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

Manual Transmittal

November 07, 2017

Purpose

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

Material Changes

(1) Made various editorial changes throughout the IRM, including tax years, line numbers, and tax rate changes.

(2) IRM 3.11.14.1 Added new requirements for Internal Controls.

(3) IRM 3.11.14.1.1 Added required Background

(4) IRM 3.11.14.1.2 Added required Authority

(5) IRM 3.11.14.1.3 Added required Responsibilities

(6) IRM 3.11.14.1.4 Added required Program Management and Reviews

(7) IRM 3.11.14.1.5 Added required Program Controls.

(8) IRM 3.11.14.1.6 Added required Terms/Definitions

(9) IRM 3.11.14.1.7 Added required Related Resources

(10) IRM 3.11.14.1.8 Deleted. Contents moved to IRM 3.11.14.1.1.5.

(11) IRM 3.11.14.1.10 New wording for TAS subsection, breaking out existing instructions into additional paragraphs.

(12) IPU 17U0007 issued 01-03-2017 IRM 3.11.14.1.10(2) Changes to Criminal Investigation Referrals.

(13) IRM 3.11.14.1.16(3) Added additional CI referral criteria for Schedule G, line 2e.

(14) IPU 17U0452 issued 03-08-2017 IRM 3.11.14.2.1(4) Added that corrections to X’d amounts are edited to the left of, or above the X.

(15) IRM 3.11.14.2.2(1) Added to note don’t sequence forms with entity section only filled in.

(16) IRM 3.11.14.2.2(2) Detach all Schedules K-1 on current year and prior two years returns.

(17) 3.11.14.3 (4) Removed exception and added new paragraph (5).

(18) IRM 3.11.14.5.3.4(4) and (5) Added paragraphs on verifying taxpayers identity.

(19) IPU 17U0184 issued 01-26-2017 IRM 3.11.14.7.18(2) Added current year returns with current year Form 8938 revision only attached, are processed according to new 8938 instructions.

(20) IPU 17U0452 issued 03-08-2017 IRM 3.11.14.7.18(3) Edit CCC 2 on prior year returns.

(21) IRM 3.11.14.8.3(2) Consolidated rows on with return posted and no return posted for Prompt Determination Requests.

(22) IRM 3.11.14.9.2(1) Changed note to When two 1041 returns are received, staple up the ESBT portion only 1041 return along with its attachments, unless the Form 1041 has entity information only. Then put the ESBT portion 1041 return on top

(23) IPU 17U1122 issued on 7-11-2017 IRM 3.11.14.13.2(2) Added route to Entity using Form 13934, Merge Sheet.

(24) IRM 3.11.14.7.21(1) Added caution significant transcription amounts are needed for CCC 8.

(25) IPU 170499 issued 3-14-2017 IRM 3.11.14.7.18(3) Clarifying Edit CCC 2 but do not sequence to the back or place in designated basket.

(26) IRM 3.11.14.8.1(7) Detach all Schedules K-1 on current year and prior two years returns.

(27) IRM 3.11.14.8.2(2) Updated gross income to be exceeded for bankruptcy estates.

(28) IRM 3.11.14.8.6(6) Deleted paragraph referencing Schedules K-1.

(29) IPU 17U0007 issued 01-03-2017 IRM 3.11.14.8.7(1) Added new CI procedures for manual refunds.

(30) IRM 3.11.14.8.10(3) Added paragraph for exceptions for Statute returns.

(31) IRM 3.11.14.9.5 Missing Schedule Codes will no longer being used, correspond instead.

(32) IPU 17U0184 issued 01-26-2017 IRM 3.11.14.10(2) Added note for postmark or delivery date.

(33) IPU 17U0184 issued on 1-26-2017 IRM 3.11.14.10(2) Updated note for postmark.

(34) IRM 3.11.14.16.5(2) Added exception to not correspond if it’s a negative amount.

(35) IRM 3.11.14.17.4(4) Detach all Schedules K-1 on current year and prior two years returns.

(36) IRM 3.11.14.21.1(3) Deleted paragraph (3) and added reminder to (2) for CCC 8.

(37) IRM 3.11.14.27.2.30 Added subsection of Form 8830, Enhanced Oil Recovery Credit.

(38) IRM 3.11.14.35(2) Sequence Form 4952 only if transcription lines contain significant amounts

(39) IRM 3.11.14.45.11.8(6) moved conversion lines table to IRM 3.11.14.45.11.16(2)

(40) IRM 3.11.14.45.11.16(2) Added conversion lines table from IRM 3.11.14.45.11.8(6)

(41) IPU 17U0007 issued 01-03-2017 IRM 3.11.14.47(3) Added Form 14039-B to routing list.

(42) IRM 3.11.14.47(4) Broke row for Form 5495 into one Yes and one No rows.

(43) IRM Exhibit 3.11.14-20 Deleted Missing Schedule Codes as no longer being used.

(44) IRM Exhibit 3.11.14-20 Removed 2007 through 2009. Added 2006 to conversion chart and only show differences in lines.

(45) IRM Exhibit 3.11.14-23 Added exhibit for acronyms and abbreviations.

Effect on Other Documents

IRM 3.11.14 dated October 25, 2016 (effective 01-01-2017) is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs) - 17U0007, 17U0184, 17U0452, 17U0499, 17U0689, and 17U1122.

Audience

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

Effective Date

(01-01-2018)

Linda J. Brown
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)) indicate paragraph numbers to be followed in order.

  5. Alpha and bullet listings (e.g., a., b., c.) indicate 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 determine the proper corrective action.

  7. IRM 3.11.14 provides Code & Edit 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.

    Note:

    Only foreign trusts can claim Form 1042-S, Form 8288-A, and Form 8805 withholding credits. They should be filed on 1040-NR returns with an EIN and processed in Cincinnati on NMF. If received as Form 1041, convert and transship.

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

    • 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), Tax Payer 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 3.11.14.44Form 1041-QFT, Qualified Funeral Trusts,, for detailed instructions.

    • All Domestic Forms 1041-QFT will be processed at the Cincinnati Submission Processing Campus (CSPC) 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. AllForms 1041-N will be processed at the Ogden Submission Processing Campus (OSPC) only. See IRM 3.11.14.45, 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 coded and edited as prescribed in the applicable subsections of this section.

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 has been 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.

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

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

    Interpretation Words

    Word Definition Example of using a word that is open to interpretation. (This column is for illustration purposes only)
    Fair Provide 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 Used to indicate lines in figures and exhibits. See figures and exhibits.
    Timely Provide the time frame to consider what is or is not timely. Process all IMF adjustments in a timely fashion.
    Usually Provide 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 Determined based on whether the fiduciary is filing for a decedent's estate or trust. Exemption amounts are claimed on Line 20 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 can be 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 or 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 does not meet these requirements, it is a "Complex Trust" .

    Complex Trust A trust which, for the taxable year, does not 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 does not 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 include Decedent's Estate.
    Pooled Income Fund A fund maintained by a public charity which provides 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 Forms 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 3.11.14-23 , Acronyms and Abbreviations, for a list of common acronyms.

Related Resources

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

    • Servicewide Electronic Research Program (SERP)

    • Submission Processing Design Center (SPDC)

    • Integrated Data Retrieval System (IDRS)

Acronyms and Abbreviations

  1. See Exhibit 3.11.14-23.

♦IRS Employee Contacts - RRA98, IRC 3705(a)♦

  1. The Restructuring and Reform Act of 1998 (RRA98), IRC 3705(a), provides identification requirements for all IRS employees working tax-related matters. IRS employees are required to give their name and unique identification number during taxpayer telephone, face-to-face and written contact. In addition, a telephone number is required on all taxpayer correspondence. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax-related matters.

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

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

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

    3. Correspondence - All correspondence must include a telephone number that taxpayers can call for answers to any questions they may have. In addition, manually generated and handwritten correspondence must have the employee’s title (e.g., Mr., Mrs., Ms., or Miss), last name, and IDRS (Integrated Data Retrieval System) number, letter system number, or their badge identification (ID Card) number.

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

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

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

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

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

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

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

    Note:

    The Taxpayer Bill of Rights (TBOR), was adopted by IRS in June 2014 and provides that taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS. They are to be spoken to in a way that is easily understood and any correspondence from the IRS must be clear and understandable. They have the right to speak to a supervisor whenever quality service is not received.

♦Taxpayer Advocate Service (TAS)♦

  1. Per the Taxpayer Bill of Rights (TBOR), taxpayers have the right to expect a fair and just tax system which provides taxpayers with the opportunity to have their facts and circumstances considered when it might affect their underlying liabilities, ability to pay, or ability to provide information timely.

  2. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through normal channels. For additional information on the Taxpayer Bill of Rights, visit http://taxpayeradvocate.irs.gov/About-TAS/Taxpayer-Rights.

  3. Refer taxpayers to TAS when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria), or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), is attached and steps cannot be taken to resolve the taxpayer's issue the same day.

  4. "Same day" includes cases that can be resolved in 24 hours, as well as cases where steps can be taken within 24 hours to begin resolving the issue. (See also, IRM 13.1.7.4, Same Day Resolution by Operations.)

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

♦Taxpayer Advocate Service Level Agreements (SLA)♦
  1. The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage & Investment (W&I) Division, Small Business/Self-Employed (SB/SE) Division, Tax Exempt & Government Entities (TE/GE), Criminal Investigation (CI), Appeals and Large Business & International (LB&I)), that outline the procedures and responsibilities for the processing of 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 located at http://tas.web.irs.gov/policy/sla/default.aspx under the heading "Policy/Procedures/Guidance" .

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 some additional schedules and forms which may be filed with Form 1041:

    • Schedule C (Form 1040) (Profit or Loss From Business (Sole Proprietorship)).

    • Schedule D (Form 1041) (Capital Gains and Losses).

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

    • Schedule E (Form 1040) (Supplemental Income and Loss).

    • Schedule F (Form 1040) (Profit or Loss From Farming).

    • Schedule H (Form 1040) Household Employment Taxes.

    • Schedule I (Form 1041) (Alternative Minimum Tax).

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

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

    • 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.

♦Business Master File (BMF) Consistency♦

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

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

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

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

♦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 appropriate channels for executive approval.

♦Foreign Currency♦

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

♦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 includes, 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 $100,000,000 or more, do the following:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Other CI Referral Criteria:

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

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

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

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

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  4. For all other CI Referral criteria listed in paragraph (3), do the following:

    1. Make a copy of the return.

    2. Attach Form 4227 to the copy.

    3. Route the copy as indicated in the table below.

      Cincinnati Ogden
      Mail Stop 83G, Criminal Investigation (CI) Mail Stop 9001, Criminal Investigation (CI)
    4. Edit an action trail "Copy to CI" , or "CI Referral" , or similar language in the lower left corner going vertically up the side of the return.

    5. Continue processing the return.

  5. If CI has stamped the return, no further CI action is required.

  6. If the return fits other criteria (e.g., Frivolous Argument), take appropriate action.

♦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 provide support and assist Submission Processing (SP) with any questionable return identified during processing. Exam has a vast multitude of programs and tolerance criteria already identified in various IRM sections. Exam does not restrict SP with the flexibility to refer questionable returns other than what is currently identified 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.

♦BMF Identification (ID) Theft♦

  1. BMF Identification Theft is increasing. If a tax examiner in Submission Processing (SP) Code and Edit (C&E) finds a case with attachments or correspondence indicating the taxpayer is a victim of ID Theft, provide the whole case to your senior/lead. Your senior/lead will expedite the case to the Planning and Analysis (P&A) staff for referral to one of the SP BMF ID Theft liaisons. The taxpayer must indicate that they are a victim of "ID Theft" ; do not send cases that are subject to Criminal Investigation (CI), Examination (Exam) or "Fraud" review.

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

General Editing Guidelines

  1. The following general information can be used when editing Form 1041, U.S. Income Tax Returns for Estates or Trusts.

  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 indicated 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 appropriate tax year, convert the tax return to the current year format. See IRM 3.11.14.46.2(3), Prior Year Editing Procedures.

  7. If a current year (2017) return is filed on a 2000 - 2016 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 1041 tax form, renumber the prior year form to current year format (2000 and subsequent).

  8. If a current year (2017) form is used to report prior year tax information, edit the tax period to reflect the prior year.

♦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. The editing can be entered in brown, red, orange, purple or green pencil/pen.

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

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

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

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

    Note:

    If the taxpayer circles an entry, edit the entry.

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

    Note:

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

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

    Note:

    C&E is not required to bracket negative amounts when brackets are preprinted on the form or schedule or when the taxpayer clearly indicates a negative amount with brackets () or "-" sign. It will be necessary to 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 Indicates the separation of dollars and cents.
    Zero, Dash, None or N/A "ZERO" , "DASH" , "NONE" or "N/A" are considered valid entries except when specific instructions require editing of an entry.
    Edit Marks Made by Other IRS Functions Edit marks entered by other areas, such as Collections, Entity, or Accounts Management, are not to be re-edited except to place the marks in the correct area or to perfect for legibility. Do not edit (or write) over another area's edit marks.

