Edit the Received Date and Tax Period to Form 1041-T.

    5. If the "Final Return" box is checked on Form 1041, notate "Final" below the Received Date on Form 1041-T. See Figure 3.11.14-48, Form 1041-T Attached to "Final" Return.

    6. Route Form 1041-T to Accounts Management.

    Form 1041-T is attached and Line 11, Schedule G has an entry,
    1. Edit CCC "X" on Form 1041.

    2. Detach Form 1041-T and notate "FORM 1041-T DETACHED" on Form 1041.

    3. Edit the Received Date and Tax Period to Form 1041-T.

    4. If the "Final Return" box is checked on Form 1041, notate "Final" below the Received Date on Form 1041-T. See Figure 3.11.14-48, Form 1041-T Attached to "Final" Return.

    5. Route Form 1041-T to Accounts Management.

    Form 1041-T is not attached,
    1. Continue editing the return.

    2. Do not correspond.

    Note:

    If a blank Form 1041-T or one not having significant money amounts distributed to taxpayers, or no statement showing distribution, is attached to the return, "X" it out and leave attached to the return. Do not code CCC "X" on the return.

    Figure 3.11.14-48

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Line 12, Schedule G - Balance of Estimated Tax Payments
  1. This amount is the result of Line 11 subtracted from Line 10.

  2. Accept taxpayer's entry.

Line 13, Schedule G - Tax Paid with Form 7004
  1. If there is an illegible entry on Line 13, Schedule G, examine the attached Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, or attachment in lieu of, or obtain the amount from entries on Lines 10, 16a or 16b of Schedule G.

    • If a legible amount is found, place an "X" to the left of the illegible entry and edit the verified amount to the left of the "X" .

Line 14, Schedule G - Federal Income Tax Withheld
  1. Form 1042-S (or signed Competent Authority letter), 8288, 8805, W-2, Form W-2G, Form 1099R, or a supporting statement, i.e., an earnings statement with year-to-date totals, must be attached to Form 1041 if an entry ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 14, Schedule G.

    • If the EIN on Form(s) 1042-S or 8805 is missing or other than the TIN in the caption area, and the credit is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, X the credit.

    • Form 8288-A is attached and the Date of Transfer on Form 8288-A (box 1) is not within the tax period of the return, X the credit and edit only the credit(s) that are within the tax period.

      Note:

      All 8288-A credits must be verified through the FIRPTA Database. See IRM 3.21.25, Miscellaneous Tax Returns. Use AC 420 to route any returns with credits not verified to CE. They will attach Form 13698 to verify the credit amount.

    • If an entry is present on Line 14, Schedule G ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ but, supporting documentation is not attached, correspond for the missing form.

  2. Edit Line 14, Schedule G as follows:

    If ... And ... Then ...
    Line 14, Schedule G has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, Supporting documentation is not attached, Correspond for the missing form.
    Line 14, Schedule G has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, Form 1042-S (or signed Competent Authority letter), 8288, 8805, W-2, W-2G, etc., do not equal the Line 14, Schedule G entry,
    1. "X" the Line 14, Schedule G amount.

    2. Edit the correct amount from Form 1042-S (or signed Competent Authority letter), 8288, 8805, W-2 or W-2G to the left of the "X" . See Figure 3.11.14-49, Line 14, Schedule G doesn't Equal W-2, W-2G, 1099R or supporting statement.

    Line 14, Schedule G entry is illegible, check the attached Form 1042-S (or signed Competent Authority letter), 8288, 8805, W-2, Form W-2G, Form 1099R or a supporting statement for a legible amount,  
    1. Edit an "X" to the left of the illegible entry.

    2. Edit the computed amount to the left of the "X."

    Line 14, Schedule G has an entry ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Amount cannot be decided,
    1. "X" the Line 14, Schedule G amount.

    2. Compute the correct amount by subtracting Line 19, Schedule G from the sum of the amounts on Lines 12, through 13, Schedule G.

    3. Edit the computed amount to the left of the "X."

    Figure 3.11.14-49

    This is an Image: 33490049.gif

    Please click here for the text description of the image.

    .

  3. Line 14, Schedule G or Line 26, Form 1041 can also be used to accommodate unusual credits such as "Claim of Rights" for which there is no line on the return.

    • If no supporting documentation is attached for a credit ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for which there is no specific line, correspond for support of this unusual credit.

  4. When examining a return for a Form 1042-S (or signed Competent Authority letter), 8288, 8805, W-2, W-2G, etc. and the form is not found but a Form 7004 is found and there is no entry on Line 13, Schedule G, see if the Line 14, Schedule G amount equals the amount on Form 7004:

    If the entries are ... Then ...
    The same, Move the Line 14, Schedule G amount to Line 13, Schedule G.
    Not the same and the amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Correspond.

Line 15, Schedule G - Net 965 Tax Liability from Form 965-A (TY2017 and later)
  1. The amount for Line 15, Schedule G, is from Form 965-A, Corporate Report of Net Tax Liability Part I, column (f).

  2. For editing procedures for Line 15, Schedule G (Form 1041) see:

    • IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY2017 and later)

    • IRM 3.11.14.10.9.1, Tax Period 202112 through 202211 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19 Form 1041-N).

    • IRM 3.11.14.10.9.2, Tax Period 202012 through 202111 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19 Form 1041-N).

    • IRM 3.11.14.10.9.3, Tax Period 201912 through 202011 - Line 25 and Line 15, Schedule G, Form 1041 (Line 19 Form 1041-N).

    • IRM 3.11.14.10.9.4, Tax Period 201812 through 201911 - Line 24 and Line 25f, Schedule G, Form 1041.

    • IRM 3.11.14.10.9.5, Tax Period 201712 through 201811 - Section 965 Tax or 965 Election (Form 1041 and Form 1041-N).

Line 16, Schedule G - Payments From Form 2439
  1. Form 2439, "Notice to Shareholder of Undistributed Long-Term Capital Gains" is reported on Line 16, Schedule G.

  2. Compare Line 16, Schedule G to Line 2 of Form 2439:

    If... Then ...
    Amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and, Form 2439 is missing, Correspond for missing forms to support the entry on Line 16, Schedule G.
    Form 2439 is attached,
    1. Edit the Line 2, Form 2439 amount to Line 16, Schedule G.

    2022 and Prior- Form 2439 is the only form attached,
    1. If Form 2439, line 2 and Form 1041, line 16c, Schedule G are the same, edit amount from Form 2439, line 2 to line 16a, Schedule G. See Figure 3.11.14-50, Line 16a, Schedule G doesn't Match Form 2439.

    2. If Form 2439, line 2 and line 16c, Schedule G are not the same, edit the smaller amount to Line 16a, Schedule G.

    3. Correspond for missing Form 4136 if the entry on Line 16c, Schedule G is more than the Form 2439 amount by ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Figure 3.11.14-50

    This is an Image: 33490050.gif

    Please click here for the text description of the image.

Line 17, Schedule G - Payments From Form 4136
  1. Form 4136, Credit for Federal Tax Paid on Fuels is reported on Line 17, Schedule G.

