IRS Logo

3.11.16  Corporate Income Tax Returns (Cont. 2)

3.11.16.10  (01-04-2016)
Return Processing - Form 1120

  1. This section addresses the editing of specific areas on Form 1120.

  2. A Form 1120 series with a notation such as "Pro Forma" , "Pro Forma Form 1120" , "Pro Forma Form 1120 for New York State" , or similar statement, the "Pro Forma" return should not be processed.

    If... Then...
    A "Pro Forma" return is attached to a Form 1120 series, Do not detach. Move the "Pro Forma" return to the back of the document.
    A "Pro Forma" return is not attached to a Form 1120 series,
    1. DO NOT edit the return.

    2. Route to Correspondence to be returned to the taxpayer.

    3. Attach Form 6800 and include the following in the open paragraph;
      "The attached form appears to have been sent to us in error. Please keep it for your tax records."

  3. To convert prior year tax returns, see Exhibit 3.11.16-3, Form 1120 — Prior Year Conversion Chart.

3.11.16.10.1  (01-01-2014)
Sequence - Form 1120

  1. Document Perfection is responsible for arranging Form 1120 in the following order when transcription line entries are present:

    • Pages 1, 2, 3, 4, 5

    • Schedule N (Form 1120)

    • Schedule D (Form 1120)

    • Schedule O (Form 1120)

    • Form 4626

    • Form 8050

    • Form 1125-A

    • Form 4136

    • Form 8913

    • Form 8941

    • Form 5884-B

    • Form 3800

    Note:

    It is not necessary to sequence Form 8050 if blank or Schedule D, Schedule N, Schedule O, Form 4626, Form 1125-A, Form 4136, Form 8913, Form 8941, Form 5884-B, or Form 3800 if there are no transcription line entries.

3.11.16.10.2  (01-01-2015)
Negative Figures

  1. On Page 1 of the Form 1120:

    1. Do not bracket or "X" the amount on Line 1b if negative.

    2. If editing a negative entry on Lines 1b, 2, 9, 10, 11, 15, 26, and 27, bracket the negative amount.

  2. Line 8 will NEVER be bracketed. "X" any negative entry on Line 8. See IRM 3.11.16.10.4.7, Line 8 – Capital Gain.

  3. Do not bracket Lines 29a and 29b.

  4. "X" any negative transcription entries on Pages 2 and 3 of the Form 1120.

  5. Page 5*, "Schedule L, Balance Sheet" . See IRM 3.11.16.10.25, Schedule L, Balance Sheet.

    • *(Page 4 for 2007 and prior.)

  6. Form 4626, "Alternative Minimum Tax" . See IRM 3.11.16.12, Form 4626 - Alternative Minimum Tax.

  7. Form 4136, "Credit for Federal Tax Paid on Fuels" – "X" any negative entries. See IRM 3.11.16.15, Form 4136 - Credit for Federal Tax Paid on Fuels.

3.11.16.10.3  (01-01-2015)
Total Assets - Box D

  1. Total Assets is shown in Box D of Form 1120.

  2. If Total Assets, Box D is blank:

    1. Check the Balance Sheet and edit Total Assets Ending from Schedule L, Line 15, Column (d) to Total Assets, Box D, Page 1. Bracket if negative. See Figure 3.11.16-14.

    2. If "1" is edited on Schedule L, Line 15, Column (d) and Box D is blank, zero, dash, none, or N/A, edit "1" in Box D.

    Figure 3.11.16-14
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.16.10.4  (01-01-2009)
Form 1120, Total Income - Lines 1 through 11

  1. The following section provides editing instructions for Form 1120, Lines 1 through 11. Edit Lines 1 through 11 in dollars only.

  2. If Line 11 is the only entry in the income section or the income section is blank and there is an indication the income items are included on an attachment (e.g., a notation such as "See attached" , "See Schedule F" , "Statement attached" , etc.), examine the return for more detailed schedules.

    If... And... Then...
    Additional income is found The income is not reflected elsewhere on the return,
    • Edit the income to the appropriate transcription line(s).

    • For Schedule F transfer lines, see Exhibit 3.11.16-18, Schedule F - Transfer Lines.

3.11.16.10.4.1  (07-02-2015)
Line 1 – Gross Receipts or Sales

  1. Line 1a is Gross Receipts or Sales, and Line 1b is Returns and allowances (Do not bracket or "X" amount on Line 1b if negative.)