    Exception:

    Photocopied Returns

    Photocopied Returns Re-edit or underline any valid, black edit marks. See IRM 3.11.14.45.3.1.1 , Correspondence Imaging System (CIS) Returns, and IRM 3.11.14.8.6, Re-Entry Document Procedures.
    Rocker Indicates 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

    • Schedule I (Form 1041)

    • Form 4952

    • Schedule H (Form 1040)

    • Schedule D (Form 1041)

    • Form 4136

    • Form 8941

    • Form 5884-B not valid for 201212 and subsequent

    • Form 3800

    • Form 8960

      Note:

      It is not necessary to sequence Schedule I, Schedule D, Form 4952, Schedule H, Form 4136, Form 8941, Form 5884-B, Form 8960, or Form 3800 if there are no transcription line entries, including forms with the entity section only filled in. There’s no need to X forms not in sequence order.

  2. Below are additional instructions:

    • Schedule D-1 (Form 1041), 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 3.11.14.27.3(2), Schedule G, Line 2c - Form 8801 (Credit for Prior Year Minimum Tax).
      *(Line 2d for 2009 and prior).

    • Place all Schedules K-1 (Form 1041), filed as attachments to Form 1041, as the last attachment in the package or follow local agreement. Detach current year and prior two years Schedules K-1 through November 30th and all future year Schedules K-1.

      Example:

      Tax years 2017, 2016, and 2015 Schedules K-1.

      See IRM 3.0.101.3(2)e, Schedule K-1 Processing, for Schedule K-1 procedures.

Dollar Tolerances

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

    • Line 23 - Total Tax

    • Line 24a -Estimated Tax Payments

    • Line 24b - Credit to Beneficiaries

    • Line 24d - Tax Paid With Extension

    • Line 24e - Federal Income Tax Withheld

    • Line 24f - Regulated Investment Company Credit

    • Line 25 - Total Payments

    • Line 26 - Estimated Tax Penalty

    • Line 27/28 - Tax Due/Overpayment

    • Line 29a - Credit Elect

    • Line 29b - Refund

    Note:

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

  2. For a display of Form 1041 transcription lines and related Forms and Schedules, see Exhibits 3.11.14-1 through 3.11.14-6.

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

  2. When necessary, a three-digit 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 include 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 3.11.14.3 (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).

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

CAF, Centralized Authorization File

  1. Editing of CAF codes is no longer required.

  2. The Centralized Authorization File (CAF) contains 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. Take no action.

    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 actions to be taken to resolve unprocessable conditions on Form 1041.

Unprocessable Conditions

  1. A return must contain 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 indicated, 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 determined.

    • 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 determined.

    • 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 contains no entity data, or the signature on the return is illegible and the alpha letter of the last name cannot be determined 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 Forms 1041 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 period 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 additional period returns.

    • Route the newly prepared returns for processing.

  3. If liability for two or more Forms 1041 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 period return to reflect the liability for the earliest period.

    2. Prepare additional period returns.

    3. Retain all these unnumbered returns in the batch.

  4. Reject all non-remittance Forms 1041 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 appropriate Key Area Examination function.

  5. For all other conditions, initiate 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. This includes:

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

    • Written communications, including annotated notice responses, that provide additional information or dispute a notice.

    • A telephone call that results in a written referral or research (Form e-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 does not constitute correspondence from the taxpayer.

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

    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 initiate research for a Transaction Code (TC) 150 and/or any other research necessary to determine if the return should continue to be processed or other actions taken. A duplicate return could include any of the following:

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

    • Incomplete returns indicating "Payment Only" .

    • Incomplete returns indicating 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. Examine the return so that all the conditions can be included in the same correspondence.

    If... And... Then...
    Correspondence is needed, Requires a response,
    1. Complete an approved Correspondence Action Sheet indicating the letter number (86C, 854C, 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, Does not require a response,
    1. Complete an approved Correspondence Action Sheet indicating the letter number (86C, 854C, 177C, 1355C, 3875C, etc.), MFT, and the appropriate paragraphs.

      Note:

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

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

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

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

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

    If ... Then ...
    The edit marks are black, Underline the edit mark if correct or circle if incorrect.
    The edit marks are red or green, Circle if incorrect.
    The edit marks are missing or incorrect, Perfect as necessary.
  4. Follow the correspondence instructions below for "CIS" returns:

    If ... And ... Then ...
    The CIS return has a Form 13596 attached, The return is not complete (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. Indicate "Additional information needed to process incomplete CIS return," or similar language on Form 4227 (or other appropriate routing slip).

    The CIS return has a Form 13596 attached and the return is not complete (e.g., missing signature, schedules, or forms), There is an indication on the return that correspondence has been sent (e.g., CCC 3 is edited on the return), Do not route the return to AM. Continue processing the return.
    The "CIS" return does not have a Form 13596 attached, The return is not complete (e.g., missing signature, schedules, or forms), Follow normal correspondence procedures.
♦Use of Fax for Taxpayer Submissions♦
  1. Tax return information can be received via fax as part of return perfection even if a taxpayer signature is required. In circumstances where contact with the taxpayer has been made and documented, faxed signatures are acceptable.

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

  3. Code and Edit examiners will indicate the fax paragraph on the approved Correspondence Action Sheet to advise taxpayers of the option to fax their response.

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

    • IRM 21.1.3.2.3, Required Taxpayer Authentication

    • IRM 21.1.3.2.4Additional Taxpayer Authentication

  5. Before leaving any messages on a taxpayer's answering machine, review:

    • IRM 11.3.2.7.1, Leaving Information on Answering Machines/Voice Mail

    • IRM 11.3.1.11, Facsimile Transmission of Tax Information

♦Frivolous Arguments♦
  1. A frivolous argument is used for the purpose of expressing dissatisfaction with the substance, form or administration of the tax laws by attempting to illegally avoid or reduce tax liabilities. Recognized frivolous arguments made by businesses include, but are not limited to, the examples in IRM 25.25.10, Frivolous Return Program (FRP), shown in Exhibit 3.11.14-17, Potential Frivolous Arguments for Examination Review.

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

    If ... Then ...
    The return meets any of the conditions identified as a frivolous return, (See Exhibit 3.11.14-17, Potential Frivolous Arguments for Examination Review.

    Exception:

    If the return shows Action Code 331 and has a Form 4227 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., indicated by Action Code 331 and a Form 4227 with the remarks, "Refer to Exam FRP for audit after processing" , but sends the return for processing, Continue processing the return using procedures in IRM 3.11.14. However, do not circle or void the Action Code indicating a frivolous return.

    Note:

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

Examination of Attachments

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

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

    1. Notate any action taken on Form 1041, Form 1041-QFT, and/or Form 1041-N regarding attachments, photocopying, etc., to leave an action/working trail. Edit the Action 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, in IRM 3.11.14.47, Routing Guide.

  3. If the document to be detached contains 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.

♦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 Forms 1041, 1041-QFT and 1041-N.

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 8936 include an invalid vehicle year or an invalid in service date.

    Form Valid Vehicle Year Valid In Service Date
    8834 see IRM 3.11.14.27.2.11, Form 8834 - Qualified Plug-In Electric Vehicle Credit 2009 After 2/17/2009 The last valid tax period for claiming this credit was 201211.
    8936 see IRM 3.11.14.27.2.35, Form 8936 - Qualified Plug-In Electric Drive Motor Vehicle Credit. 2009 After 1/1/2009
    8910 see IRM 3.11.14.27.2.29, Form 8910 - Alternative Motor Vehicle Credit. N/A After 2/17/2009

♦CCC "D" - Reasonable Cause For Waiver of 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 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 indicates "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 before the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . See IRM 3.11.14.7.4, 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 3.11.14.8.13, Streamlined Filing Compliance Process (Ogden Only).

CCC E - Potential Identify Theft Filing

  1. Effective January 1, 2017, Computer Condition Code "E" may be edited on Form 1041, Form 1041-N, and/or Form 1041-QFT 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 indicating the taxpayer is a victim of ID Theft, provide the whole case to your senior/lead. Your senior/lead will expedite the case to the Planning and Analysis (P&A) staff for referral to one of the SP BMF ID Theft liaisons. The taxpayer must indicate 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 there is another indication the estate or trust 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 3.11.14.8.1, for Amended Return 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 "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 "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 determine 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 3.11.14.8.13, Streamlined Filing Compliance Process (Ogden Only).

♦CCC "R" - Delinquent Return With Reasonable Cause Established♦

  1. CCC "R" is no longer edited when a reason is given by the taxpayer for a delay in filing a return. Issue Letter 1382C 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 indicates 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 before the normal due date for a full-period return. See IRM 3.11.14.11.2 (2) for possible editing of CCC "R" on short-period Final Returns.

  4. Edit CCC "R" on a complete Streamline return filing. See IRM 3.11.14.8.13, Streamlined Filing Compliance Process (Ogden Only) .

    Caution:

    Never change the IRS Received Date when editing CCC R.

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 contains an entry.

    Note:

    This is only valid for tax period 201001 to 201010.

♦CCC "W" - Return Cleared by Statute♦

  1. CCC "W" is used when the return has been cleared by Statute Control. See IRM 3.11.14.8.10, 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 or Form 1041-N.

    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 3.11.14-1, Editing suppression of credit interest.
    Form 1041-T is present. See IRM 3.11.14.20.2, Line 24b - Estimated Tax Treated as Paid by Beneficiaries (Form 1041-T).

    Reminder:

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

    Figure 3.11.14-1

    This is an Image: 33490001.gif
     

    Please click here for the text description of the image.

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 Short Period - Editing Proof of Entitlement, IRM 3.11.14.11.5 through 3.11.14.11.9.

  2. If a prepaid credit is claimed on a short-period Final return, see Short Period Returns - With Prepaid Credits, IRM 3.11.14.11.9.

  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 2016 and later, Form 8938, Statement of Foreign Financial Assets, will be input into the General Purpose Programming (GPP) database. If attached process a TY 2016 Form 8938 and later, per the instructions below:

  2. Process Form 8938 with the following criteria:

    1. Tax Period on Form 1041 is 201601 or later, and

    2. Form 8938 is a current year revision, and

    3. Form 8938 has significant entries.

      Note:

      The GPP database can only process current year revisions of Form 8938.

  3. If Form 8938 is attached, but does not 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 Schedules 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, can be 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 Forms 8938.

  5. Form 1041 with Form 8938 attached must be batched separately. The transcription of Form 8938 will occur under Program Code 43300 after the parent Form 1041 has been transcribed using normal procedures.

♦CCC "3" - No Reply to Correspondence♦

  1. Edit CCC "3" when the return is unprocessable.

♦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 "4" cannot be used with CCC "R" .

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 3.11.14-2, 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 portion of return, The date entity created is within two years of the tax year ending, Edit CCC 8.

    Example:

    If the filer has entered 3-17-2017 in Section D, edit CCC "8" for any return with a Tax Year Ending on or before 3-16-2019.

    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 3.11.14-3, CCC 8 for Bankruptcy Estate.   Edit CCC 8.
    If Form 2210 is attached, See Figure 3.11.14-4 Any of the boxes in Part II, a through e are checked, Edit CCC 8.
    If Form 2210-F is attached, See Figure 3.11.14-4, 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...
    Schedule H (1040) is attached to the return, Form 1041 does not contain withholding credit (Line 24e), and Total tax without household employment tax is less than $1,000 (Schedule G, Line 7 minus Line 6, 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 3.11.14.8.13, Streamlined Filing Compliance Process (Ogden Only).

    Figure 3.11.14-2

    This is an Image: 33490002.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-3

    This is an Image: 33490003.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-4

    This is an Image: 33490004.gif
     

    Please click here for the text description of the image.

CCC "9" - Low-Income Housing (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 years 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.

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

    • On MeF returns, if the “Superseded Return” or the “Amended Return” box is checked. The “Superseded Return” and the “Amended Return” boxes will only be on MeF returns that have been printed. They will be located in Section F.

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

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

      Note:

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

  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 (information may be useful to Accounts Management)

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

      Note:

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

  4. There is an indication the return is amended and:

    If ... Then ...
    TC 59X or ICS was entered on the return by Compliance Services, Do not edit CCC "G" . Process the return as an original.
    The return is stamped "Delinquent Original Cleared for Processing" by Statutes, Do not edit CCC "G" . Process the return as an original.
    Form 3893 or Form 13596 is attached, Do not edit CCC "G" . See IRM 3.11.14.8.6.2, Form 13596 - Reprocessing Returns.
    None of the above are present, Edit CCC "G" .

    Reminder:

    Do not edit a Fiduciary Code or Trust Code when editing CCC "G" . See IRM 3.11.14.8.10 for amended Statute returns.

    Reminder:

    CCC "G" is only compatible with CCCs "T" "W" , "3" , and/or ERS Action Codes. Only edit CCCs that are needed, for example an amended return that is statute imminent you edit CCC G and W.

