3.12.16 Corporate Income Tax Returns

Manual Transmittal

November 16, 2017

Purpose

(1) This transmits revised IRM 3.12.16, Error Resolution, Corporate Income Tax Returns.

Material Changes

(1) Minor editorial changes have been made throughout this IRM (e.g., line number updates, spelling, punctuation, unspan cells, links, etc.). Other significant changes to this IRM are shown below.

(2) IRM 3.12.16.1 - Program Scope and Objectives - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renamed Introduction to the Error Correction Program - Service Center Replacement System (SCRS) to General Information and moved it from IRM 3.12.16.1 to IRM 3.12.16.2. Renumbered remaining subsections accordingly.

(3) IRM 3.12.16.1.1 - Background - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining subsections accordingly.

(4) IRM 3.12.16.1.2 - Authority - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining subsections accordingly.

(5) IRM 3.12.16.1.3 - Responsibilities - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining subsections accordingly.

(6) IRM 3.12.16.1.4 - Program Management and Review - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining subsections accordingly.

(7) IRM 3.12.16.1.5 - Program Controls - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining subsections accordingly.

(8) IRM 3.12.16.1.6 - Terms/Definitions/Acronyms - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining subsections accordingly.

(9) IRM 3.12.16.1.7 - Related Resources - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining subsections accordingly.

(10) IRM 3.12.16.2 - Renamed Introduction to the Error Correction Program - Service Center Replacement System (SCRS) to General Information and moved it here from IRM 3.12.16.1 due to the addition of Internal Controls information. Renumbered remaining subsections accordingly.

(11) IRM 3.12.16.2.2(1) - Corrected the IRM title per feedback during IRM review.

(12) IRM 3.12.16.2.3(1) and (2) - Moved information from paragraphs (1) and (2) into paragraphs (1) through (5).

(13) IRM 3.12.16.2.4(1) 2. - Added Form 10886, Reject Routing Slip. (IPU 17U0172 issued 01-25-2017)

(14) IRM 3.12.16.2.5(2) - If/Then Table - First Then box - Corrected acronym for (FRP) from Frivolous Return Processing to Frivolous Return Program. (IPU 17U0401 issued 03-01-2017)

(15) IRM 3.12.16.2.6(3) - Updated IRM 11.3.2.6.1 reference to IRM 11.3.2.7.1 per the updated IRM 11.3.2 version dated January 26, 2017. (IPU 17U0401 issued 03-01-2017)

(16) IRM 3.12.16.2.7(3) - Changed "Caution" to paragraphs (4) and (5) and added bullet lists.

(17) IRM 3.12.16.2.7(5) - Updated IRM 11.3.2.6.1 reference to IRM 11.3.2.7.1 per the updated IRM 11.3.2 version dated January 26, 2017. (IPU 17U0269 issued 02-09-2017)

(18) IRM 3.12.16.2.8(3) - If/And/Then/Table - Reworded the table information per feedback during IRM 3.11.15 Review.

(19) IRM 3.12.16.2.10(6) - Moved the "Note" information into paragraph (6) new alphas d., e. and f. per feedback during IRM review.

(20) IRM 3.12.16.2.14(3) Table Sixth box - Added "(Form 4136)" per feedback during IRM review.

(21) IRM 3.12.16.2.18 - Added a list of letters.

(22) IRM 3.12.16.2.19 - Added new subsection, Suppression of Erroneous Balance Due and Return Delinquency Notices, as indicated in other BMF paper register IRMs.

(23) IRM 3.12.16.3 - Added Service Center Replacement System (SCRS) to the title.

(24) IRM 3.12.16.3.2(1) - Action Code Table - Action Code 3 - Type of Correction column - Added titles to the forms listed. (IPU 17U0172 issued 01-25-2017)

(25) IRM 3.12.16.4.4(1) - Added Document 7071-A, Name Control Job Aid - For Use Outside of the Entity Area.

(26) IRM 3.12.16.4.8(1) - Added cross-reference to Exhibit 3.12.16-14, Tax Period Underprint Flow Chart, and Exhibit 3.12.16-15, Tax Period Underprint Flow Chart for "Reply" and "No Reply" , per feedback during IRM review.

(27) IRM 3.12.16.4.8(4) a. - If/Then Table - Third Then column - Defined pending (PN). (IPU 17U0172 issued 01-25-2017)

(28) IRM 3.12.16.4.9(6) - If/Then Table - Third Then box - Corrected return due date.