  2. If Line 1a is blank and:

    1. If Lines 1b and 1c are both blank, but the taxpayer indicates "Gross Profit" on Line 3, add Line 2 and Line 3 and enter on Line 1a. Bracket if negative.

      Exception:

      If Line 2 is blank, See IRM 3.11.16.10.4.2, Line 2 - Cost of Goods Sold before computing Line 1a.

  3. If Line 1a is blank, and an amount is present on Lines 1b and 1c, add Line 1b and Line 1c and enter the total amount on Line 1a. Bracket if negative.

  4. If Line 1b is blank, check attachments.

    1. If found, enter the amount to Line 1b.

    2. If not found and Line 1a is greater than Line 1c, compute and enter Line 1b (Line 1a minus 1c).

3.11.16.10.4.2  (01-01-2012)
Line 2 – Cost of Goods Sold

  1. If Line 2 is blank, edit from Form 1125-A (2010 prior revisions - Schedule A, Line 8), Line 8. Bracket if negative.

    If... Then...
    Form 1125-A (2010 and prior revisions - Schedule A, Line 8), Line 8 is blank and Line 6 contains an entry, Edit the amount from Line 6, minus any amount on Line 7.
    Form 1125-A (2010 and prior revisions - Schedule A, Line 6), Line 6 is blank and there are entries on Lines 1 through 5, Edit the total of Lines 1 through 5 minus any amount on Line 7.

3.11.16.10.4.3  (01-01-2009)
Line 4 – Dividends

  1. Accept taxpayer's entry.

3.11.16.10.4.4  (01-01-2009)
Line 5 – Interest

  1. Accept taxpayer's entry.

3.11.16.10.4.5  (01-01-2009)
Line 6 – Gross Rents

  1. Accept taxpayer's entry.

3.11.16.10.4.6  (01-01-2009)
Line 7 – Gross Royalties

  1. Accept taxpayer's entry.

3.11.16.10.4.7  (01-01-2015)
Line 8 – Capital Gain

  1. If there is a significant entry on Line 8, and Schedule D (Form 1120) is not attached, edit MSC "32" .

  2. When Schedule D is attached, compare Form 1120, Line 8 to Schedule D, Line 18, (Line 14 for 2000 through 2011, Line 13 for 1999 and prior):

    If... And... Then...
    The comparison shows the entries are the same Both entries are positive, Continue processing.
    The comparison shows the entries are different Both entries are positive, Edit the Schedule D, Line 18 amount to Form 1120, Page 1, Line 8.
    Form 1120, Line 8 is blank, zero or illegible Schedule D, Line 18 is positive, Edit the Schedule D, Line 18 amount to Form 1120, Page 1, Line 8.

  3. If the comparison shows a negative entry:

    1. "X" the Line 8 amount.

    2. Math verify and perfect Schedule D to ensure the negative figure is correct and intended.

    3. If the negative amount is due to a loss under IRC 582 for worthlessness of bonds, move the amount to Bad Debts (Form 1120, Page 1, Line 15) as a positive figure. Adjust Total Income and Total Deductions as required.

    4. If the negative amount is due to a loss under IRC 582 for the sale or exchange of securities by a bank, etc., move the amount to Other Deductions (Form 1120, Page 1, Line 26) as a positive figure. Adjust Total Income and Total Deductions as required.

      Note:

      All other losses on Schedule D will not be allowed.

3.11.16.10.4.8  (01-01-2015)
Line 9 – Net Gain or Loss from Form 4797

  1. Edit Line 9 as follows:

    If... Then...
    Line 9, Page 1 contains an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 4797 is not attached and the taxpayer has not attached Form 4684, Edit MSC "35" .
    Form 4797 is attached, compare Form 1120, Line 9 or Form 1120-H, Line 6 with Form 4797, Line 17*,
    • *(Line 18 for 2003 and prior.)

    If different, edit Form 4797 amount to Form 1120, Line 9 for Form 1120-H, Line 6. Bracket if negative.
    Form 4797, Line 17* is blank (has not been computed by the taxpayer) and there are entries in Parts II or III of Form 4797,
    • *(Line 18 for 2003 and prior.)

    Correspond for completed Form 4797.

  2. Check for taxpayer errors in the transfer of entries from Form 4797 to Page 1, Form 1120. Also check the transfer of data from Line 9, Form 4797 to Line 7, Schedule D.