  2. Compare Line 17, Schedule G to Line 17, Form 4136:

    If... Then ...
    Line 17 has an entry and Form 4136 is missing, Correspond for Form 4136 to support the entry on Line 17, Schedule G.
    Form 4136 is attached,
    1. Edit the amount from Line 17, Form 4136 to Line 17, Schedule G.

    2022 and prior - Form 4136 is the only form attached,
    1. Subtract the Form 4136 amount from Line 16c Schedule G and edit the difference to Line 16b, Schedule G.

    2. Correspond for missing Form 2439 if the Line 16c, Schedule G entry is more than the Form 4136 by ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Line 18a, Elective or Deemed Payment Election Amount Form 3800
  1. Elective or Deemed Payment Election amount is reported on Line 18a, Schedule G.

  2. For Tax Period 202212 - 202311 - If a significant amount is present for "IRA22DPE" , edit RPC "J" and give the return to the lead. See IRM 3.11.14.10.16, Elective or Deemed Payment Election and Credit Transfers.

Line 18b, Schedule G - Other Credits or Payments
  1. Line 18b, Schedule G can have amounts for:

    • Credit For Qualified Sick and Family Leave Wages Taken Before April 1, 2021

    • Credit For Qualified Sick and Family Leave Wages Taken After March 31, 2021, and before October 1, 2021

  2. Line 18b, Schedule G amount is transferred by taxpayer from Line 8e and/or Line 8f, Schedule H.

  3. Valid for Tax Periods 202012 through 202411.

  4. Edit for non-transcription if the Tax Period is invalid.

  5. For Tax Periods 202012 through 202411 - Ensure the combine amounts for Qualified Sick and Family Leave Wages Taken Before April 1, 2021, and Credit For Qualified Sick and Family Leave Wages Taken After March 31, 2021, and before October 1, 2021 are included in the total for 18b, Schedule G - Other Credits or Payments.

Other Information Section (Page 3)

  1. The "Other Information" Section of Form 1041 is found at the bottom of Page 3.

Line 3 - Interest From Foreign Country

  1. Filers are required to report if they had activity in a foreign country at any time during the tax year on Line 3 of the Other Information Section of Form 1041.

  2. If the "Yes" box is checked and/or a foreign country is listed on Line 3 in the Other Information Section, edit Audit Code "2" in the left margin next to Line 10 on Form 1041 in "1 - 2" format.

Line 4 - Distribution From Foreign Country

  1. Filers are required to report if they received a distribution from, were a grantor of, or transfers to a foreign trust on Line 4 in the Other Information Section of Form 1041.

  2. If the "Yes" box is checked and Line 18, Income Distribution, or Line 23, Taxable Income, of Form 1041 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ edit Audit Code "1" .

Line 9 - Generation Skipping Trust

  1. Filers are required to report that they are a Generation Skipping Trust on Line 9 in the "Other Information" Section of Form 1041.

    If ... And ... Then ...
    One box is checked in Section A of Form 1041,   Edit as instructed in IRM 3.11.14.13.3, Fiduciary and Trust Code Editing, regardless of the entry on Line 9 in the Other Information Section.
    No boxes are checked, or multiple boxes are checked in Section A, The "Yes" box is checked on Line 9 in the Other Information Section, Edit Fiduciary Code "3" and Trust Code "1" .
    No boxes are checked, or multiple boxes are checked in Section A, The "Yes" box is not checked on Line 9 in the Other Information Section, Form 1041 has an indication that the return is for a "GENERATION SKIPPING TRUST." See IRM 3.11.14.13.3, Fiduciary and Trust Code Editing.

Line 13 - Digital Asset Checkbox

  1. No editing is required.

  2. Data will enter:

    • "0" if no box is checked.

    • "1" if "Yes" box checked.

    • "2" if "No" box checked.

    • "3" if "Both" boxes checked.

Schedule I (Form 1041) - Alternative Minimum Tax

  1. Alternative Minimum Tax (AMT) is reported on Schedule I, Form 1041.

  2. Only one Schedule I is processed. If more than one Schedule I is attached, find the correct Schedule I and "X" those schedules not used.

  3. Schedule I must be attached to Form 1041 if an entry ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 1c Schedule G, Form 1041.

    If ... Then ...
    Schedule G, Line 1c has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Schedule I is not attached, Correspond for the missing schedule.
    Schedule I, Line 54 and Schedule G. Line 1c entry doesn't equal, Edit the lesser amount to Schedule G, Line 1c.
    Schedule I, Line 54 has a significant entry and Schedule G, Line 1c is blank, Edit the Line 54 amount to Schedule G, Line 1c,
  4. If a current year Schedule I is attached to Form 1041, perfect Lines 22, 23, 24 and 51 as necessary.

    Note:

    "X" any prior year Schedule I that supports Form 8801, Schedule G, Line 2d on a current year Form 1041.

  5. Do not bracket any entries on Schedule I. ISRP will transcribe all fields as positive and the Form 1041 program will convert Line 22 to negative.

  6. To convert prior year Schedule I to the current revision, see editing instructions, see IRM 3.11.14.42, Prior Year Returns - Form 1041.

Form 4952 - Investment Interest Expense Deduction

  1. Lines 4e and 4g are transcribed from Form 4952 (Investment Interest Expense Deduction), effective 1-1-2004. The amounts transcribed from Form 4952 will be used in the computation of Capital Gains and Losses.

  2. Lines 4e and 4g must be positive on Form 4952. If the taxpayer has a negative entry on either Line 4e or 4g, "X" the negative entry.

    If ... Then ...
    Form 4952 is present and transcription lines have significant amounts in them, Place in sequence behind Schedule I.
    Form 4952 is present, but Schedule D is missing, Correspond, only if an amount is present on Line 4g of Form 4952.

    Note:

    Do not "X" Form 4952 when corresponding.

    The taxpayer has written a dollar amount on the dotted part to the left of Line 4e of Form 4952, Delete the Line 4e entry and arrow the amount from the dotted line to Line 4e.
    "Alternative Minimum Tax" (AMT or Alt. Min. Tax) is notated on Form 4952, "X" through the AMT Form 4952 and leave attached.

Schedule H (Form 1040) - Household Employment Taxes

  1. This subsection has instructions for processing Schedule H (Form 1040).

Schedule H - General Information

  1. Only one Schedule H (Form 1040) is processed with Form 1041.

    Reminder:

    Examine return for possible CCC "8" conditions. See IRM 3.11.14.8.24, CCC "8" - Waiver of Estimated Tax Penalty.

    If ... Then ...
    More than one Schedule H was submitted by one taxpayer, Combine the Schedule H's.
    1. Combine all data and edit it to Section B.

    2. "X" those schedules not to be transcribed.

  2. If the taxpayer submits only Page 2 of Schedule H, correspond for the missing Page 1.

  3. Taxpayers who are not required to file an income tax return but are liable for Household Employment Taxes may submit a Schedule H by itself.

    Note:

    For instructions for processing loose filed Schedule H's, see IRM 3.11.14.26.28, Loose Schedule H.

Line 1a (2020 and later) and
Line 1 (2019 and Prior) - Total Social Security Wages

  1. "X" Line 1a, Schedule H if the entry is less than the minimum reportable amount. Refer to chart below: See Figure 3.11.14-51, Delete Lines 1a or 3 if Less than the Minimum Reportable Amount.

