3.11.217 Form 1120-S Corporation Income Tax Returns

Manual Transmittal

November 05, 2019

Purpose

(1) This transmits revised IRM 3.11.217, Returns and Documents Analysis, Form 1120-S Corporation Income Tax Returns.

Material Changes

(1) Changed Form 1120S to Form 1120-S throughout IRM per Work Request Notification (WRN) dated May 21, 2019, due to Tax Forms and Publications hyphen standardization.

(2) IRM 3.11.217.1.6(1) - Revised the definition of the term "Timely" as suggested in feedback from Chief Counsel

(3) IRM 3.11.217.2(3) - Added new paragraph in regards to this IRM addressing every possibility.

(4) IRM 3.11.217.2.1(2) - Removed reference to Cincinnati Submission Processing Campus in the Business Master File (BMF) Consistency Section.

(5) IRM 3.11.217.2.3.1(1) - Reworded in plain language and removed extra words per IRM 3.11.249 feedback from Internal Management Document (IMD).

(6) IRM 3.11.217.2.4(1) - Added ID and removed quotations and extra spacing per IRM 3.11.249 feedback from Internal Management Document (IMD).

(7) IRM 3.11.217.2.5(3) - Removed reference to Cincinnati Submission Processing Campus in the Criminal Investigation (CI) Referral Table.

(8) IRM 3.11.217.2.5(3) - Corrected title of IRM reference to Refund Returns (45 Day Jeopardy and High Dollar Refunds).

(9) IRM 3.11.217.2.5(5) - Removed reference to Cincinnati Submission Processing Campus in the Criminal Investigation (CI) Routing Table.

(10) IRM 3.11.217.2.11(1) - Revised paragraph for Section 965 returns.

(11) IRM 3.11.217.3.3(1) - Removed reference to Cincinnati Submission Processing Campus. (IPU 19U0049 issued 01-11-2019)

(12) IRM 3.11.217.3.4.4(1) - Added Internal Revenue Service (IRS) per IRM 3.11.15 feedback from Chief Counsel.

(13) IRM 3.11.217.3.4.4(2) c - Corrected Integrated Data Retrieval System (IDRS).

(14) IRM 3.11.217.3.4.4(2) j Note - Added "formally" per IRM 3.11.25 feedback from Chief Counsel.

(15) IRM 3.11.217.3.4.5(1) - Added fax submissions link.

(16) IRM 3.11.217.3.7(2) - Added new paragraph for 3.11 IRM consistency. Renumbered existing paragraphs.

(17) IRM 3.11.217.3.7(3) - Reworded paragraph with plain language per IRM 3.11.217 feedback from Chief Counsel.

(18) IRM 3.11.217.3.9(4) - Added Note to clarify information at the request of 2019 Course Development focus group call. (IPU 19U0588 issued 05-02-2019)

(19) IRM 3.11.217.3.9(5) - Added two prior tax years for Schedule K-1 processing per Unified Work Request (UWR) 189691 - Schedule K-1 Scanning & Processing.

(20) IRM 3.11.217.3.11 - Changed title to Refund Returns (45 Day Jeopardy and High Dollar Refunds).

(21) IRM 3.11.217.6.1(1) - Updated the tax year information.

(22) IRM 3.11.217.6.1(2) - Tax Period Table - Updated the tax year information.

(23) IRM 3.11.217.6.1(2) - Tax Period Table - Added the editing location of the Tax Period in the 2nd & 3rd if/then boxes.

(24) IRM 3.11.217.6.1 (3) - Tax Period Table - Updated tax periods.

(25) IRM 3.11.217.6.2(1) - If/And/Then Table - Second Then box - Updated the tax year information.

(26) IRM 3.11.217.6.2(1) - Corrected paragraph in Note for Tax Period - General. (IPU 19U0049 issued 01-11-2019)

(27) IRM 3.11.217.6.3(2) - Corrected paragraph in Note for Tax Period - General. (IPU 19U0049 issued 01-11-2019)

(28) IRM 3.11.217.7(5) - If/And/Then Table - Updated the date information.

(29) IRM 3.11.217.11(1) d. - Initial Return - 24 Month Rule Table - Updated the tax year information.

(30) IRM 3.11.217.12(1) - Added cross reference to IRM 3.11.217.39(2) to the third "And" box.

(31) IRM 3.11.217.13.1(5) - Replaced the title of Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches, per Large Business & International (LB&I) request for revision pursuant to Tax Cuts and Jobs Act (TCJA) 2017 and corrected the Index reference. (IPU 19U0049 issued 01-11-2019)

(32) IRM 3.11.217.13.3(6) - Added new paragraph to reference Form 6252, Installment Sale Income, .for additional information.

(33) IRM 3.11.217.13.4 - Revised entire section to remove references to corporate AMT repeal per feedback from Chief Counsel. Renumbered remaining paragraph accordingly.

(34) IRM 3.11.217.13.7 - Added Return Processing Code (RPC) "9" and Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, to the Returns Processing Codes (RPC) index.

(35) IRM 3.11.217.13.7(3) - Updated information on RPC 6 and Form 8996, Qualified Opportunity Fund.

(36) IRM 3.11.217.13.7(3) - Replaced the title of Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI), per Large Business & International (LB&I) request for revision pursuant to Tax Cuts and Jobs Act (TCJA) 2017 and corrected the Index reference. (IPU 19U0049 issued 01-11-2019)

(37) IRM 3.11.217.13.7(3) Added Return Processing Code (RPC) "9" when Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments is present.

(38) IRM 3.11.217.14.2(4) - Deleted the first bullet for foreign corporations per feedback from Chief Counsel.

(39) IRM 3.11.217.14.9(1) - Updated the Tax Period ending and redefined Computer Condition Code (CCC) M for the presence of Code "Y" .

(40) IRM 3.11.217.14.13(1) - CCC R - Added exception to not send Letter 1382C due to CCH software outage. (IPU 19U0653 issued 05-16-2019)

(41) IRM 3.11.217.14.13(2) - Deleted first bullet for foreign corporations per feedback from Chief Counsel.

(42) IRM 3.11.217.15.1(1) - Added Sequencing of Return instructions for Form 8949, Form 8996, and Form 6252.

(43) IRM 3.11.217.15.1(1) - Updated the Sequencing of Return instructions for Schedule K-1.

(44) IRM 3.11.217.15.1(1) - Updated the tax years for Schedule K-1 processing.

(45) IRM 3.11.217.18.2(2) If/Then Table - Removed the information pertaining to Line 22c "imputed underpayment" per IRM feedback.

(46) IRM 3.11.217.19(7) - Added Exception information for faxed signatures per IRM 3.11.16 feedback from Chief Counsel.

(47) IRM 3.11.217.23.1 - Added new subsection and paragraphs (1) and (2) for Accounting Method Code.

(48) IRM 3.11.217.23.2 - Updated the title to Form 8996 - Qualified Opportunity Fund Checkbox.

(49) IRM 3.11.217.23.2(1) - Corrected the Line number reference for Form 8996, Qualified Opportunity Fund. (IPU 19U0049 issued 01-11-2019)

(50) IRM 3.11.217.23.2(1) - Added a Note to edit Qualified Opportunity Fund in dollars and cents and removed reference to Tax Cuts and Jobs Act. (IPU 19U0094 issued 01-31-2019)

(51) IRM 3.11.217.23.2(1) - Changed Line 13 to Line 14 per Work Request Notification (WRN) for Form 8996, Qualified Opportunity Fund, dated November 2, 2018.

(52) IRM 3.11.217.23.2(3) - Added new paragraph to cross reference IRM 3.11.217.32, Form 8996, Qualified Opportunity Fund.

(53) IRM 3.11.217.24(2) - Updated tax year information.

(54) IRM 3.11.217.24.9 -- Moved Schedule K Line 14a instruction in form order, after Line 14p and before Line 16d. (This instruction was previously located at 3.11.217.24.5). Renumbered remaining subsections accordingly.

(55) IRM 3.11.217.27(6) - Added new paragraph to cross reference the sequence order for Schedule N.

(56) IRM 3.11.217.27.1(1) - Replaced the title of Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches, per Large Business & International (LB&I) request for revision pursuant to Tax Cuts and Jobs Act (TCJA) 2017. (IPU 19U0049 issued 01-11-2019)

(57) IRM 3.11.217.27.10(1) - Updated tax year information.

(58) IRM 3.11.217.28(2) - Added new paragraph to cross reference the sequence order of Form 8825Rental Real Estate Income and Expenses of a Partnership or an S-Corporation.

(59) IRM 3.11.217.30(1) - Updated Schedule D information.

(60) IRM 3.11.217.30(2) - Added new paragraph to cross reference the sequence order of Schedule D.

(61) IRM 3.11.217.31 - Added instruction for editing Form 8949, Sales and other Dispositions of Capital Assets. Renumbered remaining subsections accordingly.

(62) IRM 3.11.217.32 - Added instruction for editing Form 8996, Qualified Opportunity Fund. Renumbered remaining subsections accordingly.

(63) IRM 3.11.217.33(8) - Added new paragraph to cross reference the sequence order of Form 1125-A, Cost of Goods Sold.

(64) IRM 3.11.217.34(5) - Corrected column title.

(65) IRM 3.11.217.34(6) - Added new paragraph to cross reference the sequence order of Form 4136, Credit for Federal Tax Paid on Fuels.

(66) IRM 3.11.217.35(3) - Added new paragraph to cross reference the sequence order of Form 8913, Credit for Federal Telephone Excise Tax Paid.

(67) IRM 3.11.217.36(4) Added new paragraph to cross reference the sequence order of Form 8941, Credit for Small Employer Health Insurance Premiums.

(68) IRM 3.11.217.37(2) --Added new paragraph to cross reference the sequence order of Form 5884-B, New Hire Retention Credit.

(69) IRM 3.11.217.38 - Added instructions for editing Form 6252 - Installment Sale Income. Renumbered remaining subsections accordingly.

(70) IRM 3.11.217.39(1) Note - Updated tax years for Schedule K-1 processing.

(71) IRM 3.11.217.39(2) - Updated tax years for Schedule K-1 processing.

(72) IRM 3.11.217.39(7) - Added new paragraph to cross reference the sequence order of Schedule K-1.

(73) IRM 3.11.217.40(1) - Updated tax year information.

(74) IRM 3.11.217.40(2) - Updated tax year information.

(75) IRM 3.11.217.40(6) - Added paragraph to cross reference the sequence order of Form 8938, Statement of Specified Foreign Financial Assets.

(76) Exhibit 3.11.217-1 - Removed acronym CSPC for Cincinnati Submission Processing Campus due to SP Consolidation.

(77) Exhibit 3.11.217-1 - Added new acronyms due to Large Business & International (LB&I) request for revision pursuant to Tax Cuts and Jobs Act (TCJA) 2017 for Foreign Disregarded Entities (FDE), Foreign Branches (FB) and Global Intangible Low-Taxed Income (GILTI).

(78) Exhibit 3.11.217-1- Updated the acronym for "ZIP" to "Zoning Improvement Plan" in the Acronym and Abbreviations Exhibit.

(79) Exhibit 3.11.217-2 - Updated Due Date Chart.

(80) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Letters 112C, 282C, 2255C or 2284C - Removed reference to Cincinnati Submission Processing Campus.

(81) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Added exception to not send Letter 1382C due to CCH software outage in the "Statement establishing Reasonable Cause for delinquent filing" box. (IPU 19U0653 issued 05-16-2019)

(82) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Request for e-file Waiver Statement or Request - Removed reference to Cincinnati Submission Processing Campus.

(83) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Request for Installment Agreement - Removed reference to Cincinnati Submission Processing Campus.

(84) Exhibit 3.11.217-3, Routing Guide for Attachments Table - Schedule K-1, Form 1120-S - Updated tax years for Schedule K-1 processing.

(85) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Schedule N - Added form sequencing information.

(86) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 433-B, Collection Information Statement for Businesses, - Removed reference to Cincinnati Submission Processing Campus.

(87) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 433-D, Installment Agreement, - Removed reference to Cincinnati Submission Processing Campus.

(88) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 637, Application for Registration (For Certain Excise Tax Activities), - Updated instructions to send to Kansas City Submission Processing Campus (KCSPC) Excise Team.

(89) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, - Removed reference to Cincinnati Submission Processing Campus.

(90) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations, - Removed reference to Cincinnati Submission Processing Campus.

(91) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 2848, Power of Attorney and Declaration of Representative, - Removed reference to Cincinnati Submission Processing Campus.

(92) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 3115, Application for Change in Accounting Method, - Added routing instruction when Part I is/is not completed.

(93) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, - Removed reference to Cincinnati Submission Processing Campus.

(94) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner (Under Section 6048(b)), - Removed reference to Cincinnati Submission Processing Campus.

(95) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 5713, International Boycott Report, - Updated routing information because Statistics of Income no longer needs this form. (IPU 19U0404 issued 03-25-2019)

(96) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Updated routing information for Form 6252, Installment Sale Income.

(97) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, - Updated instructions to send to Ogden Submission Processing Campus (OSPC).

(98) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests, - Removed reference to Cincinnati Submission Processing Campus.

(99) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, - Removed reference to Cincinnati Submission Processing Campus.

(100) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests, - Removed reference to Cincinnati Submission Processing Campus.

(101) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 8404, Interest Charge on DISC-Related Deferred Tax Liability, - Updated instructions to send to Kansas City Submission Processing Campus (KCSPC).

(102) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 8734 - Removed column because form is obsolete as of 02-27-2017.

(103) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Updated routing instructions for Form 8752, Required Payment or Refund Under Section 7519.

(104) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 8821, Tax Information Authorization, - Removed reference to Cincinnati Submission Processing Campus.

(105) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Replaced the title of Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches, Large Business & International (LB&I) request for revision pursuant to Tax Cuts and Jobs Act (TCJA) 2017. (IPU 19U0049 issued 01-11-2019)

(106) Exhibit 3.11.217-3 - Routing Guide for Attachments Table - Updated routing information for Form 8875, Taxable REIT Subsidiary Election (Under section 856(I)(1) of the Internal Revenue Code).

(107) Exhibit 3.11.217-3 Routing Guide for attachments Table - Form 8949, Sales and other Dispositions of Capital Assets, - Added sequencing information.

(108) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Replaced the title of Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI), per Large Business & International (LB&I) request for revision pursuant to Tax Cuts and Jobs Act (TCJA) 2017. (IPU 19U0049 issued 01-11-2019)

(109) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Updated routing information for Form 8996, Qualified Opportunity Fund.

(110) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Added Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments.

(111) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 9100 - Removed reference based on feedback from Chief CounseI.

(112) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Form 9465, Installment Agreement Request, - Removed reference to Cincinnati Submission Processing Campus.

(113) Exhibit 3.11.217-3 Routing Guide for Attachments Table - Updated routing information for Form 14039-B, Business Identity Theft Affidavit.

(114) Exhibit 3.11.217-4 - Added new exhibit for prior year conversions on Form 8996, Qualified Opportunity Fund.

(115) Exhibit 3.11.217-5 Challenges to Authority/Due Process - Changed privacy act to Privacy Act.

(116) Exhibit 3.11.217-5 IRC 861 Business Employment Tax - Reworded regulations per. IRM 3.11.15 feedback from Chief Counsel.

(117) IRM references updated throughout the IRM.

(118) Figures revised throughout the IRM.

(119) Exhibits revised throughout the IRM.

(120) Minor editorial changes have been made throughout this IRM (e.g., line number updates, spelling, punctuation, links, etc.).

Effect on Other Documents

IRM 3.11.217, Returns and Documents Analysis, Form 1120-S Corporation Income Tax Returns, dated November 13, 2018 (effective January 1, 2019), is superseded. The following IRM Procedural Updates (IPUs), issued from January 11, 2019, through May 16, 2019, have been incorporated into this IRM: 19U0049, 19U0094, 19U0404, 19U0588, and 19U0653.

Audience

Wage and Investment (W&I) Submission Processing Code and Edit (C&E) personnel are the intended audience for this IRM.

Effective Date

(01-01-2020)

Linda J. Brown
Director, Submission Processing
Wage and Investment Division

Program Scope and Objectives

  1. This section contains instructions for Form 1120-S, U.S. Income Tax Return for an S Corporation. Form 1120-S is used to report the income, gains, losses, deductions, credits, etc., of a domestic corporation or other entity for any tax year covered by an election to be an S Corporation.

  2. Purpose: This section provides instructions for Document Perfection Operation (DPO) Code and Edit (C&E) for coding and editing (perfecting) returns and other documents.

  3. Audience: These procedures apply to Wage and Investment (W&I) Submission Processing (SP) Code and Edit (C&E) personnel:

    • Supervisory Tax Technician

    • Lead Tax Technician

    • Tax Examining Technician

    • Supervisory Clerk

    • Lead Clerk

    • Clerk

  4. Policy Owner: Director, Submission Processing

  5. Program Owner: Paper Processing Branch, Business Master File (BMF) Section

  6. Primary Stakeholders: Other areas that may be affected by these procedures include (but not limited to):

    • Accounts Management (AM)

    • Chief Counsel

    • Compliance

    • Information Technology (IT) Programmers

    • Large Business and International (LB&I)

    • Modernized Electronic Filing (MeF) or Modernized e-file (MeF)

    • Small Business Self-Employed (SBSE)

    • Statistics of Income (SOI)

    • Submission Processing (SP)

    • Tax Exempt and Government Entities (TEGE)

    • Taxpayer Advocate Service (TAS)

Background

  1. Document Perfection codes and edits (perfects) returns and other documents for input to Master File (MF) through the Integrated Submission and Remittance Processing System (ISRP) and the Service Center Recognition Image Processing System (SCRIPS).

  2. Document Perfection forwards any other documents and attachments not related to the processing of the returns to the function responsible for handling them.

  3. 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.

Authority

  1. Authority for these procedures is found in the following sections of the Internal Revenue Code and their corresponding Treasury Regulations:

    • IRC 6201(a)

    • IRC 6213(b)

Responsibilities

  1. The Campus Director is responsible for monitoring operational performance for the Submission Processing campus.

  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 for following the instructions contained in this IRM and maintain updated IRM procedures.

Program Management and Reviews

  1. Program Goals: Ensure documents are code and edit ready for transcription.

  2. Program Reports: The Batch Block Tracking System (BBTS) captures and stores a vast amount of data, which can be used in performance monitoring and production projections.

  3. Program Effectiveness: The program goals are measured by using the following tools:

    • Embedded Quality Submission Processing (EQSP)

    • Balanced Measures

    • Managerial Reviews

  4. Annual Review: The processes outlined in this IRM should be reviewed annually to ensure accuracy and promote consistent tax administration.

Program Controls

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

Terms/Definitions/Acronyms

  1. The table below lists Interpretation Words and their definitions.

    Interpretation Words

    Word Definition Example of using a word that is open to interpretation

    Note:

    This column is for illustration purposes only.

    Fair Provide accurate and professional service to all persons without regard to personal bias. 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.
    Significant Entry Any entry other than zero or blank. Place Form 8941, Credit for Small Employer Health Insurance Premiums, in sequence order if significant entries are present.
    Timely Coming early or at the right time. 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.

     

  2. See Exhibit 3.11.217-1, Acronyms and Abbreviations, for a list of commonly used acronyms and abbreviations.

Related Resources

  1. The following resources may assist in performing the work as outlined in this IRM.

    • Servicewide Electronic Research Program (SERP)

    • Integrated Data Retrieval System (IDRS)

    • Submission Processing Design Center (SPDC)

General Information

  1. The purpose of this section is to provide instructions for general required processing actions on Form 1120-S, U.S. Income Tax Return for an S Corporation, to eliminate repetition of the same instructions in different subsections.

  2. In case of a conflict of instruction between this general subsection and the subsequent specific subsection, the specific subsection will govern.

  3. This IRM can’t address every possibility that may arise while perfecting 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 or manager to determine the proper corrective action.

♦Business Master File (BMF) Consistency♦

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

  2. Topics for BMF Consistency have been identified and developed as a coordinated effort between Ogden, Kansas City and Paper Processing Branch BMF Code and Edit/Error Resolution System (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.

♦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.

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

  2. The SLAs are located at http://tas.web.irs.gov/policy/sla/default.aspx.

BMF Identification (ID) Theft

  1. BMF Identification (ID) Theft is increasing. If you as a tax examiner in Submission Processing (SP) Code and Edit (C&E), find 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" may be edited on Form 1120-S (any year) by the BMF ID Theft Liaison to identify a potential identity theft filing. See IRM 3.11.217.14.3, CCC "E" - Potential Identity Theft Filing, for additional information.

♦Criminal Investigation (CI) Referral♦

  1. Criminal Investigation (CI) investigates potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes. Criminal violations of the IRC include willful attempts to evade or defeat the income tax. Criminal tax violations also include the willful failure to collect or pay over tax and false claims for refunds based on bogus return information.

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

  3. For returns with refund claims ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ do the following:

    Criminal Investigation (CI) Referral

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

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

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

    4. 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. Edit Action Code 341 on the return. See IRM 3.11.217.3.11, Refund Returns 45 Day Jeopardy and High Dollar Refunds.

    6. Continue processing the return.

     

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

  5. If a suspicious return is identified, do the following:

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

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

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

      CI Referral Criteria Routing

      Submission Processing Campus/Center Route the copy to:
      Ogden Mail Stop 9001, Criminal Investigation (CI)
      Kansas City Mail Stop S2 9000, 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.

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

♦Examination (Exam) "Funny Box" ♦

  1. The primary objective in identifying tax returns for Examination (Exam) 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.

♦Edit Marks♦

  1. Edit marks are edited on the return for transcription to the Automated Data Processing (ADP) System through 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

    Edit Mark 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 slash (/) can be used when deleting a form or schedule not being transcribed.
    "/ /$" "/ /$" is used in the entity area to identify the beginning and ending of a Foreign Country Code.

    Example:

    "/EI/$" is edited for "Ireland" or "/GM/$" is edited for "Germany" .

    "%" or "c/o" 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.
    Bracket/Parenthesis Indicates a negative numerical amount.

    Note:

    Code and Edit 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 parentheses "( )" , 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; Entity, Collections 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 3.11.217.3.4.3, Correspondence Imaging System (CIS) Returns, and IRM 3.11.217.3.8, Re-entry Document Procedures.
    Rocker Indicates the amount paid when drawn under a remittance amount.

     

♦Frivolous Arguments♦

  1. A frivolous argument is used for 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, shown in Exhibit 3.11.217-5, Potential Frivolous Arguments for Examination Review

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

    Frivolous Arguments

    If Then
    The return meets any of the conditions identified as a frivolous return. See Exhibit 3.11.217-5, Potential Frivolous Arguments for Examination Review.

    Exception:

    If the return shows Action Code 331 and has a Form 4227, Intra-SC Reject or Routing Slip, attached with the remarks, "Refer to Exam FRP for audit after processing" , continue to next procedure.

    Remove return from the batch and place the return in the locally designated basket for Examination, Frivolous Return Program (FRP) for review.
    Examination has selected the return as frivolous, (e.g., indicated by an Action Code 331 and a Form 4227, Intra-SC Reject or Routing Slip, with the remarks, "Refer to Exam FRP for audit after processing" ), but sends the return for processing. Continue processing the return using procedures in IRM 3.11.217. However, do not circle or void the Action Code indicating a frivolous return.

     

    Note:

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

♦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. Notate "Protective Claim" in the remarks box of Form 4227, Intra-SC Reject or Routing Slip.

    Exception:

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

Section 965 Returns

  1. Section 14103 of the Tax Cuts and Jobs Act (TCJA) of 2017 overhauled Section 965 of the Internal Revenue Code. Section 965, now titled "Treatment of deferred foreign income upon transition to participation exemption system of taxation" , provides that US shareholders must pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States.

  2. Identify a Section 965 return when any of the following are present:

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

    • IRC 965 Transition Tax Statement (or similar 965 statement) is attached.

    • Form 965, Inclusion of Deferred Foreign Income Upon Transition to Participation Exemption System, is attached.

    • Form 965, Schedule A, U.S. Shareholder’s Section 965(a) Inclusion Amount, is attached.

    • Form 965, Schedule B, Deferred Foreign Income Corporation’s Earnings and Profits, is attached.

    • Form 965, Schedule C, U.S. Shareholder’s Aggregate Foreign Earnings and Profits Deficit, is attached.

    • Form 965, Schedule D, U.S. Shareholder’s Aggregate Foreign Cash Position, is attached.

    • Form 965, Schedule E, U.S. Shareholder’s Aggregate Foreign Cash Position - Detail, is attached.

    • Form 965, Schedule F, Foreign Taxes Deemed Paid by Domestic Corporation, is attached.

    • Form 965, Schedule G, Foreign Taxes Deemed Paid by Domestic Corporation, is attached.

    • Form 965, Schedule H, Amounts Reported on Forms 1116 and 1118 and Disallowed Foreign Taxes, is attached.

    • Form 965-B, Corporate and Real Estate Investment Trust (REIT) Report of Net 965 Tax Liability and Electing REIT Report of 965 Amounts, is attached.