    If... And... Then...
    Form 1120, Page 1, Line 8 is blank There is a positive entry on Form 1120, Page 1, Line 9 and Form 4797, Line 9 has a significant positive entry, Arrow Form 1120, Line 9 entry to Line 8 and edit MSC "32" . See Figure 3.11.16-15.
    There is a notation on Form 1120, Page 1, Line 9 that Form 4684 is attached,   Do not correspond. Compare Form 1120, Page 1, Line 9 with Form 4684, Lines 32* plus 38a*. If different, edit Form 4684 amount to Line 9, Form 1120.
    • *(Lines 35 plus 41a for 2010, Lines 35 plus 42a for 2009, Lines 37 plus 44a for 2008, Lines 31 plus 38a for 2007, Lines 34 plus 41a for 2006–2005, Lines 31 plus 38a for 2004.)

    Figure 3.11.16-15

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

3.11.16.10.4.9  (01-01-2009)
Line 10 – Other Income

  1. Other income or loss not shown on Lines 1a through 9 is reported on Line 10 of Form 1120.

  2. Edit Line 10 as follows:

    If... Then...
    "Other Income" items are included on Lines 1 through 9,
    • Add all the Other Income items and include in Line 10.

    • Bracket if negative.

3.11.16.10.4.10  (01-01-2013)
Line 11 – Total Income

  1. The total income or loss (sum of Lines 3 through 10) is reported on Line 11 of Form 1120.

  2. Edit Line 11 as follows:

    If... Then...
    Line 11 is blank or illegible, but there are entries on Lines 1a through 10,
    • Compute and edit Line 11.

    • Bracket if negative.

    Line 11 is the only entry in the income section,
    • Examine attachments and edit the information to the appropriate transcription lines.

    • Bracket if negative.

    • See Exhibit 3.11.16-18, Schedule F - Transfer Lines.

    The income section is blank and there is an indication the income items are included on an attachment (e.g., "See attached" , "See Schedule F" , "Statement attached" , etc.),
    • Examine attachments and edit the information to the appropriate transcription lines.

    • Bracket if negative.

    • See Exhibit 3.11.16-18, Schedule F - Transfer Lines

    There is an amount present for "Total Income" on Line 11, but the amount is not identified on Lines 1a through 10 or from attachments,
    • Edit the Line 11 amount to Line 10.

    • Bracket if negative.

3.11.16.10.5  (01-01-2015)
Form 1120, Deduction Items - Lines 12 through 29

  1. Edit Lines 12 through 29 in dollars only.

  2. If Line 27 is the only entry in the deduction section or the deduction section is blank and there is an indication the deduction items are included on an attachment (e.g., "See attached" , "See Schedule F" , "Statement attached" , etc.), examine the return for more detailed schedules.

    If... And... Then...
    Additional deductions are found The deductions are not reflected elsewhere on the return,
    • Edit the deductions to the appropriate transcription lines (Lines 12 through 26).

    • See Schedule F - Transfer Lines, Figure 3.11.16-16.

    Figure 3.11.16-16

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

3.11.16.10.5.1  (01-01-2009)
Line 12 – Compensation of Officers

  1. Accept taxpayer's entry.

3.11.16.10.5.2  (01-01-2009)
Line 13 – Salaries and Wages (less employment credits)

  1. Accept taxpayer's entry.

3.11.16.10.5.3  (01-01-2009)
Line 14 – Repairs and Maintenance

  1. Accept taxpayer's entry.

3.11.16.10.5.4  (01-01-2009)
Line 15 – Bad Debts

  1. Accept taxpayer's entry.

3.11.16.10.5.5  (01-01-2009)
Line 16 – Rents

  1. Accept taxpayer's entry.

3.11.16.10.5.6  (01-01-2009)
Line 17 – Taxes and Licenses

  1. Accept taxpayer's entry.

3.11.16.10.5.7  (01-01-2009)
Line 18 – Interest

  1. Accept taxpayer's entry.

3.11.16.10.5.8  (01-01-2009)
Line 19 – Charitable Contributions

  1. Accept taxpayer's entry.

3.11.16.10.5.9  (01-01-2009)
Line 20 – Depreciation

  1. Accept taxpayer's entry.

  2. Edit prior year returns as follows:

    • 2005:

    If... And... Then...
    An amount is present on Line 20c,   Change Line 20c to 20.
    Lines 20b and 20c are blank There is an amount on Line 20a,
    1. Edit Line 20a to 20c. Bracket if negative.