  5. Do not edit CCC "G" on returns filed under Section 443(b)(2). See Exhibit 3.11.14-16, IRC Sections and Actions to be taken on Form 1041.

  6. Only the following data is edited by C&E on all amended returns:

    1. Name Control - See IRM 3.11.14.13.3 Entity Perfection - Name Control.

    2. EIN - See IRM 3.11.14.13.2 Entity Perfection - Employer Identification Number (EIN).

    3. Tax Period - See IRM 3.11.14.11,

    4. CCC "G" See IRM 3.11.14.7.5, 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 indicating 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 3.11.14.10.

    6. Signature - See IRM 3.11.14.22.

    Note:

    Do not perfect the address on amended returns. see IRM 3.11.14.13.5, 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 through November 30th. Process according to IRM 3.0.101. 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 CIS 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 provides 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 the personal exemption plus the amount of the standard deduction for married filing separate. For tax year 2017 $10,400.

  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 and 180 day deadlines can be met timely by Compliance. See IRM 3.11.14.8.3, Prompt Assessment (Form 4810)/Prompt Determination.

  4. Edit Fiduciary Code "5" on all Chapter 7 Bankruptcy Estate returns or "6" on all Chapter 11 Bankruptcy Estate returns. If neither box is checked, edit Fiduciary Code "5" if the return indicates it is a bankruptcy. See IRM 3.11.14.12.3, Fiduciary and Trust Code Editing.

    Reminder:

    Edit CCC "8" for all bankruptcies. See IRM 3.11.14.7.20, 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 before sending to Entity. See below for additional editing instructions.

    Exception:

    Do not route to Entity if there is an indication Entity has already taken action on 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 included on the individual tax return.

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

    1. Bankruptcy estate - Ch. 7

    2. Bankruptcy estate - Ch. 11

  2. If no box is checked, determine if the return is for a Bankruptcy Estate from the Name Line, or attachment and/or the applicable exemption is claimed on Line 20. See IRM 3.11.14.12.3 (5), Fiduciary and Trust Code Editing.

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

    Note:

    If the Name Line indicates Partnership or Corporation, see IRM 3.11.14.8.2.6, Corporation or Partnership Bankruptcy.

  4. If the determination is made that a Bankruptcy estate return exists, Form 1040 must 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 29 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 provided on Form 1040, 1040-A or 1040EZ.

    1. If Form 1040/Form 1040A/Form 1040EZ is attached, ensure that the amounts reported on Form 1041 equal the amounts reported on Forms 1040/1040A/1040EZ as follows: See Figure 3.11.14-6,.

      Edit to Form 1041 Form 1040 Form 1040A Form 1040EZ Description
      Line 23 Line 63 Line 39 Line 12 Total Tax
      Line 24a Line 65 Line 41   Estimated Tax Payments
      Line 24d Line 70     Amount Paid with Extension
      Line 24e Line 64 Line 40 Line 7 Federal Income Tax Withheld
      Line 24f Line 73     Credit from Form 2439
      Line 24g Line 72     Credit from Form 4136
      Line 25 Line 74 Line 46 Line 9 Total Payments
      Line 27 Line 78 Line 50 Line 14 Tax Due
      Line 28 Line 75 Line 47 Line 13a Overpayment
      Line 29b Line 76a Line 48a Line 13a 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 equals Form 1040, Continue editing the return.
      Form 1041 contains an entry, but Form 1040 is zero or blank, Continue editing the return.
      Form 1041 entry is zero or blank, and Form 1040 contains an entry, Edit the amount from Form 1040 to the applicable Line on Form 1041.
      Entries are present on both Form 1041 and 1040, but the amounts on each form are different, Correspond with Letter 177C to determine the correct amount.
      Form 1040 is not attached and Lines 1 through 22 of Form 1041 are completed and Line 9 contains Gross Income of less than the applicable tax year Exemption plus the Standard Deduction, see Figure 3.11.14-5, Exemption/Standard Deduction Chart.
      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 22 are completed on Form 1041, and Line 9 contains Gross Income of greater than the applicable tax year Exemption plus the Standard Deduction, see Figure 3.11.14-5 Exemption/Standard Deduction Chart. Correspond with Letter 177C using the appropriate paragraph to request a copy of Form 1040 for the applicable Tax Period.
      Form 1040 is not attached and lines 23 through 29 of Form 1041 are present, Correspond.

      Figure 3.11.14-5

      Tax Year Exemption Standard Deduction Combined Total
      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 - 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

    This is an Image: 33490006.gif
     

    Please click here for the text description of the image.

Joint Filed Bankruptcy Estate Returns
  1. When a husband and wife 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 Forms 1040 attached.

    • Form 1041 is received with a Form 1040 Joint return (Box "2" 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 (husband and wife) or one "Joint" Form 1040,
    1. Correspond with Letter 177C (using the appropriate paragraph) to inform the taxpayer that they must file two separate Form 1041 returns.

    Two Forms 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, completely 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 contains 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 and notate "POSSIBLE FILING DISCREPANCY" .

    2. Edit Action Code 320.

    3. 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 includes 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 determine 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 (determined 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 can be 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 Action Trail.

    See Figure 3.11.14-7, Request for Prompt Assessment (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, determine if the request and return has been processed through the Centralized Insolvency Operation Rev. Proc. 2006-24 :

    If ... Then ...
    There is an indication that the request has been processed through the Centralized Insolvency Operation (CIO), e.g., the return contains a copy of a letter addressed to CIO, Continue editing the return.
    There is no indication that the request has been 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 action 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 Assessment (Form 4810)

    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

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

    1. Research (following local procedures) to determine 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 identified 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 determine the action needed to make the return processable.

    Caution:

    If the IRS Received Date is two years and nine months or more from the Return Due Date, refer to Statute procedures before re-entering or reprocessing the return. See Statute Returns, IRM 3.11.14.8.10.

♦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.

    Form 3893 Action Taken
    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 indicate a receipt of remittance.

    2. Do not change any tax due amounts.

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

    If ... Then ...
    Improper perfection, Edit the same correction in red/green (per local procedure) to the appropriate 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 additional information is still needed to make the return processable, prepare approved Correspondence Action Sheet, or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

    Exception:

    Do not correspond for missing Schedules K-1. See IRM 3.11.14.17.4, Line 18 - Income Distribution Deduction (Schedule K-1).

  11. When perfection is not possible, edit Action Code 640 on the return and attach 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 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.

    Form 13596 Action Taken
    TIN correction, Edit correct TIN on return.
    Tax Period correction, Edit correct Tax Period ending on return.
    Reasonable cause, Edit appropriate Computer Condition Code:
    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 determine if the corrections are the result of improper perfection or taxpayer error.

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

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

    Exception:

    Do not correspond for missing Schedules K-1. See IRM 3.11.14.17.4, Line 18 - Income Distribution Deduction (Schedule K-1).

♦Refund Returns 45 Day Jeopardy and $100 Million Dollar Refunds♦

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

    Note:

    Expeditious processing of refund returns is critical if the 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 that 20 days after the received date or the return due date OR the refund is $100,000,000 or more.

    The processing date is more than 20 days after the Received Date or the Return Due Date (whichever is later) and the refund is $25,000 or more,

    Note:

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

    1. Edit Action Code 341. See Figure 3.11.14-9, Refund Return - 45 Day Jeopardy.

    2. Give the return to the manager.

    The refund is $100,000,000 or more,

    Note:

    "Refund" in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods or amount to be credited to the next years 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 or CCC U (whichever is applicable).

      Note:

      For returns with CCC U, attach Form 4227 and check the "Reject Correction" box.

    4. Make a copy of the return for Criminal Investigation (CI). See IRM 3.11.14.1.16, Criminal Investigation (CI) Referrals.

    5. Expedite processing.


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

    2. Edit Action Code 331 (or CCC U as applicable)

    3. Attach Form 4227 to the return, edit Action Code 341 on Form 4227, and leave in batch.

      Note:

      For returns with CCC U, attach Form 4227 and check the "Reject Correction" box.

    4. Make a copy of the return for Criminal Investigation (CI).See IRM 3.11.14.1.16, Criminal Investigation (CI) Referrals.

    The W&I Submission Processing TAS Liaison walks a return through Code & Edit, In addition to normal editing, edit the following:
    1. CCC "O" to freeze the refund.

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

    Figure 3.11.14-9

    This is an Image: 33490009.gif
     

    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 does not provide them.

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

    2. Secured tax returns are notated with "TC 59X" or "ICS" (Integrated 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 identified by the notation: "PREPARED AND SIGNED UNDER AUTHORITY OF SECTION 6020(b) OF THE INTERNAL REVENUE CODE" which is located in the center bottom of Page 1 of the return.

    1. Returns must have an IRS Received Date. If missing, follow the normal procedures for editing the IRS Received Date, see IRM 3.11.14.10

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

      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 3.11.14.7.19, 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. Don’t send the return to Statute Control. See IRM 3.11.14.8.10, Statute Returns.

♦Collection Secured♦
  1. These returns are identified 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 appropriate Computer Condition Code(s). See IRM 3.11.14.7, Computer Condition Codes.

♦Examination Prepared♦
  1. These returns are identified 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 3.11.14.10.

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

    3. If Form 13133 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 3.11.14.8.10, Statute Returns.

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

    1. 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 3.11.14.7.13, CCC W - Return Cleared by Statute..

      Reminder:

      If Form 13133 (or something similar) indicates a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). See IRM 3.11.14.7

Qualified Settlement Fund Tax Returns

  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 include 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, determine 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:

    This includes amended returns.

  2. Statute returns must be routed to the Statute Control Unit daily or more often if needed.

  3. Do not 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 return.

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

  4. If a Form 12412, Operations Assistance Request (OAR), is received 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 will contact the TAS employee listed on the OAR for rejection of the OAR back to TAS for clearance by the Statute 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 for clearance.

  5. Statute returns are unprocessable until they are 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 and route to Statute Control Unit.

  6. Edit CCC "W" if the return has been cleared by the Statue Control Unit. Statutes will stamp or indicate clearance on the front of the return. SeeFigure 3.11.14-11, examples of returns identified as a Statute Return..

    Figure 3.11.14-11

    This is an Image: 33490011.gif
     

    Please click here for the text description of the image.

  7. Statute may stamp a return as "No Statute Issue" . Follow the chart below to determine if a 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 indicating there is no statute issue, Edit a 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 indicating there is no statute issue, Do not edit a 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 3.11.14.13.5, Entity Perfection - Domestic Addresses.

  4. The determination of an International foreign address is based only on the address of the estate or trust located on Page 1 of the return. Don’t consider a Form 1041 or Form 1041-QFT that has schedules or attachments indicating 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 W/2555 or 2555EZ (Foreign Earned Income)

    • Form 1040 W/4563 (Exclusion of Income for Bona Fide Residents of American Samoa)

    • Form 1040 W/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 1040PR

    • Form 1040SS or 1040SS (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

    Note:

    Only foreign trusts can claim Form 1042-S, Form 8288-A, and Form 8805 withholding credits. They should be filed on 1040-NR returns with an EIN and processed in Cincinnati on NMF. If received as Form 1041, convert and transship.

  7. Route all returns with a foreign address to OSPC for processing. Prepare Letter 86C to inform the fiduciary or trustee that the return has been sent.

    1. When an International return is identified, 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

  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 indicates "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)

  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 contain 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 do not contain 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 transhipped to Ogden and if they need to correspond Ogden will do it. If the complete package contains 1040 and 1041 returns, then Austin will do the required correspondence and include a copy of the reply with the 1041 return when it is transhipped.

  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 transhipped to Ogden and if they need correspondence, Ogden will do it.

    • The taxpayer is required to submit delinquent tax returns for the years listed on the certification, when a U.S. tax return is due. They can submit more than 3 years returns.

      Exception:

      It the taxpayer attaches copies of returns or a statement indicating 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 contain 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 appropriate boxes

    • Edit appropriate action code; ie. AC 211 or AC 215.

    Note:

    Only complete packages of Form 1041 original and amended will be transhipped 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, does not 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 has been determined that a Streamlined Package is complete, the package can be separated.

    Note:

    Each tax year must contain 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 indicating 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 1041 returns will not be processed. Instead they will be scanned into CIS 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.