    • Form 1120-S, Schedule K, Line 10, Other Income (Loss), indicates a significant entry with the notation "Section 965" (or similar language). See IRM 3.11.217.24.3, Schedule K, Line 10 – Other Income (Loss), for additional information.

    • Form 1120-S, Schedule K, Line 12d, Other Deductions, indicates a significant entry with the notation "Section 965" (or similar language). See IRM 3.11.217.24.4, Schedule K, Line 12d, Other Deductions, for additional information.

    • Form 1120-S, Schedule K, Line 14r, Other Foreign Tax Information, indicates a significant entry with the notation "Section 965" (or similar language). See IRM 3.11.217.27.1, Schedule K, Line 14r - Other Foreign Tax Information, for additional information.

    Note:

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

  3. When a return has been identified as a Section 965 return, edit as follows:

    1. Completely edit the return.

    2. Edit CCC "J" . See IRM 3.11.217.14.7, CCC "J" – Section 965 Tax.

    3. Edit Action Code 460 (Management Suspense). See IRM 3.11.217.3.1, Action Codes.

    4. Do not correspond on the return. ERS will take care of any correspondence needed.

      Caution:

      Notate "K-1 Missing" (or similar language) in the lower left margin (Action Trail) of the return, if correspondence is needed for missing Schedules K-1.

Unprocessable Documents - Error Resolution System

  1. The Document Perfection tax examiner will have the first opportunity to identify a return having a problem which requires correspondence, research, and/or other action to make the return processable. An Action Code is edited to identify these unprocessable returns.

  2. The tax examiner will determine the kind of action required and assign an Action Code to the return which will force it to the Error Resolution System (ERS) (on-line correction system). The code will indicate whether correspondence, research, or some other action is needed.

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.

    Caution:

    Do not edit (or write) over another area's edit marks or action trail.

  4. Assign Action Codes in the following priority:

    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 on Form 1120-S:

    Action Codes

    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 1120-S.

    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 1120-S.

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

    3. See IRM 3.11.217.3.1(8) for suspense periods.

    Action Codes have different priority,
    1. Edit the Action Code with the higher priority on the Form 1120-S.

      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.

    3. See Figure 3.11.217-1, Example of Editing Return When More Than One Action Code is Needed.

     

    Figure 3.11.217-1

    This is an Image: 51221501.gif
     

    Please click here for the text description of the image.

  6. Edit the following Action Codes when a return can’t be perfected:

    Action Codes

    Action Code Description
    211 (First Correspondence) or 215 (International Correspondence)
    • Return is illegible, incomplete, or contradictory and therefore can’t 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 returns (only issue for correspondence).
    226 (Missing Signature International Correspondence) Unsigned foreign returns (only issue for correspondence).
    460 (Management Suspense) Section 965, Treatment of Deferred Foreign Income upon Transition to Participation Exemption System of Taxation
    480 (Early Filed Suspense) Early filed return.
    610 (Renumbered Non-Remittance) or
    611 (Renumbered with Remittance)
    A return is mis-blocked (e.g., Form 1065, U.S. Return of Partnership Income, found in a Form 1120-S, U.S. Income Tax Return for an S Corporation, 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 Campus (OSPC).

    • Return has a foreign address and must be forwarded to Ogden Submission Processing Campus (OSPC).

      Note:

      An Army Post Office (APO), Diplomatic Post Office (DPO), or Fleet Post Office (FPO) address is not considered foreign.

     

  7. Continue perfecting the return after editing the Action Codes.

  8. Valid Action Codes are listed below:

    Action Codes

    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 Other Accounting

    Note:

    This Action Code is also used for "Black Liquor" claims on Form 6478, Biofuel Producer Credit (Credit for Alcohol Used as Fuel for 2012 - 2007). See IRM 3.11.217.24.7, Schedule K, Line 13f, - Biofuel Producer Credit.

    10
    347 Form 2553, Election by a Small Business Corporation, attached to Form 1120-S, U.S. Income Tax Return for an S Corporation, and/or taxpayer indicates "Revenue Procedure (Rev. Proc.) 2013-30" (effective September 3, 2013) or "Rev. Proc. 2007-62" on Form 1120-S.

    Note:

    Action Code 347 is used to route Form 1120-S to Entity Control for review of the Form 2553 and/or Rev. Proc. 2013-30 or Rev. Proc. 2007-62.

    Exception:

    Do not edit Action Code 347 if the return has already been to Entity Control.

    20
    352 Name Research 3
    360 Other-in-House Research 10
    370 Examination - Prompt Assessment - Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d) 10
    420 2006 tax return with Form 8913, Credit for Federal Telephone Excise Tax Paid, credit 5
    440 Management Suspense 15
    450 Management Suspense 20
    460 Management Suspense

    Note:

    Used for "Section 965" identification.

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

     

    Reminder:

    Beginning with tax returns for periods ending 12-31-2007 and later, Form 2553, Election by a Small Business Corporation, may be filed as an attachment to Form 1120-S requesting to be considered an S Corporation. Edit Action Code (AC) 347 when a Form 2553 is attached to Form 1120-S and/or taxpayer indicates "Revenue Procedure (Rev. Proc.) 2013-30" or "Rev. Proc. 2007-62" on Form 1120-S.

Unprocessable Conditions and Rejection of Documents

  1. A tax return is an Ogden Submission Processing Campus (OSPC) only return if at least one of the following conditions exists:

    1. The tax return has a foreign address.

    2. There is a refund credit claimed because of U.S. income tax paid or withheld at source because of the Foreign Investors in Real Property Tax Act whether or not Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, is attached.

Treatment of All Unprocessable Tax Returns

  1. Kansas City Submission Processing Campus (KCSPC) - If the Form 1120-S is an "OSPC only" return:

    1. Discontinue perfection of the return.

    2. Prepare Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office, to inform the taxpayer the return has been sent to the Ogden Submission Processing Campus (OSPC).

    3. Edit an Action Trail (e.g., "86C Sent" or similar language) in the lower left corner going vertically up the side of the return.

  2. If the Form 1120-S is other than an "OSPC only" return, perfect the return.

    1. Examine schedules and other attachments for necessary information and edit the return as needed for processing.

    2. If perfection is not possible, perfect to the extent possible and proceed as set forth in (3) below.

  3. Action to Secure Perfection:

    1. Where indicated, prepare Form 4227, Intra-SC Reject or Routing Slip, indicating the reason for rejecting the document and that the document should be resubmitted for processing when it has been perfected.

    2. Attach the Form 4227, Intra-SC Reject or Routing Slip, below the entity area.

    3. If the tax return has not been numbered, withdraw it from processing and forward it to the proper area.

    4. If the tax return has been numbered, edit the appropriate Action Code in the bottom left margin of the return and leave it in the block.

♦Correspondence♦

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

    1. Correspondence received from taxpayers, and

    2. 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:

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

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

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

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

    1. Is the taxpayer waiting for a response from us?

    2. Is the taxpayer waiting for an action to be taken by us?

    3. Is the taxpayer asking a question?

    Note:

    A Post-It-Note, Sticky Note, or some other type of note stuck on the return by another function; such as, "Taxpayer (TP) requests penalties be waived" , 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:

    Section 965 Returns - Do not correspond on the return. ERS will take care of any correspondence needed. Notate "K-1 Missing" (or similar language) in the lower left margin (Action Trail) of the return, if correspondence is needed for missing Schedules K-1. See IRM 3.11.217.2.11, Section 965 Returns for additional information.

    Exception:

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

  2. If the return is incomplete and appears to be a duplicate, give the return to the lead. The lead will 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 of the conditions can be included in the same correspondence.

    Correspondence

    If And Then
    Correspondence is needed, Requires a response,
    1. Complete an approved Correspondence Action Sheet (CAS) indicating the letter number (e.g., 86C, 118C, 319C, etc.), Master File Tax (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, Document Locator Number (DLN), etc.

    2. Attach the approved Correspondence Action Sheet (CAS) to the front of the return below the entity area.

    3. Edit Action Code 211 (First Correspondence) or 215 (International Correspondence) (or other applicable Action Code) 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 (CAS) indicating the letter number (e.g., 86C, 118C, 319C, etc.), Master File Tax (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 approved Correspondence Action Sheet (CAS) below the entity area on the front of the copy of the return. Be sure the name and address show clearly above the approved Correspondence Action Sheet.

    3. Forward the copy to the Correspondence Area.

    4. Edit an Action Trail (e.g., "1382C Sent" or similar language) in the lower left corner going vertically up the side of the return.

    5. Finish editing the return and leave in the 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 Accounts 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.

    Correspondence Imaging System (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 instructions below for processing "CIS" returns.

    Correspondence Imaging System (CIS) Return

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

    2. Remove the return from the batch and route to Accounts Management (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, Reprocessing Returns, attached and the return is incomplete (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 Accounts Management (AM). Continue processing the return.
    The "CIS" return does not have a Form 13596, Reprocessing Returns, attached, The return is incomplete (e.g., missing signature, schedules, or forms), Follow normal correspondence procedures.

     

♦Internal Revenue Service (IRS) Employee Contacts - RRA98, Section 3705(a)♦
  1. The Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA98), Section 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 minimum) the following information:

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

    2. Face-to-Face Contact - Their title (e.g., Mr., Mrs., Ms., 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., Miss), last name, and Integrated Data Retrieval System (IDRS) 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 are considered manually-generated correspondence and must include the required information.

      Caution:

      Email can’t be used to transmit taxpayer account information.

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

    6. When taxpayer requests to speak with a specific employee who previously handled their 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 can’t 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 for 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 formally adopted by IRS in June 2014. TBOR #2, The Right to Quality Service, provides that taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service. IRS employees are responsible for being familiar with acting in accord with all ten taxpayer rights. For additional information about the Taxpayer Bill of Rights, see http://win.web.irs.gov/Taxpayer_Rights.htm.

♦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. For more information about accepting signed taxpayer documents by fax, see the most recent revision of the IRS Policy for Use of Fax, available at:http://win.web.irs.gov/SP/News/Updates/Scanned_Revision_of_Policy_for_Use_of%20Fax_in_Taxpayer_Submissions.pdf#search=Revision%20of%20Policy%20for%20Use%20of%20Fax%20in%20Taxpayer%20Submissions.

  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 tax 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 21.1.3.2.4, Additional 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 11.3.1.14, Facsimile (FAX), Electronic Facsimile (E-FAX), and IRS Internal Enterprise Electronic Facsimile (EEFAX) Transmission of Tax Information

C/SC Letters

  1. Listed below are letters which are provided by Headquarters for Submission Processing Campus use in corresponding for items listed in this IRM. It is expected that tax examiners or their supervisors (or delegates) will have access to and be familiar with the Submission Processing Center Correspondex for selection of appropriate letters. The list is not all-inclusive.

    1. Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office - Letter referring taxpayer inquiry/forms to another office.

    2. Letter 105C, Claim Disallowed - Letter disallowing claims, explaining appeal rights and procedures.

    3. Letter 118C, Corporate Return Incomplete for Processing: Form 1120, Form 1120 Series, Form 1120-S - Letter requesting missing schedules or documents.

    4. Letter 143C, Signature Missing - Letter advising taxpayer that we have received tax form and need additional information to complete action on it.

    5. Letter 319C, Return Covers Other Than 12-Month Accounting Period - Letter advising taxpayer that IRS can’t process return because it shows an improper tax period, or a period of more than 12 months, or a period less than 12 months without an explanation.

    6. Letter 1382C, Penalty Removal Request Incomplete - Letter requesting taxpayer to resubmit request for penalty relief after receiving notice of penalty assessment.

    7. Letter 3463C, Missing Information Request to Process Business Returns - Letter requesting missing information to process business returns.

♦Compliance Secured/Prepared Returns♦

  1. Compliance functions (Collections and Examination) secure returns from the taxpayer and 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" (TC = Transaction Code) or "ICS" (Integrated Collection System) or notated "Process as Original" with an attached Form 13133, Expedite Processing Cycle. The "Delinquent Return" box on Form 13133 should be checked.

      Note:

      If Return Delinquency "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 Collections♦
  1. When the taxpayer fails to file a required return, IRC 6020(b) is the authority for 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 a received date. If missing, follow the normal procedures for editing the received date. See IRM 3.11.217.7, Received Date.

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

      Note:

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

    3. 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" .

    4. Do not correspond on returns prepared by Collections. If the return would normally require correspondence, edit CCC "3" and continue processing.

    5. Edit CCC "W" if the received date is more than two years and nine months after the return due date. Do not send the return to Statute Control. See IRM 3.11.217.3.7, Statute Returns.

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

    1. Do not edit CCC "G" on these returns.

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

    3. Edit CCC "W" if the received date is more than two years and nine months after the return due date. Do not send to Statute Control. See IRM 3.11.217.3.7, Statute Returns.

      Reminder:

      If there is an indication a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.11.217.14, Computer Condition Codes - General, for additional information.

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

    1. Return must have a received date. If no received date is present, follow the normal procedures for editing the received date.

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

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

      Note:

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

    4. Edit CCC "W" if the received date is more than two years and nine months after the return due date. Do not send to Statute Control. See IRM 3.11.217.3.7, 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 can’t be processed (e.g., missing signatures, missing schedules, etc.).

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

    4. Edit CCC "W" if the received date is more than two years and nine months after the return due date. Do not send to Statute Control. See IRM 3.11.217.3.7, Statute Returns.

    Reminder:

    If Form 13133 (or something similar) indicates a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.11.217.14, Computer Condition Codes - General, for additional information.

♦Statute Returns♦

  1. Any return with a received date that is two years and nine months or more after the return due date is a potential Statute Control return.

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

  3. If any of the conditions listed below are present, do not route to Statute Control Unit for clearance. Instead, edit CCC "W" and continue processing.

    • Compliance IRC 6020(b) returns

    • Secured by Examination/Collections

    • Returns with Transaction Code "TC 59X" or Integrated Collection System "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 90 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 return and send it 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.

    Statute Returns

    If Then
    The return is numbered,
    1. Edit Action Code 310 on the return,

    2. Leave the return in the batch and continue processing the return.

    The return is unnumbered,
    1. Do not continue processing the return.

    2. Pull the return from the batch.

    3. Attach Form 4227, Intra-SC Reject or Routing Slip, and route to Statute Control Unit.

     

  6. Edit a CCC "W" if the return has been "cleared" by the Statute Control Unit. Statute Control Unit will stamp or indicate clearance on the front of the return.

  7. Statute may stamp a return as "No Statute Issue" . Follow the chart below to determine if a CCC "W" is needed:

    Statute Returns

    If And Then
    The return received date is two years and nine months or more after the return due date The return is stamped, "No Statute Issue" or a similar statement indicating there is no statute issue (e.g., "Statute N/A" ), Edit a CCC "W" .
    The return received date is less than two years and nine months from the return due date The return is stamped, "No Statute Issue" or a similar statement indicating there is no statute issue (e.g., "Statute N/A" ), Do not edit a CCC "W" .

     

♦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 electronically filed "E-File" . 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 the 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 received date is two years and nine months or more after the return due date, refer to Statute procedures before re-entering or reprocessing the return. See IRM 3.11.217.3.7, Statute Returns.

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

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

  3. Circle CCC "G" if present.

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

  5. Do not send Letter 1382C, Penalty Removal Request Incomplete, if a request for penalty relief is attached.

  6. 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.

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

    Form 3893

    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.

    Form 3893

    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. A received date must be present on all Re-input returns.

    Re-input Returns

    If Then
    Received date is not present, Edit a received date to the middle of the return. See IRM 3.11.217.7, Received Date.
    Multiple 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, Intra-SC Reject or Routing Slip, for the appropriate action (e.g., correspondence, research, etc.).

    Exception:

    Do not correspond for missing Schedules K-1, Shareholder's Share of Income, Deduction, Credits, etc.

  11. When perfection is not possible, edit Action Code 640 on the return and attach Form 4227, Intra-SC Reject or Routing Slip, 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. Do not edit CCC "G" on Amended returns.

  4. Do not send Letter 1382C, Penalty Removal Request Incomplete, if a request for penalty relief 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.

    Caution:

    If you receive a Form 1120-S converted from Form 1120, ensure that the following items are present: EIN, Name Control, NAICS, Received Date, Audit Code 4, tax period (prior year returns), CCC "3" (if applicable for "No Replies" ), and CCC "F" (if applicable for Final returns). If not, then edit the needed items. Do not detach Form 1120.

  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

    Form 13596 Action Taken
    Taxpayer Identification Number (TIN) correction, Edit the correct TIN on return.
    Tax period correction, Edit the correct tax period ending on the return.
    Reasonable cause, Edit appropriate Computer Condition Code(s).
    1. Edit CCC "R" if the Failure to File "FTF" box is checked.

    2. Edit CCC "D" if the Failure to Pay "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.

    Form 13596

    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. A received date must be present on all reprocessed returns.

    Reprocessed Returns

    If Then
    Received date is not present, Edit a received date to the middle of the return. See IRM 3.11.217.7, Received Date
    Multiple received dates are present, Circle all but the earliest date.

     

  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, Intra-SC Reject or Routing Slip, for the appropriate action (e.g., correspondence, research, etc.).

    Exception:

    Do not correspond for missing Schedules K-1, Shareholder's Share of Income, Deduction, Credits, etc.

♦Amended Returns♦

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

    • The Amended box is checked

    • Words such as "Supplemental" , "Corrected" , "Superseded" , 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 indicators and must be accompanied by a statement from the taxpayer that a previous return was filed.

  2. 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, Intra-SC Reject or Routing Slip, and edit the Action Trail on the return

    Note:

    Pull any amended Form 1120-S, U.S. Income Tax Return for an S Corporation, that has Case Base Reasoning "CBR" notated and route to Accounts Management.

  3. If there is an indication the return is amended and:

    Amended Returns

    If Then
    "TC 59X" or "ICS" was edited 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 Statute Control, 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 3.11.217.3.8.1, Form 3893 - Re-Entry Document Control, and IRM 3.11.217.3.8.2, Form 13596 - Reprocessing Returns.
    None of the above are present, Edit CCC "G" . No other codes may be used with CCC "G" .

    Exception:

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

     

  4. The following data must be edited on all Amended returns:

    1. Name Control - See IRM 3.11.217.5.4, Entity Perfection - Name Control

    2. Employer Identification Number (EIN) - See IRM 3.11.217.5.3, Entity Perfection - Employer Identification Number (EIN)

    3. Tax Period - See IRM 3.11.217.6, Tax Period

    4. CCC "G" - See IRM 3.11.217.14.5, CCC "G" - Amended Returns, and Exception above

    5. Received Date - See IRM 3.11.217.7, Received Date

    6. Signature - See IRM 3.11.217.19, Signature

    Note:

    No further editing is required.

  5. Detach Schedules K-1 for current year (TY2019), two preceding years (TY2018 and TY2017), and future Schedules K-1. See IRM 3.0.101, Schedule K-1 Processing, for complete instructions to edit and process Schedules K-1.

Prompt Assessment or Prompt Determination - Form 4810

  1. If a Prompt Assessment, Internal Revenue Code (IRC) Section 6501 is requested, either in the form of a letter or on Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), or a "Prompt Determination" is requested under Section 505 of the U.S. Bankruptcy Code.

    Prompt Assessment or Prompt Determination - Form 4810

    If And Then
    A Prompt Assessment or Prompt Determination request is not attached to a tax return,   Forward the Prompt Assessment/Prompt Determination request to Examination.
    A Prompt Assessment or Prompt Determination is attached to a tax return, A Transaction Code (TC) 150 has not posted for that return, Process the return and forward the Prompt Assessment/Prompt Determination request to Examination with a copy of the tax return.
    A Prompt Assessment or Prompt Determination is attached to a tax return, A TC 150 has posted for that return, Route the return and Prompt Assessment/Prompt Determination request to Examination.

    Note:

    If return is numbered, edit Action Code 370 and continue processing the return.

     

♦Refund Returns 45 Day Jeopardy and High Dollar Refunds♦

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

    Note:

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

    Refund Returns

    If Then
    A refund return is batched in a non-refund batch,
    1. Pull the return from the non-refund batch using local procedures.

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

    Note:

    Follow the instructions below when the processing date is more than 20 days after the received date or the return due date (2nd If box)or the refund amount is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ (3rd If box).

    The processing date is more than 20 days after the received date or the return due date (whichever is later) and the 45-day interest free period is in jeopardy and the refund amount 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.

    • Unnumbered Returns:

      1. Pull the return from the batch.

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

      3. Edit Action Code 341. See Figure 3.11.217-2, Example of Editing Action Code 341.

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

    • Numbered Returns:

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

      2. Edit Action Code 341 and leave in the batch.

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

    Note:

    Refund in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods.

    • Unnumbered Returns:

      1. Pull the return from the batch.

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

      3. Edit Action Code 341.

      4. Make a copy of the first two pages of the return along with any page of the return that appears suspicious for Criminal Investigation (CI). See IRM 3.11.217.2.5, Criminal Investigation (CI) Referral.

      5. 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.

      6. Expedite processing.

    • Numbered Returns:

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

      2. Edit Action Code 341.

      3. Attach Form 4227, Intra-SC Reject or Routing Slip, to the return, edit Action Code 341 on Form 4227, and leave in batch.

      4. Make a copy of the first two pages of the return along with any page of the return that appears suspicious for Criminal Investigation (CI). See IRM 3.11.217.2.5, Criminal Investigation (CI) Referral.

      5. 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.

    The W&I Submission Processing TAS Liaison walks a return through Code and 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 3.11.217-2

    This is an Image: 51221503.gif
     

    Please click here for the text description of the image.

Credit for Federal Telephone Excise Tax Paid Only Tax Return (Tax Year 2006 revision)

  1. For S Corporation returns claiming a refund of the Federal Telephone Excise Tax Credit (Form 8913, Credit For Federal Telephone Excise Tax Paid) only and no other income or deduction entries are present on the return, edit the following:

    1. Entity area - See IRM 3.11.217.5, Entity Perfection.

    2. Tax Period - See IRM 3.11.217.6, Tax Period.

    3. Action Code - See IRM 3.11.217.3.1, Action Codes.

    4. Received Date - See IRM 3.11.217.7, Received Date.

    5. Initial Return Code - See IRM 3.11.217.11, Initial Return Code - Page 1, Box G, Is the corporation electing to be an S corporation beginning with this tax year?.

    6. Signature - See IRM 3.11.217.19, Signature.

    7. Form 8050, Direct Deposit of Corporate Tax Refund - Place in sequence order if significant entries are present.

    8. Form 8913, Credit for Federal Telephone Excise Tax Paid - Place in sequence order if Form 8913, Line 15, Column (d) or (e) contain a significant entry. See IRM 3.11.217.35, Form 8913 - Credit for Federal Telephone Excise Tax Paid, for additional information.

      Note:

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

Examination of Tax Data

  1. This subsection provides instructions for editing general tax data.

Non-Standard or Prior Year Format

  1. All prior year returns must be reformatted to current year format. See the Code and Edit - BMF Job Aids located at the Submission Processing Design Center at http://coursebooks.enterprise.irs.gov/index.htm for specific year coding.

  2. If the return is on other than current form format (may be either a prior year or non-standard form) and the transcription lines can’t be numbered to agree with the current year return:

    1. Edit all available transcribed tax data items to the tax data portion of a blank current year form.

    2. Place a large "X" across the tax data entries of the prior year (or non-standard) form.

    3. Staple the forms together, attaching the dummied form (current format) on top so that ISRP can enter the entity data from the prior year (or non-standard) form.

Conversion of Form 1120 to Form 1120-S

  1. If a taxpayer filed Form 1120 and the Entity Control Unpostable Unit has determined the taxpayer has a valid Small Business Election (Form 2553, Election by a Small Business Corporation) on file, Rejects function will convert Form 1120 to a Form 1120-S, U.S. Income Tax Return for an S Corporation. No action is required of Document Perfection. Do not detach Form 1120.

  2. If you receive a Form 1120-S converted from Form 1120 and the Form 13596, Reprocessing Returns, is attached for reprocessing, see IRM 3.11.217.3.8.2, Form 13596 - Reprocessing Returns, for additional information.

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.

Incomplete Return

  1. When the return serves only as a transmittal for statements, schedules, and other attachments, or is otherwise incomplete, analyze the supporting documents and edit the missing entries on the form itself.

  2. Examine attachments and edit the information to appropriate transcription lines of both the income and deduction sections.

    1. Edit the income section if Line 6 is the only entry in the income section.

    2. Edit the deduction section if Line 21 is the only entry in the deduction section.

    3. Edit the income and/or deduction section if blank and there is an indication the income and/or deduction items are included on an attachment (e.g., a notation such as "See attached" , "See Schedule F" , "Statement attached" , etc.).

    Note:

    When a doubt exists concerning placement of an income or deduction item because of terminology used by the taxpayer, edit income items as "other income" and deduction items as "other deductions" .

  3. Secured Delinquent Returns are returns secured by compliance personnel. If information is missing from one of these returns, do not send the return back to the taxpayer; correspond using approved Correspondence Action Sheet.