    2. Change Line 20c to 20.

    Line 20c is blank Both Lines 20a and 20b have entries,
    1. Subtract Line 20b from 20a and edit to Line 20c. Bracket if negative.

    2. Change Line 20c to 20.

    • 2004 and prior:

      If... And... Then...
      An amount is present on Line 21b,   Change Line 21b to 20.
      Lines 21a and 21b are blank There is an amount on Line 20,
      1. Edit Line 20 to 21b. Bracket if negative.

      2. Change Line 21b to 20.

      Line 21b is blank Both Lines 20 and 21a have entries,
      1. Subtract Line 21a from 20 and edit to Line 21b. Bracket if negative.

      2. Change Line 21b to 20.

3.11.16.10.5.10  (01-01-2009)
Line 21 – Depletion*

  1. Accept taxpayer's entry. *(Line 22 for 2004 and prior)

3.11.16.10.5.11  (01-01-2009)
Line 22 – Advertising*

  1. Accept taxpayer's entry. *(Line 23 for 2004 and prior.)

3.11.16.10.5.12  (01-01-2009)
Line 23 – Pension, Profit–sharing, etc. Plans*

  1. Accept taxpayer's entry. *(Line 24 for 2004 and prior.)

3.11.16.10.5.13  (01-01-2009)
Line 24 – Employee Benefit Programs*

  1. Accept taxpayer's entry. *(Line 25 for 2004 and prior.)

3.11.16.10.5.14  (01-01-2009)
Line 25 – Domestic Production Activities

  1. The Domestic production activities deduction is valid for tax periods beginning 01/01/2005 and later. If the tax period beginning date is prior to 01/01/2005, delete Line 25 if a significant entry is present.

3.11.16.10.5.15  (01-01-2009)
Line 26 – Other Deductions

  1. Other deductions not shown on Lines 12 through 25 are reported on Line 26 of Form 1120.

  2. Edit Line 26 as follows:

    If... Then...
    "Other Deductions" items are included on Lines 12 through 25,
    1. Add the "Other Deductions" entries and edit the total to Line 26. Bracket if negative.

    2. "X" the "Other Deductions" items from Lines 12 through 25.

3.11.16.10.5.16  (01-01-2009)
Line 27 – Total Deductions

  1. The total deductions (sum of Lines 12 through 26) is reported on Line 27 of Form 1120.

  2. Edit Line 27 as follows:

    If... Then...
    Line 27 is blank or illegible but there are entries on Lines 12 through 26, Add Lines 12 through 26 and enter the total on Line 27 of Form 1120. Bracket if negative.
    Line 27 is the only entry in the deduction section,
    • Examine attachments and edit the information to the appropriate transcription lines.

    • Bracket if negative.

    • See Exhibit 3.11.16-18, Schedule F - Transfer Lines.

    The deduction section is blank and there is an indication the deduction items are included on an attachment (e.g., "See attached" , "See Schedule F" , "Statement attached" , etc.),
    • Examine attachments and edit the information to the appropriate transcription lines.

    • Bracket if negative.

    • See Exhibit 3.11.16-18, Schedule F - Transfer Lines.

    There is an amount present for "Total Deductions" on Line 27, but the amount is not identified on Lines 12 through 26 or from attachments,
    • Edit the Line 27 amount to Line 26 of Form 1120.

    • Bracket if negative.

3.11.16.10.5.17  (01-01-2015)
Lines 29a and 29b – Net Operating Loss and Special Deductions

  1. Never bracket Line 29a or 29b amounts as they are negative fields. Do not "X" these lines if they are bracketed by taxpayer.

  2. If it is obvious from a notation on Line 29b that it includes patronage dividends, edit patronage dividends from Line 29b to Line 26, "Other Deductions" , and adjust Line 27, "Total Deductions" . See Figure 3.11.16-17.

  3. If Line 29c has an entry and Lines 29a and 29b are blank, look for an entry on Schedule C, Line 20. If present, enter the amount on Line 29b and edit any difference to Line 29a. If blank or zero, edit the entire Line 29c amount to Line 29a.

    Figure 3.11.16-17

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

3.11.16.10.6  (01-01-2009)
Tax Computation and Settlement - Lines 31 through 36

  1. Following are instructions for Lines 31 through 36. Edit in dollars only.

3.11.16.10.6.1  (01-01-2012)
Line 31 – Total Tax

  1. If blank, enter amount from Page 3, Schedule J, Line 11* if present.

    • *(Line 10 for 2006-2010, Line 11 for 2005–2000, Line 12 for 1999–1998, Line 10 for 1997 and prior.)