Additional Form 1041 Perfection

  1. This section provides instructions for coding additional entries.

  2. These entries are edited in the left margin next to Line 10 of Form 1041.

  3. Each entry will be preceded by the numeric for the applicable line.

  4. Edit entries in numeric order, such as " 1 - 4" , "5 - 38" , and "7 - 3" .

    If ... Then ...
    Audit Code, Edit "1" followed by the appropriate Audit Code, e.g., "1 - 6" . See IRM 3.11.14.9.1., Audit Codes.
    Electing Small Business Trust Indicator (ESBT), Edit "2" followed by the ESBT Indicator "1" , e.g., "2 - 1" . See IRM 3.11.14.9.2, Electing Small Business Trusts (ESBT).
    Pooled Income Fund, Edit "3" followed by the Pooled Income Code "1" , i.e., "3 - 1" . See IRM 3.11.14.9.3, Pooled Income Fund.
    Penalty and Interest Code, Edit "4" followed by the Penalty and Interest Code "1" , i.e., "4 - 1" . IRM 3.11.14.9.4.
    Installment Sale Indicator, Edit "6" followed by the appropriate Installment Sale Indicator, e.g., "6 - 2" . IRM 3.11.14.9.6, Installment Sale Indicator.
    Historic Structure Code, Edit "7" followed by the Historic Structure Code "3" , e.g., "7 - 3" . IRM 3.11.14.9.7, Historic Structure Code.

Audit Codes

  1. Edit Audit Codes in the left margin next to Line 10 of Form 1041.

  2. Edit a "1 - " followed by the appropriate code(s) in the left margin next to Line 10 of Form 1041, 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. Determine the appropriate 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 22 (Taxable Income) of Form 1041 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and any of the following conditions are present:

      • Form 5471 is attached.

      • Form 8865 is attached.

      • Schedule K-1 (Form 1041) 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 contains 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 3.11.14.8.3, Prompt Assessment (Form 4810)/Prompt Determination.

    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 indicates it is a Final.

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


    See Figure 3.11.14-12, 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 3.11.14.14, Section E - Nonexempt Charitable and Split-Interest Trusts.
    8 Form 1041-N - Edit Audit Code "8" to all Form 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 3.11.14-12

    This is an Image: 33490012.gif
     

    Please click here for the text description of the image.

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 3.11.14-13, ESBT Indicator

    Note:

    When two 1041 returns are received, staple up the ESBT portion only 1041 return along with its attachments, unless the Form 1041 has entity information only. Then put the ESBT portion 1041 return on top

    Figure 3.11.14-13

    This is an Image: 33490013.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 portion, EBST portion, 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 if the "Pooled Income Fund" box (in Section "A" ) on page 1 of Form 1041 is checked. See IRM 3.11.14.12.3, 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" in the left margin next to Line 10 of Form 1041, when precomputed delinquency penalty and/or interest is shown on a return with a received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . See IRM 3.11.14.21.4, Penalty and Interest Code Editing.

Missing Schedule Codes

  1. Normal correspondence procedures will replace Missing Schedule Codes. Do not edit Missing Schedule Codes. See IRM 3.11.14.5.3 , Correspondence.

♦Installment Sale 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 Sale Indicator in the left margin next to Line 10 of Form 1041 in " 6 - N" format. See Figure 3.11.14-14, Installment Sale Indicator Code.

  4. Valid codes for Installment Sale 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 Sale Indicator Code if Form 6252 is attached to a nontaxable Grantor Trust or Bankruptcy Estate return. The Form 6252 information will be included on the individual tax return.

    Figure 3.11.14-14

    This is an Image: 33490014.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 # 3.11.14-15 #, Editing Historic Structure Code for Form 3468

    1. TY 2010 and subsequent: If there are entries under Part III, Line 11; specifically Lines e, f, g, h, i or j.

    2. TY 2008 and 2009: If there are entries under Part III, Line 10; specifically Lines e, f, g, h, i or j.

    3. TY 2006 and 2007: If there are entries on Line 1; specifically Lines e, f, g, or h.

    4. TY 1996 - 2005: If there are entries on Line 1, specifically, Lines b or c.

    Figure 3.11.14-15

    This is an Image: redimage.gif
     

♦Received Date♦

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

  2. An IRS Received Date is required on all Form 1041, Form 1041-QFT, and Form 1041-N.

    If ... Then ...
    The return is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or extended due date, See Exhibit 3.11.14-15, 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 before the legal or extended due date, Edit the IRS Received Date to agree with the postmark date.

    Note:

    The postmark or shipment date includes 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 that has been attached to the return (should be before the envelope). Use the "Acceptance" date on the record to determine timeliness and follow normal editing procedures. See Exhibit 3.11.14-22.
    If the "USPS.com Track & Confirm" record is not attached, no action is required.

  3. When a Form 1041 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 indicate the timely filed return cannot be filed electronically. The notation could 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 03-22-2017 and first rejection is 03-12-2017. Change Received Date to 03-12-17.

    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 03-23-2017 and first rejection is 03-12-2017. 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 03-22-2017, the second rejection is 03-12-2017. The first rejection is 03-09-2017 Change the Received Date to 03-09-17.

    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 03-22-2017, the second rejection is 03-12-2017. The first rejection is 03-01-2017 Change the Received Date to 03-12-17.

    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 03-23-2017, the second rejection is 03-12-2017. The first rejection is 03-01-2017. 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 System (CIS), 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 contains 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 that has been attached to the return (should be before the envelope).

      • Use the Acceptance date on the record to determine timeliness and follow normal editing procedures. See Exhibit 3.11.14-22.

      • If the USPS.com Track & Confirm record is not attached, no action is required.

      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, No editing is required.
    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:

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

    A Federal return is addressed to the IRS, but delivered to a State agency, Use the postmark date as the IRS Received Date.
    A Federal return is addressed to a State agency, Use the IRS Received Date stamp as the 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:

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

  9. If a return has been faxed to another area of the service 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:

    The EEFax Date cannot legally be used as an 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., 201712) No editing is necessary.
    The return is for a prior year, Edit the Tax Period.
    The taxpayers 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 3.11.14-16, 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 determine 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 identifies examples of tax periods:

    If ... Then ...
    Oct. 3, 2017 (52-53 week return) 1709
    Oct. 3, 2017 (Final short period return) 1710
    Oct. 25, 2017 (52-53 week return) 1710
    Oct. 25, 2017 (Final short period return) 1710
    Nov. 30, 2017 1711
    Dec. 31, 2017 1712 (No editing required for current calendar year returns)
    Feb. 28, 2017 1702
  4. Tax periods reported under the 52-53 week rule may not end more than 6 days before, 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 3.11.14-17, 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 before 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 before the end of the month or 3 days after the beginning of the month and is not a Final return,
    1. Correspond to determine 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.

    Note:

    If a prepaid credit is claimed on a short-period "Final" return, see Short Period Returns -With Prepaid Credits, IRM 3.11.14.11.9.

  7. On a "Final" return, if the Received Date is after the short period due date but on or before 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 3.11.14.8.10, 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,
      • 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 an identified Initial Return that has a Tax Period ending date in December (Calendar Year filer).

    Figure 3.11.14-16

    This is an Image: 33490016.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-17

    This is an Image: 33490017.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), process as follows:

    • Edit the Tax Period using the month preceding the month of the Received Date. See Figure 3.11.14-18, Early Filed Final Return, and follow the table below:

      Tax Period Ending Received Date Edit As
      5/31/2017 5/8/2017 1704
      6/30/2017 6/3/2017 1705
      9/30/2017 7/21/2017 1706

    Figure 3.11.14-18

    This is an Image: 33490018.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 before the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    • Edit CCC "R" and "F" . See Figure 3.11.14-19, Short-Period Final Balance Due Return.

      Note:

      Also, edit CCC "D" if the return is a Balance Due.

    Figure 3.11.14-19

    This is an Image: 33490019.gif
     

    Please click here for the text description of the image.

"Initial" Short Period Returns

  1. Initial returns can be determined by either 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 action is taken only 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 action 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, determine how early the return has been 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 action is taken only if it is not a "Final" return.

      See IRM 3.11.14.11.2, 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 indicated 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 has been approved. Continue processing.

    Note:

    No CCC “”Y” is needed.

    “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 3.11.14.11.7, 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" .
    Taxpayer has notated that the return was filed to change to Tax Period Ending month of "12" .

    Note:

    The taxpayer must indicate that the tax period was changed.

      Edit CCC "Y"
    Proof of entitlement cannot be determined,   See IRM 3.11.14.11.6, Short Period Returns - Missing Proof of Entitlement

    Figure 3.11.14-20

    This is an Image: 33490020.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 has been approved, Edit CCC "Y"
    BMFOLE shows Transaction Code 059, this is an indication that the Form 1128 has been disapproved, The return is unprocessable. Follow the instructions for Short Period Returns - Editing a Disapproved Application. See IRM 3.11.14.11.7, Short Period Returns - Editing a Disapproved Application (Form 1128).
    BMFOLE does not 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. Enter 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 has been approved,
    Edit CCC "Y"
    BMFOLE shows a Transaction Code 059,
    this is an indication that Form 1128 has been disapproved,
    The return is unprocessable. See Short Period Returns - Editing a Disapproved Application. See IRM 3.11.14.11.7, Short Period Returns - Editing a Disapproved Application (Form 1128).
    BMFOLE does not show Transaction Code 053, 054, or 059, Take the actions in (2) below.
  2. A Form 1128 with neither 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 action any return meeting both conditions below:

    1. A prepaid credit is claimed.

      Form Type Line Number(s)
      Form 1041 Lines 24a, 24b, 24c, or 24d
      Form 1041-QFT Line 14
      Form 1041-N Line 15
    2. The return is a short period (an initial return, a final return or one with a change of accounting period).

  2. Take the following actions 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 3.11.14.8.7 , Refund Returns - 45 Day Jeopardy and Million Dollar Refunds.

Section A (Type of Entity)

  1. The fiduciary checks the appropriate "Type of Entity" box in "Section A" that describes the entity for the return being filed. In addition, they are instructed to check the ESBT (S-Portion Only) box when ESBT (Electing Small Business Trusts) tax applies. The Fiduciary and Trust Code is to be determined 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 3.11.14.9.2, 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:

    • Section 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 3.11.14-21, Editing Fiduciary Code.

    Figure 3.11.14-21

    This is an Image: 33490021.gif
     

    Please click here for the text description of the image.

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 3.11.14-22, Editing Trust Code.

    Figure 3.11.14-22

    This is an Image: 33490022.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 determined from the box checked in Section A, Type of Entity.

  2. When editing the Fiduciary and Trust Codes,

    • Determine 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 3.11.14-23, Edit Fiduciary Code "9" .

    Reminder:

    Edit Audit Code "6" .

    9 None

    Note:

    If the choice of multiple entities includes the box for Section 4947(a)(2) Trusts, Fiduciary Code "9" takes priority.

    Figure 3.11.14-23

    This is an Image: 33490023.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 3.11.14.9.2, 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 3.11.14.9.3, 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 determine 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. Determine the Fiduciary and/or Trust Code:

    If no boxes or multiple boxes are checked in Section 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 include:

    • The Yes box is checked on Line 9 of the Other Information Section (Page 2 of Form 1041), or

    • Hand-drawn check box indicating 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 3.11.14-24, Identifying and coding a Generation Skipping Trust return.

      3 1
    The Grantor Trust and Simple Trust boxes are both checked,   2  
    There is an indication of a Grantor Trust, No entry present on any Lines 1 - 22

    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 - 22 and taxpayer has noted IRC 671 - 678 on the return.

    Note:

    "X" any amount shown on Lines 1 - 22. 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 - 22 and taxpayer has not made any other indication. 2 3

    Note:

    Indications of a Grantor Trust may also include 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 3.11.14-24

    This is an Image: 33490024.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 1041 does not meet any of the conditions listed in paragraph (4) above, determine the proper Fiduciary and/or Trust Code based on the Exemption amount claimed on Line 20 of Form 1041 in the following priority order:

    If Line 20 Equals ... Edit Fiduciary Code
    $4,050 - TY 2017 and 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 does not 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

    Note:

    A bankruptcy estate can have $4,050 on Line 20 Code as Fiduciary Code 5 or 6.

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, determine 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 22 of Form 1041, even if Line 23, Total Tax, is a zero or negative amount.

    2. Nontaxable Grantor Trust - If the entire trust is a grantor trust, only the entity portion of the return should be filled out. No entries should be present on any of Lines 1 through 22.

    If ... Edit ...
    Entries are present on any of Lines 1 - 22, Fiduciary Code 2 and Trust Code 3
    No entries are present on any of Lines 1 - 22, 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 22. X Lines 1 through 22 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 Section "A" of 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 of and/or D.

    • Edit Installment Sale Indicator code if Form 6252 is attached.

    • Edit any applicable CCC, Audit, Missing Schedule Codes, etc., as indicated 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 3.11.14.17.4, Line 18 - Income Distribution Deduction (Schedule K-1).

  3. Nontaxable Grantor Trust - The entire trust is a Grantor Trust. Only the entity portion of Form 1041 will be completed. Lines 1 through 21 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 indicated by attachments to Form 1041.

♦Entity Perfection – General♦

  1. The entity of a tax return identifies the taxpayer on the Business Master File. The entity area of the return contains the following:

    1. Employer Identification Number (EIN)

    2. Name

    3. "In-care-of" Name

    4. Address

♦Bankruptcy♦

  1. If the Form 1041 indicates 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, Merge Sheet).

  2. Edit return before routing to Entity Control. See IRM 3.11.14.8.2 , 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 located in the upper right of the return, Box "C" of Form 1041. Box "2" of Form 1041-QFT and Form 1041-N.