Editing Dollars and Cents

  1. Document Perfection is not required to edit a vertical line, 00, dash, or decimal point to indicate dollars and cents.

    Editing Dollars and Cents

    If Then
    The taxpayer has entered money amounts showing dollars and cents separated by a decimal point, No editing is required.
    The taxpayer has entered dollars only where dollars only should be entered, No editing is required.
    The taxpayer has entered dollars only where dollars and cents should be entered, No editing is required.

     

Negative Entries

  1. Edit negative entries as follows:

    Negative Entries

    If Then
    Brackets "[ ]" or parentheses "( )" are pre-printed on the form, No editing is required.
    The taxpayer indicates a negative amount with brackets "[ ]" or parentheses "( )" or a minus "–" sign, No editing is required.
    Editing a negative amount to a transcription line (e.g., computing a line entry, entering a missing entry, etc.), Bracket "[ ]" (or "( )" ) the negative amount.

     

♦Entity Perfection♦

  1. This subsection provides instructions related to taxpayer identification for Form 1120-S, U.S. Income Tax Return for an S Corporation.

♦Entity Perfection - General♦

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

    • Employer Identification Number (EIN)

    • Name

    • "In-care-of" Name

    • Address

♦Bankruptcy♦

  1. If the Form 1120-S, U.S. Income Tax Return for an S Corporation, indicates bankruptcy (e.g., shows "RECEIVER" , "TRUSTEE" , or "DEBTOR IN POSSESSION" ) in the entity area or on an attachment, route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

♦Entity Perfection - Employer Identification Number (EIN)♦

  1. The EIN is a nine-digit number (XX-XXXXXXX) assigned to identify the taxpayer.

  2. Determine the EIN as follows:

    1. Employer Identification Number (EIN)

      If And Then
      EIN is missing, You can determine the correct EIN from the attachments and/or schedules, Edit the EIN to the appropriate location.
      The EIN is either a Practitioner Tax Identification Number (PTIN) or Individual Taxpayer Identification Number (ITIN), Unnumbered/Numbered
      • Unnumbered

        1. Remove return from batch.

        2. Route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal, for EIN assignment.

      • Numbered

        1. Edit Action Code 320.

        2. Leave return in batch.

      Multiple EINs are present, Unnumbered/Numbered
      • Unnumbered

        1. Remove return from batch.

        2. Route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal, for EIN assignment.

      • Numbered

        1. Edit Action Code 320.

        2. Leave return in batch.

      The EIN contains any of the following conditions and can’t be determined from attachments and/or schedules:
      • Illegible;

      • Missing;

      • Other than nine digits;

      • All zeroes; or,

      • All nines,

      Unnumbered/Numbered
      • Unnumbered

        1. Circle out all illegible EINs, zeroes, or nines.

        2. Research IDRS.

        3. If found, edit to the proper location.

        4. If not found, route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

      • Numbered

        1. Circle out all illegible EINs, zeroes, or nines.

        2. Edit Action Code 320.

        3. Leave return in batch.

      "Pending" , "applied for" , etc., is indicated in the EIN area, Unnumbered/Numbered
      • Unnumbered

        1. Research Integrated Data Retrieval System (IDRS).

        2. If found, edit to the proper location.

        3. If not found, route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

      • Numbered

        1. Edit Action Code 320.

        2. Leave return in batch.

♦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.

  2. See Job Aid Document 7071-A, Name Control Job Aid - For Use Outside the Entity Area, to determine the Name Control.

  3. If Box H(2) (2006 and prior revisions: Box F(3)) "Name Change" is checked, route the return to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

  4. Edit the Name Control as follows:

    1. Name Control

      If And Then
      Able to determine the Name Control,   Underline the Name Control. See Figure 3.11.217-3, Example of Editing a Name Control.
      Unable to determine the Name Control, Unnumbered/Numbered
      • Unnumbered

        1. Research Integrated Data Retrieval System (IDRS).

        2. If found, edit to the proper location.

        3. If not found, route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.

      • Numbered

        1. Edit Action Code 352 (Name Research).

        2. Leave return in batch.

    Figure 3.11.217-3

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    Please click here for the text description of the image.

♦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).

  2. Ensure the "in-care-of" name is in the proper location.

    "In-Care-Of" Name

    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" name so it appears below the first name line and 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.

    2. Continue editing the return.

    The street address for the "in-care-of" name is different from the street address of the S Corporation,
    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 S Corporation's street address and input Transaction Code "TC 014" . See IRM 3.11.217.5.6, Entity Perfection-Domestic Addresses.

      Caution:

      See IRM 3.13.2.3, BMF Addresses, for additional information in regards to address changes on large corp.

    3. Continue editing the return.

     

    Note:

    Always circle out 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 Box H(2) (2006 and prior revisions: Box F(3)) "Name Change" , or

    • A check mark in Box H(3) (2006 and prior revisions: Box F(4)) "Address Change" , 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 parentheses)

    "In-Care-Of" Name

    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 Box H(3) (2006 and prior revisions: Box F(4)) "Address Change" 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.

     

♦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. A business may have two addresses. One is the mailing address and the other is the location address or physical location of the business.

  3. The procedures for perfection of addresses are as follows:

    Domestic Addresses

    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 3.11.217-4, Example of a Return With a Change of Address.
    Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party - Business, is attached, All of 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 or Form 8822-B and route to Entity Control following local procedures using Form 13934, Entity Document/C&E Merge Transmittal.
    Both a P.O. Box and a street address are shown,  
    1. Notate Transaction Code "TC 014" in the upper left margin. See Figure 3.11.217-5, Example of a Return With a P.O. Box and Street Address.

    2. Input "TC 014" .

    Two street addresses are shown,  
    1. Underline the second street address.

    2. Notate the "TC 014" in the upper left margin.

    3. Input "TC 014" .

    One street address is shown, The taxpayer changed the address to a P.O. Box,
    1. Notate the "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 three 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.
    Box H(3) (2006 and prior revisions: Box F(4)) "Change of Address" 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.

    2. Correct the address.

    3. Continue editing the return.

    It is necessary to edit the street address,   See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, for current Address/Street Abbreviations.
    The address contains information other than a street address or P.O. Box,   No perfection is necessary. ISRP will enter the complete address.

     

    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. See Figure 3.11.217-6, Example of a Return with In-Care-Of on the Address Line.

    Figure 3.11.217-4

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    Figure 3.11.217-5

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    Figure 3.11.217-6

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  4. The U.S. Postal Service established new address requirements for Army Post Office (APO), Diplomatic Post Office (DPO), and Fleet Post Office (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). APO/DPO/FPO addresses are considered domestic addresses. Refer to APO/DPO/FPO Conversion Chart below:

    APO/DPO/FPO Addresses

    Address State Code Abbreviation ZIP Code
    APO/DPO/FPO AA 340XX
    APO/DPO/FPO AE 090XX - 098XX
    APO/DPO/FPO AP 962XX - 966XX

     

♦Entity Perfection - Foreign Address (OSPC)♦

  1. A foreign (international) address is any address that is not in the 50 states or the District of Columbia.

  2. Returns with Army Post Office (APO), Diplomatic Post Office (DPO), and Fleet Post Office (FPO) addresses are considered domestic addresses. See IRM 3.11.217.5.6, Entity Perfection - Domestic Addresses.

  3. Route returns with a foreign address to Ogden Submission Processing Campus (OSPC) for processing. Prepare Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office, to inform the taxpayer the return has been sent to the Ogden Submission Processing Campus (OSPC). Edit an Action Trail (e.g., "86C Sent" or similar language) in the lower left corner going vertically up the side of the return.

  4. Returns with addresses in the following U.S. Possessions/Territories are considered foreign for processing purposes but are edited in the same way as domestic addresses.

    1. A two-character alpha code must be edited for the Possession/Territory name.

      U.S. Possession/Territory

      U.S. Possession 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 3.11.217-7, U.S. Possessions ZIP Codes.

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

    1. The foreign country must be the last entry in the address.

    2. 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 acceptable Foreign Country Codes.

    3. A unique country code will be edited for returns filed with an address in Canada. See IRM 3.11.217.5.7.1, Country Code - Canada.

      Note:

      Coding and Editing BMF Tax Returns, Foreign Addresses Job Aid (Number 2324-002) provides examples for editing foreign addresses.

    4. 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.

      Note:

      There may be other countries with provinces, states, and territories not listed above, see Coding and Editing BMF Tax Returns, Foreign Addresses Job Aid (Number 2324-002) for additional information.

      Province, State or Territory

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

      2. Enter the appropriate abbreviation. See Exhibit 3.11.217-6, Province, Foreign State and Territory Abbreviations.

      A province, state, or territory name is not present, Continue editing the return.
      A province, state, or territory is shown in abbreviated format, Continue editing the return.

       

    5. 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. 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.

    Country Code - Canada

    If Then
    The foreign address contains a Canadian Province/Territory name, or abbreviation shown in the table below,
    1. See table below to ensure the correct Canadian Province/Territory is present or edited to the return.

    2. Circle the country name.

    3. 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/Territory Abbreviations, Postal Codes, and Canadian Country Codes Table

    Canadian Province/Territory Province Abbreviation Postal Code Beginning

    Note:

    If the Canadian Postal Code begins with one of the following, use the corresponding Country Code abbreviation in the right most column.

    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 3.11.217.5.6, Entity Perfection - Domestic Addresses.

Tax Period

  1. This subsection provides instructions for editing the tax period.

Tax Period - General

  1. Form 1120-S must have a tax period.

    Exception:

    Form 1120-S is for the current processing calendar year (e.g., 201912).

  2. Edit the tax period to the right of the title area of Form 1120-S in YYMM format following the instructions below.

    Tax Period

    If Then
    The return is for the current processing calendar year (e.g., 201912), Do not edit the tax period.
    The return is for a prior year, Edit the tax period to the right of the form title in YYMM format.
    The taxpayer has notated a tax period other than the preprinted year on the return, Edit the tax period to the right of the form title in YYMM format based on the taxpayers indication, per paragraph (3).
    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 form title 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.

    Tax Period

    Tax Period Ends Tax Period
    Oct. 3, 2019 (52-53 week document) 1909
    Oct. 3, 2019 (Final short period return) 1910
    Oct. 25, 2019 (52-53 week document) 1910
    Oct. 25, 2019 (Final short period return) 1910
    Nov. 30, 2019 1911
    Dec. 31, 2019 1912 (no editing required)
    Feb. 28, 2020 2002

     

  4. Tax periods reported under the 52-53 week rule may end not more than six days before, and not more than three 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.

    Tax Period

    If Then
    The tax period ending is not more than three days after the beginning of the month, Edit the previous month (e.g., October 3, use the numeric designation for September, YY09).
    The tax period ending is not more than six days before the end of the month, Edit the month shown on the return (e.g., October 25, use the numeric designation for October, YY10).
    Tax period ending is more than six days before the end of the month or three days after the beginning of the month, and is not a Final, Correspond to determine the correct tax period ending.

     

  5. If the tax period is for more than 12 months or 53 weeks, correspond.

  6. On a "Final" return, if the month and year is equal to or later than the received date’s month and year (future return) or the taxpayer has not indicated in which month the business ended, edit the tax period to be one month prior to the received date. See Figure 3.11.217-7, Example of Editing an Early Filed Final Return.

    Figure 3.11.217-7

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  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 CCC "R" and CCC "F" . See IRM 3.11.217.6.3(2) for additional information. See Figure 3.11.217-8, Example of Editing CCC “F” and CCC “R” on Form 1120-S.

    Note:

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

    Figure 3.11.217-8

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  8. The separate short period return of a subsidiary which became affiliated with a "consolidated" group may end on the day preceding such affiliation. As a practical matter, do not question the ending date on any change-of-accounting period return.

  9. Check all tax periods for the Statute of Limitation (two years and nine months from the normal due date of the return). For statute instruction, see IRM 3.11.217.3.7, Statute Returns.

Tax Period Beginning - Final, Initial, or Short Period Return

  1. Edit the Tax Period Beginning to the left of the title area of Form 1120-S in MMDDYY format following the instructions below: (See Figure 3.11.217-9, Example of Editing the Tax Period Beginning.)

    Tax Period Beginning

    If And Then
    The return is a final, initial, or a short period, Tax Period Beginning is present, Edit the Tax Period Beginning (MMDDYY).
    The return is a final, initial, or a short period, The day is not present in the Tax Period Beginning, Edit "01" for the day. (For example, taxpayer writes May 2019, edit Tax Period Beginning as 050119.)
    The return is a final, initial, or a short period, Tax Period Beginning is not present, No editing required.

     

    Note:

    See IRM 3.11.217.6.1, Tax Period - General, for additional information.

    Figure 3.11.217-9

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Early Filed Return

  1. Never send an early filed return back to the taxpayer.

  2. If the month of the tax period is the same or after the month of the received date, determine how early the return has been filed:

    Tax Period

    If Then
    The Tax Period Ending (TPE) is equal to or later than the received date by four months or less (e.g., the received date is in April but the TPE is April, May, June, or July),
    1. Edit Action Code 480 (Early Filed -Suspense). See Figure 3.11.217-10, Example of Early Filed Return – Editing Action Code 480 vs Action Code 211.

    2. Leave return in batch.

    The Tax Period Ending (TPE) is later than the received date by more than four months (e.g., the received date is in April but the TPE is in September),
    1. Edit Action Code 211 or 215 and attach approved Correspondence Action Sheet to request confirmation of the Tax Period Ending. See Figure 3.11.217-10, Example of Early Filed Return – Editing Action Code 480 vs Action Code 211.

    2. Completely edit the return. Edit the future tax period indicated by the taxpayer. Leave return in batch.

    On a "Final" return, the received date is after the short period due date, but on or before the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ,
    1. Edit CCC "R"

    2. Edit CCC "F"

    3. Edit CCC “D” if the return is a Balance Due.

    4. See IRM 3.11.217.6.1, Tax Period - General, for additional information.

     

    Note:

    See IRM 3.11.217.6.1, Tax Period - General, for additional information.

    Figure 3.11.217-10

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Short Period - Editing Proof of Entitlement

  1. A Short Period Return is one which covers a period of less than 12 months or 52-53 weeks.

    • If the Short Period Return is marked "Final" , see instructions for editing the tax period in IRM 3.11.217.6.1, Tax Period - General.

    • If the Short Period Return is marked "Initial" , "First Return" , "New Corporation" , etc., or meets any of the identifying conditions in the instructions for "Initial Return Code" , see IRM 3.11.217.11, Initial Return Code - Page 1, Box G, Is the corporation electing to be an S corporation beginning with this tax year?

    • Process all other Short Period Returns as a "Change of Accounting Period" . In such cases, proof of entitlement to the change is required.

    Reminder:

    Edit the Tax Period Beginning in MMDDYY format on short period returns per IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

  2. Use the Proof of Entitlement Table below to identify and edit proof of entitlement.

    Proof of Entitlement

    If And Then
    A statement the S Corporation is changing tax period under:
    1. National Office "Grant Letter" or

    2. Revenue Procedure 2006-46,

    Command Code BMFOLE shows a Transaction Code (TC) 053 or TC 054,

    Note:

    This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year, or National Office "Grant Letter" has been approved.

    Continue processing the return. See Figure 3.11.217-11, Example of a Short Period Return with Proof of Entitlement.

    Note:

    No CCC "Y" is needed.

    A statement the S Corporation is changing tax period under:
    1. National Office "Grant Letter" or

    2. Revenue Procedure 2006-46,

    Command Code BMFOLE shows a TC 059,

    Note:

    This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year, or National Office "Grant Letter" has not been approved.

    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" . See IRM 3.11.217.6.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Statement referring to "S" (1120-S) Status Termination or revocation under Section 1362, or Form 1120-S, Page 1, Item H, Box 5, S Election termination or revocation is checked,   Edit CCC "R" .

    Note:

    No CCC "Y" is needed.

    Caution:

    If return reflects tax, or if return was filed after the due date based on a full year, prepare Form 3465, Adjustment Request, and route Form 3465 and a copy of Form 1120-S, Page 1 to Accounts Management (AM) requesting review of interest and/or Failure To File (FTF) penalty.

    Statement referring to Termination of Shareholders Interest under Section 1377(a)(2) and Regulations Section 1.1377-1(b),   Continue processing the return.

    Note:

    No CCC "Y" is needed.

    Statement referring to "S" Status Election and a National Office "Grant Letter" is attached allowing the fiscal year (other than 12/31/XX),   Continue processing the return.

    Note:

    No CCC "Y" is needed.

    Notation referring to:
    1. Section 444 or

    2. Reference to Revenue Procedure 2006-46,

    Command Code BMFOLE shows a Transaction Code (TC) 053, TC 054, or TC 055,

    Note:

    This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year, or Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, has been approved.

    Continue processing the return.

    Note:

    No CCC "Y" is needed.

    Notation referring to:
    1. Section 444 or

    2. Reference to Revenue Procedure 2006-46,

    Command Code BMFOLE shows a TC 058 or TC 059,

    Note:

    This is an indication that the Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, or Form 1128, Application to Adopt, Change, or Retain a Tax Year, has not been approved.

    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" . See IRM 3.11.217.6.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Form 1128, Application to Adopt, Change, or Retain a Tax Year, Command Code BMFOLE shows a Transaction Code (TC) 053 or TC 054,

    Note:

    This is an indication that the Form 1128 has been approved.

    Continue processing the return.

    Note:

    No CCC "Y" is needed.

    Form 1128, Application to Adopt, Change, or Retain a Tax Year, Command Code BMFOLE shows a TC 059,

    Note:

    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 3.11.217.6.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Form 1128, Application to Adopt, Change, or Retain a Tax Year, Command Code BMFOLE does not show Transaction Code (TC) 053, TC 054, or TC 059, See IRM 3.11.217.6.7, Editing Form 1128 With No Indication of Approval or Disapproval.
    Statement referring to Qualifying Disposition under Regulations Section 1.1368-1(g)(2)(i),   Edit CCC "Y" .
    Statement referring to "S" Status Election and taxpayer is changing to required tax year (12/31/XX),   Edit CCC "Y" .
    Statement the S Corporation is coming out of consolidation,   Edit CCC "Y" .
    Statement the corporation is a qualified sub chapter S subsidiary,   Edit CCC "Y" .
    Notation referring to:
    1. "Section 1398 election" (Bankruptcy Petition has been filed), or

    2. "Second Short Year after Section 1398 Election" ,

      Edit CCC "Y" . Do not correspond.

     

    Note:

    The following table is a list of transaction codes and meanings.

    Transaction Code (TC)

    Transaction Code (TC) Meaning
    053 A TC 053 identifies a Fiscal Year Month (FYM) change from Form 1128, Application to Adopt, Change, or Retain a Tax Year, (other than Revenue Procedure 2006-46).
    054 A TC 054 identifies a FYM change from Form 1128, Application to Adopt, Change, or Retain a Tax Year, or Form 2553, Election by a Small Business Corporation, approved under Revenue Procedure 2006-46.
    055 A TC 055 identifies a FYM change from Form 8716, Election To Have a Tax Year Other Than a Required Tax Year.
    058 A TC 058 identifies a DeniedForm 8716, Election To Have a Tax Year Other Than a Required Tax Year.
    059 A TC 059 identifies a DeniedForm 1128, Application to Adopt, Change, or Retain a Tax Year.

     

    Reminder:

    Edit the Tax Period Beginning in MMDDYY format on short period returns according to IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Figure 3.11.217-11

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Short Period - Missing Proof of Entitlement

  1. If proof of entitlement is missing or the taxpayer states on the return or an attachment that the S Corporation has filed an application but has not received a response, research IDRS using Command Code BMFOLE (or other applicable Command Code) for approval or disapproval information and proceed as follows:

    Proof of Entitlement

    If Then
    Command Code BMFOLE shows a Transaction Code (TC) 053, TC 054, or TC 055,

    Note:

    This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year or Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, has been approved.

    Continue processing the return.

    Note:

    No CCC "Y" is needed.

    Reminder:

    Edit the Tax Period Beginning on short period returns according to IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Command Code BMFOLE shows a TC 058 or TC 059,

    Note:

    This is an indication that the Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, or Form 1128, Application to Adopt, Change, or Retain a Tax Year, has not been approved.

    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" . See IRM 3.11.217.6.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Command Code BMFOLE does not show a TC 053, TC 054, TC 055, TC 058, or TC 059, Correspond with the taxpayer using Letter 319C, Return Covers Other Than 12-month Accounting Period.

     

    Reminder:

    Edit the Tax Period Beginning in MMDDYY format on short period returns per IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Note:

    See IRM 3.11.217.6.4(2) for the list of transaction codes and meanings.

Short Period Returns - Editing a Disapproved Application (Form 1128)

  1. If Form 1128, Application to Adopt, Change, or Retain a Tax Year, is disapproved, the return is considered unprocessable:

    1. Edit Action Code 211 or 215 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.

    Reminder:

    Edit the Tax Period Beginning in MMDDYY format on short period returns per IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

Short Period Returns - Editing Form 1128 With No Indication of Approval or Disapproval

  1. When a Form 1128, Application to Adopt, Change, or Retain a Tax Year, is attached with no indication of approval or disapproval and no proof of entitlement is present, research Integrated Data Retrieval System (IDRS) using Command Code BMFOLE (or other applicable Command Code) for approval or disapproval and proceed as follows:

    Form 1128

    If Then
    Command Code BMFOLE shows a Transaction Code (TC) 053 or TC 054,

    Note:

    This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year, has been approved.

    Continue processing the return.

    Note:

    No CCC "Y" is needed.

    Reminder:

    Edit the Tax Period Beginning on short period returns according to IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Command Code BMFOLE shows a TC 059,

    Note:

    This is an indication that the Form 1128, Application to Adopt, Change, or Retain a Tax Year, has not been approved.

    The return is unprocessable. Follow the instructions for "Short Period Returns - Editing a Disapproved Application" . See IRM 3.11.217.6.6, Short Period Returns - Editing a Disapproved Application (Form 1128).
    Command Code BMFOLE does not show TC 053, TC 054, or TC 059, Take the actions in (2) below.

     

    Reminder:

    Edit the Tax Period Beginning in MMDDYY format on short period returns per IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Note:

    See IRM 3.11.217.6.4(2) for the list of transaction codes and meanings.

  2. Form 1128, Application to Adopt, Change, or Retain a Tax Year, with neither approval or disapproval, discontinue processing Form 1120-S, U.S. Income Tax Return for an S Corporation. Route Form 1120-S and Form 1128 to Entity Control as directed in the paragraphs below.

    1. If Form 1128, Application to Adopt, Change, or Retain a Tax Year, is attached to a numbered return, enter Action Code 320. Attach Form 4227, Intra-SC Reject or Routing Slip, and check the box for Entity Control. Edit the Form 1120-S received date to Form 1128. Leave the return in the batch and continue processing the return.

      Note:

      Do not detach Form 1128.

    2. If Form 1128 is attached to an unnumbered return, edit the Form 1120-S received date to Form 1128, attach Form 4227, Intra-SC Reject or Routing Slip, and route the return to Entity Control. See Figure 3.11.217-12, Example of Form 1128 Attached With No Indication of Approval or Disapproval.

      Note:

      Do not detach Form 1128.

    3. Entity will process the Form 1128 and route the return back to Code and Edit with a Form 4227, Intra-SC Reject or Routing Slip, attached. The Form 4227 will indicate if the Form 1128 is approved, denied, or returned and the words "Process Return" or "Let Unpost" .

    Figure 3.11.217-12

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Short Period Return with Prepaid Credits

  1. Route to Accounting for possible adjustment action any return meeting both conditions below.

    1. A prepaid credit, Line 23a or Line 23b is claimed.

    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 action when routing these returns to Accounting.

    1. Enter Action Code 342 on the return.

    2. Attach Form 4227, Intra-SC Reject or Routing Slip, check the "Accounting" box and notate "Short period return with ES Credits" .

    3. Continue normal processing.

    4. If the return shows a refund, follow "Refund Returns" instructions in IRM 3.11.217.3.11, Refund Returns 45 Day Jeopardy and $100 Million or more Refunds.

    5. See Figure 3.11.217-13, Example of Short Period Return With ES Credits.

    Reminder:

    Edit the Tax Period Beginning in MMDDYY format on short period returns per IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    Figure 3.11.217-13

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♦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. A received date is required on all Forms 1120-S.

  3. A return is considered timely if the envelope in which the return is contained is postmarked on or before the due date.

    Received Date

    If Then
    The return is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the extended due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , The return is considered timely. See Exhibit 3.11.217-2, Due Date Chart, for additional information.
    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 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the legal or extended due date, the postmark date or shipment date is on or before the legal or extended due date, Edit the received date to agree with the postmark date or shipment date. See Figure 3.11.217-14, Example of Editing a Timely Received Date.

    Note:

    The postmark date or shipment date includes returns delivered by:

    • U.S. Postal Service (USPS),

    • Private Delivery Services (PDS), 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 3.11.217-9, USPS.com Track & Confirm Record. If the "USPS.com Track & Confirm" record is not attached, no action is required.