  2. If pre-computed interest or delinquency penalty or an additional charge is evident, ensure that it has not been included in Line 31.

    If... Then...
    The amount on Line 31 contains pre-computed interest or penalty or additional charge,
    1. "X" the Line 31 amount.

    2. Delete the interest, penalty or additional charge from the total.

    3. Edit the correct total tax to the left of the original entry.

3.11.16.10.6.2  (01-01-2012)
Line 32 - Total payments and refundable credits

  1. If blank, enter amount from Page 3, Schedule J, Line 21 if present.

3.11.16.10.6.3  (01-01-2013)
Line 32g - Credit for Federal Telephone Excise Tax Paid, Form 8913

  1. Form 8913, Credit for Federal Telephone Excise Tax Paid, is reported on a 2006 Form 1120, Line 32g. Delete Line 32g if an amount is present.

  2. Place Form 8913 in sequence order if Line 15, Column (d) or (e) contain a significant amount.

  3. Edit Action Code "420" .

3.11.16.10.6.4  (11-04-2016)
Backup Withholding

  1. "X" any entry identified by the taxpayer as "Backup Withholding" and edit it to Part II, Schedule J, Line 17.

  2. If the taxpayer has claimed backup withholding ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 1099 is not attached, correspond using Letter 118C.

3.11.16.10.6.5  (01-01-2015)
FIRPTA, Form 1042-S, and Form 8288-A Credits

  1. If Foreign Investors in Real Property Tax Act (FIRPTA) credit or Form 8288-A credit is claimed, route to OSPC. OSPC will:

    1. Use Form 13698, International Credit(s) Verification Slip to request verification of credit from the Foreign Team.

    2. If the credits are verified by the Foreign Team, "X" the amount entered by the taxpayer and edit the verified FIRPTA/8288-A credit from Form 13698 to the bottom center of Form 1120, Page 1. See Figure 3.11.16-18.

    3. If FIRPTA/8288-A credits are not verified, disallow.

      Note:

      If Form 8288-A is not attached for verification, correspond.

  2. If Form 1042-S credit is claimed on any other credit line, "X" the credit and add to Schedule J, Line 19a (Line 32f(1) for 2010 and prior). See Figure 3.11.16-19. If the taxpayer's name is not listed as the recipient in Box 13a of the Form 1042-S (Box 13a cannot be a withholding rate pool) or if the withholding amounts on Form 1042-S do not equal the amount of the credit, then "X" the amount.

    Figure 3.11.16-18

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

    Figure 3.11.16-19

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

3.11.16.10.6.6  (01-01-2015)
Line 33 – Estimated Tax Penalty

  1. Estimated tax penalty must be edited when either:

    1. An additional penalty is precomputed on the return, or

    2. Form 2220, Underpayment of Estimated Income Tax by Corporations, is attached to the return, and shows liability for estimated tax penalty.

  2. To edit Line 33, do the following:

    1. Leave blank for Form 1120-H.

    2. If the taxpayer follows the instructions on Form 2220, the applicable amount must be shown on Form 2220, Page 2, Line 38*, and on Form 1120, Line 33 or equivalent lines on other forms. The taxpayer may also have increased Form 1120, Line 34 or decreased Line 35 accordingly. Do not adjust this amount.
      *(Line 34 for 2007–2005, Line 38 for 2004, Line 36 for 2003, Line 34 for 2002, Line 36 for 2001, Line 34 for 2000–1998, Line 32 for 1997.)

    3. If Form 1120, Line 33 is blank, edit the amount from Form 2220, Page 2, Line 38* to Form 1120, Line 33.
      *(Line 34 for 2007–2005 Line 34, Line 38 for 2004, Line 36 for 2003, Line 34 for 2002, Line 36 for 2001, Line 34 for 2000-1998, Line 32 for 1997.)

    4. If Form 2220, Page 2, Line 38* is blank and Form 1120, Line 33 is also blank, review the Form 2220 to determine the taxpayer's method of computation. If there are entries on Form 2220, Line 37, Columns (a) through (d)**, compute the total amount and enter on Form 1120, Line 33. See Figure 3.11.16-20.

      Note:

      If Form 2220 is attached some conditions may require CCC "8" and/or Reserve Code "4" .