    Tax Period... Minimum Reportable Amount Less than
    202312 - 202411 $2,600
    202212 - 202311 $2,400
    202112 - 202211 $2,300
    202012 - 202111 $2,200
    201812 - 202011 $2,100
    201612 - 201811 $2,000
    201412 - 201611 $1,900
    201212 - 201411 $1,800
    200912 - 201211 $1,700
    200812 - 200911 $1,600
    200612 - 200811 $1,500
    200312 - 200611 $1,400

Line 1b - Qualified Sick and Family Leave Wages Leave Taken Before April 1, 2021

  1. Valid for Tax Period 202012 through 202411.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Line 2a (2020 and later) and
Line 2 (2019 and Prior) - Social Security Taxes

  1. Accept taxpayer's entry.

Line 2b - Employer Social Security Qualified Sick and Family Leave Wages Taken Before April 1, 2021

  1. Valid for Tax Period 202012 through 202411.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Line 2c - Total Social Security Tax

  1. Line 2c, Schedule H is only valid for 202012 through 202411.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Line 3 - Total Medicare Wages

  1. "X" Line 3 on Schedule H if the entry is less than the minimum reportable amount listed in table below:

    Tax Period... Minimum Reportable Amount Less Than
    202312 - 202411 $2,600
    202212 - 202311 $2,400
    202112 - 202211 $2,300
    202012 - 202111 $2,200
    201812 - 202011 $2,100
    201612 - 201811 $2,000
    201412 - 201611 $1,900
    201212 - 201411 $1,800
    200912 - 201211 $1,700
    200812 - 200911 $1,600
    200612 - 200811 $1,500
    200312 - 200611 $1,400

    Figure 3.11.14-51

    This is an Image: 33490051.gif

    Please click here for the text description of the image.

Line 4 - Medicare Taxes

  1. Accept taxpayer's entry.

Line 5 - Total cash wages subject to Additional Medicare Tax Withholding

  1. Accept taxpayer's entry.

Line 6 - Additional Medicare Tax Withholding

  1. Accept taxpayer's entry.

Line 7- Federal Income Tax Withheld

  1. Accept taxpayer's entry.

Line 8a - Total Social Security, Medicare, and Federal Income Taxes

  1. Compute Line 8a when it is blank by adding Lines 2c, 4, 6 and 7.

Line 8b - Nonrefundable Credit Qualified Sick and Family Leave Wages Taken Before April 1, 2021

  1. Valid for Tax Period 202012 through 202411.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Line 8c - Nonrefundable Credit Qualified Sick and Family Leave Wages Taken After March 31, 2021 and Before October 1, 2021

  1. Valid for Tax Period 202112 through 202411.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Line 8d - Total Social Security, Medicare and Federal Income Taxes After Nonrefundable Credits

  1. Valid for Tax Period 202012 and later.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Line 8e - Refundable Credit Qualified Sick and Family Leave Wages Taken Before April 1, 2021

  1. Valid for Tax Periods 202012 through 202411.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Line 8f - Refundable Credit Qualified Sick and Family Leave Wages Taken After March 31, 2021 and Before October 1, 2021

  1. Valid for Tax Periods 202112 through 202411.

  2. Edit the entry for non-transcription if the Tax Period is invalid.

Lines 10 through 12 - FUTA Indicator Code (FIN Code)

  1. Edit the FUTA Indicator (FIN) Code under the "Yes/No" boxes in Part II, on page 2 of Schedule H.

  2. Do not edit a FIN code when Part II has no significant money entries.

  3. Edit the FIN Code based on the taxpayer's answers to questions 10, 11, and 12, in Part II of Schedule H.

  4. Edit the FUTA Yes/No Indicator using the following guidelines:

    If ... Then ...
    All Questions 10, 11, and 12 are answered "Yes," Do not edit. See Figure 3.11.14-52, FUTA Yes/No Indicator.
    Any Questions 10, 11, and 12 are answered "No," Edit a "1" below the "Yes/No" box for Question 12. See Figure 3.11.14-52, FUTA Yes/No Indicator.

    Figure 3.11.14-52

    This is an Image: 33490052.gif

    Please click here for the text description of the image.

  5. If the conditions in (4) above are not met, decide from the information given in Sections A and B in Part II of Schedule H using the chart below:

    If ... Then ...
    Entries are present in Section A only, Do not edit.
    Entries are present in Section B only, Edit a "1" below the "Yes/No" box for Question 12.
    Entries are present in both Section A and Section B,
    1. Delete the entries in Section A.

    2. Edit a "1" below the "Yes/No" box for Question 12. See Figure 3.11.14-53, Entries in Both Sections A and B.

    Entries are not present in either Section A or Section B, Do not edit.

    Figure 3.11.14-53

    This is an Image: 33490053.gif

    Please click here for the text description of the image.

Line 13 - State Code

  1. Circle all states when more than one State Code or state name is present on line 13.

  2. Edit the State Code from the taxpayer's address listed in the entity part of the return when there are no State Codes or state names present.

  3. Valid State Codes are the fifty states plus the District of Columbia, the U.S. Virgin Islands and Puerto Rico.

    • For a complete listing of valid State Codes, see below:

    State Code State
    AL Alabama
    AK Alaska
    AZ Arizona
    AR Arkansas
    CA California
    CO Colorado
    CT Connecticut
    DC District of Columbia
    DE Delaware
    FL Florida
    GA Georgia
    HI Hawaii
    ID Idaho
    IL Illinois
    IN Indiana
    IA Iowa
    KS Kansas
    KY Kentucky
    LA Louisiana
    ME Maine
    MD Maryland
    MA Massachusetts
    MI Michigan
    MN Minnesota
    MS Mississippi
    MO Missouri
    MT Montana
    NE Nebraska
    NV Nevada
    NH New Hampshire
    NJ New Jersey
    NM New Mexico
    NY New York
    NC North Carolina
    ND North Dakota
    OH Ohio
    OK Oklahoma
    OR Oregon
    PA Pennsylvania
    PR Puerto Rico
    RI Rhode Island
    SC South Carolina
    SD South Dakota
    TN Tennessee
    TX Texas
    UT Utah
    VT Vermont
    VA Virginia
    VI U.S. Virgin Islands
    WA Washington
    WV West Virginia
    WI Wisconsin
    WY Wyoming

  4. Edit Line 13 as follows:

    If ... Then ...
    The State Code is present, Underline the State Code on Line 13.
    The State Name is spelled out (not abbreviated as a State Code), Edit the correct State Code. See table above
    More than one State Code or State Name is present, Circle all State Codes and continue editing the return.
    There are no State Codes or State Names present, Edit the State Code that corresponds with the taxpayer's address listed in the entity section of Form 1041.

Line 14 - FUTA Contributions Paid

  1. "X" Line 14 when the taxpayer has notated "0%" , "0% RATE" , or "ZERO PERCENT RATE" , etc. as the only entry.

Line 15 - Total FUTA Wages

  1. Accept taxpayer's entry.

Line 16 - FUTA Tax

  1. Accept taxpayer's entry.

Line 17, Column (a) - FUTA State Code

  1. A valid State Code (two alpha characters) must be present if there are significant entries in Section B of Schedule H.