     

    Figure 3.11.217-14

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  4. When a Form 1120-S 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 Modernized Electronic Filing (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 can’t 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.

  5. If a MeF rejection notification is not attached, perfection of the received date is not necessary. If a MeF rejection notification is attached, edit the IRS Received Date in MMDDYY format 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.

    Received Date

    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. For example, postmark date is 03-22-2020 and first rejection is 03-12-2020. Change received date to 031220.
    The postmark date is more than 10 days after the date of the rejection,   Leave the IRS Received Date as is. For example, postmark date is 03-23-2020 and first rejection is 03-12-2020. 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. For example, postmark date is 03-22-2020, the second rejection is 03-12-2020. The first rejection is 03-09-2020. Change the received date to 030920.
    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. For example, postmark date is 03-22-2020, the second rejection is 03-12-2020. The first rejection is 03-01-2020. Change the received date to 031220.
    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. For example, postmark date is 03-23-2020, the second rejection is 03-12-2020. The first rejection is 03-01-2020. Leave the received date as is.

    Exception:

    Change the received date to the postmark date if the postmark date makes the return timely.

     

  6. The received date may or may not be stamped on the face of the return.

  7. A valid 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) Site" plus the city, location, or 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, 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" .

  8. If the received date stamp is not present or the date is illegible or invalid, edit the received date in "MMDDYY" format in the middle of Page 1 of the return. See Figure 3.11.217-15, Example of Editing the Received Date. Edit the received date according to the following priority:

    1. The earliest legible postmark date (U. S. Postal Service (USPS), foreign postmark, or Private Delivery Service(PDS)) on the envelope. Rules for using the U. S. Postal Service (USPS) postmark or foreign postmark date are as follows:

      Received Date

      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 3.11.217-9, USPS.com Track & Confirm Record. If the "USPS.com Track & Confirm" record is not attached, no action is required.
      An envelope has both 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 Date of the Document Locator Number (DLN) minus 10 days.

    6. Current Date minus 10 days.

    Figure 3.11.217-15

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  9. Edit the received date as follows:

    Received Date

    If And Then
    A timely 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, or multiples of the same date) not needed for transcription (e.g., One received date should be on the return for transcription).

    3. See Figure 3.11.217-16, Example of a Multiple Valid Received Date.

    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, Delivered to a State agency, Use the postmark date as the received date.
    A Federal return is addressed to a State agency,   Use the IRS date stamp as the received date.
    The only received date on the return is a Taxpayer Advocate Service (TAS) Received Date or Chief Counsel Received Date,   Circle out the TAS or Chief Counsel Received Date and edit the 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.

    Figure 3.11.217-16

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  10. If a return has been faxed to another area of the service and then sent to Submission Processing for processing, do not enter the Enterprise Electronic Fax (EEFax) Date as the IRS Received Date. Enter a received date according to normal procedures.

    Caution:

    The EEFax Date can’t legally be used as an IRS Received Date.

North American Industry Classification System (NAICS) Code - Page 1, Box B

  1. The Principal Business Activity (PBA) Code is based on the North American Industry Classification System Code (NAICS). These codes are a high priority to the Service. It is critical data for Statistics of Income, Examination, Research, and other Service organizations.

  2. The NAICS Code is a four-digit (prior year) or six-digit code on Page 1, Box B of Form 1120-S.

  3. A NAICS Code is required on Form 1120-S.

    Exception:

    Do not edit a NAICS Code on an Amended (CCC "G" ) return.

  4. Only one NAICS Code can be used on the return. Edit the NAICS Code as follows:

    North American Industry Classification System (NAICS) Code

    If Then
    A legible six-digit NAICS Code is shown on Page 1, Box B,

    Note:

    The number may not contain all repeating numbers, e.g., "000000" , "333333" , "666666" , "999999" , etc.

    No editing is necessary.
    A legible four-digit NAICS Code is shown on Page 1, Box B,

    Note:

    The number may not contain all repeating numbers, e.g., "0000" , "3333" , "6666" , "9999" , etc.

    No editing is necessary.
    Page 1, Box B is blank and Schedule B, Line 2a has a legible four-digits or six-digits NAICS code, Edit the NAICS code to Page 1, Box B.
    There is more than one NAICS Code on Page 1, Box B, Circle all but the first NAICS Code listed.
    Page 1, Box B is blank or illegible, Refer to Page 2, Schedule B, Line 2a and/or Line 2b, if present. If the NAICS Code can’t be determined, then edit NAICS Code "999000" .
    The code is other than four-digits or six-digits, Refer to Page 2, Schedule B, Line 2a and/or Line 2b, if present. If the NAICS Code can’t be determined, then edit NAICS Code "999000" .
    A NAICS Code with all repeating number is present, e.g., "000000" , "333333" , "666666" , "999999" , etc., Refer to Page 2, Schedule B, Line 2a and/or Line 2b, if present. If the NAICS Code can’t be determined, then edit NAICS Code "999000" .

     

Schedule M-3 Attached - Page 1, Box C

  1. Edit Computer Condition Code "B" when the box on Form 1120-S, Line C (2006 and prior revisions: Box H), "Check if Schedule M-3 is attached" is marked or Schedule M-3 (Net Income (Loss) Reconciliation for S Corporations With Total Assets of $10 Million or More) is attached to the return.

    Note:

    Edit Audit Code 8 if Schedule M-3 is attached. See IRM 3.11.217.13.1, Audit Codes.

Total Assets - Page 1, Box F

  1. The first source for this entry is Form 1120-S, Page 1, Box F, Total Assets, (2006 and prior revisions: Box E).

  2. Compare Box F amount with Schedule L, Balance Sheets per Books, Line 15, Column (d), or an equivalent entry on a schedule(s) or attachment(s).

  3. If Box F and Schedule L, Balance Sheets per Books, Line 15, Column (d), differ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , use the amount on Schedule L, Line 15, Column (d). Edit the amount to Box F. Bracket if negative.

  4. If Schedule L, Balance Sheets per Books, Line 15, Column (d), is blank, then compute Lines 1 through 14, Column (d), and compare it with Box F. If there is only one entry in Column (d), Lines 1 through 14, use that figure to compare to Box F.

  5. If Box F is blank, enter the amount from Schedule L, Line 15, Column (d) to Box F, in dollars only. Bracket if negative.

  6. If Schedule L, Balance Sheets per Books, is blank, or missing, and there is an amount in Box F, place an "X" to the left of the entry.

  7. If the amount in Box F (2006 and prior revisions: Box E) is for cents only (e.g., $.89, -$.99), place an "X" to the left of the entry.

Initial Return Code - Page 1, Box G, Is the corporation electing to be an S corporation beginning with this tax year?

  1. Edit an Initial Return Code "2" in the margin to the right of Page 1, Box E, "DATE INCORPORATED" if any of the following conditions are met:

    1. Form 1120-S, Page 1, Box E, Date incorporated (2006 and prior revisions: Box D), has a date which is within 12 months from the tax period ending date.

      Reminder:

      Edit the Tax Period Beginning on initial returns according to IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

    2. Page 1, Box G*, "Is the corporation electing to be an S corporation beginning with this tax year?" is checked "Yes" *(2006 and prior revisions: Box F(1)).

    3. There is a taxpayer notation of initial filing, such as, "First Return" , "New Corporation" , etc.

    4. The date incorporated is within 24 months from the Tax Period Ending (or is not shown) and the taxpayers' Balance Sheet, "Beginning of tax year" (first two columns of Schedule L, Balance Sheets per Books,) is blank or zeroes (see Initial Return - 24 Month Rule Table below). See Figure 3.11.217-17, Example of Editing the Initial Return Code With 24 Month Rule.

      Note:

      Do not edit Initial Return Code "2" if the Balance Sheet is missing or the Balance Sheet has been dummied.

    Initial Return Code

    Tax Period Ending 24 Month Cutoff Date
    2012 01/01/2019
    2011 12/01/2018
    2010 11/01/2018
    2009 10/01/2018
    2008 09/01/2018
    2007 08/01/2018
    2006 07/01/2018
    2005 06/01/2018
    2004 05/01/2018
    2003 04/01/2018
    2002 03/01/2018
    2001 02/01/2018
    1912 01/01/2018
    1911 12/01/2017
    1910 11/01/2017
    1909 10/01/2017
    1908 09/01/2017
    1907 08/01/2017
    1906 07/01/2017
    1905 06/01/2017
    1904 05/01/2017
    1903 04/01/2017
    1902 03/01/2017
    1901 02/01/2017
    1812 01/01/2017
    1811 12/01/2016
    1810 11/01/2016
    1809 10/01/2016
    1808 09/01/2016
    1807 08/01/2016
    1806 07/01/2016
    1805 06/01/2016
    1804 05/01/2016
    1803 04/01/2016
    1802 03/01/2016
    1801 02/01/2016
    1712 01/01/2016
    1711 12/01/2015
    1710 11/01/2015
    1709 10/01/2015
    1708 09/01/2015
    1707 08/01/2015
    1706 07/01/2015
    1705 06/01/2015
    1704 05/01/2015
    1703 04/01/2015
    1702 03/01/2015
    1701 02/01/2015
    1612 01/01/2015

     

    Figure 3.11.217-17

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Number of Shareholders - Page 1, Line I

  1. Follow the instructions below for editing Form 1120-S, Page 1, Line I*, Number of Shareholders, *(2006 and prior revisions: Line G).

    Note:

    If the entry on Line I is written in a non-numeric fashion ("two" instead of "2" ), edit the numeric equivalent on Line I and circle the non-numeric characters.

    Number of Shareholders

    If And Then
    Form 1120-S, Page 1, Line I*, Number of Shareholders, is zero or blank,
    *(2006 and prior revisions: Line G)
    No Schedules K-1 are attached and Schedules K-1 are required,
    1. Leave zero or blank. Do not edit Line I, Number of Shareholders

    2. Correspond for the Schedules K-1. See IRM 3.11.217.39, Schedule K-1, for corresponding information.

      Exception:

      Do not correspond on Section 965 Returns. ERS will take care of any correspondence needed. See IRM 3.11.217.2.11, Section 965 Returns, for additional information.

    Page 1, Line I, Number of Shareholders, is zero or blank, Schedule(s) K-1 are attached, Edit the number of Schedules K-1 to Page 1, Line I, Number of Shareholders. See Figure 3.11.217-18, Example of Editing Number of Shareholders.
    Page 1, Line I, Number of Shareholders, is zero or blank, No Schedule K-1’s are attached and correspondence is not necessary according to IRM 3.11.217.39(2), Edit a "1" to Page 1, Line I, Number of Shareholders.

     

    Note:

    See IRM 3.11.217.39, Schedule K-1, for additional information.

    Figure 3.11.217-18

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Additional Form 1120-S Perfection

  1. This subsection provides instructions for editing additional Form 1120-S information.

  2. Entries previously entered on the Form 3892, Corporation Edit Sheet, are edited in the left margin near Line 9 (Deductions area) of Form 1120-S.

  3. Edit entries in numeric order, (e.g., 1-2, 4-1). Edited information will be preceded by the applicable number as follows:

    Additional Form 1120-S Perfection

    If Then
    Editing an Audit Code, Edit "1 -" followed by the appropriate Audit Code(s). (e.g., "1 - 2" ). See IRM 3.11.217.13.1, Audit Codes.
    Editing a Penalty and Interest Code, Edit "2 -" followed by the Penalty and Interest Code. (e.g., "2 - 1" ). See IRM 3.11.217.13.2, Penalty and Interest Code.
    Editing an Installment Sale Indicator, Edit "3 -" followed by the appropriate Installment Sale Indicator. (e.g., "3 - 2" ). See IRM 3.11.217.13.3, Installment Sale Indicator.
    Editing a Tax Preference Code, Edit "4 -" followed by the Tax Preference Code. (e.g., "4 - 1" ). See IRM 3.11.217.13.4, Tax Preference Code.

    Caution:

    Tax Cuts and Jobs Act of 2017 - P.L. 115-97 (H.R. 1), Section 12001 repeals the corporate alternative minimum tax (Form 4626), effective for taxable years beginning after December 31, 2017. Do not edit the Tax Preference Code on Form 1120-S with a tax period beginning date of January 1, 2018, (201801) or later.

    Editing Form 8586, Low Income Housing Credit, Edit "5 -" followed by the Form 8586 credit in dollars only. (e.g., "5 - 357" ). See IRM 3.11.217.13.5, Low-Income Housing Credit.
    Editing Form 8611, Recapture of Low-Income Housing Credit, Edit "6 -" followed by the Form 8611 credit in dollars only (e.g., "6 - 753" ). See IRM 3.11.217.13.6, Form 8611, Recapture of Low-Income Housing Credit and Form 8693, Low-Income Housing Credit Disposition Bond.

     

  4. The Return Processing Code (RPC) is edited on Page 1, in the right margin next to Line 1c (Total, Add Lines 1a and 1b) of Form 1120-S. See IRM 3.11.217.13.7, Return Processing Code (RPC), for additional information.

Audit Codes

  1. Up to nine (9) Audit Codes may be used at one time.

    Note:

    Audit Codes do not need to be edited in a specific order on the return.

  2. Edit Audit Codes in the left margin near Line 9 (Deductions area) of Form 1120-S.

  3. Edit as "1 -" followed by the appropriate code(s).

  4. Audit Code 1:

    1. Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request, is attached.

    2. Form 8275 or Form 8275R, Disclosure Statement, is attached or statement referring specifically to IRC 6662 (Disclosure).

    3. Form 8886, Reportable Transaction Disclosure Statement, is attached. See IRM 3.11.217.14.15, CCC "T" - Form 8886, Reportable Transaction Disclosure Statement.

  5. Audit Code 2:

    1. Form 1120-S, Schedule K, Line 14p*, Total Foreign Taxes, has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ *(Prior year line numbers: 2017 - 2004: Line 14l; 2003 - 2001: Line 15(g); 2000: Line 15(f); 1999 and prior revisions: Line 15(e)).

    2. Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, is attached.

    3. Schedule N (Form 1120), Foreign Operations of U.S. Corporations, is attached and "Yes/No" Questions 1a, 3, 4a, 5, and/or 7a are answered "Yes" .

    4. Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, is attached or Schedule N (Form 1120), Foreign Operations of U.S. Corporations, Question 4a is checked "Yes" .

    5. Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in U.S. Trade or Business (Under Sections 6038A and 6038C of the Internal Revenue Code), is attached.

    6. Form 5713, International Boycott Report, is attached and both Questions in 7(f) are answered "Yes" .

    7. Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, is attached and Part V* (Distributions From and Dispositions of Stock of a Section 1291 Fund), Lines 15a through Line 16f has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . *(2011 and prior revisions: Part IV, Lines 10a through Line 11f).

    8. Form 8832, Entity Classification Election, is attached and either Box 6(d), (e), or (f) (January 2006 and prior revisions: Box 2(d), (e), or (f)) is checked.

    9. Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), is attached.

    10. Form 8858, Information Return of U.S. Persons With Respect To Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs), is attached or Schedule N (Form 1120), Foreign Operations of U.S. Corporations, Question 1a is checked "Yes" .

    11. Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, is attached.

  6. Audit Code 3:

    1. Form 8283, Noncash Charitable Contributions, is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    2. Form 8283, Noncash Charitable Contributions, is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    3. Form 8883, Asset Allocation Statement Under Section 338, is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . See IRM 3.11.217.14.14, CCC "S" - Form 8883, Asset Allocation Statement Under Section 338 for additional information.

    4. Form 8594, Asset Acquisition Statement Under Section 1060, is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  7. Audit Code 4:

    1. Entity Control Unpostable Unit determines that a valid Form 2553, Election by a Small Business Corporation, is on file, the Form 1120, U.S. Corporation Income Tax Return, must be converted to Form 1120-S, U.S. Income Tax Return for an S Corporation.

      Caution:

      If you receive a Form 1120-S converted from Form 1120 and the Form 13596, Reprocessing Returns, is attached for reprocessing, see IRM 3.11.217.3.8.2, Form 13596 - Reprocessing Returns, for additional information.

  8. Audit Code 5:

    1. Form 1120-S, Schedule K, Line 10, Other Income (Loss), reflects a loss ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  9. Audit Code 6:

    1. Presence of Form 3115, Application for Change in Accounting Method.

  10. Audit Code 7:

    1. Form 1120-S, Schedule K, Line 14p*, Total Foreign Taxes, has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . *(Prior year line numbers: 2017 - 2004: Line 14l)

    2. Form 5713, International Boycott Report, is attached and both questions in 7(f) are not answered "Yes" .

    3. Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, is attached and Part V* (Distributions From and Dispositions of Stock of a Section 1291 Fund), Lines 15a through Line 16f has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . *(2011 and prior revisions: Part IV, Lines 10a through Line 11f).

  11. Audit Code 8:

    1. Edit Audit Code 8 if the following schedule is attached: Schedule M-3, Net Income (Loss) Reconciliation for S Corporations With Total Assets of $10 Million or More.

      Reminder:

      See IRM 3.11.217.14.1, CCC "B" - Schedule M-3 for additional information.

  12. Audit Code 9:

    1. The date shown in Box A falls during the tax year for which the S Corporation return is being filed and the Date Incorporated in Box E (2006 and prior revisions: Box D) is more than one year earlier than the Date of Election as an S Corporation in Box A. See Figure 3.11.217-19, Example of Editing Audit Code 9.

    Figure 3.11.217-19

    This is an Image: 51221560.gif
     

    Please click here for the text description of the image.

Penalty and Interest Code

  1. Edit the Penalty and Interest Code in the left margin near Line 9 (Deductions area) of Form 1120-S.

  2. Edit as "2 - 1" if pre-computed interest and/or delinquency penalty is shown on a return with a received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  3. This code is valid only within the unextended (original) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . When the pre-computed interest does not pertain to the ≡ ≡ ≡ ≡ ≡ ≡ ≡ but to some other situation, such as an Estimated Tax Penalty, do not code "1" and do not edit Computer Condition Code "R" .

    Note:

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

♦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 S Corporation's response to Question 3 on Form 6252.

  3. Edit the Installment Sale Indicator in the left margin near Line 9 (Deductions area) of Form 1120-S.

  4. Edit as "3 -" followed by the appropriate code.

  5. Valid codes for installment Sale Indicator are as follows:

    Installment Sale Indicator

    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 checked or Question 3 is blank Question 3 is blank on all returns.

     

  6. See IRM 3.11.217.38Form 6252, Installment Sale Income, for additional information.

Tax Preference Code

  1. For tax periods ending November 30, 2018, (201811) and prior, edit the Tax Preference Code in the left margin near Line 9 (Deductions area) of Form 1120-S as "4 - 1" if

    • Form 4626, Alternative Minimum Tax - Corporations, is attached and an amount is present on Lines 3, 6, and/or 11 (Prior year line numbers: 2002 - 1994: Lines 3, 6, and/or 12).

    • Schedule K-1, Shareholder's Share of Income, Deduction, Credits, etc., Line 15*, Alternative Minimum Tax (AMT) Items, sum equals an amount of more than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ after computing positive and/or negative amounts *(2003 and prior year line numbers: Lines 14a through 14e).

      Note:

      Entries on Form 1120-S, Schedule K, Lines 15a through Line 15f* are an indication that the Schedule K-1 may have Tax Preference Items *(Schedule K prior year line numbers: Lines 14a through 14e).

    • See Figure 3.11.217-20, Example of Editing the Tax Preference Code.

      Figure 3.11.217-20

      This is an Image: redimage.gif
       

      Please click here for the text description of the image.

Form 8586, Low-Income Housing Credit

  1. Edit the Form 8586, Low-Income Housing Credit, in the left margin near Line 9 (Deductions area) of Form 1120-S.

  2. Edit as "5 -" followed by the credit amount in dollars only.

  3. When editing Form 1120-S, Schedule K, Line 13a or Line 13b for Form 8586, Low-Income Housing Credit, take the following actions:

    Form 8586, Low-Income Housing Credit

    If Then
    Form 8586 is attached with an entry on Lines 1 through Line 3 (2004 and prior revisions: Lines 1 through Line 4), Enter CCC "9" .
    Form 8609, Low-Income Housing Credit Allocation and Certification, is attached Enter CCC "9" .
    Form 8609-A (prior year Schedule A (Form 8609)) is attached, Enter CCC "9" .
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8586 is not attached, Correspond with the taxpayer for the missing Form 8586.
    Form 8586 is attached, In the left margin near Line 9 (Deductions area) of Form 1120-S, edit "5 -" followed by the amount on Line 5*, Form 8586, plus Line 12, Form 8586, in dollars only *(Form 8586 prior year line numbers: 2005: Line 17; 2004 and prior revisions: Line 18). See Figure 3.11.217-21, Example of Editing Low-Income Housing Credit (Form 8586).

    Note:

    If the taxpayer attaches Form 8586 or indicates the credit on Schedule K, but has not entered a significant entry on Line 13a or Line 13b, do not enter the amount from the Form 8586 in the left margin.

     

    Figure 3.11.217-21

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    Please click here for the text description of the image.

Form 8611, Recapture of Low-Income Housing Credit and
Form 8693, Low-Income Housing Credit Disposition Bond

  1. Edit the Form 8611, Recapture of Low-Income Housing Credit, in the left margin near Line 9 (Deductions area) of Form 1120-S.

  2. Edit as "6 -" followed by the credit amount in dollars only.

  3. Form 8611 is required if Schedule K-1, Line 13, Code A or B indicates a Form 8611 credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  4. Edit Form 8611 as follows:

    Form 8611 and Form 8693

    If Then
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 8611 is not attached, Correspond with the taxpayer for the missing Form 8611.
    Form 8611 is attached, In the left margin near Line 9 (Deductions area) of Form 1120-S, edit "6 -" followed by the Line 14*, Form 8611 amount (in dollars only) *(Form 8611 January 1999 revision, Line 12).
    Multiple Forms 8611 are attached, In the left margin near Line 9 (Deductions area) of Form 1120-S, edit "6 -" followed by the total amount (in dollars only) of all Forms 8611, Line 14* *(Form 8611 January 1999 revision, Line 12).
    Form 8611 is reported on Schedule K-1, Line 13, Code A or B or Form 8611 is attached, Enter CCC "9" .

     

  5. If Form 8693, Low-Income Housing Credit Disposition Bond, is attached to Form 1120-S, enter CCC "9" .

Return Processing Code (RPC)

  1. A Return Processing Code (RPC) is an alpha character (e.g., A, B, C, D, E, F) or numeric character (e.g., 2, 4, 6, 7) used to alert the computer to a special condition.

  2. The RPC is edited on Page 1, in the right margin next to Line 1c (Total, Add Lines 1a and 1b) of Form 1120-S. Thirty-five characters may be edited.

    Note:

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

  3. The table below lists the RPC and explanation when to edit each RPC.

    Return Processing Code (RPC)

    RPC Explanation
    A Form 5471, Schedule E, Income, War Profits, and Excess Profits Taxes Paid or Accrued, is attached.
    B Form 5471, Schedule H, Current Earnings and Profits, is attached.
    C Form 5471, Schedule I-1, Information for Global Intangible Low-Taxed Income, is attached.
    D Form 5471, Schedule P, Previously Taxed Earnings and Profits of U.S. Shareholder of Certain Foreign Corporations, is attached.
    E Form 8865, Schedule G, Statement of Application of the Gain Deferred Method Under Section 721(c), is attached.
    F Form 8865, Schedule H, Acceleration Events and Exceptions Reporting Relating to Gain Deferral Method Under Section 721(c), is attached.
    1 Not Applicable (N/A) at this time
    2 Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI), is attached.
    3 Not Applicable (N/A) at this time
    4 Form 8994, Employer Credit for Paid Family and Medical Leave, is attached.
    6 Form 8996, Qualified Opportunity Fund, is attached.

    Note:

    See IRM 3.11.217.23.2, Form 8996, Qualified Opportunity Fund Checkbox, and IRM 3.11.217.32Form 8996, Qualified Opportunity Fund, for additional information.

    7 Form 8990, Limitation on Business Interest Expense IRC 163(j), is attached.
    8 Not Applicable (N/A) at this time
    9 Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, is attached.

     

♦Computer Condition Codes♦

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

  2. Computer Condition Codes are edited in the center of Lines 1 and 2 of the Form 1120-S.

♦CCC "B" - Schedule M-3♦

  1. Edit CCC "B" when any of the following conditions are met:

    1. Schedule M-3 (Net Income (Loss) Reconciliation for S Corporations With Total Assets of $10 Million or More) box on Form 1120-S, Page 1, Box C (2006 and prior revisions: Box H) is checked, or

    2. Schedule M-3 is attached.

  2. Edit Audit Code 8 if Schedule M-3 is attached. See IRM 3.11.217.13.1, Audit Codes.

CCC "D" - Reasonable Cause for Failing to Pay Timely

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

  2. Edit CCC "D" when the return is stamped: "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 before the regular tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  4. Edit CCC "D" if an S Corporation attaches a statement indicating the S Corporation qualifies for an automatic 3-month extension under Regulations Section 1.6081-5 or indicates one of the following:

    • The domestic S Corporation transacts its business and keeps its books and records of account outside the United States and Puerto Rico, or

    • The domestic S Corporation's principal income is from sources within the possessions of the United States

      Exception:

      Do not edit CCC "D" if the balance due is paid after the 15th day of the 6th month following the tax period ending date.