  3. Determine the EIN as follows:

    If ... And ... Then ...
    EIN is missing, You can determine the correct EIN from the attachments and schedules, Edit the EIN to the appropriate location. See Figure 3.11.14-25, 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 , Merge Sheet 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, Merge Sheet for EIN assignment.

    Multiple EINs are present, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    The EIN contains any of the following conditions and cannot be determined 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 , Merge Sheet

    The EIN contains any of the following conditions and cannot be determined 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 indicated 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, Merge Sheet

    "PENDING" , "APPLIED FOR" , etc., is indicated in the EIN area, Numbered,
    1. Edit Action Code 320.

    2. Leave return in batch.

    Reminder:

    Finishing editing return before routing.

    Figure 3.11.14-25

    This is an Image: 33490025.gif
     

    Please click here for the text description of the image.

♦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. Determine the Name Control 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 determine 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 determine 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, or 82 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 if an estate would be PAUL.

  5. Edit the Name Control as follows:

    If ... And ... Then ...
    Able to determine the Name Control,   Underline the Name Control.
    Unable to determine the 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.

    Unable to determine the Name Control, Numbered
    1. Edit Action Code 352 .

    2. Leave return in batch.

    A return indicates 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 3.11.14.8.2, Bankruptcy Estates..
  6. A Fiduciary or Fiduciary name change will be indicated by a mark in the "Change in fiduciary or Change in fiduciary name" box 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 has been 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 action needed.

    Note:

    ISRP will input the new address.


    See IRM 3.11.14.13.5, Entity Perfection - Domestic Addresses, if an In-Care-Of Name is also present.
  7. A Trust name change will be indicated 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, Merge Sheet, after editing.

♦Entity Perfection – "In-Care-of" Name♦

  1. An "in-care-of" name can be identified by the words "in-care-of" or the symbols "c/o" or "%" (percent). See Figure 3.11.14-26, Valid In-Care of Name.

  2. Ensure the "in-care-of" name is located in the proper location, above the street address.

    If … Then …
    The "in-care-of" name is located on the street address line preceding the street address, No editing is required.
    The "in-care-of" name is located 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 located on an attachment.

    2. Circle the Fiduciary street address and input "TC 014" . See IRM 3.11.14.13.5, 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 can be determined 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 3.11.14-26

    This is an Image: 33490026.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 identified.

    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 has been changed,   Edit the new address in the Entity section of the return. See Figure 3.11.14-27, Address Change.
    Form 8822, Change of Address or Form 8822-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,

    Take no action.
    Form 8822, Change of Address or Form 8822-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.
    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 3.11.14-28, Both a P.O. Box and a Street Address.
    Two street addresses are shown, An "in-care-of" name includes 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 determine 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 can be determined,   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 appropriate name.

    The National Change of Address (NCOA) label is present,   Underline the Name Control.
    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 3.11.14-27

    This is an Image: 33490027.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-28

    This is an Image: 33490028.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 3.11.14-29, 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 3.11.14-29

    This is an Image: 33490029.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 3.11.14.13.5, Entity Perfection - Domestic Addresses.

  3. Route returns with a foreign address to Ogden Submission Processing Campus (OSPC) for processing. Prepare Letter 86C to inform the taxpayer that the return has been sent to Ogden.

    Exception:

    All 1040-NR Fiduciary returns filed using an EIN instead of a SSN are processed in Cincinnati as Non-Master File (NMF). Fiduciary Form 1041, that has a Form 1040-NR attached for an individual (SSN) will be forwarded to Austin SPC for processing.

  4. Returns with addresses in the following U.S. Possessions/Territories are considered to be 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 appropriate ZIP code if one is not provided. See Exhibit 3.11.14-18, U.S. Possessions ZIP Codes.

  5. All other foreign addresses are edited the same as a domestic address with the following exceptions:

    • The foreign country must be 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.

      Note:

      Submission Processing BMF Foreign Address Job Aid, (Number 2324-002) provides examples for editing foreign addresses.

    • A unique country code will be edited for returns filed with an address in Canada. See IRM 3.11.14.13.6.1, Country Code - Canada.

      Note:

      Submission Processing BMF Foreign Address Job Aid (Number 2324–002) provides examples for editing foreign addresses.

    • If the foreign address is from Australia, Brazil, Canada, Cuba, Italy, Mexico or The Netherlands, check if the address contains a province, state or territory. See Exhibit 3.11.14-19, Province, State and Territory Abbreviations.

    If .. Then ...
    A province, state or territory is present,
    1. Circle the province, state or territory name.

    2. Edit the appropriate abbreviation. See Exhibit 3.11.14-19, 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 before the city or foreign country and is part of the address.

♦Country Code - Canada♦
  1. In an effort 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 contains a Canadian Province/Territory name or abbreviation shown in the table below,
    1. Circle the country name.

    2. Edit the appropriate Country Code based on the province/territory preceded by a "/" and followed by a "/$" as the last entry in the address.

    The foreign address does not contain 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 3.11.14.13.6, Entity Perfection - Foreign Address.

Section "E" - Nonexempt Charitable and Split-Interest Trusts

  1. Section "E" , Nonexempt charitable and split-interest trusts, is located in the upper-right corner of 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"

Section "F" - Type of Return Filed (Initial, Final, Amended, etc.)

  1. Section "F" of Form 1041 provides the taxpayer with check boxes to indicate any of the following:

    If ... Then ...
    Initial Return, See IRM 3.11.14.11.3, Initial Short Period Returns.
    Final Return, See IRM 3.11.14.11.2
    Amended Return. See IRM 3.11.14.8.1
    Change in Fiduciary, See IRM 3.11.14.13.3, Entity Perfection - Name Control.
    Change in Fiduciary's Name, See IRM 3.11.14.13.3, Entity Perfection - Name Control.
    Change in Fiduciary's Address, See IRM 3.11.14.13.3, Entity Perfection - Name Control.
    Change in Trust's Name, See IRM 3.11.14.13.3, Entity Perfection - Name Control.

Form 1041, Income Section (Lines 1-9)

  1. This subsection provides 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 appropriate lines.

  5. If a Nontaxable Grantor Trustdo 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, determine the correct amount and perfect Line 2b(2). If the correct amount cannot be determined, 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 3.11.14-30, Line 3 - Business Income or Loss (Sch C or C EZ (Form 1040))

  2. Edit Line 3 as follows:

    If ... And ... Then ...
    Line 3 contains 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 3.11.14-30

    This is an Image: 33490030.gif
     

    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 in excess of ($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 contains 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 3.11.14.35, Form 4952 - Investment Interest Expense Deduction. Correspond.
  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.

  7. Edit Schedule D in dollars only.

  8. Only one Schedule D can be processed. If more than one is attached, take the following actions:

    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 Portion, ESBT Portion, etc.

    Line 4 of Form 1041 does not equal Line 19(3) or Line 20 on any of the attached Schedules D, Correspond to determine the correct Schedule D amount.
  9. 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, include 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 does not 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), Take no action.
    Line 4 has a positive entry, Line 4 does not 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 negative entry of $3,000 or less, Line 4 equals Line 20 (Line 19(3), if Line 20 is blank, zero or illegible), Take no action.
    Line 4 has a negative entry of $3,000 or less, Line 4 does not 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 ($3,000).

    Line 4 has a negative entry greater than 3,000, Form 1041 is not a Final return,
    1. "X" the amount on Line 4.

    2. Edit $3,000 on Line 4.

    3. Bracket the edited amount.

    See Figure 3.11.14-31, Line 4 - Capital Gains and Losses (Sch D, Form 1041).
    Line 4 has a negative entry of $3,000 or less, Form 1041 is a Final return, Take no action.
    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 3.11.14-32, Line 4 blank - Determine Schedule D Income/Loss
    Line 4 is blank, zero, or illegible, A negative entry, a loss of $3,000 or less is 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 3.11.14-31

    This is an Image: 33490031.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-32

    This is an Image: 33490032.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 22 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, ie., Schedules, Forms, signature, etc., Include the request for missing Schedule D-1 in the correspondence to the filer.
    No other correspondence items, No action necessary.
  4. Move Schedule D-1 out of the sequence order for Form 1041.

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 contains 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 3.11.14-33, Line 5 - Rents, royalties, ... (Sch E, Form 1040).

    Figure 3.11.14-33

    This is an Image: 33490033.gif
     

    Please click here for the text description of the image.

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 contains 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 3.11.14-34, Line 6 - Farm Income and Loss (Sch F, Form 1040).

    Figure 3.11.14-34

    This is an Image: 33490034.gif
     

    Please click here for the text description of the image.

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 contains 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 8824must 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. 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 included on Lines 1 - 7, Add all the "Other Income" items and include in 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 appropriate Income line (Lines 1 through 7). See Figure 3.11.14-35, Line 8 - Other Income.
    Line 8 is blank or illegible and "Other Income" is reported on an attachment to Form 1041, Determine if the amount has been reported elsewhere on the return. If unable to determine, edit the amount to Line 8 of Form 1041.
    The amount on Line 8 does not 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.

    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 appropriate Total line(s).

    Figure 3.11.14-35

    This is an Image: 33490035.gif
     

    Please click here for the text description of the image.

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.

Form 1041, Deductions Section, Lines 10–21

  1. This subsection provides instructions for editing Lines 10 through 21 on Form 1041. Edit Lines 10 through 21 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 appropriate lines.

Lines 10 through 15c

  1. All authorized deductions on Page 1 of Form 1041 are to be reported on Lines 10 through 15c.

  2. Lines 10 through 15c consist of the following items:

    • Line 10 - Interest Deduction.

    • 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.

    • Line 15c - Allowable Miscellaneous Itemized Deductions Subject to the 2% Floor.

  3. After perfecting Lines 10 through 14, from taxpayer entry on return, edit the balance to Line 15(a). See Figure 3.11.14-36, Allocating Deductions.

    Figure 3.11.14-36

    This is an Image: 33490036.gif
     

    Please click here for the text description of the image.

  4. Lines 10 through 15c will normally be positive.

  5. If a negative amount is present on any of Lines 10 through 15c, determine from Lines 16 and 17 as instructed in the table below:

    If ... Then ...
    Line 16 is positive,
    1. "X" the negative amounts on Lines 10 through 15c

    2. Move the deleted amounts from Lines 10 through 15c 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 to include the amounts moved from Lines 10 through 15c.

    4. Recompute the amounts on Lines 9, 16, 17, and 22. See Figure 3.11.14-37, 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 15c which are actually positive.

    Don’t bracket or move the entries in Lines 10 through 15c.
    Line 16 is negative and Line 17 is greater than Line 9,
    1. "X" the negative amount(s) on Lines 10 through 15c.

    2. Move the deleted amount(s) from Lines 10 through 15c to Line 8 as a positive amount.

    3. If an amount was already present on Line 8, delete the existing Line 8 amount and recalculate to include the amounts moved from Lines 10 through 15c.

    4. Recompute the amounts on Lines 9, 16, 17, and 22.

  6. If a negative amount is on Line 15b and the taxpayer indicates a NOL (net operating loss), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Don’t bracket or move the entry.

    Exception:

    If a negative entry is present on Line 15a, 15b, or 15c and the taxpayer indicates that all a negative amount 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 instructed in See IRM 3.11.14.17.8, Tax-Exempt Entries.

    Figure 3.11.14-37

    This is an Image: 33490037.gif
     

    Please click here for the text description of the image.

  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, and adjust the appropriate Total line(s). See Figure 3.11.14-38, Net Operating Loss (NOL) and Line 15(b).

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Figure 3.11.14-38

    This is an Image: 33490038.gif
     

    Please click here for the text description of the image.

Line 16 - Total of Lines 10 through 15c

  1. Line 16 is the total of Lines 10 through 15c on Form 1041.

  2. If Line 16 is blank, add the entries on Lines 10 through 15c 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 15c (which are actually positive), resulting in a negative amount on Line 16.

    If ... Then ...
    Line 16 is negative and Line 17 is less than Line 9, Do not bracket or move the entries in Lines 10 through 15c.
    Line 16 is negative and Line 17 is greater than Line 9,
    1. Delete the negative amounts on Lines 10 through 15c.

    2. Move the deleted amounts from Lines 10 through 15c to Line 8 as a positive amount.

    3. If an amount was already present on Line 8, delete the existing Line 8 amount and recalculate to include the amounts moved from Lines 10 through 15c.

    4. Recalculate the amounts on Line 9, Line 16, Line 17, and Line 22.

  4. If an entry is present on Line 16 but all Lines 10 through 15c are blank, determine if an attachment or schedule is present which clarifies the deduction.

    • If documentation is present, edit the amount to the appropriate Line 10 through 15c.

    • If documentation is not present, correspond to determine 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 does not 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 21 and 22.

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), determine 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 determine what action 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 21 and 22.