  2. Valid State Codes are the fifty states plus the District of Columbia, the U.S. Virgin Islands and Puerto Rico. See IRM 3.11.14.26.19(3), Line 13 - State Code, for a complete listing of valid State Codes.

  3. Edit Line 17(a) as follows:

    If ... Then ...
    One or two State Codes are present, Underline the State Codes.
    More than two State Codes are present, or taxpayer notates SEE ATTACHED, Delete all State Codes.
    The State Name is spelled out (not abbreviated as a State Code),
    1. Delete the State Name.

    2. Edit the correct two-character State Code.

    There are no State Codes or State Names present, Edit the State Code that corresponds with the taxpayer's address listed in the Entity section of Form 1041.

Line 18, Column (h) - FUTA Contributions Paid

  1. "X" Line 18 when the taxpayer has written "0%" , "0% RATE" , or "ZERO PERCENT RATE" as the only entry.

Line 19 - FUTA Total Tentative Credit

  1. Compute and edit Line 19 when it is blank by adding Lines 18(g) and 18(h).

  2. Edit line 19 of Schedule H as follows:

    If ... Then ...
    Line 19 is blank, but an entry is present on Line 18(g) and 18(h), Compute Line 19 by adding Lines 18(g) and 18(h).
    Lines 19, 18(g), and 18(h) are all blank, but an entry is present on Line 17(g) and 17(h), Compute Line 19 by adding Rows 1 and 2 of Lines 17(g) and 17(h).
    Lines 19, 18g, and 18(h) are all blank and Line 17(g) and 17(h) are also blank,
    1. Do not edit.

    2. Continue editing the return.

Line 20 - Total FUTA Wages

  1. Accept taxpayer's entry.

Line 24 - FUTA Tax

  1. Accept taxpayer's entry.

Loose Schedule H

  1. Taxpayers who are not required to file Form 1041 may still be required to file Schedule H (Form 1040). These taxpayers will file Schedule H alone.

    If a loose Schedule H is received ... Then ...
    With a payment, The Deposit function will notate "LOOSE SCHEDULE H" on the form and forward it to Code and Edit.
    Without a payment, Receipt & Control will route the Schedule H directly to Code and Edit.

  2. Route loose Schedules H to Receipt and Control, Media Transport Unit when "TRUST" or "ESTATE" is not noted in the Name Line.

    Note:

    Work leaders will review all forms to ensure transshipment is required prior to forwarding to the Media Transport Unit.

  3. Process all loose filed Schedule H with "TRUST" or "ESTATE" notated on the Name Line as BMF. Also, process as BMF, any loose filed Schedule H received with an EIN and a BMF Name Line (e.g., Kennedy Christian Church, Johnson's Home for the Elderly).

  4. Loose filed Schedule H received with remittance will have already been researched to obtain the Tax Period Ending and decide whether the taxpayer had a filing requirement for a Form 1041 (MFT 05) or a Form 1040 (MFT 30).

    • Calendar Year Schedule H With Remittance - shown by the notation "LOOSE BMF SCHEDULE H" or "LOOSE BMF SCHEDULE H, 200X12" on Schedule H.

    • Fiscal Year Schedule H With Remittance - shown by the same notation as calendar year filers, except the Tax Period Ending will be other than blank or "12" .

      Example:

      The notation might read "LOOSE BMF SCHEDULE H, 200X06" .

    • Calendar or Fiscal Year Schedule H With No Remittance - Schedule will not have any notation.

Loose Filed Calendar Year Schedule H (with Remittance)
  1. Loose filed Calendar Year Schedule H received with remittance will have the notation "LOOSE BMF SCHEDULE H" or "LOOSE BMF SCHEDULE H, 200X12" . Edit the tax year of the loose filed Schedule H as follows:

    If ... Then ...
    TY 2011 or later,
    1. Prepare a Dummy Form 1041 (see (2) below).

    2. Edit Action Code 480.

    TYs 2010 through 1995,
    1. Prepare a "Dummy" Form 1041 (see Item (2), below).

    2. Edit CCC "8" .

    3. Continue processing the "Dummy" Form 1041 and Schedule H.

    TY 1994 and Prior, Send Schedule H back to the taxpayer.

  2. "Dummy" Form 1041 Procedures - When preparing a "Dummy" Form 1041, ensure that all the following information is entered:

    1. Complete the Entity part of the return using information given from the Name Line at top of Page 1 and the Signature and Address Sections at bottom of Page 2.

    2. Edit Fiduciary Code "4" and Trust Code "3" Family Estate Trust.

    3. Edit lines 7 and 18b Schedule G and Form 1041, Line 26 as follows:

      If ... Then ...
      Line 8d, Schedule H has an amount, Edit the amount to Line 7, Schedule G.
      Line 8e, Schedule H, has an amount, Edit the amount to Line 18b, Schedule G.
      Line 8f, Schedule H, has an amount, Edit the amount to Line 18b, Schedule G.
      Line 26, Schedule H, has an amount, Edit the amount to Line 7, Schedule G.

Loose Filed Calendar Year Schedule H (without Remittance)
  1. Loose filed Calendar Year Schedule H received without remittance will not have any indication of the Tax Period Ending or the Filing Requirement notated on the document.

  2. Assume that the Schedule H was filed for an IMF (Form 1040) account unless the taxpayer has notated "TRUST" or "ESTATE" on Schedule H. If this is notated, process as a BMF (Form 1041) return:

    1. Follow local procedures for researching the BMF and edit the Tax Period Ending and Filing Requirement as follows:

    If ... Then ...
    Calendar Year Return,
    1. Prepare a "Dummy" Form 1041.

    2. Continue processing the "Dummy" Form 1041 and Schedule H.

    Fiscal Year Return, Process as instructed in IRM 3.11.14.26.28.3, Loose Filed Fiscal Year Schedule H (with or without Remittances).

Loose Filed Fiscal Year Schedule H (with or without Remittance)
  1. Federal employment taxes for household employees must be reported on a calendar year basis on Schedule H (Form 1040) for Tax Year ending 1995 or later.

  2. Process all loose filed Fiscal Year Schedule H's as follows:

    1. Issue Letter 177C to the taxpayer using an approved Correspondence Action Sheet. Enter the following in the "Fill–Ins" Section of the approved Correspondence Action Sheet:

      WE CANNOT PROCESS YOUR SCHEDULE H (FORM 1040) AS FILED WITHOUT A COMPLETED FORM 1041 (U.S. INCOME TAX RETURN FOR ESTATES AND TRUSTS). THE INFORMATION REPORTED ON LINE 6 OF YOUR FORM 1041, SCHEDULE G, MUST BE SUPPORTED BY THE INFORMATION ON YOUR SCHEDULE H.

      EFFECTIVE TY 1995, FEDERAL EMPLOYMENT TAXES FOR HOUSEHOLD EMPLOYEES MUST BE REPORTED ON A CALENDAR YEAR BASIS ON SCHEDULE H (FORM 1040). IF YOU FILED YOUR SCHEDULE H TO REPORT HOUSEHOLD EMPLOYMENT TAX (HET) FOR A FISCAL YEAR ENDING IN 2011, YOUR SCHEDULE H SHOULD HAVE HET FOR THE PERIOD JANUARY 1, 2010, THROUGH DECEMBER 31, 2010. RETURNS FILED WITH A FISCAL YEAR ENDING IN 2010 SHOULD HAVE HET FOR THE PERIOD JANUARY 1, 2009, THROUGH DECEMBER 31, 2009.