(29) IRM 3.12.16.4.9(7) f. - Removed "Current Date minus 10 days" per feedback from IRM 3.12.217.

(30) IRM 3.12.16.4.17(5) - Clarified Taxpayer Notice Codes (TPNCs).

(31) IRM 3.12.16.4.17(6) - Added information about Taxpayer Notice Code 90.

(32) IRM 3.12.16.6.1(1) Section 03 Table Missing Schedule Code - Added Reserved and IRM reference.

(33) IRM 3.12.16.6.3(2) - Updated location information.

(34) IRM 3.12.16.6.3(4) - Clarified NAICS Code instructions.

(35) IRM 3.12.16.6.4(1) - Reworded because Code and Edit will no longer edit the Missing Schedule Code (MSC). Code and Edit will correspond. (IPU 17U1287 issued 08-29-2017)

(36) IRM 3.12.16.6.4(2) - Reworded because Missing Schedule Codes will not be used. (IPU 17U1287 issued 08-29-2017)

(37) IRM 3.12.16.6.4(3) - Reworded because Missing Schedule Codes will not be used.

(38) IRM 3.12.16.6.4(4) - Added "No Reply" procedures for correspondence because Missing Schedule Codes will not be used. (IPU 17U1287 issued 08-29-2017)

(39) IRM 3.12.16.8.2(6) - Changed TPNC 90 to TPNC 05. (IPU 17U0269 issued 02-09-2017)

(40) IRM 3.12.16.8.7(3) - If/Then Table - Last Then box - Added TPNC 90 language.

(41) IRM 3.12.16.8.8(4) - If/Then Table - Fourth Then box - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(42) IRM 3.12.16.8.8(4) - If/Then Table - Seventh Then box - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(43) IRM 3.12.16.8.10.1(3) a. - Reworded for clarity per feedback during IRM review.

(44) IRM 3.12.16.8.10.1(3) a. - Corrected the return due date.

(45) IRM 3.12.16.8.10.1(3) a. Note - Reworded for clarity per feedback during IRM review.

(46) IRM 3.12.16.8.19(4) - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(47) IRM 3.12.16.8.19(4) - Changed TPNC 90 to TPNC 05. Removed information pertaining to TPNC 90.

(48) IRM 3.12.16.8.19(5) Note - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(49) IRM 3.12.16.8.19(5) Note - Changed TPNC 90 to TPNC 05 and updated Figure 3.12.16-10, Manually Corrected Tax, accordingly.

(50) IRM 3.12.16.9.5.1(2) - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(51) IRM 3.12.16.10.1(4) - Added IRM reference for additional information.

(52) IRM 3.12.16.10.1(6) - Changed TPNC 90 to TPNC 05. (IPU 17U0269 issued 02-09-2017)

(53) IRM 3.12.16.10.1(6) - Removed the Note since no longer needed.

(54) IRM 3.12.16.10.2(5) - Changed TPNC 90 to TPNC 05. (IPU 17U0269 issued 02-09-2017)

(55) IRM 3.12.16.10.2(5) - Removed the Note since no longer needed.

(56) IRM 3.12.16.12.1(4) b. - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(57) IRM 3.12.16.13.1(4) b. - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(58) IRM 3.12.16.14.1(4) b. - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(59) IRM 3.12.16.15.1(4) b. - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(60) IRM 3.12.16.17(1) - Added "incomplete return" information.

(61) IRM 3.12.16.17(6) No Reply Conditions Table - Unsubstantiated Credits - Added Schedule D (Form 1120), Form 8834, Form 8910, and Form 8936. Removed Form 2439 to agree with IRM 3.11.16 information.

(62) IRM 3.12.16.17(6) No Reply Conditions Table - Unsubstantiated Credits - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(63) IRM 3.12.16.17(6) No Reply Conditions Table - Controlled Group - No Apportionment Schedule - Added TPNC 90 language. (IPU 17U0269 issued 02-09-2017)

(64) IRM 3.12.16.17(6) - No Reply Conditions Table - Controlled Group - No Apportionment Schedule - Added IRM reference.

(65) IRM 3.12.16.17(6) - No Reply Conditions Table - Controlled Group - No Apportionment Schedule - Added Form 8913, Credit for Federal Telephone Excise Tax Paid, information.

(66) IRM 3.12.16.17.4(3) - Added IRM reference.

(67) IRM 3.12.16.19.1(3) - Updated the tax period information.

(68) IRM 3.12.16.19.2(2) - Updated the tax period information.