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

CCC "E" - Potential Identity Theft Filing

  1. Effective January 1, 2017, Computer Condition Code "E" may be edited on Form 1120-S (any year) by the BMF ID Theft Liaison to identify a potential identity theft filing. If CCC "E" has been edited, no action is required by Code and Edit (C&E).

    Note:

    CCC "E" may be edited by other functions. C&E will continue to follow procedures below.

  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 "Criminal Investigation (CI)" , "Examination (Exam)" , or "Fraud" review.

  3. If the SP Theft Liaison says the return is "ID Theft" , the tax examiner may (upon request) edit CCC "E" .

CCC "F" - Final Return

  1. Edit CCC "F" when the "Final Return" box is checked or there is another indication the S Corporation is not liable for filing future returns. Notations such as (but not limited to):

    • Final

    • Deceased

    • Out-of-Business

    • Liquidation

    • Exempt under IRC 501(c)(3)

    • Dissolved

    • Cites IRC 708(b)(1)(B)

    • Notates "Filed in accordance with Rev. Proc. 2003-84"

  2. The presence of Form 966, Corporate Dissolution or Liquidation, is an indication of a possible dissolution. If Form 966 is attached, compare tax periods in Box 7a to the Form 1120-S being edited. If the tax periods are the same and the entity section of Form 966 is for the S Corporation, edit CCC "F"

    Exception:

    If "Filed Pursuant to Notice 97-4" is written on Form 966, do not use Form 966 as an indication that this is a final return.

  3. If a prepaid credit is claimed (Lines 23a and 23b) on a short period "Final" return, enter Action Code 342 on the return. See IRM 3.11.217.6.8, Short Period Return with Prepaid Credits.

  4. Edit the Tax Period Beginning on final returns according to IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

♦CCC "G" -
Amended Returns♦

  1. See IRM 3.11.217.3.9, Amended Returns.

CCC "I" -
Tax Straddles
and Future
Contracts
(Form 6781)

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

    Note:

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

CCC "J" -
Section 965 Tax

  1. CCC "J" indicates Section 965 (Repatriation Provision), Treatment of deferred foreign income upon transition to participation exemption system of taxation for U.S. Shareholders of Specified Foreign Corporations per Tax Cuts & Jobs Act of 2017, Provision Section 14103, Public Law 115-97 (H.R. 1).

  2. Edit CCC "J" and Action Code 460 (Management Suspense) when:

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

    • IRC 965 Transition Tax Statement (or similar 965 statement) is attached.

    • Form 965, Inclusion of Deferred Foreign Income Upon Transition to Participation Exemption System, is attached.

    • Form 965, Schedule A, U.S. Shareholder’s Section 965(a) Inclusion Amount, is attached.

    • Form 965, Schedule B, Deferred Foreign Income Corporation’s Earnings and Profits, is attached.

    • Form 965, Schedule C, U.S. Shareholder’s Aggregate Foreign Earnings and Profits Deficit, is attached.

    • Form 965, Schedule D, U.S. Shareholder’s Aggregate Foreign Cash Position, is attached.

    • Form 965, Schedule E, U.S. Shareholder’s Aggregate Foreign Cash Position - Detail, is attached.

    • Form 965, Schedule F, Foreign Taxes Deemed Paid by Domestic Corporation, is attached.

    • Form 965, Schedule G, Foreign Taxes Deemed Paid by Domestic Corporation, is attached.

    • Form 965, Schedule H, Amounts Reported on Forms 1116 and 1118 and Disallowed Foreign Taxes, is attached.

    • Form 965-B, Corporate and Real Estate Investment Trust (REIT) Report of Net 965 Tax Liability and Electing REIT Report of 965 Amounts, is attached.

    • Form 1120-S, Schedule K, Line 10, Other Income (Loss), indicates a significant entry with the notation "Section 965" (or similar language).

    • Form 1120-S, Schedule K, Line 12d, Other Deductions, indicates a significant entry with the notation "Section 965" (or similar language).

    • Form 1120-S, Schedule K, Line 14r, Other Foreign Tax Information, indicates a significant entry with the notation "Section 965" (or similar language).

    Note:

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

CCC "L" -
Treaty Based
Positions

  1. Edit CCC "L" when:

    1. Taxpayer writes "Section 6114 Election" on the return or

    2. Form 8833, Treaty-Based Return Position Disclosure Under IRC Section 6114 or IRC Section 7701(b), is attached.

      Note:

      Edit Audit Code 2 if Form 8833 is attached to Form 1120-S. See IRM 3.11.217.13.1, Audit Codes.

CCC "M" - Form 8949
(Sales and Other Dispositions of Capital Assets)

  1. Edit CCC "M" when:

    • Tax period ending is 201712 and later, and

    • Form 8949,Sales and Other Dispositions of Capital Assets, contains a code “Z” and/or code "Y" is present in column (f).

  2. CCC "M" is for Form 8949 per Tax Cuts and Jobs Act of 2017, P.L. 115-97 (H.R. 1), Section 13823, Opportunity Zones. Taxpayers who elect to defer gain on the sale of an asset by investing in an Opportunity Zone Fund will indicate that they are deferring the gain by entering code "Z" or "Y" in column (f).

CCC "O" -
Module Freeze

  1. CCC "O" is entered when a Pre-Settlement Manual Refund will be made and a Form 3753, Manual Refund Posting Voucher, Form 5792, Request for IDRS Generated Refund (IGR), or Form 12857, Refund Transfer Posting Voucher, is attached. Verify that the Name Control, EIN, and Tax Period on the return is the same as the data on the form.

    1. Research to determine if "TC 840" (Manual Refund Transaction) has posted:

    Manual Refund

    If Then
    "TC 840" has posted, Enter CCC "O" and continue processing the return.
    "TC 840" has not posted, Enter Action Code 341 to issue Manual Refund.

     

  2. TAS manual refund returns, see IRM 3.11.217.3.11, Refund Returns 45 Day Jeopardy and $100 Million or more Refunds, for processing instructions.

CCC "P" - BMF Mail Indicator

  1. No editing required.

CCC "Q" -
Return Filed Claiming TETR Only
(Credit for Federal Telephone Excise Tax Paid, Form 8913)

  1. No editing required.

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

  1. CCC "R" is no longer edited when a reason is given for the delay in filing a return (or if the taxpayer requests abatement or penalty relief). Send Letter 1382C, Penalty Removal Request Incomplete, to inform the taxpayer of the proper procedure to follow to request penalty relief/penalty abatement, if, and when a penalty is assessed and continue editing the return.

    Exception:

    Do not send Letter 1382C, Penalty Removal Request Incomplete, if the taxpayer has notated "Late filed return due to CCH software outage" or similar language.

  2. Edit CCC "R" if an S Corporation attaches a statement indicating the S Corporation qualifies for an automatic 3-month extension under Regulations Section 1.6081-5 or indicates one of the following:

    • The domestic S Corporation transacts its business and keeps its books and record of account outside the United States and Puerto Rico, or

    • The domestic S Corporation's principal income is from sources within the possessions of the United States

      Exception:

      Do not edit CCC "R" if the return is filed after the 15th day of the 6th month following the tax period ending date.

  3. Edit CCC "R" on a "Final" return if the received date is after the short period due date but before the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Edit CCC "R" on the return when there is an indication such as "DO NOT ASSESS FAILURE TO FILE PENALTY" on a secured return annotated with "599" .

  5. Edit CCC "R" on the short period return when the Statement referring to "S" (1120-S) Status Termination or revocation under Section 1362, or Form 1120-S, Page 1, Item H, Box 5, S Election termination or revocation is checked. See IRM 3.11.217.6.4, Short Period - Editing Proof of Entitlement, for additional information.

  6. Edit CCC "R" on the return if an internal use form or routing slip is attached and indicates do not assess failure to file penalty.

  7. All CCC "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.

CCC "S" -
Form 8883, Asset Allocation Statement Under Section 338

  1. Edit CCC "S" when Form 8883, Asset Allocation Statement Under Section 338, is attached to Form 1120-S.

CCC "T" -
Form 8886, Reportable Transaction Disclosure Statement

  1. Edit CCC "T" when Form 8886, Reportable Transaction Disclosure Statement, is attached to Form 1120-S. Edit Audit Code 1 when Form 8886 is attached. See IRM 3.11.217.13.1, Audit Codes.

♦CCC "W" -
"Cleared by Statute"
Stamped On Return♦

  1. CCC "W" is used when the return has been cleared by Statute Control. See IRM 3.11.217.3.7, Statute Returns.

CCC "X" - Refund/Settlement Freeze

  1. Edit CCC "X" when the taxpayer indicates on the tax return a request that any balance left over after paying tax and/or penalties to be applied to another account. Take the following actions to route the request to Accounts Management (AM).

    1. Prepare Form 3465, Adjustment Request, and indicate in the "Routing" box "Adjustments" .

    2. Notate the requested action in the "Remarks" box.

    3. Attach a copy of Page 1 of the tax return to Form 3465.

    Reminder:

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

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

  1. Edit CCC "Y" for 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 Periods" in IRM 3.11.217.6.4, Short Period-Editing Proof of Entitlement, through IRM 3.11.217.6.8, Short Period Return with Prepaid Credits.

  2. Edit CCC "Y" on a Short Period Form 1120-S when the taxpayer indicates any of the following:

    • Statement referring to Qualifying Disposition under Regulations Section 1.1368-1(g)(2)(i).

    • Statement referring to “S” Status Election and taxpayer is changing to required tax year (12/31/XX).

    • Statement the S Corporation is coming out of consolidation.

    • Statement the corporation is a qualified sub chapter S subsidiary.

    • Notation referring to “Section 1398 election” (Bankruptcy Petition has been filed) or “Second Short Year after Section 1398 Election”.

    Note:

    See IRM 3.11.217.6.4, Short Period-Editing Proof of Entitlement, through IRM 3.11.217.6.8, Short Period Return with Prepaid Credits for additional information.

  3. If a prepaid credit is claimed on a short period return (Lines 23a and 23b), enter Action Code 342 on the return. See IRM 3.11.217.6.8, Short Period Return with Prepaid Credits.

  4. Edit the Tax Period Beginning on short period returns according to IRM 3.11.217.6.2, Tax Period Beginning - Final, Initial, or Short Period Return.

CCC "1" -
Like-Kind Exchanges

  1. Edit CCC "1" if Form 8824, Like-Kind Exchanges (and Section 1043 Conflict-of-Interest Sales), is attached.

CCC "2" -
Form 8938,
Statement of Specified Foreign Financial Assets

  1. Edit CCC “2” if Form 8938, Statement of Specified Foreign Financial Assets, is attached to Form 1120-S.

  2. See IRM 3.11.217.27.10, Schedule N (Form 1120), Line 8 - Statement of Specified Foreign Financial Assets, and IRM 3.11.217.40, Form 8938, Statement of Specified Foreign Financial Assets, for additional information.

♦CCC "3" -
No Reply to
Correspondence♦

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

CCC "8" -
Waiver of
Estimated
Tax Penalty

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

    1. Form 2220, Underpayment of Estimated Tax by Corporations, is attached and Part II*, Box 6 or Box 7 *(2004 and prior revisions: Part I, Box 1 or Box 2) is checked.

    2. Form 2220 is attached and any column on Form 2220, Schedule A, Page 4, Line 38 (2002 and prior revisions: Line 40) has entries.

CCC "9" -
Low-Income
Housing Forms

  1. Edit CCC "9" when any of the following are attached:

    • Form 8611, Recapture of Low-Income Housing Credit

    • Form 8693, Low-Income Housing Credit Disposition Bond

    • Form 8609, Low-Income Housing Credit Allocation and Certification

    • Form 8609-A, Annual Statement for Low-Income Housing Credit (prior year Form 8609, Schedule A)

    • Form 8586, Low-Income Housing Credit, with entries on any of Lines 1 through Line 3 (prior year Lines 1 through Line 4)

  2. Edit CCC "9" whenever recapture tax for Low-Income Housing Credit is reported on Schedule K-1, Line 13, Code A or B.

Return Processing

  1. This subsection provides instructions for processing Form 1120-S, U.S. Income Tax Return for an S Corporation. Form 1120-S can be filed for a calendar year or a fiscal year.

Sequencing of Return

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

    • Pages 1, 2, 3, 4, 5

    • Schedule N, Foreign Operations of U.S. Corporations, - See IRM 3.11.217.27, Schedule N (Form 1120) - Foreign Operations of U.S. Corporations.

    • Schedule D, (Form 1120-S) Capital Gains and Losses and Built-in Gains, - See IRM 3.11.217.30, Schedule D (Form 1120-S) - Capital Gains and Losses and Built-in Gains.

    • Form 8949, Sales and other Dispositions of Capital Assets, - See IRM 3.11.217.31, Form 8949, Sales and other Dispositions of Capital Assets.

    • Form 8996, Qualified Opportunity Fund, - See IRM 3.11.217.32, Form 8996, Qualified Opportunity Fund.

    • Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, - See IRM 3.11.217.28, Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation.

    • Form 1125-A, Cost of Goods Sold, - See IRM 3.11.217.33, Form 1125-A, Cost of Goods Sold.

    • Form 8050, Direct Deposit of Corporate Tax Refund.

    • Form 4136, Credit for Federal Tax Paid on Fuels, - See IRM 3.11.217.34, Form 4136, Credit for Federal Tax Paid on Fuels.

    • Form 8941, Credit for Small Employer Health Insurance Premiums, - See IRM 3.11.217.36, Form 8941, Credit for Small Employer Health Insurance Premiums.

    • Form 5884-B, New Hire Retention Credit, - See IRM 3.11.217.37, Form 5884-B, New Hire Retention Credit.

    • Form 8913, Credit For Federal Telephone Excise Tax Paid, - See IRM 3.11.217.3.12, Form 8913, Credit for Federal Telephone Excise Tax Paid Only Tax Return (Tax Year 2006 revision).

    • Form 6252, Installment Sale Income - See IRM 3.11.217.38Form 6252, Installment Sale Income.

    • Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc. - Place all Schedules K-1 (Form 1120-S), filed as attachments to Form 1120-S, as the last attachment in the package or follow local agreement. Detach Schedules K-1 for current year (TY2019), two preceding years (TY2018 and TY2017), and future Schedules K-1. See IRM 3.0.101, Schedule K-1 Processing, for complete instructions to edit and process Schedule K-1. See IRM 3.11.217.39, Schedule K-1 - Shareholder’s Share of Income, Deductions, Credits, etc. and IRM 3.11.217.12, Number of Shareholders - Page 1, Line 1, for additional editing instructions.

    • Form 8938, Statement of Specified Foreign Financial Assets - Sequence Form 8938 to the back of the last page of Form 1120-S (after schedules and attachment pages), attaching the Form 8938 so that it is back-to-back with the parent return.

      Note:

      Form 8938 should only be sequenced if Form 8938 meets the requirements in IRM 3.11.217.40, Form 8938, Statement of Specified Foreign Financial Assets.

    Note:

    It is not necessary to sequence Form 8050 if blank or Schedule N, Form 8825, Schedule D, Form 1125-A, Form 4136, Form 8913, Form 8941, Form 5884-B, or Form 8938 if there are no transcription line entries.

  2. It is not necessary to sequence an Amended return. See IRM 3.11.217.3.9, Amended Returns, for additional information.

Positive/Negative Figures

  1. Income Items - Lines 1a, 1b, 1c, 2, 4, 5, and 6 can contain positive or negative amounts.

  2. Deduction Items - All lines in the deduction section can contain positive or negative amounts.

  3. Tax and Payment Items - Following lines are positive only amounts:

    • Line 22c - Total tax (Add Lines 22a and 22b)

    • Line 23a - Estimated tax payments and overpayment credited

    • Line 23b - Tax Deposited with Form 7004

    • Line 23c - Credit for Federal Tax Paid on Fuels (attach Form 4136)

    • Line 23d - Refundable Credit from Form 8827

      Note:

      Prior year line numbers: 2017 - 2007 revision: Line 23d - Total Payments (Add Lines 23a through 23c); 2006 revision: Line 23d - Federal telephone excise tax paid.

    • Line 23e - Total Payments (Add Lines 23a through 23d)

    • Line 24 - Estimated Tax Penalty

  4. Do not bracket any negative entries on Lines 25, 26, and 27.

Income Items - Lines 1 through 6, Page 1

  1. All line items are edited in dollars only and all the line items are either positive or negative.

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. Edit Lines 1a, 1b, and 1c as follows:

    Line 1 - Gross Receipts or Sales

    If And Then
    Line 1a is blank, Amounts are present on Line 1b and/or Line 1c, Add Line 1b and Line 1c, and edit the total amount to Line 1a. Bracket if negative.
    Lines 1a, 1b, and 1c are blank, The taxpayer indicates “Gross Profit” on Line 3, Add Lines 2 and 3, and edit the amount to Line 1a. Bracket if negative.

    Exception:

    If Line 2 is blank, determine from Form 1125-A, Line 8 amount (2010 and prior revisions: Page 2, Schedule A, Line 8), before computing Line 1a. If cost of goods sold is zero or blank on Form 1125-A (2010 and prior revisions: Page 2, Schedule A, Line 8), edit the Line 3 amount to Line 1a. Bracket if negative.

    Line 1b is blank, check attachments. If found,   Edit the amount to Line 1b. Do not bracket if negative.
    Line 1b is blank, check attachments. If not found, Line 1a is greater than Line 1c, Compute Line 1b (Line 1a minus Line 1c) and edit the amount to Line 1b.

     

Line 2 - Cost of Goods Sold

  1. Follow instructions below for editing Cost of Goods Sold (Line 2):

    Line 2 - Cost of Goods Sold

    If And Then
    Line 2 is blank, An amount is present on Form 1125-A (2010 and prior revisions: Page 2, Schedule A, Line 8) Line 8, Edit the amount from Form 1125-A (2010 and prior revisions: Page 2, Schedule A, Line 8) Line 8. Bracket if negative.
    Line 2 is blank, Form 1125-A (2010 and prior revisions: Page 2, 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. Bracket if negative.
    Line 2 is blank, Form 1125-A (2010 and prior revisions: Page 2, Schedule A, Lines 6 and 8) Lines 6 and 8 are blank and there are entries on Lines 1 through 5, Edit the total of Lines 1 through 5 minus any amount on Line 7. Bracket if negative.

     

Line 4 - Net Gain (Loss)

  1. Correspond with the taxpayer for the missing Form 4797, Sales of Business Property, if there is an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ on Line 4, Page 1 and Form 4797 is not attached.

    Exception:

    Do not correspond if "Form 4684" is notated on Line 4.

Line 5 - Other Income (Loss)

  1. Accept taxpayer's entry.

Line 6 - Total Income (Loss)

  1. Edit Line 6 as follows:

    Line 6 - Total Income (Loss)

    If Then
    Line 6 is blank,
    1. Compute Lines 3 through 5 and edit to Line 6.

      Note:

      If Line 3 is blank, compute Line 3 by subtracting Line 2 from Line 1c.

    2. Bracket if negative.

    Line 6 is the only entry in the Income Section,
    1. Enter the amount from Line 6 to Line 5.

    2. Bracket if negative.

Deduction Items and Computation of Ordinary Income - Lines 7 through 21, Page 1

  1. This subsection provides instructions for editing the Deduction area of Form 1120-S, including the Salary and Wage Code. All line items are edited in dollars only and all the line items are positive or negative unless otherwise stated.

Line 7 - Compensation of Officers

  1. Accept taxpayer's entry.

Line 8 - Salaries and Wages

  1. Accept taxpayer's entry.

Salary and Wage Code

  1. Edit a "1" in the right margin of Page 1, Line 8 Form 1120-S if an entry greater than zero is present on any of the following:

    • Form 1120-S, U.S. Income Tax Return for an S Corporation, Page 1, Line 8

    • Form 1125-A, Cost of Goods Sold, Line 3 (2010 and prior revisions: Page 2, Schedule A, Line 3). See Figure 3.11.217-22, Example of Editing Salary and Wage Code from Form 1125-A

    • Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, Page 1, Line 13, Columns A through D or Page 2, Line 13, Columns E through H

    • Schedule F, Profit or Loss From Farming, Line 22 (2010 and prior revisions: Schedule F, Line 24)

    • Form 4835, Farm Rental Income and Expenses (Crop and Livestock Shares (Not Cash) Received by Landowner (or Sub-Lessor)), Line 20, or

    • An attachment shows an entry for salaries, wages, labor, or payroll. See Figure 3.11.217-23, Example of Editing Salary and Wage Code from an Attachment.

  2. Do not code for any of the following entries:

    • Contract, outside, custom, or miscellaneous labor

    • Temporary help

    • Management fees

    • Janitorial services

    • Maintenance fees

    • Commissions

    • Payroll taxes

    • Casual labor

    Figure 3.11.217-22

    This is an Image: 51221575.gif
     

    Please click here for the text description of the image.

    Figure 3.11.217-23

    This is an Image: 51221580.gif
     

    Please click here for the text description of the image.

Line 9 - Repairs

  1. Accept taxpayer's entry.

Line 10 - Bad Debts

  1. Accept taxpayer's entry.

Line 11 - Rents

  1. Accept taxpayer's entry.

Line 12 - Taxes

  1. Accept taxpayer's entry.

Line 13 - Interest

  1. Accept taxpayer's entry.

Line 14 - Depreciation
(2005 and prior revisions: Line 14c)

  1. Accept taxpayer's entry.

  2. For 2005 and prior revisions: if Line 14c is blank and there is a significant entry on either Line 14a or Line 14b, compute and edit the amount to Line 14c. Renumber Line 14c to Line 14. Bracket if negative.

    Note:

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

Line 15 - Depletion

  1. Accept taxpayer's entry.

Line 16 - Advertising

  1. Accept taxpayer's entry.

Line 17 - Pension Profit Sharing Plan

  1. Accept taxpayer's entry.

Line 18 - Employee Benefit Plan

  1. Accept taxpayer's entry.

Line 19 - Other Deductions

  1. Edit Page 1, Line 19 as follows:

    Line 19 - Other Deductions

    If Then
    If the taxpayer uses "Other Deduction" items on Lines 7 through 18,
    1. Add the "Other Deduction" items and edit the total to Line 19.

    2. Bracket if negative.

    3. "X" the Other Deductions items from Lines 7 through 18.

     

Line 20 - Total Deductions

  1. Edit Page 1, Line 20 as follows:

    Line 20 - Total Deductions

    If Then
    Line 20 is blank,
    1. Add Lines 7 through 19 and edit this amount to Line 20.

    2. Bracket if negative.

    If Line 20 is the only entry in the "Deduction" section (Lines 7 through 20),
    1. Edit the Line 20 amount to Line 19.

    2. Bracket if negative.

     

Line 21 - Ordinary Income

  1. Edit Page 1, Line 21 as follows:

    Line 21 - Ordinary Income

    If Then
    Line 21 is blank, Subtract Line 20 (Total Deductions) from Line 6 (Total Income) and edit this amount to Line 21. Bracket if negative.
    If Line 21 is the only entry on Page 1 of the return and the amount is positive, Edit the Line 21 amount to both Lines 5 and 6.
    If Line 21 is the only entry on Page 1 of the return and the amount is negative, Edit the Line 21 amount to both Lines 19 and 20 as a positive amount.

     

    Note:

    Correspond with the taxpayer if ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ no Schedule K-1 is attached. See IRM 3.11.217.39, Schedule K-1.

    Exception:

    Do not correspond on Section 965 Returns. ERS will take care of any correspondence needed. See IRM 3.11.217.2.11, Section 965 Returns, for additional information.

Tax and Payments - Lines 22 through 27, Page 1

  1. This subsection provides instructions for editing the Tax and Payments section of Form 1120-S.

Line 22b - Tax From Schedule D (Form 1120-S)

  1. If there is a significant entry on Line 22b and Schedule D, (Form 1120-S) Capital Gains and Losses and Built-in Gains, is not attached, correspond.

    Note:

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

Line 22c - Total Tax

  1. Total Tax (Line 22c) can only be a positive amount. If blank, edit as follows:

    Line 22c - Total Tax

    If Then
    There is no entry on Line 22c (Total Tax), Compute and edit the total of Lines 22a and 22b to Line 22c (Total Tax).
    There is no entry on any of Lines 22a, 22b, and 22c (Total Tax), and Schedule D, (Form 1120-S) Capital Gains and Losses and Built-in Gains, is present, Edit the amount from Schedule D, Line 23* to Form 1120-S, Page 1, Line 22c. *(Schedule D prior year line numbers: 2011 - 2005: Line 21; 2004 - 2003: Line 22; 2002 - 2001: Line 25 (or Line 33, if Line 25 is blank); 1999 and prior revisions: Line 22).