    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 21 is the total of Lines 18 through 20, 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, determine the 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 can be computed from the lesser of Lines 13 or 14 of Schedule B, Edit this amount to Line 18 of Form 1041. See Figure 3.11.14-39, Determine 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 3.11.14-40, Determine Line 18 From Schedule K–1.

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Figure 3.11.14-39

    This is an Image: 33490039.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-40

    This is an Image: 33490040.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) returns

    • Examination Prepared Substitute (SFR) returns

    • Re-entry returns

    • Amended (“G” coded) returns

    • ESBT returns

    • 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)

    • 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 - Exemption

  1. Accept taxpayer's entry for exemption as in paragraph (2) below.

  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) $4,050 8
    Non-Exempt Charitable or Split Interest Trust $100 9

    Exception:

    Bankruptcy estates are entitled to the same exemption as an individual.

Line 21 - Total Deductions

  1. Line 21 of Form 1041 is the total of Lines 18 through 20.

  2. Line 21 can be positive or negative.

  3. If Line 21 is blank or illegible:

    1. If entries are present on any of Lines 18 through 20, add these amounts and edit the total to Line 21.

      Exception:

      If a Line 18 entry has been deleted based on the instructions in IRM 3.11.14.17.4, Line 18 - Income Distribution Deduction (Schedule K-1).do not recompute Lines 21 and 22.

    2. If Lines 18 through 20 are blank, determine if entries are present on Lines 13, 14 or 15 of Schedule B, Page 2 of Form 1041:

      Note:

      The following if/then chart is also in IRM 3.11.14.17.4 (3)(2), Line 18 - Income Distribution Deduction (Schedule K-1).

    If ... Then ...
    Line 15 of Schedule B is present or can be 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 21 is the total of Lines 18 through 20, do not perfect Line 18

    2. Perfect Line 21 of Form 1041 accordingly.

    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 21 of Form 1041 accordingly.

  4. If an entry should have been placed on Line 22, Taxable Income, but was inadvertently placed on Line 21 and Line 22 is blank or zero:

    1. Delete Line 21 amount and edit that amount to Line 22.

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 include those items in any entries on Lines 10-21. See Figure 3.11.14-41, Editing Tax Exempt entries.

    Figure 3.11.14-41

    This is an Image: 33490041.gif
     

    Please click here for the text description of the image.

  2. If the taxpayer indicates that all a negative amount on Line 15a, 15b, and 15c 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, 15b, or 15c.

    • Reduce the remaining Deduction line amount (positive) by the negative amount the taxpayer entered on Line 15a, 15b, or 15c.

    • Perfect Line 16, if necessary.

      Example:

      If $461.00 is entered on Line 14 (positive amount), Line 15a or 15c is a negative $120.00, and Lines 10 through 13 are blank, delete the negative $120.00 from Line 15a or 15c 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 3.11.14-42, Tax Exempt Allocation.

    Figure 3.11.14-42

    This is an Image: 33490042.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 22, Taxable Income, but was inadvertently placed on Line 21 and Line 22 is blank or zero:

    1. Delete the Line 21 amount and edit that amount to Line 22.

  4. If unable to determine 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.

Line 22 - Taxable Income

  1. If Line 22 is blank, subtract Line 21 from Line 17 and edit on Line 22.

  2. If Line 22 is blank and it can be determined that an entry that should have been placed on Line 22 was inadvertently placed on Line 23.

    • "X" the Line 23 amount and edit the amount to Line 22.

Line 23 - Total Tax

  1. Line 23 of Form 1041 is derived from Line 7 of Schedule G.

  2. If Line 23 contains a negative amount (a loss), determine Line 23 from Line 7 of Schedule G, Page 2:

    If ... Then ...
    Line 7, Schedule G, is positive, Edit the Line 7 amount to Line 23.
    Line 7, Schedule G, is negative, "X" the Line 23 amount.
  3. If Line 23 is blank or illegible:

    1. Compute by adding Lines 3 through 6 of Schedule G.

    2. Edit the total to Line 23 of Form 1041.

    3. If there are no entries on lines 3 through 6 of Schedule G and no entries are present on Lines 24 through 26, edit the amount from Line 27 to Line 23.

    Note:

    For instructions for editing Form 1041 with an entry present on Line 7 of Schedule G, see IRM 3.11.14.31, Schedule G, Line 7 - Total Tax.

  4. If it is determined that an entry was inadvertently placed on Line 23, determine if the entry should be edited to Line 22:

    If ... Then ...
    The Line 23 entry should be on Line 22 and Line 22 is blank, "X" the Line 23 amount and edit the amount to Line 22.
    The Line 23 entry should be on Line 22, but an entry is already present on Line 22,
    1. "X" the Line 23 amount.

      Note:

      Do not edit the amount to Line 22.

    2. Continue editing the return.

    If unable to determine where the Line 23 entry belongs,
    1. "X" the Line 23 amount.

      Note:

      Do not edit the amount to Line 22.

    2. Continue editing the return.

    Note:

    For instructions for editing Schedule G, see IRM 3.11.14.26, Schedule G, Form 1041, Lines 1a through 1d through IRM 3.11.14.31, Schedule G, Line 7 - Total Tax.

  5. Taxpayers may report a special tax for Electing Small Business Trusts (ESBT) on Line 7 of Schedule G. Effective for TY 2002, the taxpayer should check the "ESBT" box in Section "A" , Type of Entity, of Form 1041 or they may notate one of the following on the dotted portion of Line 7, Schedule G:

    • ELECTING SMALL BUSINESS TRUST

    • ESBT

    • IRC Section 641(c)

  6. If one of the above notations is written on the dotted portion of Lines 7, process as follows:

    If ... Then ...
    The ESBT amount was included on Line 7, Schedule G, and Line 23, Form 1041, Continue editing the return.
    The ESBT amount on Line 7, Schedule G, was not included on Line 23, Form 1041, Increase Line 23 (Form 1041) by the ESBT amount written in on Line 7 of Schedule G.
    The ESBT amount is written separate from the Line 7, Schedule G, amount, Increase Line 23, Form 1041, by the ESBT amount written in separately from the Line 7, 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.

Form 1041 Refundable Credits Section - Lines 24a to 25

  1. This subsection provides instructions for editing Lines 24a through 25 of Form 1041.

  2. If a return has a short Tax Period and any of Lines 24a through 24d have an entry, process as instructed in IRM 3.11.14.11.9, Short Period Returns - With Prepaid Credits.

Line 24a - Estimated Tax Payments

  1. Only Form 1041-ES Tax Payments are to be reported on Line 24a.

    • "X" any amounts determined to be other than ES Tax Payments and edit these amounts to the proper line. See Figure 3.11.14-43, Estimated Tax Payments.

    Figure 3.11.14-43

    This is an Image: 33490043.gif
     

    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.

    • If the Estate has incorrectly included an amount which can be identified as Form 1040-ES Credits, delete the Form 1040 Credit.

Line 24b - Estimated Tax Treated as Paid by Beneficiary (Form 1041-T)

  1. Line 24b of Form 1041 will reflect the portion of Line 24a 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 24b. Edit Line 24b as follows:

    If ... Then ...
    Form 1041-T is attached and Form 1041 Line 24b is blank,
    1. Edit CCC "X" on Form 1041. See IRM 3.11.14.7.14, CCC X - Refund/Settlement Freeze.

    2. If Form 1041-T, Lines 1 and 4 have entries, edit Form 1041-T, Line 1 amount to Form 1041, Line 24b.

    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 3.11.14-44, Form 1041-T Attached to Final Return.

    6. Route Form 1041-T to Accounts Management.

    Form 1041-T is attached and Form 1041, Line 24b contains 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 3.11.14-44, 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 3.11.14-44

    This is an Image: 33490044.gif
     

    Please click here for the text description of the image.

Line 24c - Balance of Estimated Tax Payments

  1. Accept taxpayer's entry.

Line 24d - Tax Paid with Extension Form

  1. If there is an illegible entry on Line 24d, 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 determine the amount from entries on Lines 24a, 24e or 24h.

    • 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 24e - Federal Income Tax Withheld

  1. Form 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 24e.

    • If an entry is present on Line 24e ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ but, supporting documentation is not attached, correspond for the missing form.

  2. Edit Line 24e as follows:

    If ... And ... Then ...
    Line 24e contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Supporting documentation is not attached, Correspond for the missing form.
    Line 24e contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form W-2, W-2G, etc., do not equal the Line 24 entry,
    1. "X" the Line 24e amount.

    2. Edit the correct amount from Form W-2 or W-2G to the left of the "X" . See Figure 3.11.14-45, Line 24e Does Not Equal W-2, W-2G, 1099R, or supporting statement .

    Line 24e entry is illegible, check the attached Form 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 24e contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Amount cannot be determined,
    1. "X" the Line 24e amount.

    2. Compute the correct amount by subtracting Line 25 from the sum of the amounts on Lines 24a through 24d.

    3. Edit the computed amount to the left of the "X" .

    Figure 3.11.14-45

    This is an Image: 33490045.gif
     

    Please click here for the text description of the image.

  3. Line 24e or 25 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 W-2, W-2G, etc. and the form is not found but a Form 7004 is found and there is no entry on Line 24d, determine if the Line 24e amount equals the amount on Form 7004:

    If the entries are ... Then ...
    The same, Move the Line 24e amount to Line 24d.
    Not the same and the amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ Correspond.

Line 24f - Form 2439

  1. Form 2439, "Notice to Shareholder of Undistributed Long-Term Capital Gains" is reported on Line 24f.

  2. Compare Line 24f, Form 1041 to Line 2 of Form 2439:

    If ... Then ...
    Line 24f contains an entry≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 2439 is missing, Correspond for the missing form.
    Form 2439 shows a lesser amount, Place an "X" to the left of the entry on Line 24f, Form 1041. Edit the lesser amount to the left of the "X" .

    See Figure 3.11.14-46 , Edit of Line 24f, Form 2439.

Line 24g - Form 4136

  1. If Line 24g contains a significant entry and Form 4136, Credit for Federal Tax Paid on Fuels, is not present, correspond for the missing Form 4136.

  2. For processing instructions, see IRM 3.11.14.41, Form 4136 - Credit for Federal Tax Paid on Fuels.

Line 24h - Total Credits

  1. Accept taxpayer's entry.

  2. If Lines 24f and 24g are blank and there is a significant entry on Line 24h, process as follows:

    If ... Then ...
    Both Form 2439 and Form 4136 are missing, Correspond for missing forms to support the entry on Line 24h.
    Both Form 2439 and Form 4136 are attached, Edit the Form 2439 amount to Line 24f.
    Form 2439 is the only form attached,
    1. If Form 2439, line 2 and Form 1041, line 24h are the same, edit amount from Form 2439, line 2 to Form 1041, line 24f. See Figure 3.11.14-46, Line 24f Does Not Match Form 2439.

    2. If Form 2439, line 2 and Form 1041, line 24h are not the same, edit the smaller amount to Form 1041, Line 24f.

    3. Correspond for missing Form 4136 if the entry on Line 24h is more than the Form 2439 amount.

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    Form 4136 is the only form attached, Subtract the Form 4136 amount from Line 24h and edit the difference to Line 24g. Correspond for missing Form 2439 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Figure 3.11.14-46

    This is an Image: 33490046.gif
     

    Please click here for the text description of the image.

Line 25 - Total Payments

  1. If Line 25 is blank or illegible, add Lines 24c through 24e and 24h. Edit the sum to Line 25.

  2. If Line 25 contains an entry, but there are no entries in Lines 24a through 24h, double arrow or edit the amount to Line 24a.

  3. Do not correct the taxpayer's entry on Line 25 unless it is a misplaced entry or the Line 24h credits are being brought forward.

Lines 26 through 29 - Settlement Area

  1. This subsection provides instructions for editing Lines 26 through 29 of Form 1041.

Line 26 - Estimated Tax Penalty

  1. Estimated Tax Penalty must be edited when either:

    1. An additional 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 3.11.14.7.7, CCC K - Qualifying Small Business Taxpayer.

  2. If Line 26 is blank, edit the amount from Line 17 or Line 27 of Form 2210 to Line 26, Form 1041.

    Reminder:

    See IRM 3.11.14.7.20, CCC 8 - Waiver of Estimated Tax Penalty.

Lines 27 and 28 - Amount Owed/Overpayment

  1. Lines 27 and 28 are edited as positive only. If the entry is a negative amount, do not bracket.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. If an entry is present on Line 27 and no entries are present on Lines 23 through 26, edit the amount from Line 27 to Line 23.

  3. If no entry is present on Line 27, and no entries are present on Lines 23 through 26, edit the amount from Schedule G, Line 7 to Line 23 and Line 27.

  4. If Lines 27 and 28 are blank and entries are present on lines 23 through 26, do both of the following:

    1. Add Lines 23 and 26. Subtract Line 25.

    2. Edit the positive result on Line 27 or the negative result (do not bracket) on Line 28. See Figure 3.11.14-47, Calculation of Overpayment.