(69) IRM 3.12.16.19.2(3) - Removed paragraph (3) since no longer valid per feedback during IRM review. Renumbered remaining paragraphs accordingly.

(70) IRM 3.12.16.19.2(4) - Updated the tax period information.

(71) IRM 3.12.16.19.2(5) - Updated the tax period information.

(72) IRM 3.12.16.20.4(4) - Added "For purposes of determining tax rates" per feedback during IRM review.

(73) IRM 3.12.16.20.4(4) d. - Added IRM reference.

(74) Exhibit 3.12.16-5 - Acronyms and Abbreviations - Added Internal Controls information as outlined in The Heightened Awareness, Sensitivity, and Understanding of Internal Controls Memo dated September 14, 2016. Renumbered remaining exhibits accordingly.

(75) Exhibit 3.12.16-10 - No Reply Procedures - Removed the exhibit since the information is contained within subsections of the IRM. Renumbered remaining exhibits accordingly.

(76) Exhibit 3.12.16-11 - North American Industry Classification System (NAICS) Code - Removed exhibit to be consistent with other IRMs and renumbered remaining exhibits accordingly.

(77) Exhibit 3.12.16-11 - Updated the tax period information. The biodiesel or renewable diesel mixture credit and the alternative fuel credit expired on December 31, 2016, per Public Law (P.L.) 114-113, Division Q, Section 185; IRC 6426(c)(6).

(78) Exhibit 3.12.16-13 - Updated the tax period information. The biodiesel or renewable diesel mixture credit and the alternative fuel credit expired on December 31, 2016, per Public Law (P.L.) 114-113, Division Q, Section 185; IRC 6426(c)(6).

(79) Exhibit 3.12.16-14 - Tax Period Underprint Flow Chart Table - Updated the Tax Period Examples.

(80) Exhibit 3.12.16-15 Tax Period Underprint Flow Chart for Reply and No Reply - Tax Period Underprint Flow Chart - Second Box - Added information for taxpayer replying without Form 1128 or Form 8716 and the resolution. Renamed the tables to match the other BMF ERS IRMs for consistency.

(81) IRM references updated throughout the IRM.

(82) Figures revised throughout the IRM.

(83) Exhibits revised throughout the IRM.

Effect on Other Documents

IRM 3.12.16, Error Resolution, Corporate Income Tax Returns, dated November 14, 2016 (effective January 01, 2017), is superseded. The following IRM Procedural Updates (IPUs), issued from January 25, 2017, through August 29, 2017, have been incorporated into this IRM: 17U0172 (issued 01-25-2017), 17U0269 (issued 02-09-2017), 17U0401 (issued 03-01-2017), and 17U1287 (issued 08-29-2017).

Audience

Wage and Investment (W&I) Submission Processing Error Resolution personnel are the intended audience for this IRM.

Effective Date

(01-01-2018)

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

Program Scope and Objectives

  1. This section contains instructions for Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons, and Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B).

  2. Purpose: This section provides instructions for resolving errors made by taxpayers and correcting errors made during campus processing. These instructions apply to the Service Center Replacement System (SCRS) involving corrections made using paper error registers.

  3. Audience: These procedures apply to Wage and Investment (W&I) Submission Processing Error Resolution System (ERS) personnel:

    • Supervisory Tax Examining Assistant

    • Lead Tax Examining Technician

    • Tax Examining Technician

  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)

    • Small Business Self-Employed (SBSE)

    • Statistics of Income (SOI)

    • Submission Processing (SP)

    • Taxpayer Advocate Service (TAS)

    • Tax Exempt and Government Entities (TEGE)

Background

  1. Error Resolution resolves validity errors, field errors, consistency errors, and math errors on returns using paper error registers. Employees use the paper register (error register) and the return to correct these conditions and when necessary use Integrated Data Retrieval System (IDRS) to research.

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 Review

  1. Program Goals: Enter corrections on the paper error registers for any errors falling out through Service Center Replacement System (SCRS) in Error Resolution.

  2. Program Reports: System control reports are on the Control-D WebAccess (CTDWA) and a general listing of the reports are located in IRM 3.12.38, Error Resolution, BMF General Instructions.

  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 lists Interpretation Words and their definitions.