      WE WILL APPLY THE PAYMENT YOU SENT AS AN ESTIMATED PAYMENT TO YOUR FORM 1041 ACCOUNT FOR THE FISCAL PERIOD ENDING IN 2010. THE PAYMENT WILL BE APPLIED UNDER EMPLOYEE IDENTIFICATION NUMBER (EIN). IF THIS IS NOT THE CORRECT EIN, PLEASE LET US KNOW.

      Note:

      Use this paragraph for Remittance returns only.

      IF THE TAXES WERE ERRONEOUSLY REPORTED AND YOU DO NOT WANT YOUR PAYMENT APPLIED BUT INSTEAD WANT EITHER A REFUND OR THE PAYMENT NEEDS TO BE APPLIED TO ANOTHER TAX PERIOD, PLEASE WRITE TO US AT THE ADDRESS AT THE TOP OF THIS LETTER. IF YOU PREFER, YOU MAY CALL THE IRS TELEPHONE NUMBER LISTED IN THE LOCAL DIRECTORY. AN EMPLOYEE THERE SHOULD BE ABLE TO HELP YOU, BUT THE OFFICE AT THE ADDRESS SHOWN ON THIS LETTER IS THE MOST FAMILIAR WITH YOUR CASE.

      Note:

      Use this paragraph for Remittance returns only.

Loose Filed Amended Schedule H
  1. If the taxpayer has filed a Schedule H (Form 1040) with the notation "AMENDED" , "SUPPLEMENTAL" , "CORRECTION" or any other phrase signifying that the filing is for other than the original filing of the Schedule H:

    1. Edit CCC "G" (Amended Return) on the "Dummy" Form 1041.

    2. Continue editing the return.

Schedule D (Form 1041) - Capital Gains and Losses

  1. Only accept a Schedule D (Form 1041) version. If a Schedule D other than a Schedule D (Form 1041) version is submitted to support the entry on line 4 (Form 1041), then correspond for the Schedule D (Form 1041).

  2. Edit Schedule D in dollars only.

  3. Only one Schedule D is processed. If more than one is attached, Do the following:

    Note:

    If Line 19(3)/20 is blank, compute by adding Lines 19(1) and 19(2), Use the comparison with Line 4, Form 1041. It is not necessary to edit Line 19(3).

    If ... Then ...
    Line 4 of Form 1041 equals Line 19(3)/20 of one of the Schedules D,
    1. Process the Schedule D that matches Line 4 of Form 1041. Ensure that it is the first Schedule D in sequence order.

    Line 4 of Form 1041 equals the combined totals of the multiple Schedules D Line 19(3)/20,
    1. Edit the combined totals of the Schedules D to the first Schedule D.

    2. Bracket if negative.

    Line 4 of Form 1041 equals Line 19(3) or Line 20 on more than one of the attached Schedules D,
    1. X any Schedules D with annotations such as Alternative Minimum Tax, AMT, S-Corp part, ESBT part, etc.

    Line 4 of Form 1041 doesn't equal Line 19(3) or Line 20 on any of the attached Schedules D, Correspond for the correct Schedule D amount.

Schedule D, Part I and II (Page 1)

  1. Transcription of page 1, Schedule D will be for tax year 2013 and subsequent tax returns with a current revision of Schedule D attached. We are capturing the data entered on the Schedule D. If a 201311 or prior revision is used, convert page 2 line numbers and edit as necessary. Line through the line numbers on page 1, Schedule D.

Schedule D, Part III, (Page 2)

  1. When Schedule D (Form 1041) is attached the following lines will be transcribed from Schedule D, Part III Column 2, Page 2.

    • Line 17 (Net Short-Gain or Loss) - Positive or negative.

    • Line 18a (Net Long-Term Gain or Loss) - Positive or negative.

    • Line 18b (Unrecaptured Section 1250 Gain) - Positive only. Don’t"X" if negative.

    • Line 18c (28% Rate Gain or Loss) - Positive or negative.

    • Line 19 (Total Net Gain or Loss) - Positive or negative.

  2. Line 4 is verified with entries, if any reported on Schedule D, Part III, columns (1), (2), and/or (3).

    • "Dummy" Schedule D, Page 2 if missing, if return is TY 2013 or later:

      Exception:

      Do not verify or "dummy" if attached to a "Nontaxable" Grantor Trust. Do not Dummy if corresponding for other missing items, has the request for Schedule D in the correspondence.

    If ... Then ...
    The Schedule D, Line 7 amount equals Line 4 (Form 1041) and no amount on Schedule D, Line 16,
    1. Edit the Line 7 amount to Lines 17(2) and 19(2).

    2. Bracket if negative.

    The Schedule D, Line 16 amount equals Line 4 (Form 1041) and no amount on Schedule D, Line 7,
    1. Edit the Line 16 amount to Lines 18a (2) and 19 (2).

    2. Bracket if negative.

    The total of Schedule D, Lines 7 and 16 equals Line 4 (Form 1041),
    1. Edit the Line 7 amount to Lines 17(2).

    2. Edit the Line 16 amount to Lines 18a(2).

    3. Compute the total of Lines 17(2) and 18a(2). Edit the total to Line 19(2).

    4. Bracket if negative.

    The total of Schedule D, Lines 7 and 16 doesn't equal Line 4 (Form 1041),
    1. Do not dummy Schedule D, Page 2.

    2. Correspond.

      Exception:

      Don’t correspond if negative amount.

    If Schedule D, Part III, Columns (1) and (2) are both blank … And ... Then ...
    Line 17, Schedule D, Line 7 has an entry,
    1. Edit the amount from Line 7 to Line 17(2).

    2. Bracket if negative.

    Line 17, Schedule D, Line 7 is blank but there are entries in Lines 1a - 6, Column (h),
    1. Compute the total of Lines 1a - 6 Column (h) and edit to Line 17(2).

    2. Bracket if negative.

    Line 18a, Schedule D, Line 16 has an entry,
    1. Edit the amount from Line 16 to Line 18a (2).

    2. Bracket if negative.

    Line 18a, Schedule D, Line 16 is blank but there are entries in Lines 8a - 15, Column (h),
    1. Compute the total of Lines 8a - 15, Column (h) and edit to Line 18a (2).

    2. Bracket if negative.

    If ... And ... Then ...
    Line 19 is blank, Entry(s) present in Line 17, Column (2) and/or Line 18a, Column (2),
    1. Compute the total of Line 17(2) and Line 18a(2).

    2. Edit the amount to Line 19(2).

    3. Bracket if negative.

  3. Verify Line 4 of Form 1041 with amounts reported on Schedule D, Part III as follows:

    Exception:

    If the ESBT box is checked on Form 1041, don’t edit money amounts from Schedule D to Line 4 of Form 1041.

    If ... And ... Then ...
    Line 4 has a positive entry, Line 4 equals Line 19(3), Do not edit.
    Line 4 has a positive entry, Line 4 doesn't equal Line 19(3),

    Note:

    Compute line 19(3) when necessary.