  5. If precomputed interest or delinquency penalty is evident, ensure that it has not been included in Line 27 or reduced Line 28.

    If ... Then ...
    The amount on Line 27 contains precomputed interest or penalty,
    1. "X" Line 27 amount.

    2. Delete the interest, penalty or additional charge from the amount owed.

    3. Edit the correct amount owed to the left of the original entry.

    See Figure 3.11.14-48, Line 27 Includes Late Filing Penalty.
    The amount on Line 28 is reduced by precomputed interest or penalty,
    1. "X " Line 28 amount.

    2. Compute the Overpayment amount without the interest or penalty.

    3. Edit the correct Overpayment to the left of the original entry.

    Figure 3.11.14-47

    This is an Image: 33490047.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-48

    This is an Image: 33490048.gif
     

    Please click here for the text description of the image.

Lines 29a and 29b - Credit Elect/Refund

  1. If an entry is present on Line 28, an entry must be present on Line 29a or 29b.

    If ... And ... Then ...
    Lines 29a and 29b are both blank or zero, Return is not final, Edit the amount from Line 28 to Line 29a.
    Lines 29a and 29b are both blank or zero, Final Return, Edit the amount from Line 28 to Line 29b.
    Lines 29a and 29b are the same, and the total of the two do no equal Line 28, Return is not final, Delete the amount on Line 29b.
    Lines 29a and 29b are the same, and the total of the two do no equal Line 28, Final Return, Delete the amount on Line 29a.
    Line 29a contains an entry, and Line 29b is blank or zero, Return is not final, Take no action.
    Line 29a contains an entry, and Line 29b is blank or zero, Final Return, Arrow entry from Line 29a to Line 29b,

    Note:

    An entry on Line 29b is an indication of a refund return. For refund return processing instructions, see IRM 3.11.14.8.7, Refund Returns 45 Day Jeopardy and $100 Million Dollar Refunds.

Penalty and Interest Code Editing

  1. The purpose of this code is to induce the computer to perform an abnormal computation of delinquency penalty and/or interest.

  2. The Penalty and Interest Code (P&I) will be edited in the left margin next to Line 10 of Form 1041 in "4 -1" format. See IRM 3.11.14.9.4, Penalty/Interest Code.

  3. Determine the Penalty and Interest Code as follows:

    • If penalty and/or interest is included on Line 27 of Form 1041, delete the Line 27 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 P&I Code when the taxpayer has notated penalty and/or interest on the return.
    Form 1041 is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , but only interest is indicated, Edit P&I Code "1" in the left hand margin next to Line 10 in " 4 - 1" format. See Figure # 3.11.14-49 #, Penalty and Interest Code.
    Form 1041 is provided within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , but only precomputed penalty, or precomputed penalty and interest, is provided, Edit P&I 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, Determine and edit the Received Date in the center of Form 1041.

    Figure 3.11.14-49

    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 3.11.14.8.8.1, 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 identified 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 "CIS" returns that have Form 13596 attached. See IRM 3.11.14.5.3.3, Correspondence Imaging System (CIS) Returns, for processing instructions.

  3. If a signature is missing, correspond:

    Note:

    See IRM 3.11.14.5.3.2, 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's 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 3.11.14.5.3.5, 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 3.11.14.5.3.5, Frivolous Arguments.

    2. If the taxpayer responds with a self prepared "signature declaration" it must contain 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. Since tax examiners are not expected to be handwriting experts, IRC 6064 and IRC 6064-1 of Regulations allows the Service to presume that the signature on a return, statement, or other document is the true signature of the person who actually 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 actually 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 that 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 located 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 3.11.14-50, Fiduciary’s EIN.

    1. There is a positive entry on Line 22.

    2. There is an entry on Line 24a, 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 %. See Figure 3.11.14-51 , When not to edit Fiduciary’s EIN.

      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 can be determined 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 determined from the return or attachments, Correspond for the missing information.

    Figure 3.11.14-50

    This is an Image: 33490050.gif
     

    Please click here for the text description of the image.

    Figure 3.11.14-51

    This is an Image: 33490051.gif
     

    Please click here for the text description of the image.

♦Paid Preparer Check box Indicator♦

  1. The Paid Preparer Check box is located next to the taxpayer signature area. It indicates whether the taxpayer has elected to allow the Paid Preparer to answer questions about the return as it is processed.

  2. No action is required on amended returns.

  3. Take the following actions when an entry is present in the Paid Preparer Check box:

    If ... Then ...
    Only the "Yes" box is checked, Take no action.
    The "No" box is checked; neither box is checked; or both boxes are checked, Circle the Paid Preparer's Telephone Number, if present. See Figure 3.11.14-52, Paid-Preparer Check box Indicator.

    Figure 3.11.14-52

    This is an Image: 33490052.gif
     

    Please click here for the text description of the image.

♦Paid Preparer Section♦

  1. The Paid Preparer Section is located to the right of and below the Fiduciary's Signature area near the bottom of Form 1041, Form 1041-QFT, and Form 1041-N.

♦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 located 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 action 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.

♦EIN♦

  1. The Firm's EIN (Paid Preparer EIN - 2009 and prior revisions) is located 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 action 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 or all nines.

♦Paid Preparer Phone Number♦

  1. The Paid Preparer's Phone Number is located 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, No action required.
    The Preparer’s Phone Number is more than 10 digits, No action required.
    The Preparer’s Phone Number is illegible or less than 10 digits, Circle the Phone Number. See Figure 3.11.14-53, Editing Paid Preparer Phone Number.

    Figure 3.11.14-53

    This is an Image: 33490053.gif
     

    Please click here for the text description of the image.

E-File Waiver Indicator (Form 8948)

  1. P.L. 111-92 H.R. 3548 Sec. 17 mandates that preparers of more than ten Form 1041 returns must file electronically. Form 8948, Preparer Explanation for Not Filing Electronically, provides 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 can be edited.

  3. If Form 8948 is attached edit the E-File Waiver Indicator in 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, Form 1041, Lines 1a through 1d

  1. Schedule G, Form 1041, is located in the middle of Page 2 of Form 1041.

Schedule G, Line 1a (Tax Per 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 of 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 3.11.14.16.5, Line 4 - Capital Gain or Loss/Schedule D.

  5. For prior year editing instructions, see IRM 3.11.14.46, Prior Year Returns - Form 1041, and IRM 3.11.14.46.2.3, Schedule D (Form 1041).

Schedule G, Line 1b - 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 contains 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.

Schedule G, Line 1c - Alternative Minimum Tax - Schedule I

  1. Only one Schedule I can be processed. If more than one is attached, determine 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 3.11.14.33 ,Schedule I (Form 1041) - Alternative Minimum Tax.

    If ... Then ...
    Line 1c contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Schedule I is not attached, Correspond for the missing schedule.
    Line 1c entry and Schedule I, Line 56 entry do not equal, Edit the lesser amount to Schedule G, Line 1c.
    Line 1c is blank and Schedule I, Line 56 contains an entry, Edit the amount from Line 56 Schedule I to Line 1c, Schedule G.
  3. For prior year conversion instructions, see IRM 3.11.14.46.2.2, Schedule G - Form 1041.

Schedule G, Line 1d -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.

Schedule G, Lines 2a through 2e

  1. This subsection provides instructions for editing Lines 2a through 2e of Schedule G Form 1041.

Schedule G, Line 2a - Form 1116 (Foreign Tax Credit)

  1. Form 1116 must be attached to Form 1041 if an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 2a, Schedule G.

    If ... Then ...
    Line 2a contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ but Form 1116 is not attached, Correspond.
    Line 2a contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Edit Audit Code "1" .

Schedule G, Line 2b -General Business Credits

  1. Line 2b of Schedule G is used by taxpayers to claim General Business Credits (GBC).

  2. If Form 3800is 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 contains an entry on Line 38, Edit the Line 38 amount to Line 2b of Schedule G.
    Line 2b, Schedule G contains 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.
Form 3468 - Investment Credit
  1. Form 3468, Investment Credit, is required to be filed with Estate and Trust returns when claiming the Form 3468 credit.

  2. When an amount is present on Form 3800, Part III Line 1a or 4a*, or Form 1041, Schedule G, Line 2b** for Form 3468, take the following actions:
    *(Line 29a for 2010-2008) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 3468 is not attached, Correspond.
    Form 3468 has an entry on Line 8 and Form 3800 has an entry on Line 1a and/or 4a, Edit CCC "V" .

    Note:

    This is only valid for tax period 201001 to 201010.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond.

Form 5884 - Work Opportunity Credit
  1. Form 5884, Work Opportunity Credit, is required to be filed with Estate and Trust returns when claiming the Form 5884 credit.

  2. When an amount is present on Form 3800, Line 4b* or Form 1041, Schedule G, Line 2b** for Form 5884, take the following actions:
    *(Line 29b for 2010-2008) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 5884 is not attached to a 200712 or later return, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 5884-A - Credits for Affected Midwestern Disaster Area Employers (Employers Affected by Hurricane Katrina, Rita, or Wilma for 2006 Revision)
  1. Form 5884-A, Credits for Affected Midwestern Disaster Area Employers*, is required to be filed with Form 1041 returns when claiming the Form 5884-A credit.
    *(Employers Affected by Hurricane Katrina, Rita, or Wilma, for 2006 revision)

  2. When an amount is present on Form 3800, Line 1t* (2009-2008) for Form 5884-A, take the following action:
    *(Not applicable for 2007 revision)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 5884-A is not attached, Correspond.
Form 5884-B - New Hire Retention Credit
  1. Form 5884-B, New Hire Retention Credit, is required to be filed with Form 1041 tax returns when claiming the Form 5884-B credit.

    Caution:

    This credit was valid for 2011 tax year only and fiscal year filers. It cannot be used on returns filed for tax periods 201212 and subsequent.

  2. If an amount is present on Form 3800, Line 1aa for Form 5884-B:

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 5884-B is not attached, Correspond.
    Form 5884-B is attached, Place in sequence order if a significant entry is present on Line 10 or 11.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 6478 - Alcohol and Cellulosic Biofuel Fuels Credit (Credit for Alcohol Used as Fuel for 2007 and prior)
  1. Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit (Credit for Alcohol Used as Fuel for 2007 and prior), is required with Estate and Trust returns if any of the following are present:

    1. The 2011 and subsequent revisions of Form 3800, Line 4c has an entry≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. The 2008 - 2010 revision of Form 3800, Line 29c has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    3. Schedule G, Line 2b* has an entry indicating Form 6478 is attached and a Form 6478 credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is claimed.
      *(Line 2c for 2009 and prior.)

    4. An amount is shown on the Alcohol and Cellulosic Biofuel Fuels Credit line on a prior year return.

  2. When an amount is present on Form 3800, Line 4c* or Form 1041, Schedule G, Line 2b** for Form 6478, take the following actions:
    *(Line 29c for 2010 -2008) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 6478 is not attached, Correspond.
    These instructions apply to 2009 tax year only, including fiscal year (200901 through 201011).
    Form 6478 has a significant amount on Line 5*, Column (c) or Line 8**,
    *(Line 5(c) or Line 7 for 2009, Line 7(c) or Line 9 for 2008, not applicable for other prior year revisions).

    Reminder:

    Do not edit Action 343 for Tax Period 201012.

    Edit action code "343" .

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 6765 - Credit for Increasing Research Activities
  1. Form 6765, Credit for Increasing Research Activities, is required to be filed with the 1041 tax return when claiming Form 6765 credit.

  2. When an amount is present on Form 3800, Line 1c or Form 1041, Schedule G, Line 2b** for Form 6765, take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 6765 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8586 - Low-Income Housing Credit
  1. Form 8586, Low-Income Housing Credit, is required to be filed with the 1041 tax return when claiming Form 8586 credit.

  2. When an amount is present on Form 3800, Line 1d or Line 4d** or Form 1041, Schedule G, Line 2b*** for Form 8586, take the following actions:
    **(Line 29d for 2010-2008) ***(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8586 is not attached, Correspond.
    Form 8586 is attached with an entry on Line 7 or 14, or
    Form 8609 is attached or
    Form 8609-A (prior year Schedule A (Form 8609)) is attached,
    Edit CCC "9" .

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8820 - Orphan Drug Credit
  1. Form 8820, Orphan Drug Credit, is valid for Tax Periods 9607 and later.

    Note:

    If this credit is claimed for an invalid tax period, "X" and disallow the credit.

  2. Form 8820, Orphan Drug Credit is required to be filed with 1041 tax returns when claiming Form 8820 credit.

  3. When an amount is present on Form 3800, Line 1h or Form 1041, Schedule G, Line 2b** for Form 8820 take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8820 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8826 - Disabled Access Credit
  1. Form 8826, Disabled Access Credit, is required to be filed with 1041 tax returns when claiming Form 8826 credit.