    *(Line 34 for 2007–2005, Line 38 for 2004, Line 36 for 2003, Line 34 for 2002, Line 36 for 2001, Line 34 for 2000-1998, Line 32 for 1997.)
    **(See table below for prior year line numbers.)

    2007–2005 2004 2003 2002 2001 2000–1998
    Line 33
    Columns a-d
    Line 37
    Columns a-e
    Line 35
    Columns a-e
    Line 33
    Columns a-d
    Line 35
    Columns a-d
    Line 33
    Columns a-d

    Figure 3.11.16-20

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

3.11.16.10.6.7  (01-01-2012)
Lines 34 and 35 – Amount Owed/Overpayment

  1. Lines 34 and 35 are edited as positive only. If the taxpayer enters a negative amount, do not bracket.

  2. For Form 1120, edit the proper entry to Line 34 or 35 if both are blank. Do both of the following:

    1. Add Lines 31 and 33. Subtract Line 32*.
      *(Line 32h for 2010 – 2008, Line 32g for 2007, Line 32h for 2006, Line 32g for 2005, Line 32h for 2004 and prior.)

    2. Edit the positive result on Line 34 or the negative result (do not bracket) on Line 35.

  3. If pre-computed interest or delinquency penalty or an additional charge is evident, ensure that it has not been included in Line 34 or reduced Line 35.

    If... Then...
    The amount on Line 34 contains pre-computed interest or penalty or additional charge,
    1. "X" Line 34 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.

    The amount on Line 35 is reduced by pre-computed interest or penalty or additional charge,
    1. "X" Line 35 amount.

    2. Compute the Overpayment amount without the interest, penalty or additional charge.

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

3.11.16.10.6.8  (01-01-2009)
Line 36 – Credit To Estimated Tax

  1. Line 36 – (Center) Overpayment Credit to Estimated Tax.

3.11.16.10.7  (09-09-2016)
♦ Signature ♦

  1. A signature and jurat are required on all returns except the following:

    • Returns prepared under IRC 6020(b). These returns must be signed by a Compliance Function representative. See IRM 3.11.16.2.6.1, IRC 6020(b) Prepared by Collections.

      Note:

      Starting July 1st, 2013 we will accept the Revenue Officers (RO) electronic signature or typed signature as a valid signature on the return.

    • Returns prepared by Examination, for example "SFR" (Substitute for Return) or "SUBSTITUTE RETURN" . See IRM 3.11.16.2.6.3, Examination Prepared Returns - SFR or Substitute for 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 prints 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" .

    • Form 1120-X, with a signature on the line designated for the taxpayer's signature is attached to Form 1120. Form 1120-X must be for the same tax period as Form 1120.

  2. Do not correspond for a signature on "CIS" tax returns that have Form 13596 attached. For processing instructions, see IRM 3.11.16.2.4.3, Correspondence Imaging System (CIS) Returns.

  3. If a signature is missing, correspond:

    Note:

    See IRM 3.11.16.2.4.2, 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 taxpayer's signature,

    or
    • The jurat is not present on the line designated for the taxpayer's signature (a non-standard tax 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) for Form 1120, Form 1120-C, Form 1120-F, Form 1120-H, Form 1120-L, Form 1120-PC, Form 1120-REIT and Form 1120-RIC.

      • CCC "U" for all other 1120 series. Attach Form 4227 notating "Signature missing" .

    2. Leave in batch and continue editing.

    Note:

    Paper returns sent in by the filer that states their return was rejected through the E-file system require a signature. Form 8879-C or Form 8879-I are not acceptable signature substitutes for a paper return.

  4. If the jurat is altered or stricken (crossed out), see IRM 3.11.16.1.6, Frivolous Arguments.

  5. Accept a "signature declaration" (a signature with jurat obtained through IRS correspondence) if attached to the tax return.

    1. If the "signature declaration" is altered or stricken (crossed out), see IRM 3.11.16.1.6, 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."

    3. Form 8879-C and Form 8879-I are not acceptable signature substitutes for a paper return.

  6. Since tax examiners are not expected to be handwriting experts, Internal Revenue Code section 6064 and regulation section 301.6064-1 allows the IRS to presume that the signature on the tax return, statement or other document is the true signature of the person who actually signed the document.

    Note:

    A check mark or "X" used to designate where the taxpayer should sign the return is not considered a valid signature.

  7. Only one correspondence attempt is required for a signature.

3.11.16.10.8  (01-01-2011)
♦ Paid Preparer Checkbox Indicator ♦

  1. The Paid Preparer Checkbox 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 Checkbox:

    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 Phone Number if present.