    1. "X" the amount on Line 4.

    2. Edit the amount reported on Line 19(3) of Schedule D in its place.

    Line 4 has a ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, Line 4 equals Line 20 (Line 19(3), if Line 20 is blank, zero or illegible), Do not edit.
    Line 4 has a ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, Line 4 doesn't equal Line 20 (Line 19(3), if Line 20 is blank, zero, or illegible),
    1. X” the amount on Line 4.

    2. Edit the amount reported on Line 20 (Line 19(3) if Line 20 is blank, zero, or illegible) in its place.

    3. Bracket the edited amount.

      Note:

      Do not edit more than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

    Line 4 has a ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, Form 1041 is not a final return,
    1. "X" the amount on Line 4.

    2. Edit ≡ ≡ ≡ ≡ ≡ on Line 4.

    3. Bracket the edited amount.

    See Figure 3.11.14-54, Line 4 - Capital Gains and Losses (Sch D, Form 1041).
    Line 4 has a ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, Form 1041 is a final return, DO not edit.
    Line 4 is blank, zero, or illegible, A positive entry, a gain is present on Line 19(3), Edit the amount from Line 19(3) to Line 4 of Form 1041.
    See Figure 3.11.14-54, Line 4 blank - Schedule D Income/Loss.
    Line 4 is blank, zero, or illegible, A negative entry, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ present on Line 20 (Line 19(3), if Line 20 is blank, zero, or illegible),
    1. Edit the amount from Line 20 (Line 19(3) if Line 20 is blank, zero, or illegible) to Line 4 of Form 1041.

    2. Bracket the edited amount.

    Figure 3.11.14-54

    This is an Image: 33490054.gif

    Please click here for the text description of the image.

    Figure 3.11.14-55

    This is an Image: 33490055.gif

    Please click here for the text description of the image.

Schedule D, Part V (Page 2)

  1. Schedule D, Part V, page 2, Tax Computation Using Maximum Capital Gains Rates, is completed by the taxpayer when both Lines 18a and 19 in column (2) are gains, or an amount is entered in Part I or Part II and there is an entry on Form 1041, Line 2b (2) and Form 1041, line 23 is more than zero.

  2. If Line 43 is blank, compute by adding Lines 37, 41, and 42.

  3. If an amount is present on Line 23 of Schedule D and Form 1041, Page 1 Line 2b (2) is blank, edit the amount from Schedule D, Line 23 to Line 2b(2) of Form 1041.

    Exception:

    If the ESBT box is checked on Form 1041, do not edit the amount to Line 2b (2) of Form 1041.

  4. If a positive amount is present on Line 45 of Schedule D and Line 1a of Schedule G is blank, edit amount from Line 45 to Line 1a of Schedule G.

Schedule D-1, Continuation

  1. Schedule D-1 (Form 1041) is used to report gains and losses from the sale or exchange of capital assets if there are more transactions to report than spaces on Lines 1a or 6a of Schedule D

    Note:

    Schedule D-1 is not valid for returns after 201212.

  2. Schedule D-1 should be attached to support Line 1b and/or Line 6b of Schedule D.

    Note:

    Do not correspond for missing Schedule D-1 unless you are corresponding for other items and the return is 201212 or earlier.

  3. If an amount is present on Line 6b of Schedule D and Schedule D-1 or supporting attachment is missing:

    If ... Then ...
    Corresponding for other missing information, i.e., Schedules, Forms, signature, etc., Add the request for missing Schedule D-1 in the correspondence to the filer.
    No other correspondence items, Do not edit.

  4. Move Schedule D-1 out of the sequence order for Form 1041.

Form 8949 - Sales and Other Dispositions of Capital Assets

  1. Form 8949 is valid for Tax Periods 201712 and later.

  2. The Form 8949 should be placed in sequenced order following Schedule D. If there are more than one Form 8949 attached, sequence the Form 8949 with the edited data. See IRM 3.11.14.3.3, Sequence - Form 1041.

Line 1(f) - Part I Short-Term (Page 1)

  1. If the taxpayer has entered a "Z" or "Y" in any rows of Part I, Line 1, Column (f), edit a CCC "M" .

  2. If a code "Z" is present for any row on Line 1, Column (f), then edit the first line row with the code "Z" as follows:

    If ... Then ...
    An EIN is present in column (a) Underline the EIN
    No EIN is present or is eligible in column (a) Do not edit.
    A Date Acquired present in column (b) Underline the Date Acquired present
    No Date Acquired present or is eligible in column (b) Do not edit.
    A dollar amount is present in column (g). Underline the dollar amount.
    No dollar amount is present in column (g). Do not edit.
    If more than one row has a “Z” in Column (f) Edit a "Z-1" to the right margin of Part I, Line 1, Row 1.

  3. If a code "Y" is present for any row on Line 1, Column (f), then edit the first line row with the code "Y" as follows:

    If ... Then ...
    An EIN is present in column (a) Underline the EIN
    No EIN is present or is eligible in column (a) Do not edit.
    A Date Acquired present in column (b) Underline the Date Acquired present
    No Date Acquired present or is eligible in column (b) Do not edit.
    A dollar amount is present in column (g). Underline the dollar amount.
    No dollar amount is present in column (g). Do not edit.
    If more than one row has a “Y” in Column (f) Edit a "Y-1" to the right margin of Part I, Line 1, Row 1.

Line 1(f) - Part II Long-Term (Page 2)

  1. If the taxpayer has entered a "Z" or "Y" in any of the rows in Part II, Line 1, Column (f), edit a CCC "M" .

  2. If a code "Z" is present for any row on Line 1, Column (f), then edit the first line row with the code "Z" as follows:

    If ... Then ...
    An EIN is present in column (a) Underline the EIN
    No EIN is present or is eligible in column (a) Do not edit.
    A Date Acquired present in column (b) Underline the Date Acquired present
    No Date Acquired present or is eligible in column (b) Do not edit.
    A dollar amount is present in column (g). Underline the dollar amount.
    No dollar amount is present in column (g). Do not edit.
    If more than one row has a “Z” in Column (f) Edit a "Z-1" to the right margin of Part II, Line 1, Row 1.

  3. If a code "Y" is present for any row on Line 1, Column (f), then edit the first line row with the code "Y" as follows:

    If ... Then ...
    An EIN is present in column (a) Underline the EIN
    No EIN is present or is eligible in column (a) Do not edit.
    A Date Acquired present in column (b) Underline the Date Acquired present
    No Date Acquired present or is eligible in column (b) Do not edit.
    A dollar amount is present in column (g). Underline the dollar amount.
    No dollar amount is present in column (g). Do not edit.
    If more than one row has a “Y” in Column (f) Edit a "Y-1" to the right margin of Part II, Line 1, Row 1.

Form 8995 / Form 8995-A - Qualified Business Income Deduction

  1. This subsection has instructions for processing one of the following two forms:

    • Form 8995, Qualified Business Income Deduction Simplified Computation

    • Form 8995-A, Qualified Business Income Deduction

  2. These forms will only be edited for Tax Period 201912 and later.

  3. The Form 8995 or Form 8995-A should be placed in sequenced order following Form 8949.

  4. If an amount is present on Line 20, Form 1041, then Form 8995 or Form 8995-A must be attached. Do not correspond if missing, the return will systemically go to ERS for correction.