    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. Copy any significant amount on Line 1d to Line 2d, when the amount on Line 2d is blank and the Common Parent’s Name and EIN are blank.
    Timely Provide the time frame to consider what is or is not timely. 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 3.12.16-5, 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)

    • Integrated Automation Technologies (IAT)

    • Submission Processing Design Center (SPDC)

General Information

  1. As an Error Correction tax examiner, you develop your expertise working all types of Business Master File (BMF) programs. As your expertise increases, you are also developing your judgement decisions to a comfort level needed to resolve your cases. In this Internal Revenue Manual (IRM) we have provided instructions, procedures, and guidelines for you to attain that comfort level needed for correcting cases in the Error Correction Program.

  2. This section provides instructions for resolving errors made by corporate taxpayers and errors made during campus processing. These instructions apply to the Service Center Replacement System (SCRS). This IRM can’t address every possibility that may arise while correcting returns or documents. Taxpayer intent must be taken into consideration. In some cases, it may be necessary to refer the issue to your Subject Matter Expert (SME), lead or manager to determine the proper action.

  3. The Service Center Replacement System (SCRS) is a term used to refer to the processing of paper register (error register) documents. While Error Resolution System (ERS) is worked on the computer with Integrated Data Retrieval System (IDRS), SCRS documents are corrected on a paper print, by hand, with a pen. The errors appear on paper error registers. SCRS programs are few in number as programs continue to be moved to ERS each year; the few that remain are generally received in such small numbers that it is considered too expensive to move them to ERS. Despite the low amounts of receipts, these forms are just as important to process correctly as those on ERS.

  4. Instructions in specific sections take precedence over general section instructions in case of a conflict.

  5. The instructions in this text apply to the following Corporate Income Tax forms:

    Form and Title

    Form Title Document (Doc) Code Processing Service Campus
    1120-FSC U.S. Income Tax Return of a Foreign Sales Corporation

    Note:

    Form 1120-FSC is used to report the income, gains, losses, deductions, credits, and to figure the income tax liability of a FSC.

    07 Ogden Submission Processing Campus (OSPC) Only
    1120-ND Return for Nuclear Decommissioning Funds and Certain Persons

    Note:

    Form 1120-ND is used to report contributions received, income earned, the administrative expenses of operating the fund, and the tax on modified gross income.

    08 Ogden Submission Processing Campus (OSPC) and Cincinnati Submission Processing Campus (CSPC)
    1120-SF U.S. Income Tax Return for Settlement Funds (Under Section 468B)

    Note:

    Form 1120-SF is used to report transfers received, income earned, deductions claimed, distributions made, and to figure the income tax liability of a designated or qualified settlement fund.

    06 Ogden Submission Processing Campus (OSPC) and Cincinnati Submission Processing Campus (CSPC)

     

  6. Internal Revenue Manual (IRM) 3.12.16 is exempt from the BMF Consistency Guidelines (for example (e.g.), indicating diamonds) as shown in other sections of IRM 3.12, Error Resolution.

Organization of Text

  1. The text is organized to help find corrective procedures quickly and to provide, to the extent possible, all necessary procedures in one place. The text is organized as follows:

    • General information on the overall concepts and procedures of the error resolution process;

    • Math error and manual computation criteria and procedural instructions for correcting each section and each field on Form 1120-FSC, Form 1120-ND, and Form 1120-SF error register.

    • Exhibits are displayed on the last pages of the Internal Revenue Manual (IRM) with transcription lines and other frequently used codes with explanations.

  2. This text provides sufficient information to correct most error conditions. It may be necessary to refer at times to the instructions in IRM 3.11.16, Corporate Income Tax Returns. If there is a discrepancy between the instructions contained in IRM 3.11.16 and those in IRM 3.12.16, contact your Headquarters Analyst and continue to follow the instructions in IRM 3.12.16. If there is a conflict between IRM 3.12.16 and another IRM or Job Aid, IRM 3.12.16 takes precedence until the conflict is resolved.

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 can’t 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 (SBSE) Division, Tax Exempt and Government Entities (TEGE) Division, Criminal Investigation (CI), Appeals, and Large Business and International (LB&I) Division, that outline the procedures and responsibilities for the processing of 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 Theft is increasing. If a tax examiner in Submission Processing (SP) Error Resolution System (ERS) finds a case with attachments or correspondence indicating the taxpayer is a victim of ID Theft:

    1. Enter Action Code 3 on the error register and reject the record.

    2. Attach Form 4227, Intra-SC Reject or Routing Slip, or Form 10886, Reject Routing Slip, (or other appropriate routing slip) and give the return to the lead/manager.