3.11.16.10.9  (01-01-2009)
♦ Paid Preparer Section ♦

  1. The Paid Preparer section is located below the Signature area at the bottom of Form 1120.

3.11.16.10.9.1  (03-25-2015)
♦ Paid Preparer Social Security Number (SSN) or Preparer's Tax Identification Number (PTIN) ♦

  1. The Paid Preparer's Social Security Number (SSN) 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) at the bottom-right corner of Form 1120.

  2. No action is required on amended returns.

  3. The Preparer's SSN is a nine digit number. Circle the SSN if all zeroes or all nines.

  4. A valid PTIN begins with a "P" , followed by an eight digit number (e.g., PXXXXXXXX). Circle the SSN/PTIN if it is invalid, all zeros or all nines.

3.11.16.10.9.2  (01-01-2011)
♦ Paid Preparer EIN ♦

  1. The Preparer's EIN is located below the PTIN box (Preparer's SSN or PTIN box for 2009 and prior) at the bottom-right corner of Form 1120.

  2. No action is required on amended returns.

  3. The Preparer's EIN is a nine digit number. Circle the EIN if all zeroes or all nines.

3.11.16.10.9.3  (01-01-2011)
♦ Paid Preparer Phone Number ♦

  1. The Paid Preparer's Phone Number is located below the Paid Preparer's EIN at the bottom right hand corner of Form 1120.

  2. If the return is amended, no action is required.

  3. If the Preparer's Phone Number is more than 10 digits, no action is required.

  4. If the Preparer's Phone Number is illegible or less than 10 digits, circle the Phone Number.

3.11.16.10.10  (01-01-2012)
Schedule C, Page 2 - Dividends and Special Deductions

  1. If an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on any of Lines 3, 6, 7, 8, 12, 13, 14, 15, and/or 16, edit Audit Code "2" .

  2. If an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on any of Lines 3, 6, 7, 8, 12, 13, 14,15, and/or 16, edit Audit Code "7" .

3.11.16.10.11  (01-01-2015)
Schedule J, Page 3 - Controlled Group Code / Personal Service Corporation Code / Tax Computation

  1. For returns that are subsequent to 8812, edit Personal Service Corporation Code "2" above the check box on Line 1, Page 3, Schedule J if the Qualified Personal Service Corporation box located on Page 3, Schedule J, Line 2* is checked.

    • *(Line 3 for 2005 and prior.)

    Note:

    If the box on Schedule J, Line 2* is checked, edit ABLM Code "400" on Form 1120, Page 1. See IRM 3.11.16.8.2, ABLM Code and Schedule M-3 Checkbox.


    *(Line 3 for years 2005 and prior.)

  2. Personal Service Corporation Code "2" takes priority over Controlled Group Codes "4" and "1" (described below).

  3. If both the Schedule J, Line 2* box and the Schedule J, Line 1 box are checked, edit Personal Service Corporation Code "2" and delete Schedule O (Form 1120) if significant entries are present.

    • *(Line 3 box for 2005 and prior.)

  4. Edit Controlled Group Code "4" when ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ at least one of the following is present:

    1. The box on Page 3, Schedule J, Line 1 is checked.

    2. There is an indication that the taxpayer is a member of an IRC 1561 Group or IRC 1563 Group.

    3. Schedule O (Form 1120), Box* 3a, 3b, 3d, or 5b is checked.
      *(Box 3a, 3b, 4b, 4c, or 4d for 2006 revision.)

    4. An allocation/apportionment schedule is attached. Some examples of the title of these schedules may be "apportionment plan" , "apportionment consent plan," "consent to apportionment" , "controlled group tax apportionment plan" , "surtax apportionment plan" , or "allocation schedule" . Any attachment labeled as "controlled group tax calculation statement" is NOT an apportionment plan and should not be used to edit tax bracket amounts on Schedule O. See Figure # 3.11.16-21 #.

      Note:

      If there is any doubt whether an attachment is a "Surtax Apportionment Plan," refer the document to the lead tax examiner.

  5. Edit Controlled Group Code "1" when ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ any of Code "4" conditions in paragraph (4)a through (4)d are present. See Figure # 3.11.16-22 #.

  6. If Controlled Group Code "4" or "1" is edited, process Schedule O (Form 1120). See IRM 3.11.16.10.27, Schedule O (Form 1120) - Consent Plan and Apportionment Schedule for a Controlled Group.