     

  2. If Lines 22a and 22b are blank, and a significant amount is present on Line 22c (Total Tax), edit as follows:

    Line 22c - Total Tax

    If Then
    Line 22c includes pre-computed interest, delinquency penalty, or additional charge,
    1. "X" the Line 22c (Total Tax) amount.

    2. Delete the interest, penalty, or additional charge from the Total Tax.

    3. Edit the correct Total Tax to the left of the original entry, if other than “0” (zero).

    Line 22c includes "Tax From Form 4255" , Section 47 Recapture of Investment Credit (or similar language),
    1. Accept the taxpayer’s entry.

    2. Do not correspond with the taxpayer for the missing Form 4255, Recapture of Investment Credit, if not present.

    Line 22c includes "Last In First Out (LIFO) Tax" (or similar language), Accept the taxpayer’s entry.
    No supporting form, schedule, or statement is attached to explain the entry on Line 22c (Total Tax), Correspond with the taxpayer using Letter 118C, Corporate Return Incomplete for Processing: Form 1120, Form 1120 Series, Form 1120-S.

     

    Note:

    A significant entry is defined as any amount other than zero (0).

Line 23a - Estimated Tax Payments

  1. Accept taxpayer's entry.

Line 23b - Tax Deposited with Form 7004

  1. Accept taxpayer's entry.

Line 23c - Credit for Federal Tax Paid on Fuels – Form 4136

  1. If Line 23c has a significant entry, and Form 4136, Credit for Federal Tax Paid on Fuels, is not present, correspond with the taxpayer for the missing Form 4136.

    Note:

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

Line 23d - Refundable Credit from Form 8827

  1. Accept taxpayer's entry.

  2. Form 1120-S, Page 1, Line 23d, Refundable Credit from Form 8827, added to allow S Corporations to figure the new refundable credit amount for tax periods beginning after December 31, 2017, (per P.L. 115-97, Section 12002; IRC 53 & 1374).

Line 23d (2006 revision Form 1120-S) - Credit for Federal Telephone Excise Tax Paid, Form 8913

  1. Edit Action Code 420 and place Form 8913, Credit For Federal Telephone Excise Tax Paid, in the sequence order if Line 15, Column (d) or (e) contain a significant entry.

    Note:

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

Line 23e - Tax and Payments

  1. If Line 23e (Prior year line numbers: 2017 - 2007 revision: Line 23d) is blank or illegible and there are entries on any of Lines 23a, 23b, 23c, or 23d, compute the total of Lines 23a, 23b, 23c, and 23d and edit the total to Line 23e (Prior year line numbers: 2017 - 2007 revision: Lines 23a, 23b, and 23c).

  2. If Line 23e (Prior year line numbers: 2017 - 2007 revision: Line 23d) contains an entry, but there are no entries on Lines 23a through Line 23d, double arrow or edit the amount to Line 23a (Prior year line numbers: 2017 - 2007 revision: Lines 23a, 23b, and 23c).

Line 24 - Estimated Tax Penalty

  1. Estimated Tax Penalty must be edited when either:

    1. An additional penalty is pre-computed on the return, or

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

  2. To edit Form 1120-S, Line 24, do the following:

    1. If the taxpayer follows the instructions on Form 2220, the applicable amount must be shown on Form 2220, Line 38*, and on Form 1120-S, Line 24. The taxpayer may have also increased Form 1120-S, Line 25 or decreased Form 1120-S, Line 26, accordingly. Do not adjust this amount. *(Form 2220 prior year line numbers: 2007 - 2005: Line 34; 2004: Line 38; 2003: Line 36; 2002: Line 34; 2001: Line 36; 2000 - 1998: Line 34; 1997: Line 32.)

    2. If Form 1120-S, Line 24 is blank, edit the amount from Form 2220, Line 38*, to Form 1120-S, Line 24. *(Form 2220 prior year line numbers: 2007 - 2005: Line 34; 2004: Line 38; 2003: Line 36; 2002: Line 34; 2001: Line 36; 2000 - 1998: Line 34; 1997: Line 32.)

    3. If Form 1120-S, Line 24 is blank and Form 2220, Line 38* is also blank, review the Form 2220 to determine the taxpayer's method of computation. *(Form 2220 prior year line numbers: 2007 - 2005: Line 34; 2004: Line 38; 2003: Line 36; 2002: Line 34; 2001: Line 36; 2000 - 1998: Line 34; 1997: Line 32.) If there are entries on Form 2220, Line 37*, Columns (a) - (d), compute the total amount and enter on Form 1120-S, Line 24. *(See table below for prior year line numbers for Form 2220, Line 37)

    Note:

    If Form 2220 is attached, some conditions may require CCC "8" .

    Form 2220

    Current - 2008 2007 - 2005 2004 2003 2002 2001 2000 - 1998
    Line 37
    Columns a-d
    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

     

Lines 25 and 26 - Amount Owed/Overpayment

  1. Lines 25 and 26 are edited as positive only. If the taxpayer enters a negative amount, no action is required.

  2. Edit the proper entry to Line 25 or Line 26 if both are blank. Do both of the following:

    1. Add Lines 22c and 24. Subtract Line 23e (Prior year line numbers: 2017 - 2007 revision: Line 23d; 2006 and prior revisions: Line 23e).

    2. Edit the positive result on Line 25 or the negative result (do not bracket) on Line 26.

  3. If pre-computed interest, delinquency penalty, or additional charge is evident, ensure that it has not been included in Line 25 or reduced Line 26.

    Lines 25 and 26 - Amount Owed/Overpayment

    If Then
    The amount on Line 25 contains pre-computed interest, delinquency penalty, or additional charge,
    1. "X" Line 25 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 26 is reduced by pre-computed interest, delinquency penalty, or additional charge,
    1. "X" Line 26 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.

     

Backup Withholding

  1. If the taxpayer has indicated "Backup Withholding" , edit an "X" to the left of the amount and continue processing the return.

♦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 3.11.217.3.6.1, IRC 6020(b) Prepared by Collections

      Note:

      Starting July 1, 2013, the Revenue Officer's (RO's) electronic signature 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" - See IRM 3.11.217.3.6.3, Examination Prepared

    • 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 electronically filed (E-File). These returns may be identified by the presence of Modernized Electronic Filing (Mod E-file) printouts or "Tax Return Print (TRPRT) Do Not Process" (or similar language) 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" .

  2. Do not correspond for a signature on "CIS" returns that have Form 13596, Reprocessing Returns, attached. See IRM 3.11.217.3.4.3, Correspondence Imaging System (CIS) Returns, for processing instructions.

  3. If a signature is missing, correspond:

    Exception:

    Do not correspond on Section 965 Returns. ERS will take care of any correspondence needed. See IRM 3.11.217.2.11, Section 965 Returns, for additional information.

    Note:

    See IRM 3.11.217.3.4.2(2) - Issuing Correspondence - for returns that are incomplete and appear to be duplicate filings.

    Signature

    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 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.

     

    Note:

    Paper returns sent in by the filer that states their return was rejected through the E-file system require a signature. Form 8879-S, IRS e-file Signature Authorization for Form 1120-S, is not an acceptable signature substitute for a paper return.

  4. If the jurat is altered or stricken (crossed-out), see IRM 3.11.217.2.8, Frivolous Arguments, for frivolous return instructions.

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

    1. If the "signature declaration" is altered or stricken (crossed out), see IRM 3.11.217.2.8, Frivolous Arguments, for frivolous return instructions.

    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-S, IRS e-file Signature Authorization for Form 1120-S, is not an acceptable signature substitute for a paper return.

  6. Since tax examiners are not expected to be handwriting experts, Section 301.6064-1 of the Regulations allows the Service to presume that the signature on the return, statement, or other document is the true signature of the person who 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. The following types of signatures are not valid for Form 1120-S:

    • Faxed signatures

      Exception:

      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.

    • Electronic signatures

    • Docusign signatures

    • Typed font signatures

    Exception:

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

  8. Only one correspondence is required for a signature.

♦Paid Preparer Checkbox Indicator♦

  1. The Paid Preparer Checkbox is 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:

    Paid Preparer Checkbox Indicator

    If Then
    Only the "Yes" box is checked, Take no action.
    • "No" box is checked;

    • Neither box is checked; or

    • Both boxes are checked,

    Circle the Paid Preparer's Telephone Number if present.

     

♦Paid Preparer Section♦

  1. The Paid Preparer section is below the Signature area at the bottom of Form 1120-S, U.S. Income Tax Return for an S Corporation.

♦Paid Preparer's Tax Identification Number (PTIN)♦

  1. The Preparer's Social Security Number (SSN) (2009 and prior revisions) or Preparer's Tax Identification Number (PTIN) is to the right of the Preparer's Signature in the PTIN Box (2009 and prior revisions: Preparer's SSN or PTIN box) at the bottom right margin of Form 1120-S, Page 1.

  2. No action is required on Amended returns.

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

  4. A valid PTIN begins with the alpha "P" followed by an eight-digit number (e.g., PXXXXXXXX). Circle the PTIN if invalid, all zeroes or all nines.

♦Firm's EIN♦

  1. The Firm's EIN (2009 and prior revisions: Paid Preparer's EIN) is below the Preparer's PTIN Box (2009 and prior revisions: Paid Preparer's EIN) at the bottom right margin of Form 1120-S, Page 1.

  2. No action is required on Amended returns.

  3. The Firm's EIN (2009 and prior revisions: Paid Preparer's EIN) is a nine-digit number. Circle the EIN if all zeroes or all nines.

♦Paid Preparer Telephone Number♦

  1. The Paid Preparer's Phone Number is below the Paid Preparer's EIN at the bottom right corner of Form 1120-S, Page 1.

    Paid Preparer Telephone Number

    If Then
    The return is amended, No action is required.
    The Preparer's Phone Number is more than 10 digits, No action is required.
    The Preparer's Phone Number is illegible or less than 10 digits, Circle the Phone Number.

Schedule A - Cost of Goods Sold (2010 and prior revisions)

  1. Schedule A was replaced with Form 1125-A, Cost of Goods Sold.

  2. See IRM 3.11.217.33, Form 1125-A, Cost of Goods Sold, for processing instructions of prior year returns containing a Schedule A.

Schedule B - Other Information

  1. This subsection provides instructions for editing Schedule B, Other Information, on Form 1120-S.

Accounting Method Code

  1. The Accounting Method Code is transcribed from the taxpayers response to the boxes on Form 1120-S, Schedule B, Line 1.

  2. No editing is necessary.

Form 8996 - Qualified Opportunity Fund Checkbox

  1. If Form 1120-S, Schedule B, Question 15 "Is the corporation attaching Form 8996, Qualified Opportunity Fund, to certify as a Qualified Opportunity Fund" is answered "Yes" and the amount line is blank, search attachments for Form 8996. If Form 8996 is attached with an amount on Line 14 (Form 8996 prior year line number: 2018: Line 13), then edit the amount to Schedule B, Question 15.

    Note:

    Edit this amount using dollars and cents.

  2. If Form 8996, Qualified Opportunity Fund, is attached, edit Return Processing Code (RPC) 6 to Page 1, in the right margin next to Line 1c (Total, Add Lines 1a and 1b) of Form 1120-S. See IRM 3.11.217.13.7, Return Processing Code (RPC), for additional information.

  3. See IRM 3.11.217.32, Form 8996, Qualified Opportunity Fund, for additional information.

Schedule K - Shareholders' Pro Rata Share Items

  1. This subsection provides instructions for editing Schedule K, Shareholders' Pro Rata Share Items. on Form 1120-S.

  2. Correspond for Schedule K if missing or blank unless the return meets any of the following conditions:

    • The tax period 200912 and prior.

    • Attached Schedule K-1 (Form 1120-S), Part III, contains no tax data or reports only Ordinary Income, on Line 1.

    • Any of the following are attached:
      Schedule D, (Form 1120-S) Capital Gains and Losses and Built-in Gains
      Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation
      Form 6478, Biofuel Producer Credit
      Form 4797, Sales of Business Property
      Form 4562, Depreciation and Amortization (Including Information on Listed Property)
      Form 3468, Investment Credit

    • The return is for a short period.

    • The return contains no significant entries or is blank.

      Note:

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

Schedule K, Line 2 - Net Rental Real Estate Income (Loss)

  1. Correspond with the taxpayer for Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, if ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ not attached.

  2. For processing of Form 8825, see IRM 3.11.217.28, Form 8825 - Rental Real Estate Income and Expenses of a Partnership or an S Corporation.

Schedule K, Line 4 - Interest Income

  1. If Form 1120-S, Schedule K, Line 4, Interest Income, is blank check the supporting attachments for Portfolio Income. If an amount is present, edit to Line 4.

  2. Bracket if negative.

Schedule K, Line 10 - Other Income (Loss)

  1. If Form 1120-S, Schedule K, Line 10, Other Income (Loss), reflects a loss ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ edit Audit Code 5 in the left margin near Line 9 (Deductions area). See IRM 3.11.217.13.1, Audit Codes, for additional information.

  2. If Form 1120-S, Schedule K, Line 10, Other Income (Loss) indicates a significant entry with the notation "Section 965" (or similar language), edit Computer Condition Code (CCC) "J" and Action Code 460 (Management Suspense).

    Note:

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

  3. Form 1120-S, Schedule K-1, Box 10, with code F may indicate a Section 965(a) return. See IRM 3.0.101, Schedule K-1 Processing, for complete instructions to edit and process Schedules K-1.

  4. See IRM 3.11.217.2.11, Section 965 Returns, IRM 3.11.217.14.7, CCC "J" - Section 965 Tax, and IRM 3.11.217.3.1, Action Codes, for additional information.

Schedule K, Line 12d - Other Deductions

  1. If Form 1120-S , Schedule K, Line 12d, Other Deductions, indicates a significant entry with the notation "Section 965" (or similar language), edit Computer Condition Code (CCC) "J" and Action Code 460 (Management Suspense).

    Note:

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

  2. Form 1120-S, Schedule K-1, Box 12, with code K may indicate a Section 965(c) return. See IRM 3.0.101, Schedule K-1 Processing, for complete instructions to edit and process Schedules K-1.

  3. See IRM 3.11.217.2.11, Section 965 Returns, IRM 3.11.217.14.7, CCC "J" - Section 965 Tax, and IRM 3.11.217.3.1, Action Codes, for additional information.

Schedule K, Line 13a -
Low-Income Housing Credit (Section 42(j)(5))

  1. If Form 1120-S, Schedule K, Line 13a, Low-Income Housing Credit (Section 42(j)(5)), has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8586 is required.

    Form 8586

    If Then
    Form 8586 is attached, See IRM 3.11.217.13.5, Form 8586, Low-Income Housing Credit.
    Form 8586 is not attached, Correspond with the taxpayer for the missing Form 8586.

     

Schedule K, Line 13b -
Low-Income Housing Credit (Other)

  1. If Form 1120-S, Schedule K, Line 13b, Low-Income Housing Credit (Other), has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8586 is required.

    Form 8586

    If Then
    Form 8586 is attached, See IRM 3.11.217.13.5, Form 8586, Low-Income Housing Credit.
    Form 8586 is not attached, Correspond with the taxpayer for the missing Form 8586.

     

Schedule K, Line 13f - Biofuel Producer Credit

  1. If Form 1120-S, Schedule K, Line 13f, Biofuel Producer Credit, (2003 and prior year line number: Line 12a) has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 6478, Biofuel Producer Credit, (Credit for Alcohol Used as Fuel, for 2012 - 2007), is required. If Form 6478 is not attached, correspond with the taxpayer for the missing form.

  2. Check Form 6478, Line 4* against Schedule K, Line 13f (2003 and prior year line number: Line 12a). *(Form 6478 prior year line numbers: 2012 - 2010: Line 9; 2009: Line 8; 2008: Line 10; 2007 - 2006: Line 6; 2005: Line 21; 2004 - 2000: Line 22; 1999 - 1996: Line 21)

    1. If the amounts agree, continue processing the return. *(Form 6478 prior year line numbers: 2012 - 2010: Line 9; 2009: Line 8; 2008: Line 10; 2007 - 2006: Line 6; 2005: Line 21; 2004 - 2000: Line 22; 1999 - 1996: Line 21.)

    2. If there is a discrepancy, edit the amount from Form 6478, Line 4* to Schedule K, Line 13f (2003 and prior year line number: Line 12a). *(Form 6478 prior year line numbers: 2012 - 2010: Line 9; 2009: Line 8; 2008: Line 10; 2007 - 2006: Line 6; 2005: Line 21; 2004 - 2000: Line 22; 1999 - 1996: Line 21.)

  3. These instructions apply to 2009 tax year only, including fiscal year filers (200901 through 201011). Edit Action Code 343 if Form 6478, Line 5(c) (2009: Line 5(c); 2008: Line 7(c)) or Line 8 (2009: Line 7; 2008: Line 9), has a significant entry. Not applicable for revisions not listed (e.g., 2010 - 2008 form revisions are valid).

    Reminder:

    Do not edit Action Code 343 for tax period 201012.

Schedule K, Line 14p - Total Foreign Taxes

  1. If Form 1120-S, Schedule K, Line 14p*, Total Foreign Taxes, has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , edit an Audit Code 2 in the left margin near Line 9 (Deductions area) *(Schedule K prior year line numbers: 2017 - 2004: Line 14l; 2003 - 2000: Line 15g; 1999 and prior revisions: Line 15e). See IRM 3.11.217.13.1, Audit Codes.

  2. If Form 1120-S, Schedule K, Line 14p*, Total Foreign Taxes, has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , edit an Audit Code 7 in the left margin near Line 9 (Deductions area). *(Schedule K prior year line numbers: 2017 - 2004: Line 14l; 2003 - 2000: Line 15g; 1999 and prior revisions: Line 15e). See IRM 3.11.217.13.1, Audit Codes.

Schedule K, Line 14r - Other Foreign Tax Information

  1. If Form 1120-S, Schedule K, Line 14r, Other Foreign Tax Information, indicates a significant entry with the notation "Section 965" (or similar language), edit Computer Condition Code (CCC) "J" and Action Code 460 (Management Suspense).

    Note:

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

  2. Form 1120-S, Schedule K-1, Box 14, with code U may indicate a Section 965 return. See IRM 3.0.101 ,Schedule K-1 Processing, for complete instructions to edit and process Schedules K-1.

  3. See IRM 3.11.217.2.11, Section 965 Returns, IRM 3.11.217.14.7, CCC "J" - Section 965 Tax, and IRM 3.11.217.3.1, Action Codes, for additional information.

Schedule K, Line 16d - Property Distributions

  1. Accept taxpayer's entry.

Schedule K, Line 18 - Income/Loss Reconciliation

  1. Accept taxpayer's entry on Form 1120-S, Schedule K, Line 18 (2005 and prior revisions: Schedule K, Line 17e).

Schedule L - Balance Sheets per Books

  1. Correspond with the taxpayer for missing or blank Schedule L, Balance Sheets per Books, unless the return meets any of the following conditions:

    • Tax periods 0712 and prior

    • Amended return (CCC "G" )

    • Final return

    • Page 2, Schedule B, Line 11 (prior years: 2017 - 2012: Line 10; 2011 - 2007: Line 8; 2006 - 2002: Line 9) is checked "Yes"

      Note:

      If both the "Yes" box and the "No" box are checked, or neither box is checked, and none of the conditions in the bullets listed here are met, correspond.

    • There are no significant entries on Page 1, Lines 1 through 20

      Note:

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

    • Page 1, Box F, Total assets and Line 1a (2011: Line 1b), Gross receipts or sales, contain a "-" (dash), "None" , "N/A" , or some similar entry or is less than $250,000

    • Schedule L is crossed out or annotated "0" (zero), "-" (dash), "None" , "N/A" , or some similar entry

    • Schedule B, Line 1 (Check accounting method) - The "Cash" box on Schedule B is checked or the taxpayer has notated "Single Entry Records" , "See Books" , "Balance Sheet not available" , or similar entry

  2. If the "Yes" box on Form 1120-S, Schedule B, Line 11* is checked and Total assets, (Page 1, Box F)** ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Gross receipts or sales, (Page 1, Line 1a)*** ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , delete (slash (/)) Schedule L. (For example, If either "Total assets" or "Gross receipts or sales" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , do not delete Schedule L, Balance Sheets per Books.)
    *Schedule B, Line 10 (prior years: 2017 - 2012: Line 10; 2011 - 2007: Line 8; 2006 - 2002: Line 9)
    **Page 1, Box F (prior years: 2006 and prior: Box E)
    ***Page 1, Line 1a (prior years: 2011: Line 1b; Line 1c minus Line 1a if Line 1b is blank)

    Reminder:

    Edit Total Assets, Page 1, Box F (2006 and prior revisions: Box E) per IRM 3.11.217.10, Total Assets-Page 1, Box F.

  3. The following information is transcribed from Form 1120-S, Page 4, Schedule L, Balance Sheets per Books. No action is necessary to perfect these amounts. Accept the taxpayer's entry:

    1. Loans to Shareholders, end of year. Schedule L, Line 7 (d).

    2. Total Assets, beginning of year. Schedule L, Line 15 (b).

    3. Loans from Shareholders, end of year. Schedule L, Line 19 (d).

    4. Capital Stock, end of year. Schedule L, Line 22 (d).

    5. Additional Paid-In Capital, end of year. Schedule L, Line 23 (d).

    6. Retained Earnings, end of year. Schedule L, Line 24 (d).

Schedule M-1 and Schedule M-2

  1. This section provides instructions for Form 1120-S , Schedule M-1, Reconciliation of Income (Loss), and Schedule M-2, Analysis of Accumulated Adjustments Account.

Schedule M-1 - Reconciliation of Income (Loss)

  1. The following information is transcribed from Schedule M-1, Reconciliation of Income (Loss), Form 1120-S, Page 5 (Page 4 for prior years).

  2. Schedule M-1, Line 3(b) - Travel and Entertainment. Accept taxpayer's entry.

Schedule M-2 - Analysis of Accumulated Adjustments Account

  1. The following information is transcribed from Schedule M-2, Analysis of Accumulated Adjustments Account, Form 1120-S, Page 5 (Page 4 for prior years).

  2. Schedule M-2, Line 1, Column (a) - Balance at beginning of tax year. Accept taxpayer's entry.

Schedule N (Form 1120) - Foreign Operations of U.S. Corporations

  1. Schedule N is valid for tax periods beginning 01-01-2000. Delete Schedule N if the tax period begins prior to 01-01-2000.

  2. S Corporations that, at any time during the tax year, have assets in or operate a business in a Foreign Country or U.S. possession may have to file Schedule N.

  3. Do not correspond if Schedule N is missing. Dummy a Schedule N and edit the applicable entries when Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, or Form 8873, Extraterritorial Income Exclusion, is attached to the tax return.

  4. If Schedule N is present and contains no entries, do not correspond.

  5. If more than one Schedule N is attached, combine the information from all Schedules N, including all subsidiaries and:

    1. Edit to the first Schedule N that contains the EIN of the return being processed. "Staple up" any remaining Schedules N, or

    2. Dummy and edit a Schedule N, for the parent return if one is not present on a consolidated return.

  6. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Schedule N.

Schedule N (Form 1120), Line 1a - Form 8858, Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs)

  1. Form 8858 (Revision 12-2018), Information Return of U.S. Persons With Respect To Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs), is required to be filed by U.S. persons with respect to FDEs and FBs. Also, Form 8858 (Revision 12-2018) is required to be filed by U.S. persons with respect to FDEs and FBs owned by certain controlled foreign corporations or controlled foreign partnerships.

  2. Edit Audit Code 2 if:

    1. Schedule N (Form 1120), Question 1a is answered "Yes" , or

    2. Form 8858 is present.

Schedule N (Form 1120), Line 2 - Number of Forms 8865

  1. No entry is required for Schedule N, Line 2 unless Form 8865 is present.

  2. Edit Line 2 as follows:

    Schedule N (Form 1120), Line 2

    If And Then
    A number is present for Schedule N, Line 2,   Take no further action.
    Schedule N, Line 2 is blank, Form(s) 8865 is attached, Edit the number of Forms 8865 in the dotted line area of Line 2.
    Form 8865 is attached, Schedule N is not present, Dummy a Schedule N and edit the number of Forms 8865 to Schedule N, Line 2.
  3. Edit Audit Code 2 if Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, is attached. See IRM 3.11.217.13.1, Audit Codes.

Schedule N (Form 1120), Line 3 - Form 8865 Question

  1. Edit Audit Code 2 if Schedule N (Form 1120), Question 3 is answered "Yes" or Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, is attached. See IRM 3.11.217.13.1, Audit Codes.

Schedule N (Form 1120), Line 4 - Form 5471, Controlled Foreign Corporation

  1. Edit Audit Code 2 if Schedule N (Form 1120), Question 4a is answered "Yes" or Form 5471 is attached. See IRM 3.11.217.13.1, Audit Codes.

  2. No entry is required for Schedule N, Line 4b unless Form 5471 is present.

  3. Edit Line 4b as follows:

    Schedule N (Form 1120), Line 4

    If And Then
    A number is present for Schedule N, Line 4b,   Take no further action.
    Schedule N, Line 4b is blank, Form(s) 5471 is attached, Edit the number of Forms 5471 in the dotted line area of Line 4b.