  2. Your lead/manager 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. Effective January 1, 2017, Computer Condition Code "E" may be edited on Form 1120-FSC, Form 1120-ND, and Form 1120-SF (any year) by the BMF ID Theft Liaison to identify a potential identity theft filing.

Frivolous Arguments

  1. A frivolous argument is used for the purpose of expressing dissatisfaction with the substance, form, or administration of the tax laws by attempting to illegally avoid or reduce tax liabilities. Recognized frivolous arguments made by businesses include, but are not limited to, the examples in IRM 25.25.10, Frivolous Return Program. Also, see Exhibit 3.12.16-6, 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.

    Caution:

    If the return shows CCC "U" (or Action Code 331) and has a Form 4227 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 CCC "U" or an Action Code 331) and a Form 4227 with the remarks, "Refer to Exam FRP for audit after processing", but sends the return for processing, Continue processing the return using procedures in IRM 3.12.16. However, do not circle or void the CCC "U" (or the Action Code) indicating a frivolous return.

     

    Note:

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IRS Employee Contacts - RRA98, Section 3705(a)

  1. The 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 a 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), provide 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 IDRS (Integrated Data Retrieval System) number, letter system number, or their badge identification (ID Card) number.

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

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

    6. When a taxpayer requests to speak with a specific employee who previously handled 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 to provide additional case-related information.

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

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

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

    Note:

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

  3. When contacting taxpayers by telephone, you must be sure you are speaking with the taxpayer or authorized representative before disclosing tax information. See IRM 21.1.3.2.3, Required Taxpayer Authentication, and IRM 21.1.3.2.4, Additional Taxpayer Authentication. Also, before leaving a message on a taxpayer's answering machine, see IRM 11.3.2.7.1, Leaving Information on Answering Machines/Voice Mail. See IRM 3.12.16.2.7, Use of Fax for Taxpayer Submissions, for additional information.

  4. Prior to faxing confidential information to the taxpayer, review fax procedures contained in IRM 11.3.1.11, Facsimile Transmission of Tax Information. See IRM 3.12.16.2.7, Use of Fax for Taxpayer Submissions, for additional information.

  5. During taxpayer contact, if the taxpayer asks to be referred to the Taxpayer Advocate Service (TAS) or you believe a referral to TAS may be appropriate, see IRM 3.12.16.2.3, Taxpayer Advocate Service (TAS).

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://irweb.irs.gov/AboutIRS/co/dese/memo/48254.aspx.

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

  3. ERS tax examiners will indicate the fax paragraph on the Form 3696, Correspondence Action Sheet, (or other approved Correspondence Action Sheet) to advise taxpayers of the option to fax their response.

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

    • IRM 21.1.3.2.3, Required Taxpayer Authentication

    • IRM 21.1.3.2.4Additional Taxpayer Authentication

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

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

    • IRM 11.3.1.11, Facsimile Transmission of Tax Information

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. Follow the instructions below for processing CIS returns.

    Correspondence Imaging System (CIS) Returns

    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. Enter Action Code 3 on the error register and reject the record.

    3. Cancel the Document Locator Number (DLN)

    4. Attach Form 4227Intra-SC Reject or Routing Slip, (or other appropriate routing slip) to the return and route to Accounts Management (AM) to secure missing information.

    5. 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), Research for a prior posting (Transaction Code (TC) 150 posted).
    1. If TC 150 is present and the information is the same, cancel DLN and treat as Classified Waste.

    2. If TC 150 is not present, follow normal correspondence procedures.

     

Refund Returns 45-Day Jeopardy and $100 Million or More Refunds

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

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

    Refund Returns

    If Then
    The processing date is more than 20 days after 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.

    1. Enter Action Code 3 on the error register and reject the record.

    2. Attach Form 4227 (or other appropriate routing slip) and give the return to the manager.

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

    Note:

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

    1. Do not leave the return in the block.

    2. Enter Action Code 3 on the error register and reject the record.

    3. Attach Form 12230, Expedite Processing Million Dollar Manual Refund, and give the return to the manager.

    4. If there is no indication Code and Edit (C&E) made a copy and sent to CI Referral, then see below.

      • Make a copy of the return.

      • Attach Form 4227 (or other appropriate routing slip) to the copy.

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

      • 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.

     

    Note:

    See IRM 3.12.16.8.10.1, Refund Returns, for additional information.