Line 3 or Line 2 - Qualified Business Net Loss Carryforward

  1. Line 3 is from Form 8995 and Line 2 is from Form Schedule C (Form 8995-A).

  2. If an amount is present, accept the entry.

Line 5 or Line 27 - Qualified Business Income Component

  1. Line 5 is from Form 8995 and Line 27 is from Form 8995-A.

  2. If an amount is present, accept the entry.

Line 7 or Line 29 - Qualified REIT Dividends and PTP Loss Carryforward

  1. Line 7 is from Form 8995 and Line 29 is from Form 8995-A.

  2. If an amount is present, accept the entry.

Line 9 or Line 31 - Qualified REIT/PTP Component

  1. Line 9 is from Form 8995 and Line 31 is from Form 8995-A.

  2. If an amount is present, accept the entry.

Line 12 or Line 34 - Net Capital Gains

  1. Line 12 is from Form 8995 and Line 34 is from Form 8995-A.

  2. If an amount is present, accept the entry.

Line 16 or Line 6 - Total Qualified Business Loss Carryforward

  1. Line 16 is from Form 8995 and Line 6 is from Form Schedule C (Form 8995-A).

  2. If an amount is present, accept the entry.

Line 38 - Domestic Production Activities Deduction

  1. Line 38 is from Form 8995-A.

  2. If an amount is present, accept the entry.

Line 17 or Line 40 - Total Qualified REIT Dividends and PTP Loss Carryforward

  1. Line 17 is from Form 8995 and Line 40 is from Form 8995-A.

  2. If an amount is present, accept the entry.

Form 4136 - Credit for Federal Tax Paid on Fuels

  1. Form 4136, Credit for Federal Tax Paid on Fuels, must be attached if a significant entry is present on Line 16b, Schedule G. Correspond if Form 4136 is missing.

  2. Form 4136 should be placed in sequence order.

  3. If Fuel Tax Credit is claimed on Line 16b, Schedule G and Form 4136 is attached:

    • Perfect column (d) if blank when there is an entry in Column 9(c).

    • Column (d) should equal Line 17, Form 4136. If perfection is not possible, correspond.

  4. Code and Edit is not required to renumber the lines on prior year Form 4136 to current year format. Column (d) credit amounts are transcribed using the corresponding Credit Reference Number (CRN) in Column (e).

Form 8978 - Partner’s Audit Liability Under Section 6226

  1. The form will only be edited for Tax Period 201712 and later.

  2. Place Form 8978 and or Schedule A (Form 8978) in sequence order and should follow Form 4136 if any if the following apply:

    • Any of the “Source of review year adjustments” check boxes are checked on Form 8978 or Schedule A (Form 8978).

    • Significant entries are present on Form 8978, Part I, Line 14, Part II, Line 16, or Part III, Line 18.

      Note:

      No editing is required for these lines.

Source of Review Year Adjustment Check Boxes (Form 8978 and Schedule A (Form 8978)

  1. Located just below the Name of Partners box for Form 8978 and Schedule A (Form 8978).

  2. The Check Boxes are valid for Tax Period 202112 and later.

  3. If the tax period is not valid, edit the check boxes for non-transcription.

  4. If the tax period is valid, edit the digit to the right margin of Form 8978, Part I row as follows:

    If... And... Then...
    Only Form 8978 is attached, One or more of the boxes are checked, Edit:
    1. "1" if the BBA check box is marked.

    2. "2" if the AAR check box is marked.

    3. "3" if Both the BBA and AAR check boxes are marked.

    Form 8978 and Schedule A (Form 8978) are attached, The boxes on Form 8978 and Schedule A (Form 8978) are marked the same, Use the Form 8978 data and edit the Form 8978 Source of Review Year Adjustment Checkbox digit as indicated above.
    Form 8978 and Schedule A (Form 8978) are attached, The boxes on Form 8978 are marked differently on Schedule A (Form 8978), Use the Schedule A (Form 8978) data and edit on Form 8978 Source of Review Year Adjustment Checkbox digit as indicated above.
    Only Schedule A (Form 8978), is attached,   No editing is required.

Line 14, Part I - Total Reporting Year Tax

  1. The amount is positive or negative.

  2. If the entry is a negative amount, then edit the amount as negative.

Line 16, Part II - Total Penalties

  1. If an amount is present, accept the entry.

Line 18, Part III - Total Interest Amount

  1. If an amount is present, accept the entry.

Form 965-A - Individual Report of Net 965 Tax Liability

  1. This form is only filed for Tax Period 201712 and later or until the taxpayer’s liability is paid in full. If the Tax Period on the return is 201711 and prior, then edit the Form 965-A for non-transcription.

  2. Place Form 965-A in sequence order and should follow Form 8978.

  3. If an amount is present on Line 25, Form 1041 or Line 15, Part II, Schedule G, and Form 965-A is not attached, then correspond for Form 965-A.

    Exception:

    For Tax Period 202112 and later returns do not correspond. Form 965-A will not be attached to Form 1041 or 1041-N for Tax Year 2021 and later.

  4. Edit CCC "J" if the return is shown as Section 965 return as follows:

    If ... Then ...
    Tax Period is 202012 and later, Any of the following apply:
    1. Amount on Line 25, Form 1041 (Line 19, Form 1041-N).

    2. Amount on Line 15, Sch. G, Part II, Form 1041.

    3. Form 965-A attached and:

      • Amount on Line 4, Columns (a), (j) or (k).

      • Amount on Line 4, Columns (f), Part II.

    4. "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

    Tax Period is 201912 - 202011, Any of the following apply:
    1. Amount on Line 25, Form 1041 (Line 19, Form 1041-N).

    2. Amount on Line 15, Sch. G, Part II, Form 1041.

    3. Form 965-A attached and:

      • Amount on Line 3, Columns (a), (j) or (k).

      • Amount on Line 3, Columns (f), Part II.

    4. "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

    Tax Period is 201812 - 201911, Any of the following apply:
    1. Amount on Line 24, Form 1041 (Line 19, Form 1041-N).

    2. Amount on Line 25f, Form 1041.

    3. Form 965-A attached and:

      • Amount on Line 2, Columns (a), (j) or (k).

      • Amount on Line 2, Columns (f), Part II.

    4. "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

    Tax Period is 201712 - 201811, Any of the following apply:
    1. Form 965-A attached and:

      • Amount on Line 1, Columns (a), (j) or (k).

      • Amount on Line 1, Columns (f), Part II.

    2. "Section 965" or "965 Tax" (or similar language) notated on the return, attachments, or statements.

  5. Edit CCC "B" if the return has a Section 965(i) election listed as follows:

    If ... Then ...
    Tax Period is 202012 - 202211 Form 965-A attached and both entries are present:
    • Part I, Line 4, Column (e).

    • Part III, Line 4, Column (e).

    Tax Period is 201912 - 202011, Form 965-A attached and both entries are present:
    • Part I, Line 3, Column (e).

    • Part III, Line 3, Column (e).

    Tax Period is 201812 - 201911, Form 965-A attached and both entries are present:
    • Part I, Line 2, Column (e).