    Note:

    Document Perfection is responsible for determining the number of any and all Form(s) 5471 received, whether attached to a parent return in a consolidated group, or found as an attachment to a subsidiary return.

    Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, is attached, Schedule N is not present, Dummy a Schedule N and edit the number of Forms 5471 to Schedule N, Line 4b.

Schedule N (Form 1120), Line 5 - Form 3520 Question

  1. Edit Audit Code 2 if Schedule N (Form 1120), Question 5 is answered "Yes" . See IRM 3.11.217.13.1, Audit Codes.

Schedule N (Form 1120), Line 6b - Foreign Country Code

  1. Edit Schedule N (Form 1120), Line 6b as follows:

    Schedule N (Form 1120), Line 6b

    If And Then
    The taxpayer has entered the name of a Foreign Country in Line 6b,   Write the two letter Country Code to the left of Line 6b. See Acceptable Foreign Countries in Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

    Exception:

    Edit Other Country Code "OC" if the foreign country is not listed in Document 7475.

    Note:

    Use "UK" for England, Northern Ireland, Scotland, and Wales. Also, "Holland" is not an official country name, but is part of The Netherlands.

    No Foreign Country is present or "US" , "USA" , "America" , or similar reference to the United States is present, Question 6a is checked "Yes" , Edit Other Country Code, "OC" .
    More than one Foreign Country is present,   Edit the Country Code of the first Foreign Country shown.

     

Schedule N (Form 1120), Line 7a - Form 8873 Question

  1. Edit Audit Code 2 if Schedule N (Form 1120), Question 7a is answered "Yes" . See IRM 3.11.217.13.1, Audit Codes.

Schedule N (Form 1120), Line 7b - Number of Forms 8873

  1. No entry is required for Schedule N (Form 1120), Line 7b unless Form 8873, Extraterritorial Income Exclusion, is present.

    Note:

    Input of Command Code (CC) REQ77 / FRM77 with IDRS Transaction Code (TC) "971" and appropriate IDRS Action Code (depending on which election has been made) may be needed with the Form 8873. See IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.

  2. Edit Line 7b as follows:

    Schedule N (Form 1120), Line 7b

    If And Then
    A number is present for Schedule N, Line 7b, Form(s) 8873 is attached, Process Form 8873, Extraterritorial Income Exclusion, per IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.
    A number is present for Schedule N, Line 7b, Form(s) 8873 are not attached, Take no further action.
    Schedule N, Line 7b is blank, Form(s) 8873 is attached,
    1. Edit the number of Forms 8873 in the dotted line area of Line 7b.

    2. Process Form 8873 per IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.

    Form 8873 is attached, Schedule N is not present,
    1. Dummy a Schedule N and edit the number of Forms 8873 to Line 7b of Schedule N.

    2. Process Form 8873 per IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.

Schedule N (Form 1120), Line 7c - Total Extraterritorial Income Exclusion

  1. No entry is required for Schedule N (Form 1120), Line 7c unless Form 8873 is present.

  2. Edit Line 7c as follows:

    Schedule N (Form 1120), Line 7c

    If And Then
    An amount is present for Schedule N, Line 7c, Form 8873 is attached, Process Form 8873 per IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.
    An amount is present for Schedule N, Line 7c, Form 8873 is not attached, Take no further action.
    Schedule N, Line 7c is blank, Form(s) 8873 is attached,
    1. Compute the total amount of extraterritorial income exclusion from Line 52* and edit to the area provided on Line 7c *(Form 8873 prior year line numbers: 2006 - 2005: Line 54; 2004: Line 52b or Line 52a if Line 52b is blank; 2003 - 2002: Line 52; 2001 - 2000: Line 55).

    2. Process Form 8873 per IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.

    Form 8873 is present with a significant entry on Line 52 (Form 8873 prior year line numbers: 2006 - 2005: Line 54; 2004: Line 52b or Line 52a if Line 52b is blank; 2003 - 2002: Line 52; 2001 - 2000: Line 55),

    Note:

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

    Schedule N is not attached,
    1. Dummy a Schedule N and compute the total amount of extraterritorial income exclusion from all attached Forms 8873. Edit the total to the area provided on Schedule N, Line 7c.

    2. Process Form 8873 per IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.

     

    Note:

    Input of Command Code (CC) REQ77 / FRM77 with IDRS Transaction Code (TC) "971" and appropriate IDRS Action Code (depending on which election has been made) may be needed with the Form 8873. See IRM 3.11.217.29, Form 8873, Extraterritorial Income Exclusion.

Schedule N (Form 1120), Line 8 - Statement of Specified Foreign Financial Assets

  1. For Tax Year (TY) 201701 and later, Form 8938, Statement of Specified Foreign Financial Assets, will be transcribed into the General Purpose Programming (GPP) database. If Form 8938 is attached, see IRM 3.11.217.40, Form 8938, Statement of Specified Foreign Financial Assets, for additional information.

Form 8825 - Rental Real Estate Income and Expenses of a Partnership or an S Corporation

  1. If Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, is attached to Form 1120-S, compute Line 18a, Total Gross Rents (2006 and prior revisions: Line 17), when there are entries on Page 1, Line 2, Columns A through D and/or Page 2, Line 2, Columns E through H. Edit Form 8825 in positive amounts in dollars only as follows:

    Note:

    Change Line 17 to Line 18a for 2006 and prior revisions of Form 8825.

  2. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Form 8825.

    Form 8825

    If And Then
    Only one Form 8825 is attached, Line 18a* is negative *(2006 and prior revisions: Line 17), "X" the negative amount.
    Only one Form 8825 is attached, Line 18a* is blank *(2006 and prior revisions: Line 17), Compute and enter a positive amount on Line 18a. See Figure 3.11.217-24, Example of Editing Form 8825.
    Multiple Forms 8825 are attached, Only one Form 8825 has an entry on Line 18a (2006 and prior revisions: Line 17),
    1. Accept positive taxpayer entry ("X" negative amount).

    2. Place Form 8825 in sequence order if Line 18a has a positive amount.

    Multiple Forms 8825 are attached, More than one Form 8825 has an entry on Line 18a* or Line 18a* is blank *(2006 and prior revisions: Line 17),
    1. Add all Line 2 amounts together (Page 1, Line 2 and Page 2, Line 2).

    2. If positive, edit the amount to Line 18a of the first Form 8825.

    3. Place edited Form 8825 in sequence order.

     

    Figure 3.11.217-24

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    Please click here for the text description of the image.

Form 8873 - Extraterritorial Income Exclusion

  1. Document Perfection is responsible for processing Part I, "Elections and Other Information" of Form 8873. Elections are identified by inputting Command Code (CC) REQ77 / FRM77 with Transaction Code (TC) "971" and IDRS Action Code 361, 362, or 363 depending on which election has been made.

    Note:

    "Action Codes" referenced in the Form 8873 instructions are IDRS Action Codes, not to be confused with ERS Action Codes.

  2. If Part I, Lines 1 through 3 of the Form 8873, are not checked, then no "TC 971" needs to be entered on IDRS.

Form 8873, Line 1 - Section 942(a) (3) Election

  1. If the box is marked for Part 1, Line 1 of Form 8873, enter "TC 971" with IDRS Action Code 361. Use the current date for the Effective Date.

    Note:

    Edit Action Trail (e.g., "TC 971-361" or similar language) in the lower left margin going vertically up the side of the return.

Form 8873, Line 2 - Extraterritorial Income Exclusion in Lieu of Election

  1. If the box is marked for Part I, Line 2 of Form 8873, enter "TC 971" with IDRS Action Code 362. Use the current date for the Effective Date.

    Note:

    Edit Action Trail (e.g., "TC 971 - 362" or similar language) in the lower left margin going vertically up the side of the return.

Form 8873, Line 3 - Domestication Election

  1. If the box is marked for Part I, Line 3 of Form 8873, enter "TC 971" with IDRS Action Code 363. Use the current date for the Effective Date.

    Note:

    Edit Action Trail (e.g., "TC 971 - 363" or similar language) in the lower left margin going vertically up the side of the return.

Schedule D (Form 1120-S) - Capital Gains and Losses and Built-in Gains

  1. Edit Schedule D, (Form 1120-S) Capital Gains and Losses and Built-in Gains,:

    Schedule D (Form 1120-S)

    If Then
    All of the following conditions apply:
    1. Form 1120-S is for 201212 tax year or later and

    2. The Schedule D is a 2012 or later revision and

    3. Significant entries are present on one or more of the transcription lines.

      Note:

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

      • Transcription lines for 2019 and subsequent are as follows:

        • Checkbox above Part I,

          Note:

          Valid for tax periods ending 201712 and later.

        • Part I, Line 1a, Column(s) d and e,

        • Part I, Lines 1b - 3, Column(s) d, e and g,

        • Part II, Lines 8a, column(s) d and e,

        • Part II, Lines 8b - 10, column(s) d, e and g,

        • Part II, Line 13.

      • Transcription lines for 2013 through 2018 are as follows:

        • Part I, Line 1a, Column(s) d and e,

        • Part I, Lines 1b - 3, Column(s) d, e, and g

        • Part II, Lines 8a, Column(s) d and e,

        • Part II, Lines 8b - 10, Column(s) d, e, and g,

        • Line 13.

      • Transcription lines for 2012 are as follows:

        • Part I, Lines 1 - 3, Column(s) d and e,

        • Part II, Lines 8 - 10, Column(s) d and e,

        • Line 13

    1. Place Schedule D in sequence order.

    2. Edit Schedule D in dollars only.

    3. For 2013 and later Schedule D revisions:

      • "X" any negative transcription entries, except the following: Lines 1b(g), 2(g), 3(g), 8b(g), 9(g), and 10(g). These lines can be positive or negative.

    4. For 2012 Schedule D revisions:

      • "X" any negative transcription entries.

      • Change Page 1, Part I, Line 1 to Line 1b and

      • Change Page 1, Part II, Line 8 to Line 8b.

    Criteria above is not met, Cross-out or slash Schedule D.

    Exception:

    If Form 1120-S, Page 1, Line 22b has a significant entry, do not cross-out or slash Schedule D. Continue processing the return.

     

  2. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Schedule D.

Form 8949 - Sales and Other Dispositions of Capital Assets

  1. Form 8949, Sales and other Dispositions of Capital Assets, is valid for tax periods 201712 and later. See Figure 3.11.217-25, Example of Editing Form 8949.

  2. If the taxpayer has entered a "Z" or "Y" in any of the rows in either Part I, Line 1, Column (f), or Part II, Line 1, Column (f), of Form 8949, then edit a CCC "M" .

  3. If the taxpayer has entered a "Z" in any of the rows from Part I, Line 1, Column (f), then edit Form 8949 as follows:

    Note:

    For PY2020, only the "Z" code information will be transcribed.

    1. Place Form 8949 in sequence order if significant entries are present. See IRM 3.11.217.15.1(1), Sequencing of Return. If there is more than one Form 8949 attached, then sequence the Form 8949 with the Part I edited data first.

    2. Underline the EIN (Column (a)) from the first row with a "Z" present in Column (f) if EIN is present.

    3. Underline the Date Acquired (Column (b)) from the first row with a "Z" present in Column (f) if Date Acquired is present..

    4. Underline the dollar amount (Column (g)) from the first row with a "Z" present in Column (f) if the money amount is present.

    5. If the taxpayer has indicated more than one row with a "Z" in Column (f), then edit a "1" in the right margin of Part I, Line 1 of Form 8949.

  4. If the taxpayer has entered a "Z" in any of the rows from Part II, Line 1, Column (f) then edit Form 8949 as follows:

    1. Place the form in sequence order. See IRM 3.11.217.15.1(1), Sequencing of Return. If there is more than one Form 8949 attached, then sequence the Form 8949 with the Part I edited data first followed by the Part II edited data.

    2. Underline the EIN (Column (a)) from the first row with a "Z" present in Column (f) if EIN is present.

    3. Underline the Date Acquired (Column (b)) from the first row with a "Z" present in Column (f) if Date Acquired is present.

    4. Underline the dollar amount (Column (g)) from the first row with a "Z" present in Column (f) if a money amount is present.

    5. If the taxpayer has indicated more that one row with a "Z" in Column (f), then edit a "1" in the right margin of Part II, Line 1, Row 1 of Form 8949.

    Figure 3.11.217-25

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    Please click here for the text description of the image.

Form 8996 - Qualified Opportunity Fund

  1. Form 8996, Qualified Opportunity Fund, is valid for tax periods ending in 201712 and later. See Exhibit 3.11.217-4, Form 8996 - Prior Year Conversion Chart.

  2. Place Form 8996 in sequence order if significant entries are present on any of the lines listed below in 1 through 7 below. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Form 8996.

    Note:

    Only Part II, Lines 13 and 14 require editing.

    1. Part I, Line 5 checkbox is marked - no editing is required.

    2. Part II, Line 6 - Total qualified opportunity zone property held by the taxpayer on the last day of the first 6-month period of the taxpayer’s tax year.

    3. Part II, Line 7 - Total assets held by the taxpayer on the last day of the first 6-month period of the taxpayer’s tax year.

    4. Part II, Line 9 - Total qualified opportunity zone property held by the taxpayer on the last day of the taxpayer’s tax year.

    5. Part II, Line 10 - Total assets held by the taxpayer on the last day of the taxpayer’s tax year.

    6. Part III, Line 13 - Perfect Line 13 as follows:
      - Edit the Line 13 percent in 0.00 format. For example, edit 50 percent as 0.50.
      - If the percent is greater than 1.00, "X" the percentage amount on Line 13. For example, if the percentage shown is 1.23.

    7. Part III, Line 14 - Perfect Line 14 as follows:
      - If Form 8996, Part III, Line 14 is blank and Part IV, Line 8 has an amount, edit Part IV, Line 8 to Part III, Line 14 in dollars cents.

  3. If Form 8996, Qualified Opportunity Fund, is attached, then edit Return Processing Code (RPC) "6" . See IRM 3.11.217.13.7 Return Processing Code (RPC), for additional information.

    Note:

    If Form 8996 is attached, then further editing may be needed on Form 1120-S, Schedule B, Line 15. See IRM 3.11.217.23.2(1). Form 8996 Qualified Opportunity Fund.

Form 1125-A - Cost of Goods Sold (Formerly Form 1120-S, Page 2, Schedule A)

  1. Place Form 1125-A, Cost of Goods Sold, in sequence order if entries are present on Line 1 or Line 7. See IRM 3.11.217.15.1, Sequencing of Return.

  2. Edit Form 1125-A in dollars only.

    Note:

    If a negative entry is present on either of Line 1 or Line 7, no action is required.

  3. Form 1125-A (2010 and prior revisions: Schedule A, Line 1) Line 1 - Inventory at the beginning of the year. Accept taxpayer's entry. If Line 1 is blank, edit from the taxpayer's attachment (if present).

  4. Form 1125-A (2010 and prior revisions: Schedule A, Line 3) Line 3 - Cost of labor. No specific editing is necessary, but an entry on this line is indicative of a Salary and Wage Code condition. See IRM 3.11.217.17.3, Salary and Wage Code.

  5. Form 1125-A (2010 and prior revisions: Schedule A, Line 7) Line 7 - Inventory at the end of the year. Accept taxpayer's entry. If Line 7 is blank, edit from the taxpayer's attachment (if present).

  6. Form 1125-Amust be dummied if missing and if Line 1 and/or Line 7 are able to be edited. Use instructions in (2) through (5) above to edit lines. Place dummy Form 1125-A in sequence order.

    Note:

    If a negative entry is present on either of Line 1 or Line 7, no action is required.

  7. For 2010 and prior revisions, follow instructions below if entries are present on Form 1120-S, Schedule A, Line 1 or Line 7:

    1. Dummy a Form 1125-A and place in sequence order.

      Note:

      If a negative entry is present on either of Line 1 or Line 7, no action is required.

    2. See Figure 3.11.217-26, Example of Creating a "Dummy" Form 1125-A.

    Figure 3.11.217-26

    This is an Image: 51221595.gif
     

    Please click here for the text description of the image.

  8. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Form 1125-A.

Form 4136 - Credit for Federal Tax Paid on Fuels

  1. If Form 4136, Credit for Federal Tax Paid on Fuels, is missing and a significant entry is claimed on Form 1120-S, Page 1, Line 23c for a Fuel Tax Credit, correspond with the taxpayer for the missing Form 4136.

    Note:

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

  2. If a fuel credit claim is found on other than the appropriate line on the return, and Form 4136 is attached, adjust incorrect entry prior to editing Fuel Tax Credits.

  3. Form 4136 should be placed in sequence order.

  4. If Fuel Tax Credit is claimed on Page 1, Form 1120-S and Form 4136 is attached, perfect Column (d) as necessary. Column (d) should equal Line 17* of Form 4136 *(Form 4136 prior year line numbers: 2007: Line 18; 2006: Line 20; 2005: Line 15; 2004 - 2001: Line 10; 2000 - 1997: Line 9). If perfection is not possible, correspond.

  5. Code and Edit is no longer required to renumber the lines on prior year Form 4136 to current year format. Column (d), Amount of credit, is transcribed using the corresponding Credit Reference Number (CRN) in Column (e).

    Exception:

    CRNs for prior years 2000 - 1997 must be renumbered when a significant entry is present. Column (e) conversion is provided in Exhibit 3.11.217-8, Form 4136 - Prior Year Conversion Chart.

  6. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Form 4136.

Form 8913 - Credit for Federal Telephone Excise Tax Paid

  1. Edit Action Code 420 and place Form 8913, Credit for Federal Telephone Excise Tax Paid, in the sequence order if a significant entry is present on Line 15, Column (d) or Column (e).

    Note:

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

  2. For tax returns filed with tax period ending 200612 through 200711, a refund for the federal telephone excise tax paid on long-distance service may be claimed. The credit claimed is for the tax paid on service that was billed after February 28, 2003, and before August 1, 2006.

  3. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Form 8913.

Form 8941 - Credit for Small Employer Health Insurance Premiums

  1. Place Form 8941, Credit for Small Employer Health Insurance Premiums, in sequence order if significant entries are present.

    Note:

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

  2. Significant entries are present on one or more of the transcription lines (T lines). Transcription lines are shown in the Transcription Line Table below.

    Transcription Line

    Transcription Line Description
    A Small Business Health Options Program (SHOP) Marketplace Box - Did you pay premiums during your tax year for employee health insurance coverage you provided through a Small Business health Options Program (SHOP) Marketplace (or do you qualify for an exception to this requirement)?
    B Employer Identification Number (EIN) - Enter the employer identification number (EIN) used to report employment taxes for individuals included on Line 1 below if different from the identifying number listed above.
    C Does a tax return you (or any predecessor) filed for a tax year beginning in 2014 include a Form 8941, Credit for Small Employer Health Insurance Premiums, with Line A checked "Yes" and Line 12 showing a positive amount?
    1 Enter the number of individuals you employed during the tax year who are considered employees for purposes of this credit (total from Worksheet 1, column (a)).
    2 Enter the number of full-time equivalent employees (FTEs) you had for the tax year (from Worksheet 2, Line 3). If you entered 25 or more, skip Lines 3 through 11 and enter -0- on Line 12.
    3 Average annual wages you paid for the tax year (from Worksheet 3, Line 3). This amount must be a multiple of $1,000.
    4 Premiums you paid during the tax year for employees included on Line 1 for health insurance coverage under a qualifying arrangement (total from Worksheet 4, column (b)).
    5 Premiums you would have entered on Line 4 if the total premium for each employee equaled the average premium for the small group market in which the employee enrolls in health insurance coverage (total from Worksheet 4, column (c))
    10 Enter the total amount of any state premium subsidies paid and any state tax credits available to you for premiums included on Line 4 (see instructions).
    13 If Line 12 is zero, skip Lines 13 and 14 and go to Line 15. Otherwise, enter the number of employees included on Line 1 for whom you paid premiums during the tax year for health insurance coverage under a qualifying arrangement (total from Worksheet 4, column (a)).
    14 Enter the number of FTEs you would have entered on Line 2 if you only included employees included on Line 13 (from Worksheet 7, Line 3).
    15 Credit for small employer health insurance premiums from partnerships, S corporations, cooperatives, estates, and trusts (see instructions).
    16 Add Lines 12 and 15. Cooperatives, estates, and trusts, go to Line 17. Tax-exempt small employers, skip Lines 17 and 18 and go to Line 19. Partnerships and S corporations, stop here and report this amount on Schedule K. All others, stop here and report this amount on Form 3800, Part III, Line 4h.

     

  3. For prior year Form 8941, Credit for Small Employer Health Insurance Premiums, revisions, if significant amounts/entries are present on Form 8941, see Form 8941 Prior Year Revision Table below.

    Form 8941 Prior Year Revision

    Form 8941 Prior Year Revision Action
    2013
    • Change Line 1a to Line 1

    • Change Line 1b to Line B

    2012
    • Change Line 1a to Line 1

    • Change Line 1b to Line B

    2011 No changes are needed.
    2010
    • Delete Line 16 and Line 18

    • Change Line 21 to Line 16

    • Change Line 23 to Line 18


    See IRM 3.11.217.41, Form 1120-S Prior Year Conversion Charts, for additional prior year information.

  4. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Form 8941.

Form 5884-B - New Hire Retention Credit

  1. For tax years 201212 and later, line through or "X" Form 5884-B, New Hire Retention Credit. For tax years 2010 and 2011, place Form 5884-B in sequence order if a significant entry is present on Line 10 and/or Line 11.

    Note:

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

  2. See IRM 3.11.217.15.1(1), Sequencing of Return, for the sequence order of Form 5884-B.

Form 6252 - Installment Sale Income

  1. Form 6252, Installment Sale Income, is valid for tax periods ending in 201712 and later.

  2. Place Form 6252 in sequence order if entries are present on any of the lines listed in 1) through 7) below. See IRM 3.11.217.15.1(1),Sequencing of Return, for the sequence order of Form 6252.

    Note:

    Part II, Line 19 is the only line that requires editing.

    1. Line 1 - Description of Property - Taxpayer may enter a code and a description of installment sale property as described in the table below. No editing is necessary.

      Indicator Description of property
      1 Sale property is Timeshare or residential lot
      2 Sale by an individual of personal use property (within the meaning of Section 1275(b)(3))
      3 Sale of any property used or produced in the trade or business of farming (within the meaning of Section 2032A(e)(4) or (5))
      4 Other - All other installment sales not listed
    2. Line 2a - Date acquired.

    3. Line 2b - Date sold.

    4. Part I, Line 7 - Subtract Line 6 from Line 5.

    5. Part II, line 19 - Gross Profit Percentage. If Line 19 is not in 0.0000 format, edit the percentage as follows:

      Taxpayer’s Entry Edit
      50 percent 0.5000
      .123 0.1230
      .12345 0.1234

      Note:

      If the percent is greater than 1.00, X the percentage amount on Line 19. For example, the percentage is 1.2300 or 1.23 percent.

    6. Part II, Line 21 - Payments received during year.

    7. Part II, Line 23 - Payments received in prior years.

  3. See IRM 3.11.217.13.3 , Installment Sale Indicator, for additional information.

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

  1. All Form 1120-S filers are required to complete and file Schedule K-1, Shareholder’s Share of Income, Deductions, Credits, etc., and attach it to the Form 1120-S. If no Schedules K-1 are attached, follow the procedures listed below:

    Note:

    Detach Schedules K-1 for current year (TY2019), two preceding years (TY2018 and TY2017), and future Schedules K-1.

  2. Do not correspond for Schedule K-1 if:

    • Section 965 Returns - See IRM 3.11.217.2.11, Section 965 Returns, for additional information.

    • Form 1120-S is a TY2016 and prior year tax period

    • Form 1120-S, Line 21, Ordinary Business Income (Loss), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • There are attachments to the return in a standard format which may be used as a Schedule K-1

    • Re-entry return (Form 13596, Reprocessing Returns or Form 3893, Re-Entry Document Control, is attached to return)

    • Amended (CCC "G" ) return

    • IRC 6020(b) return

    • Examination Secured "Substitute for Return" (SFR) returns

    • There are no entries on Form 1120-S, Lines 1 through 21

    • Form 1120-S has a Form 4251, Return Charge-Out, attached and is being processed as an original return

    • Payee is a foreign entity

  3. When correspondence with the taxpayer is required, see IRM 3.11.217.3.4.2, Issuing Correspondence.

  4. If Schedule K-1, Line 15*, Alternative minimum tax (AMT) items, *(2003 and prior year line numbers: Lines 14a through 14e) has an amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , edit a Tax Preference Code in the left margin near Line 9 (Deductions area) of Form 1120-S . See IRM 3.11.217.13.4, Tax Preference Code.

  5. Form 1120-S, Schedule K-1, Box 10 (with code F), Box 12 (with code K), and Box 14 (with code U) may indicate a Section 965 return. See IRM 3.11.217.2.11, Section 965 Returns, for additional information.