Taxpayer Advocate Service (TAS) Manual Refunds

  1. Taxpayer Advocate Service (TAS) Manual Refunds - Any return hand walked by a W&I Submission Processing (SP) liaison for Taxpayer Advocate Service (TAS) as a manual refund should be processed by a lead tax examiner or designated tax examiner using the following procedures:

    1. CCC "O" should be edited on the return and entered in Field 01-F (CCC) after the manual refund has been issued.

    2. Enter Reserve Code "1" (if applicable) in Field 03-E when a refund of $1 million or more has been issued. The Reserve Code "1" is valid on correction only.

    3. Delete CCC "Y" . Continue processing the return.

  2. Correspondence - If the return requires correspondence for missing or incomplete information, then do the following:

    1. Enter Action Code 3 on the error register and reject the record.

    2. Prepare Form 3696, Correspondence Action Sheet, (or other approved Correspondence Action Sheet) and request all information that is missing or incomplete.

    3. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49.

    4. Edit an action trail "L118C Sent" (or similar language) in the lower left corner going vertically up the side of the return.

    5. Inform the W&I SP liaison of all information that is being requested.

    6. Give the return back to the W&I SP liaison.

    7. The W&I SP liaison will contact the Taxpayer Advocate to obtain the required information needed to complete the processing of the return.

  3. Other Suspense Action - If the return requires other suspense action, then do the following:

    1. Initiate the suspense action according to procedures.

    2. Inform the W&I SP liaison the reason of the action taken.

    3. Give the return back to the W&I SP liaison.

    4. The W&I SP liaison will contact the Taxpayer Advocate, who in turn will take the necessary action to complete the processing of the return.

  4. Assigning Taxpayer Notice Codes (TPNCs)/Math Error - When a math error is identified, do the following:

    1. Assign the applicable TPNC according to procedures.

    2. After all TPNCs have been assigned, inform the W&I SP liaison of the TPNCs issued.

    3. Suspend according to procedures and then give the return to the W&I SP liaison.

    4. The W&I SP liaison will contact the Taxpayer Advocate, who in turn will take the necessary action to complete the processing of the return.

  5. When Balance Due/Overpayment Math Error generates do the following:

    1. Make a copy of the error register and highlight the Computer Generated Refund Amount (underprint).

    2. Attach the copy to the front of the return with the entity portion of the return visible.

    3. Enter the amount the taxpayer claimed as the amount they requested to be refunded back into Field 07-I.

  6. If Balance Due/Overpayment Math Error loops because the taxpayer made a math error when computing their refund, then do the following:

    1. Make a copy of the error register and highlight the Computer Generated Refund Amount (underprint).

    2. Attach the copy to the front of the return with the entity portion of the return visible.

    3. Enter Action Code 1 and assign the appropriate TPNC.

    4. The first time a document in error prints on a error register it is called a "raw" register.

    5. Tax examiners will make various corrections to the paper register (error register), trying to correct as many errors as possible. The document and register are then sent back through the Integrated Submission and Remittance Processing (ISRP) system to be transcribed. If the correction resolves the error, the information is transmitted to the Enterprise Computing Center-Martinsburg (ECC-MTB).

    6. If all the errors do not clear, the system will generate a subsequent register (known as a “loop” register) showing the errors that are remaining. The title line will tell you if the register is a raw register or a loop register and how many times (if any) the register has looped. The term "loop" means the register continues to reappear on the next correction cycle until every validity check has been satisfied.

  7. Once return processing is complete, give the return, copy of the error register and Form 12412, Operations Assistance Request (OAR), to the W&I SP liaison.

  8. Rejects Suspense - Manual refunds that are hand walked by a W&I SP liaison that have been suspended should be processed as follows:

    1. Follow the specific instruction given by the W&I SP liaison in regards to correspondence issues and the assignment of the TPNCs.

    2. Refer to applicable paragraphs above.

Local Desk Procedures

  1. Some Submission Processing Campuses have developed local use "Desk Procedures" . Such procedures are only to be used:

    1. To supplement existing Headquarters procedures

    2. To expand Submission Processing Campus Error Resolution procedures by incorporating material from other IRMs, Automated Data Processing (ADP) handbooks, etc.

    3. For local routing procedures; and

    4. Not limited to the examples listed above

  2. Team managers must have a signed approval on file from the responsible Operation Manager on all Submission Processing Campus Desk Procedures.

  3. All existing local information and procedural issuances should be reviewed periodically by the Operation Manager level (at least 2 times a year or with each IRM revision) to ensure conformance with Headquarters procedures (make necessary changes, secure necessary approvals, etc.).