    • Part III, Line 2, Column (e).

    Tax Period is 201712 - 201811, Form 965-A attached and both entries are present:
    • Part I, Line 1, Column (e).

    • Part III, Line 1, Column (e).

  6. If CCC "J" or "B" (Section 965(i) Election) was edit on a Tax Period 201712 - 201811 return, edit as follows:

    If ... Then ...
    Form 965-A is attached and both entries are present:
    • Line 1, Column (f), Part I

    • Line 1, Column (g), Part 1, Yes box marked.

    • Edit Action Code 460 on the return.

    • Attach to return Form 4227 to route to ERS Rejects.

    • Notate on Form 4227 Sec. 965 CCC B/J.

Part I - Report of Net Tax Liability and Election to Pay Installments

  1. This part may have data for Tax years 2017 through 2020.

  2. Each Line row will pertain to a specific Tax Year and the following line rows may be edited according to the instructions given in this subsection:

    • Line 1 row - Tax Year 2017 Columns (a), (j), and (k)

    • Line 2 row - Tax Year 2018 Columns (a), (j), and (k)

    • Line 3 row - Tax Year 2019 Columns (a), (j), and (k)

    • Line 4 row - Tax Year 2020 Columns (a), (j), and (k)

    • Left of Line 6 row - Part I Additional Information Indicator

Line 1 Row - 1(a), 1(j) and 1(k)
  1. This line row is for Tax Year 2017

  2. Edit as follows:

    Line ... Line name ... Editing ...
    1(a) Inclusion Liability Triggering Event Year 1 If the Year is other than 2017, then edit the year to the correct line year
    1(j) Net Tax Liability Transferred Amount 1 If the amount entered is a negative amount, then edit the amount as negative.
    1(k) Buyer Seller Transferrer Tax ID Number 1 Accept the entry as entered.

Line 2 Row - 2(a), 2(j) and 2(k)
  1. This line is for Tax Year 2018

  2. Edit as follows:

    Line ... Line name ... Editing ...
    2(a) Inclusion Liability Triggering Event Year 2 If the Year is other than 2018, then edit the year to the correct line year
    2(j) Net Tax Liability Transferred Amount 2 If the amount entered is a negative amount, then edit the amount as negative.
    2(k) Buyer Seller Transferrer Tax ID Number 2 Accept the entry as entered.

Line 3 Row - 3(a), 3(j) and 3(k)
  1. This line is for Tax Year 2019

    Line ... Line name ... Editing ...
    3(a) Inclusion Liability Triggering Event Year 3 If the Year is other than 2019, then edit the year to the correct line year
    3(j) Net Tax Liability Transferred Amount 3 If the amount entered is a negative amount, then edit the amount as negative.
    3(k) Buyer Seller Transferrer Tax ID Number 3 Accept the entry as entered.
Line 4 - Row 4(a), 4(j) and 4(k)
  1. This line is for Tax Year 2020

    Line ... Line name ... Editing ...
    4(a) Inclusion Liability Triggering Event Year 4 If the Year is other than 2020, then edit the year to the correct line year
    4(j) Net Tax Liability Transferred Amount 4 If the amount entered is a negative amount, then edit the amount as negative.
    4(k) Buyer Seller Transferrer Tax ID Number 4 Accept the entry as entered.
Line 6 - Part I Additional Information Indicator
  1. If the taxpayer has entered information in any columns for line 6 or subsequent lines, edit a "1" to left of line 6.

Part IV - Annual Report of Deferred Net 965 Tax Liability

  1. This part may have data for Tax years 2017 through 2020.

  2. Each Line row will pertain to a specific Tax Year and the following line rows may be edited according to the instructions given in this subsection:

    • Line 1 row - Tax Year 2017 columns (f)

    • Line 2 row - Tax Year 2018 columns (f)

    • Line 3 row - Tax Year 2019 columns (f)

    • Line 4 row - Tax Year 2020 columns (f)

    • Line 5 row - Tax Year Columns (f)

    • Left of Line 6 - Part IV Additional Information Indicator

    • Line 10 - Column (j)

Line 1(f) - 2017 Net Tax Liability Triggered Amount 1
  1. This entry is valid for Tax Year 2017 and is dollars only and negative only.

  2. If the amount is for Tax Year 2017, accept the entry.

  3. If the amount is for a tax year other than 2017, edit the entry to the correct Tax Year line column (f).

Line 2(f) - 2018 Net Tax Liability Triggered Amount 1
  1. This entry is valid for Tax Year 2018 and is dollars only and negative only.

  2. If the amount is for Tax Year 2018, accept the entry.

  3. If the amount is for a tax year other than 2018, edit the entry to the correct Tax Year line column (f).

Line 3(f) - 2019 Net Tax Liability Triggered Amount 1
  1. This entry is valid for Tax Year 2019 and is dollars only and negative only.

  2. If the amount is for Tax Year 2019, accept the entry.

  3. If the amount is for a tax year other than 2019, edit the entry to the correct Tax Year line column (f).

Line 4(f) - 2020 Net Tax Liability Triggered Amount 1
  1. This entry is for Tax Year 2020 and is dollars only and negative only.

  2. If the amount is for Tax Year 2020, accept the entry.

  3. If the amount is for a tax year other than 2020, edit the entry to the correct Tax Year line column (f).

Line 6 - Part IV Additional Information Indicator
  1. If the taxpayer has entered information in any columns for line 6 or subsequent lines, edit a "1" to left of line 6.

Column (i) Total - Total Deferred Net Tax Liability Amount
  1. This entry is the total deferred amounts of all year's combined from line rows 1 - 10 in column (i). This amount is dollars only and positive only.

  2. Accept the entry as entered.

Form 8941 - Credit for Small Employer Health Insurance Premiums

  1. Place Form 8941 in sequence order if significant entries are present.

  2. Form 8941, Credit for Small Employer Health Insurance Premiums, is required to be filed with 1041 returns when claiming any amount on Form 3800, Part III, Line 4h, unless there is an EIN next to it, then Form 8941 is not required.

  3. If Form 8941 is required but not attached, or incomplete, correspond.

  4. For more information on Form 8941, see IRM 3.11.14.35.42, Line 4h - Credit for Small Employer Health Insurance Premiums (Form 8941).

Reserved

  1. Reserved,

Form 3800 - General Business Credit

  1. Form 3800, General Business Credit, is required to be filed with the return when an amount is present on Schedule G, Line 2b, General Business Credit.

  2. Place Form 3800 in sequence order if significant entries are present.

  3. For Tax Year 2022 and prior - If multiple copies of page 3, Form 3800 are attached follow the instructions below:

    If ... And ... Then ...
    More than one copy of Page 3, Form 3800 is attached, Box I is checked on one copy of Page 3,
    1. Place copy with Box I checked behind Page 2, Form 3800.

    2. Staple all copies of Page 3 together.

    More than one copy of Page 3, Form 3800 is attached, Box I is checked on more than one copy of Page 3,
    1. Place first copy of Page 3 with Box I checked behind Page 2, Form 3800.

    2. Staple all copies of Page 3 together.

    More than one copy of Page 3, Form 3800 is attached, Box I is not checked on any copy of Page 3, Staple all copies of page 3 toget