  6. See IRM 3.0.101, Schedule K-1 Processing, for complete instructions to edit and process Schedules K-1.

  7. See IRM 3.11.217.15.1, Sequencing of Return, for the sequence order of Schedule K-1.

Form 8938, Statement of Specified Foreign Financial Assets

  1. For Tax Year (TY) 201701 and later, Form 8938, Statement of Specified Foreign Financial Assets, will be transcribed into the General Purpose Programming (GPP) database.

  2. Process Form 8938 with the following criteria:

    1. The Tax Period Beginning on Form 1120-S is 201701 or later, and

    2. Form 8938 is a 2017, 2018, or 2019 revision, and

    3. Form 8938 has significant entries.

      Note:

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

  3. If Form 8938 is attached, but does not meet the criteria in paragraph (2), edit CCC "2" and continue normal processing of the Form 1120-S. Do not sequence the form to the back of the return, or place the form in a designated basket.

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

    1. Completely edit Form 1120-S.

    2. Edit CCC "2" .

    3. Detach Schedules K-1.

    4. Pull the Form 8938 from the return and sequence to the back of the last page of Form 1120-S (after schedules and attachment pages), attaching the Form 8938 so that it is back- to- back with the parent return.

    5. Place the Form 1120-S in a designated basket.

    6. Only one Form 8938, Pages 1 and 2, can be processed. If multiple Forms 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 1120-S with Form 8938 attached must be batched separately. The transcription of Form 8938 will occur under Program Code 43300 after the parent Form 1120-S has been transcribed using normal procedures.

  6. See IRM 3.11.217.15.1(1), Sequencing of Returns, for the sequence order of Form 8938.

Form 1120-S Prior Year Conversion Charts

  1. The following charts provide information for converting Form 1120-S (and other applicable forms and schedules) to the current year form (and schedule).

    Prior Year Conversion 2017 - 2014

    Form/Schedule Action
    Form 1120-S, Page 1
    • Change Line 23d to Line 23e

     

    Prior Year Conversion - 2013

    Form/Schedule Action
    Form 1120-S, Page 1
    • Change Line 23d to Line 23e

    Form 8941
    • Change Line 1a to Line 1

    • Change Line 1b to Line B (EIN)

     

    Prior Year Conversion - 2012

    Form/Schedule Action
    Form 1120-S, Page 1
    • Change Line 23d to Line 23e

    Schedule D, (Form 1120-S) Capital Gains and Losses and Built-in Gains, Page 1, Part I
    • Change Line 1 to Line 1b

    Schedule D (Form 1120-S), Page 1, Part II
    • Change Line 8 to Line 8b

    Form 8941
    • Change Line 1a to Line 1

    • Change Line 1b to Line B

     

    Prior Year Conversion - 2011

    Form/Schedule Action
    Form 1120-S, Page 1
    • Line out Line 1a

    • Line out Line 1b

    • Change Line 1c to Line 1a

      Note:

      If Line 1c is blank, add Lines 1a and 1b, and edit on Line 1c.

    • Change Line 1d to Line 1b

    Form 1120-S, Page 1
    • Change Line 23d to Line 23e

     

    Prior Year Conversion - 2010

    Form/Schedule Action
    Form 1120-S, Page 1
    • Change Line 23d to Line 23e

    Form 1120-S, Page 2, Schedule A
    • If there are entries on Line 1 and/or Line 7, dummy a Form 1125-A and place in sequence order.

    Form 8941
    • Delete Line 16 and Line 18

    • Change Line 21 to Line 16

    • Change Line 23 to Line 18

     

    Prior Year Conversion - 2009 - 2007

    Form/Schedule Action
    Form 1120-S, Page 1
    • Change Line 23d to Line 23e

    Form 1120-S, Page 2, Schedule A
    • If there are entries on Line 1 and/or Line 7, dummy a Form 1125-A and place in sequence order.

     

    Prior Year Conversion - 2006

    Form/Schedule Action
    Form 1120-S, Page 1
    • Line 23d - "X" Line 23d (Credit for Federal Telephone Excise Tax) if an amount is present

    Form 1120-S, Page 2, Schedule A
    • If there are entries on Line 1 and/or Line 7, dummy a Form 1125-A and place in sequence order.

    Form 8825
    • Change Line 17 to Line 18a

     

    Prior Year Conversion - 2005 - 2004

    Form/Schedule Action
    Form 1120-S, Page 1
    • Change Line 14c to Line 14

    • Change Line 23d to Line 23e

    Form 1120-S, Page 2, Schedule A
    • If there are entries on Line 1 and/or Line 7, dummy a Form 1125-A and place in sequence order.

    Form 1120-S, Schedule K
    • Change Line 17e to Line 18

    Form 8825
    • Change Line 17 to Line 18a

     

    Prior Year Conversion - 2003 - 1994

    Form/Schedule Action
    Form 1120-S, Page 1
    • Change Line 14c to Line 14

    • Change Line 23d to Line 23e

    Form 1120-S, Page 2, Schedule A
    • If there are entries on Line 1 and/or Line 7, dummy a Form 1125-A and place in sequence order.

    Form 1120-S, Schedule K
    • Change Line 4a to Line 4

    • Change Line 12a to Line 13f

    • Change Line 20 to Line 16d

    • Change Line 23 to Line 18

    Form 8825
    • Change Line 17 to Line 18a

     

Acronyms and Abbreviations

ExhibitsAcronyms and Abbreviations

The table below lists commonly used acronyms, abbreviations and their definitions.

Acronyms and Abbreviations

Acronyms and Abbreviations Definition
ACA Affordable Care Act
ADP Automatic Data Processing
AM Accounts Management
AMRH Accounts Maintenance Research
APO Army Post Office
AUR Automated Underreporter
BBTS Batch Block Tracking System
BMF Business Master File
c/o Care of
C&E Code and Edit
CAS Correspondence Action Sheet
CBR Case Base Reasoning
CCC Computer Condition Code
CDP Collection Due Process
CFR Code of Federal Regulations
CI Criminal Investigation
CIS Correspondence Imaging System
CP Computer Paragraph
CSCO Compliance Services Collection Operations
DLN Document Locator Number
DPO Diplomatic Post Office
DPO Document Perfection Operation
EEFax Enterprise Electronic Fax
E-File Electronic Filing
e.g. For Example
EIN Employer Identification Number
EQSP Embedded Quality Submission Processing
EOCU EO Compliance Unit
ERS Error Resolution System
etc. Et Cetera
Exam Examination
FATCA Foreign Account Tax Compliance Act
Fax Facsimile
FB Foreign Branches
FDE Foreign Disregarded Entities
FedEx Federal Express Corporation
FPO Fleet Post Office
FRP Frivolous Return Program
FTF Failure To File
FTP Failure To Pay
GILTI Global Intangible Low-Taxed Income
GPP General Purpose Programming
HIRE Hiring Incentives to Restore Employment
http HyperText Transfer (or Transport) Protocol
ICS Integrated Collection System
ICT Image Control Team
ID Identification or Identity
IDRS Integrated Data Retrieval System
IMF Individual Master File
IPU IRM Procedural Update
IRC Internal Revenue Code
IRS Internal Revenue Service
ISRP Integrated Submission and Remittance Processing
IT Information Technology
KCSPC Kansas City Submission Processing Campus or Kansas City Submission Processing Center
LB&I Large Business and International
MeF Modernized Electronic Filing
MFT Master File Tax
MMDDYY Month, Day, Year
Mod E-File Modernized Electronic Filing
NAICS North American Industry Classification System
N/A Not Applicable
NDC National Distribution Center
OC Other Country
OID Original Issue Discount
OMB Office of Management and Budget
OSPC Ogden Submission Processing Campus or Ogden Submission Processing Center
PBA Principal Business Activity
PDS Private Delivery Service
P.L. Public Law
PTIN Preparer Tax Identification Number
POA Power of Attorney
P.O. Post Office
QSSS Qualified Subchapter S Subsidiary
R&C Receipt and Control
RD Return Delinquency
Rev. Proc. Revenue Procedure
RICS Return Integrity and Compliance Services
RO Revenue Officer
RPC Return Processing Code
RRA98 Restructuring and Reform Act of 1998
SBSE Small Business Self-Employed
SCAMPS Service Center Automated Mail Processing System
SCRIPS Service Center Recognition Image Processing System
SERP Servicewide Electronic Research Program
SFR Substitute for Return
SLA Service Level Agreement
SME Subject Matter Expert
SOI Statistics of Income
SP Submission Processing
SPDC Submission Processing Design Center
SSN Social Security Number
TAC Taxpayer Assistance Center
TAS Taxpayer Advocate Service
TBOR Taxpayer Bill of Rights
TC Transaction Code
TCJA Tax Cuts & Jobs Act of 2017
TE Tax Examiner
TEGE Tax Exempt and Government Entities
TETR Telephone Excise Tax Refund
TIN Taxpayer Identification Number
TP Taxpayer
TPE Tax Period Ending
TRPRT Tax Return Print
TY Tax Year
U.S. United States
UCC Uniform Commercial Code
UPS United Parcel Service
USC United States Code
USPS United States Postal Service
UWR Unified Work Request
W&I Wage and Investment
ZIP Zoning Improvement Plan

 

Note:

The above list may not be all-inclusive.

Due Date Chart

ExhibitsDue Date Chart

Due Date Chart

Tax Period Return Due Date (weekends and holidays considered) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Extended Due Date - 6 months (weekends and holidays considered)
Dec. 2016 3-15-2017 ≡ ≡ ≡ ≡ ≡ 9-15-2017
Jan. 2017 4-18-2017 ≡ ≡ ≡ ≡ ≡ ≡ 10-16-2017
Feb. 2017 5-15-2017 ≡ ≡ ≡ ≡ 11-15-2017
Mar. 2017 6-15-2017 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 12-15-2017
Apr. 2017 7-17-2017 ≡ ≡ ≡ ≡ 1-16-2018
May 2017 8-15-2017 ≡ ≡ ≡ ≡ ≡ 2-15-2018
Jun. 2017 9-15-2017 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 3-15-2018
Jul. 2017 10-16-2017 ≡ ≡ ≡ ≡ ≡ ≡ 4-17-2018
Aug. 2017 11-15-2017 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 5-15-2018
Sep. 2017 12-15-2017 ≡ ≡ ≡ ≡ ≡ 6-15-2018
Oct. 2017 1-16-2018 ≡ ≡ ≡ ≡ ≡ 7-16-2018
Nov. 2017 2-15-2018 ≡ ≡ ≡ ≡ ≡ ≡ 8-15-2018
Dec. 2017 3-15-2018 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 9-17-2018
Jan. 2018 4-18-2018

Reminder:

The Internal Revenue Service announced that it is providing taxpayers an additional day to file and pay their taxes following system issues that surfaced early on the April 17 tax deadline. Individuals and businesses with a filing or payment due date of April 17, 2018, will now have until midnight on Wednesday, April 18, 2018.

≡ ≡ ≡ ≡ ≡ ≡ 10-15-2018
Feb. 2018 5-15-2018 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 11-15-2018
Mar. 2018 6-15-2018 ≡ ≡ ≡ ≡ 12-17-2018
Apr. 2018 7-16-2018 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 1-15-2019
May 2018 8-15-2018 ≡ ≡ ≡ ≡ ≡ 2-15-2019
Jun. 2018 9-17-2018 ≡ ≡ ≡ ≡ ≡ 3-15-2019
Jul. 2018 10-15-2018 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 4-15-2019
Aug. 2018 11-15-2018 ≡ ≡ ≡ ≡ ≡ 5-15-2019
Sep. 2018 12-17-2018 ≡ ≡ ≡ ≡ ≡ ≡ 6-17-2019
Oct. 2018 1-15-2019 ≡ ≡ ≡ ≡ ≡ 7-15-2019
Nov. 2018 2-15-2019 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 8-15-2019
Dec. 2018 3-15-2019 ≡ ≡ ≡ ≡ ≡ ≡ 9-16-2019
Jan. 2019 4-15-2019 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 10-15-2019
Feb. 2019 5-15-2019 ≡ ≡ ≡ ≡ 11-15-2019
Mar. 2019 6-17-2019 ≡ ≡ ≡ ≡ 12-16-2019
Apr. 2019 7-15-2019 ≡ ≡ ≡ ≡ ≡ 1-15-2020
May 2019 8-15-2019 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 2-18-2020
Jun. 2019 9-16-2019 ≡ ≡ ≡ ≡ ≡ 3-16-2020
Jul. 2019 10-15-2019 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 4-15-2020
Aug. 2019 11-15-2019 ≡ ≡ ≡ ≡ ≡ 5-15-2020
Sep. 2019 12-16-2019 ≡ ≡ ≡ ≡ ≡ 6-15-2020
Oct. 2019 1-15-2020 ≡ ≡ ≡ ≡ 7-15-2020
Nov. 2019 2-18-2020 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 8-17-2020
Dec. 2019 3-16-2020 ≡ ≡ ≡ ≡ ≡ 9-15-2020
Jan. 2020 4-15-2020 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 10-15-2020
Feb. 2020 5-15-2020 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 11-16-2020
Mar. 2020 6-15-2020 ≡ ≡ ≡ ≡ 12-15-2020
Apr. 2020 7-15-2020 ≡ ≡ ≡ ≡ 1-15-2021
May 2020 8-17-2020 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 2-16-2021
Jun. 2020 9-15-2020 ≡ ≡ ≡ ≡ ≡ 3-15-2021
Jul. 2020 10-15-2020 ≡ ≡ ≡ ≡ ≡ 4-15-2021
Aug. 2020 11-16-2020 ≡ ≡ ≡ ≡ ≡ ≡ 5-17-2021
Sep. 2020 12-15-2020 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 6-15-2021
Oct. 2020 1-15-2021 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 7-15-2021
Nov. 2020 2-16-2021 ≡ ≡ ≡ ≡ ≡ ≡ ≡ 8-16-2021
Dec. 2020 3-15-2021 ≡ ≡ ≡ ≡ ≡ ≡ 9-15-2021

Routing Guide for Attachments

ExhibitsRouting Guide for Attachments

All attachments to the return must be reviewed before the return can be considered processable.

Attachments should only be detached when specifically instructed.

Note:

Consider a return or document an "Original" if it has an original signature or has been stamped "Process as Original" .

Edit Action Trail(s) (e.g., "2848 detached" or similar language) in the lower left margin going vertically up the side of the return.

Note:

When documents, forms, attachments, and photocopies are detached and routed to the appropriate area/function, edit the name and EIN, if not present. Also, edit the return received date (e.g., "Rec'd MM/DD/YY" ) in the lower left margin of the detached document before forwarding.

Caution:

The Routing Guide for Attachments is included as an exhibit only for use in assisting in the identification of possible forms or conditions that require action or routing to the appropriate area/function. The guide should not be used in place of the completed IRM section governing those conditions, since space limitations do not always allow for full instructions in the Routing Guide for Attachments.

Follow general guidelines below for each attachment:

Routing Guide for Attachments

Form/Document Detach Action
Adjustment - Request for Adjustment to another document Yes
  • Route to appropriate function.

  • Attachment must contain Name, Address, EIN, and Received Date. Edit if missing.

IRC 965 Transition Tax Statement (or similar 965 statement)

Note:

Additional Form 965 series below.

No
  • Edit Computer Condition Code "J" and Action Code 460 (Management Suspense) on the return and continue processing.

    Caution:

    Do not correspond on Section 965 Returns. ERS will take care of any correspondence needed.

  • See IRM 3.11.217.2.11, Section 965 Returns, for additional information.

  • See IRM 3.11.217.3.1, Action Codes, for additional information.

  • See IRM 3.11.217.14.7, CCC "J" - Section 965 Tax, for additional information.

  • See IRM 3.11.217.24.3, Schedule K, Line 10 - Other Income (Loss), for additional information.

  • See IRM 3.11.217.24.4, Schedule K, Line 12d - Other Deductions, for additional information.

  • See IRM 3.11.217.27.1, Schedule K, Line 14r - Other Foreign Tax Information, for additional information.

  • See IRM 3.0.101, Schedule K-1 Processing, for complete instructions to edit and process Schedule K-1.

CP 259/CP 959 (Spanish version)
Master File Generated 1st TDI Notice

Note:

CP stands for Computer Paragraph.

No Correspondence is attached or taxpayer’s response indicates any of the following:
  • Taxpayer disagrees that they are required to file the return.

  • Only page one of the return is attached.

  • Employer Identification Number (EIN) on notice does not match EIN on return.

  • Return requested on notice not the same as return submitted.

  • Taxpayer asking question(s) or requesting IRS take action(s) on their account.

  • Case involves any other IRS action(s) C&E not trained to complete.

Then, Route to Compliance Services Collection Operations (CSCO). Use return address on Computer Paragraph (CP) notice:
  • Brookhaven - Mail Stop #662

  • Memphis - Mail Stop #81

  • Philadelphia - 4-N31.142


If none of the above apply, correspondence or written response to the notice is not attached, and/or, "599" is notated:
  1. Move the notice to the back of the return.

  2. Continue processing the return.

Note:

If the return is unsigned, but the taxpayer has signed the CP notice under the jurat, it is not necessary to correspond for the signature.

CP 259 A through H
Master File Generated 1st TDI Notice
No Route to:
Ogden Submission Processing Campus (OSPC)
BMF Entity Mail Stop 6273
CP 504/CP 504B
Final Notice - Balance Due
No
  1. Place Computer Paragraph (CP) 504/CP 504B to the front of the return.

  2. Route notice and return to Accounts Management (AM).

CP 518
Delinquency Notice
No Correspondence is attached or taxpayer’s response indicates any of the following:
  • Taxpayer disagrees that they are required to file the return.

  • Only page one of the return is attached.

  • Employer Identification Number (EIN) on notice does not match EIN on return.

  • Return requested on notice not the same as return submitted.

  • Taxpayer asking question(s) or requesting IRS take action(s) on their account.

  • Case involves any other IRS action(s) C&E not trained to complete.

Then, Route to Compliance Services Collection Operations (CSCO). Use return address on Computer Paragraph (CP) notice:
  • Brookhaven - Mail Stop #662

  • Memphis - Mail Stop #81

  • Philadelphia - 4-N31.142


If none of the above apply, correspondence or written response to the notice is not attached, and/or, "599" is notated:
  1. Move the notice to the back of the return.

  2. Continue processing the return.

Note:

If the return is unsigned, but the taxpayer has signed the CP notice under the jurat, it is not necessary to correspond for the signature.

Letters 112C, 282C, 2255C, or 2284C No
  1. Identify which organization initiated the letter to the taxpayer (e.g., What organization signed the letter?).

  2. Route letters initiated by Accounts Management (AM) to Accounts Maintenance Research (AMRH):

    • Ogden - Mail Stop 6712

    • Kansas City - Mail Stop N2 6800

  3. Route letters initiated by Collections as follows:

    1. If correspondence is attached or taxpayer’s response indicates any of the following:

      • Taxpayer disagrees that they are required to file the return.

      • Only page one of the return is attached.

      • Employer Identification Number (EIN) on letter does not match EIN on return.

      • Return requested on letter not the same as return submitted.

      • Taxpayer asking question(s) or requesting IRS take action(s) on their account.

      • Case involves any other IRS action(s) C&E not trained to complete.

      Then, Route to Compliance Services Collection Operations (CSCO). Use return address on letter:

      • Brookhaven - Mail Stop #662

      • Memphis - Mail Stop #81

      • Philadelphia - 4-N31.142

    2. If none of the above apply, correspondence or written response to the letter is not attached and/or, no "599" is notated:
      Then, Move the letter to the back of the return and continue processing the return.

Note:

If the return is unsigned, but the taxpayer has signed the letter under the jurat, it is not necessary to correspond for the signature.

Letter 2030
Initial Letter Issued to Request Verification for Unreported Income, Deductions, Payment and/or Credits on BMF Income Tax Returns Matched to Payer Information Documents Procedures
No
  1. Place Letter 2030 to the front of return.

  2. Route letter and return to BMF Automated Underreporter (AUR) in Compliance.

Letter 2531
Initial Contact for Potential Discrepancy of Income, Deductions and/or Credits Claimed on BMF Income Tax Returns Matched to Payer Information Documents Procedures
No
  1. Place Letter 2531 to the front of return.

  2. Route letter and return to BMF Automated Underreporter (AUR) in Compliance.

Includes tax liability for Multiple Tax Periods or Types of Tax No
  • Unnumbered Return - Prepare a dummy return if possible; otherwise, correspond.

  • Numbered Return - Route to Rejects.

Other Tax Returns (Original Signature) Yes
  1. Edit the received date to the detached return.

  2. Route to appropriate function, unless specifically directed otherwise.

Exception:

Returns attached to a consolidated return will not be detached. Conversion of Form 1120 to Form 1120-S will not be detached. See IRM 3.11.217.4.2, Conversion of Form 1120 to Form 1120-S for additional information.

Statement establishing Election to be subject to the Tonnage Tax Regime - Sect 1354 No Route a copy of the election to:
Brenda E. Sarini,
Internal Revenue Agent
1719 C Route 10
Parsippany, New Jersey
07054-4507
Petitions in opposition of tax law provisions Yes

Note:

No Action Trail needs to be edited when detaching a petition.

Route to:
IRS
≡ ≡ ≡ ≡ ≡ ≡ ≡
1111 Constitution Avenue, NW
Washington, DC 20224
Pro Forma Form 1120 (Form 1120 with a notation of "Pro Forma" , "Pro Forma Form 1120" , "Pro Forma Form 1120 New York State" , or similar statement is notated on the return) for New York State No No action required.
Prompt Assessment/Prompt Determination Request Yes/No See Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), information below.
Statement establishing Reasonable Cause for delinquent filing No
  1. Issue Letter 1382C, Penalty Removal Request Incomplete.

    Exception:

    Do not send Letter 1382C, Penalty Removal Request Incomplete, if the taxpayer has notated "Late filed return due to CCH software outage" or similar language.

  2. Continue editing the return.

  3. See the following IRM references for additional information:

    • IRM 3.11.217.14.2, CCC "D" - Reasonable Cause for Failing to Pay Timely

    • IRM 3.11.217.14.13CCC "R" - Reasonable Cause for Failing to Timely File Return

Remittance found No Immediately hand-carry return and remittance to supervisor.
Request for e-file Waiver
Statement notating:
"Form 1120-S e-file Waiver Request"
Yes/No
  • Yes - Ogden - Route request to: Mail Stop 1057.

  • No - Kansas City - Fax request to: 877-477-0575.

Request for Form 8109
Deposit Slips, or Coupon Books
No No action required.
Request for Forms or Schedules No
  • If requesting current year forms:

    1. Prepare Form 4190, Order Form for Tax Forms and Publications.

    2. Forward to National Distribution Center (NDC) for processing.

  • If requesting prior year forms:

    1. Prepare Form 6112, Prior Year Tax Products Order Form.

    2. Forward to National Distribution Center (NDC) for processing.

Note:

Form 4190 and Form 6112 are generally used for IMF requests. Therefore, enter all BMF requests for forms and/or schedules in the "WRITE-IN" portions of the forms.

Request for Acknowledgement No No action required.
Request for Installment Agreement Yes
  • Ogden - Route to Collections.

  • Kansas City - Route to Mail Stop P4 5000

Request for Information or Inquiries Yes
  1. Photocopy any data necessary to process the return.

  2. Attach the photocopy to the return.

  3. Route original attachment to the proper office for necessary action.

Request for Money Transfer Yes/No
  • Yes - If the taxpayer notates "Transfer of Money" (or similar language) FROM the return you are processing:

    1. Edit CCC "X" to freeze overpayment.

    2. Detach Transfer of Money request.

    3. Prepare Form 3465, Adjustment Request, and:

      • Indicate in the "Routing" box "Adjustments" .

      • Notate the requested action in the "Remarks" box.

    4. Attach Form 3465, Adjustment Request, to the Transfer of Money request and route to Accounts Management (AM).

    5. Continue editing the return.

  • No - the taxpayer notates "Transfer of Money" (or similar language) TO the return you are processing:

    1. Prepare Form 3465, Adjustment Request, and:

      • Indicate in the "Routing" box "Rejects" .

      • Notate "See attached money transfer request" in the "Remarks" box.

    2. Edit Action Code 450 to route the request to Rejects.

State Tax Returns
Original or Copy with an original signature
Yes Route to Receipt and Control (R&C).
State Tax Returns Photocopy, facsimile, or no signature No Leave attached.
Indication of Final return No
  • Edit CCC "F" .

  • See IRM 3.11.217.14.4, Computer Condition Code "F" - Final Return.

Notices - Payment Agreement or Disagreement with notice amount   Follow local Submission Processing Campus procedures. May involve inputting a STAUP and routing attachment to another function.
SS-4
Application for Employer Identification Number
Yes/No
  • Yes - Original - Route to Entity Control.

  • No - Copy - No action required.

Schedule D (Form 1120-S)
Capital Gains and Losses and Built-in Gains
No
  • Place in sequence order.

  • See IRM 3.11.217.15.1, Sequencing of Return, and IRM 3.11.217.30, Schedule D (Form 1120-S) - Capital Gains and Losses and Built-in Gains.