  4. Emergency problems should be telephoned to the Headquarters Analyst if the problem can’t be resolved and is identified as a work stoppage.

Perfection of Attachments

  1. If the taxpayer writes a question or request for assistance on the return itself, make a photocopy of the question/request and the taxpayer’s Employer Identification Number (EIN), name and address. Route this information to the appropriate function.

    Perfection of Attachments

    If Then
    Unrelated, unanswered taxpayer correspondence is attached and no action has been taken, Detach and route to the appropriate area using local procedures.
    Unanswered taxpayer correspondence relating to the Form 1120 SCRS Program is attached, Make a photocopy of the attachment and forward it to the appropriate area using local procedures.

     

    Note:

    If a return or attachment indicates "Pro Forma Form 1120 for New York State" or similar statement is notated on the return, then no action is required. Do not detach the attachment from the return.

Procedures for "In-Care-Of" Instructions

  1. An "in-care-of" name can be identified by the words "in-care-of" or the symbols "c/o" or "%" (percent). Correct "in-care-of" names by researching Integrated Data Retrieval System (IDRS) using Command Code (CC) INOLES.

  2. Ensure that the "in-care-of" name is located above the street address.

    Procedures for "In-Care-Of"

    If And Then
    The "in-care-of" name on the return Name control on CC INOLES matches,
    1. Delete % (percent) from the name control field.

    2. Enter the name control in Field 01-B (Name Control).

    The "in-care-of" name on the return Name control on CC INOLES does not match, Overlay CC INOLES with CC ENMOD and transmit.
    There is a pending (PN) transaction changing the c/o name,  
    1. Delete % (percent) from the name control field.

    2. Enter the name control in Field 01-B (Name Control).

    There is no PN transaction,   Input a change to the "in-care-of" name as shown below.

     

    1. Overlay CC ENMOD with CC ENREQ and transmit (Page Up key).

      Note:

      CC BNCHG will display.

    2. Caution: If CC ENMOD is not present, displays "THE MODULE YOU HAVE REQUESTED IS FOUND AT THE FOLLOWING CAMPUS(S); XXX@ xx," or the ENMOD name control does not match the name control on the return, see the CC MFREQ instructions below.

    3. Position the cursor at "CARE-OF-NAME" by tabbing over.

    4. Enter the "c/o" name from the return making sure the % (percent) sign is in the first position followed by a space.

    5. TAB to "REMARKS" and enter "PER DOC" and transmit (Page Up key). "REQUEST COMPLETED" will display.

    6. Delete % from Field 01-B (Name Control) and enter the correct name control in Field 01-B (Name Control).

  3. CC MFREQ Instructions
    Enter: MFREQC00-1234567
    00 000000 XXXX

    1. Enter the name control on CC INOLES in place of the 4 Xs.

    2. After "REQUEST COMPLETED" displays, overlay CC MFREQ with CC ENMOD and transmit (Page Up key) to return to the "c/o" name change function.

      Note:

      Addresses on extensions should NEVER be changed.

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. For returns with refund claims of $100,000,000 or more, do the following:

    Caution:

    If there is no indication Code and Edit (C&E) made a copy and sent to CI Referral, then see below.

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  3. Other CI Referral Criteria:

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

    Caution:

    If there is no indication Code and Edit (C&E) made a copy and sent to CI Referral, then see below.

    1. Make a copy of the return.

    2. Attach Form 4227 (or other appropriate routing slip) to the copy.

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

      CI Referral Criteria Routing

      Cincinnati Ogden
      Mail Stop 83G, Criminal Investigation (CI) Mail Stop 9001, Criminal Investigation (CI)

       

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

    5. Continue processing the return.

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

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

Examination (Exam) "Funny Box"

  1. The primary objective in identifying tax returns for examination is to promote the highest degree of voluntary compliance. Examination will provide support and assist Submission Processing (SP) with any questionable return identified during processing. Exam has a vast multitude of programs and tolerance criteria already identified in various IRM sections. Exam allows SP to refer questionable returns unless restricted by another IRM section.

IDRS Decision Assisting Program/Integrated Automation Technologies (IDAP/IAT)

  1. IDAP/IAT provides tools to IRS employees that simplify research, reduce keystrokes and increase the accuracy of regular work processes. When used with IRS systems, it eliminates repetitive typing and assists in making precise decisions. IDAP/IAT tools improve efficiency, productivity and quality by performing some functions automatically. Through more complex programming, they are designed to reduce fallout to other areas.