  7. If neither Controlled Group Code "4" or "1" is edited, delete Schedule O (Form 1120) if significant entries are present.

    Figure 3.11.16-21

    Figure 3.11.16-22

3.11.16.10.12  (01-01-2014)
Schedule J, Line 3 - Alternative Minimum Tax

  1. If Schedule J, Line 3* is blank and Form 4626 is attached with an amount on Line 14**, edit the amount from Line 14, Form 4626 to Schedule J, Line 3.

    • *(Line 4 for 2005–2000, Line 9 for 1999–1996.)

    • **(Line 15 for 2002 and prior.)

  2. If Schedule J, Line 3 has a significant entry and Form 4626 is not attached, edit MSC "34" .

3.11.16.10.13  (01-01-2013)
Schedule J, Lines 5a and 5b - Credits

  1. The following general instructions apply to Schedule J, Lines 5a and 5b* only:

    • (Lines 6a - 6c for 2005–2000, Lines 4a - 4c for 1999–1996.)

    1. If supporting documentation is missing for two or more credits ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , correspond.

    2. If supporting documentation is missing for only one credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , edit the applicable MSC.

3.11.16.10.13.1  (01-01-2013)
Schedule J, Line 5a - Form 1118, Foreign Tax Credit

  1. If Schedule J, Line 5a*, Foreign Tax Credit has an entry, check for Form 1118 or similar statement:

    • *(Line 6a for 2002–2000, Line 4a for 1999–1996.)

    If... Then...
    The entry on Line 5a is ≡ ≡ ≡ ≡ ≡ ≡ and Form 1118 is missing, Edit MSC "29" .
    There is an entry on Line 5a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Edit Audit Code "2" .
    There is an entry on Line 5a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Edit Audit Code "7" .

3.11.16.10.13.2  (01-04-2016)
Schedule J, Line 5b - Form 8834 Credit and Form 5735

  1. Schedule J, Line 5b*, includes credits from Form 8834 and a write-in credit from Form 5735. If the Line 5b entry or the write-in entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present, take the following action:

    • *(Line 6c for 2005–2000, Line 4c for 1999 and prior.)

    If... And... Then...
    The entry is for Form 8834
    (Form 5735 is not indicated)
    Form 8834 is missing, Edit MSC "49" .
    The entry is for Form 5735
    (Form 5735 is indicated)
    Form 5735 is missing, Edit MSC "37" .

  2. For prior years 2007 and 2006 Form 1120 revisions, Form 5735 credit was also included on Line 5b.

    If... And... Then...
    The entry on Line 5b is ≡ ≡ ≡ ≡ ≡ ≡ There is no indication which form the credit is from and both Form 5735 and Form 8834 are missing, Edit MSC "37" .
    The entry on Line 5b is ≡ ≡ ≡ ≡ ≡ ≡ There is an indication the credit is from Form 5735 and Form 5735 is missing, Edit MSC 37.
    The entry on Line 5b is ≡ ≡ ≡ ≡ ≡ ≡ There is an indication the credit is from Form 8834 and Form 8834 is missing, Edit MSC "49" .

  3. When Form 8834 is attached, check for invalid vehicle years and invalid in-service dates:

    If... Then...
    Form 8834, *Part I, Line 1, Column (a), or (b) include a vehicle year of 2008 or earlier,
    • (Part I, Line 1, Column (a), (b), or (c) for 2010 revision and Part II, Line 8, Column (a), (b), or (c) for July 2009 revision.)

    Edit CCC "C" and circle the invalid vehicle year(s) and/or invalid in-service date(s).
    Form 8834, *Part I, Line 3, Column (a), or (b) include an in-service date of 02/16/2009 or earlier,
    • (Part I, Line 2, Column (a), (b) or (c) for 2010 revision and Part II, Line 9, Column (a), (b), or (c) for July 2009 revision.)

    Edit CCC C and circle the invalid vehicle year(s) and/or invalid in-service date(s).

  4. If Nonconventional Source Fuel, Form 8907 credit, is included on a "prior year return" , Schedule J (Line 6c for 2005–2000, Line 4c for 1999–1996), see IRM 3.11.16.10.14.26, Form 8907 – Nonconventional Source Fuel Credit.

    Note:

    For tax periods 200612 and later, Form 8907 credit, is reported as a General Business Credit.


More Internal Revenue Manual