  2. When an amount is present on Form 3800, Line 1e or Form 1041, Schedule G, Line 2b** for Form 8826, take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8826 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not edit correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8830 - Enhanced Oil Recovery Credit
  1. Form 8830, Enhanced Oil Recovery Credit, is required to be filed with 1041 tax returns when claiming Form 8830 credit.

  2. When an amount is present on Form 3800, Line 1t for Form 8830 credit, take the following action:

    If... Then...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8830 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8834 - Qualified Plug-In Electric Vehicle Credit
  1. Form 8834, Qualified Plug-In-Electric Vehicle Credit, is no longer required to be filed with 1041 tax returns when claiming Form 8834 credit.

    Note:

    It is a carryforward credit only.

Form 8835 - Renewable Electricity, Refined Coal, and Indian Coal Production Credit
  1. Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit, is required to be filed with 1041 tax returns when claiming Form 8835 credit.

  2. When an amount is present on Form 3800, Line 1f or Line 4e or Form 1041, Schedule G, Line 2b** for Form 8835 take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8835 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8844 - Empowerment Zone Employment Credit
  1. Form 8844, Empowerment Zone Employment Credit, is required if:

    1. Form 3800, Line 3*, Part III has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
      *(Line 24 for 2010-2008 revision)

    2. Form 1041, Schedule G, Line 2b* has an entry indicating Form 8844 is attached and Form 8844 credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is claimed.
      (*Line 2c for 2009 and prior)

  2. When an amount is present on Form 3800, Line 22 or Form 1041, Schedule G, Line 2b* for Form 8844 take the following actions:
    (*Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8844 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8845 - Indian Employment Credit
  1. Form 8845, Indian Employment Credit, is required to be filed with 1041 tax returns when claiming Form 8845 credit.

  2. When an amount is present on Form 3800, Line 1g (2012-2007) or Form 1041, Schedule G, Line 2b** for Form 8845, take the following action:
    ( **Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8845 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8846 - Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips
  1. Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, is required to be filed with 1041 tax returns when claiming Form 8846 credit.

  2. When an amount is present on Form 3800, Line 4f* or Form 1041, Schedule G, Line 2b** for Form 8846 take the following action:
    *(Line 29f for 2010-2008) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8846 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8847 - Credit for Contributions to Selected Community Development Corporations
  1. Form 8847, "Credit for Contributions to Selected Community Development Corporations" , is required to be filed with Form 1041 tax returns when claiming Form 8847 credit.

    Note:

    The last valid tax period for claiming this credit was 200911.

  2. When an amount is present on Form 3800, Line 1y* (2008 revision) or Form 1041, Schedule G, Line 2c** for Form 8847 take the following action:
    *(Line 1w for 2007) **(Line 2c for 2008 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8847 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8861 - Welfare-to-Work Credit
  1. Form 8861, Welfare to Work Credit, is required to be filed with 1041 tax returns when claiming Form 8861 credit.

    Note:

    The last valid tax period for claiming this credit was 200911.

  2. When an amount is present on Form 3800, Line 1b (2009-2007) or Form 1041, Schedule G, Line 2b** for Form 8861, take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8861 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8864 - Biodiesel and Renewable Diesel Fuels Credit
  1. Form 8864, Biodiesel and Renewable Diesel Fuels Credit, is required to be filed with 1041 tax returns when claiming Form 8864 credit.

  2. When an amount is present on Form 3800, Line 1l* or Form 1041, Schedule G, Line 2b** for Form 8864 take the following action:
    *(Line 1m for 2007) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8864 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8874 - New Markets Credit
  1. Form 8874, New Markets Credit, is required to be filed with 1041 tax returns when claiming Form 8874 credit.

  2. When an amount is present on Form 3800, Line 1i or Form 1041, Schedule G, Line 2b** for Form 8874, take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8874 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8881 - Credit for Small Employer Pension Plan Startup Costs
  1. Form 8881, Credit for Small Employer Pension Plan Startup Costs, is required to be filed with 1041 tax returns when claiming Form 8881 credit.

  2. When an amount is present on Form 3800, Line 1j, Part III (2011 and subsequent), Line 1j (2010-2007) or Form 1041, Schedule G, Line 2b** for Form 8881, take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8881 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8882 - Credit for Employer Provided Child Care Facilities and Services
  1. Form 8882, Credit for Employer Provided Child Care Facilities and Services, is required to be filed with 1041 tax returns when claiming Form 8882 credit.

  2. When an amount is present on Form 3800, Line 1k or Form 1041, Schedule G, Line 2b** for Form 8882 take the following action:
    **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8882 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8884 - New York Liberty Zone Business Employee Credit
  1. No editing required.

Form 8896 - Low Sulfur Diesel Fuel Production Credit
  1. Form 8896, Low Sulfur Diesel Fuel Production Credit, is required to be attached to the 1041 Tax Returns when claiming Form 8896 credit.

  2. When an amount is present on Form 3800, Line 1m* or Form 1041, Schedule G, Line 2b** for Form 8896, take the following action.
    *(Line 1n for 2007) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8896 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8900 - Qualified Railroad Track Maintenance Credit
  1. Form 8900, Qualified Railroad Track Maintenance Credit, is required to be filed with 1041 tax returns when claiming Form 8900 credit.

  2. When an amount is present on Form 3800, Line 4g* or Form 1041, Schedule G, Line 2b** for Form 8900, take the following action:
    *(Line 29g for 2010-2008, Line 1l for 2007) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8900 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8906 - Distilled Spirits Credit
  1. Form 8906, Distilled Spirits Credit, is required to be filed with 1041 tax returns when claiming Form 8906 credit.

  2. When an amount is present on Form 3800, Line 1n* or Form 1041, Schedule G, Line 2b** for Form 8906, take the following action:
    *(Line 1o for 2007) **(Line 2c for 2009 and prior).

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8906 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8907 - Nonconventional Source Fuel Credit
  1. Form 8907, Nonconventional Source Fuel Credit, is no longer required to be filed with 1041 tax returns when claiming Form 8907 credit.

    Note:

    It is a carryforward credit only.

Form 8908 - Energy Efficient Home Credit
  1. Form 8908, Energy Efficient Home Credit, is required to be filed with 1041 tax returns when claiming Form 8908 credit.

  2. When an amount is present on Form 3800, Line 1p* or Form 1041, Schedule G, Line 2b** for Form 8908, take the following action:
    *(Line 1q for 2007) **(Line 2c for 2009 and prior).

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8908 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8909 - Energy Efficient Appliance Credit
  1. Form 8909, Energy Efficient Appliance Credit, is no longer required to be filed with 1041 tax return when claiming Form 8909 credit.

    Note:

    It is carryforward credit only.

Form 8910 - Alternative Motor Vehicle Credit
  1. Form 8910, Alternative Motor Vehicle Credit, is required to be filed with 1041 tax returns when claiming Form 8910 credit.

  2. When an amount is present on Form 3800, Line 1r* or Form 1041, Schedule G, Line 2b** for Form 8910, take the following action:
    *(Line 1s for 2007) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8910 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

  3. When Form 8910 is attached, check for invalid in-service dates:

    If ... Then ...
    Form 8910, Part I, Line 2, Column (a), (b), or (c) include an in service date earlier than 02/18/2009, Edit CCC "C" and circle the invalid-in service dates. See IRM 3.11.14.7.1 (2), CCC C - Invalid Vehicle Year or Service Date.
Form 8911 - Alternative Fuel Vehicle Refueling Property Credit
  1. Form 8911, Alternative Fuel Vehicle Refueling Property Credit, is required to be filed with 1041 tax returns when claiming Form 8911 credit.

  2. When an amount is present on Form 3800, Line 1s* or Form 1041, Schedule G, Line 2b** for Form 8911, take the following action:
    *(Line 1t for 2007) **(Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8911 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8923 - Rescue Team Training Credit
  1. Form 8923, Rescue Team Training Credit, is required to be filed with 1041 tax returns when claiming Form 8923 credit.

  2. When an amount is present on Form 3800, Line 1u for Form 8923 credit, take the following action:

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8923 is not attached, Correspond for missing Form 8923.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

Form 8931 - Agricultural Chemicals Security Credit
  1. Form 8931, Agricultural Chemicals Security Credit, is no longer required to be filed with 1041 tax returns when claiming Form 8931 credit.

    Note:

    It is carryforward credit only.

Form 8932 - Credit for Employer Differential Wage Payments
  1. Form 8932, Credit for Employer Differential Wage Payments, is required to be filed with 1041 tax returns when claiming Form 8932 credit.

  2. When an amount is present on Form 3800, Line 1w* for Form 8932:
    (*Line 1w for 2009-2008, Line 1v for 2007) take the following action:

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8932 is not attached, Correspond.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not edit MSC or correspond. The credit is from a pass-through entity and the form is not required.

Form 8933 - Carbon Dioxide Sequestration Credit
  1. Form 8933, Carbon Dioxide Sequestration Credit, is required to be filed with 1041 tax returns when claiming Form 8933 credit.

  2. When an amount is present on Form 3800, Line 1x for Form 8933:

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8933 is not attached, Correspond for missing Form 8933.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not edit MSC or correspond. The credit is from a pass-through entity and the form is not required.

Form 8936 - Qualified Plug-In Electric Drive Motor Vehicle Credit
  1. Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit, is required to be filed with 1041 tax returns when claiming Form 8936 credit.

  2. When an amount is present on Form 3800, Line 1y or Form 1041, Schedule G, Line 2b* contains an entry for Form 8936:
    (*Line 2c for 2009 and prior)

    If ... Then ...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8936 is not attached, Correspond for missing Form 8936. See IRM 3.11.14.7.1 (2), CCC C - Invalid Vehicle Year or Service Date.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not edit MSC or correspond. The credit is from a pass-through entity and the form is not required.

  3. When Form 8936 is attached, check for invalid vehicle years and invalid in service dates:

    If ... Then ...
    Form 8936, Part I, Line 1, Column (a), (b), or (c) include a vehicle year of 2008 or earlier, Edit CCC "C" and circle the invalid vehicle year(s) and/or the invalid in service date(s).
    Form 8936, Part I, Line, Column (a), (b), or (c) include an in service date 12/31/2008 or earlier, Edit CCC C and circle the invalid vehicle years and/or the invalid in service dates.
Form 8941 - Credit for Small Employer Health Insurance Premiums
  1. Form 8941, Credit for Small Employer Health Insurance Premiums, is required to be filed with the 1041 tax return when claiming Form 8941 credit.

  2. If any amount is present on Form 3800, Line 4h for Form 8941 process as follows:

    If ... Then ...
    Form 8941 is not attached, Correspond.
    Form 8941 is present, Place in sequence order if significant entries are present. IRM 3.11.14.2.2, Schedule G - Form 1041.

    Exception:

    If Form 3800, Part III Box C, D, or G are checked, do not correspond. If an EIN is present on Form 3800, Page 3, Column (b), do not correspond. The credit is from a pass-through entity and the form is not required.

  3. To determine if correspondence is needed for the SHOP (Small Business Health Options Program) check box (Line A, Form 8941) for TY 2014 and later, follow the table below:

    If... Then...
    Line A, only"Yes" box or"No" box is checked, No correspondence needed.
    Line A, Neither box is checked, Correspond using the 177C letter.
    Line A, Both the "Yes" box and the "No" box are checked, Correspond using the 177C letter.
  4. To determine if correspondence is needed for the Credit Period Limitation check box (Line C, Form 8941) for TY 2016 and later, follow the table below:

    If... Then...
    Line C, only"No" box is checked, No correspondence needed.
    Line C, Only"Yes" box is checked, Neither box is checked, or Both boxes are checked, Correspond using 177C letter.

Schedule G, Line 2c - Form 8801 (Credit for Prior Year Minimum Tax)

  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.

Schedule G, Line 2d - 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.

Schedule G, Line 2e - Total Credits

  1. Line 2e of Schedule G is computed by adding Lines 2a through 2d.

  2. If Schedule G, Line 2e contains an amount of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ refer the return for Criminal Investigation review following local procedures. See IRM 3.11.14.1.16, Criminal Investigation (CI) Referrals.

  3. For TY 2009 and prior year returns, new Line 2e (old Line 3) was used to claim bond credits. The following notations could be written on the dotted portion 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 has been used as a distribution to the beneficiaries.

      Caution:

      It is not necessary to math verify that all the credit has been distributed on Schedule K-1.

    If ... Then ...
    A distribution is indicated on Schedule K-1, Do not edit the amount to Form 1041.
    A distribution is not indicated on Schedule K-1, Follow the specific instructions for processing the credit form received.

Schedule G, Lines 3 through 5

  1. This subsection provides instructions for editing Lines 3 through 5 of Schedule G Form 1041.

Schedule G, Line 3 - Subtract Line 2e from Line 1d (Net Tax)

  1. Accept taxpayer's entry. This line is calculated by the computer.

Schedule G, Line 4 - Net Investment Income Tax

  1. Form 8960, Net Investment Income Tax, is required to be attached to the Form 1041 return when a