  2. Managers will ensure employees understand the use of IDAP/IAT and will verify that employees have access to all the tools needed for their duties. They will make sure that all employees receive training on the use of IDAP/IAT.

    Note:

    IDRS will be used when IDAP/IAT is unavailable.

  3. See the IDAP/IAT website at http://iat.web.irs.gov/jobaids/iat.asp for a complete list of available tools and User Guides. A few of the tools available are:

    • Address Change

    • Auto MFREQ

    • CC Prints

    • Credit Transfer

    • Manual Refund

    • Route It Out

Customer Account Data Engine (CADE) 2

  1. The Customer Account Data Engine (CADE) 2 Program Office in Headquarters, is charged with the primary goal to implement a single, modernized programming solution which provides daily processing of taxpayer accounts.

  2. The CADE 2 solution is comprised of several components, to modernize the IRS to a daily processing environment with several Transition States.

  3. The Business Master File (BMF) campus cycles are:

    1. Campus Cycle: Thursday - Wednesday

    2. Master File Processing: Friday - Thursday

    3. Notice Review Saturday: Monday (8+ days)

    4. Unpostables: New available Tuesday; Closing Tuesday

  4. BMF transaction posting time frames are outlined as follows:

    1. Transactions will be viewable using CFOL command codes on Saturday following the weekly Master Files processing run on Thursday.

    2. Transactions will be viewable as posted transactions using IDRS command codes on Monday, following the weekly Master File processing run on Thursday.

      Note:

      With the acceleration of the IDRS weekly analysis being performed the weekend directly after the Master File processing on Thursday, transactions will be posted instead of in pending status on Monday.

  5. Cycle posting dates will reflect a format of YYYYCCDD. YYYY will indicate the year. CC will indicate the posting cycle. For Individual Master File (IMF) transactions, the following values for DD are defined:

    • 01 = Friday

    • 02 = Monday

    • 03 = Tuesday

    • 04 = Wednesday

    • 05 = Thursday

    Note:

    BMF cycle posting dates on BMFOL will continue to reflect YYYYCC. YYYY will indicate the year. CC will indicate the posting cycle. BMF cycle posting dates in TXMOD will reflect a format of YYYYCCDD. The DD value will be 08.

C/SC Letters

  1. Listed below are letters provided by Headquarters for Submission Processing Center 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.

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

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

    3. Letter 106C, Claim Partially Disallowed - Letter disallowing claims, explaining appeal rights and procedures.

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

    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.

    8. Letter 3833C, Tax Return Adjustment Explained (BMF) - Letter explaining adjustment made on business returns.

    9. Letter 3875C, Missing or Incorrect EIN on Return - BMF/EPMF - Letter requesting missing or incorrect EIN on business returns.

  2. When corresponding, edit an action trail "118C Sent" (or similar language) in the lower left corner going vertically up the side of the return.

Suppression of Erroneous Balance Due and Return Delinquency Notices - Reject/Suspense Correction

  1. For any return received within the specified accounting period which cannot be processed by the Program Completion Date (PCD) as established in IRM 3.30.123, Processing Timeliness: Cycles, Criteria, and Critical Dates, a Transaction Code (TC) 599 with Closing Code (cc) 018 must be input on Integrated Data Retrieval System (IDRS) using Command Code FRM49. See IRM 3.30.123.2.4, Acceptable Inventory and Aged Criteria for Submission Processing Databases for additional information. This includes block deletes, nullified unpostables and rejects suspense/correction. Input of TC 599 with cc 018 does not need to be completed until three weeks prior to delinquency checks. However, checks can begin as soon as three weeks after the return’s PCD.

  2. Paper registers must have the fact of filing (TC 599) input manually to prevent erroneous notices. Automatic generation of a TC 599 is done only by the Error Resolution System (ERS).

  3. Whenever a return or payment must be withdrawn from the work flow, immediate consideration must be given to the possibility that erroneous balance due or return delinquency notices may be issued. This includes block deletes, nullified unpostables, and rejects suspense/correction.

  4. If notices would be sent erroneously, Integrated Data Retrieval System (IDRS) action must be input to the correct account by the first person identifying any of the following conditions:

    1. If the return is more than ten weeks past the due date, input TC 599 with Closing Code (cc) 018 on IDRS using Command Code FRM49.

    2. Any subsequent payment transaction (Document (Doc.) Code 017, 018, 019) requires input of Command Code STAUP for six cycles.

      Note:

      STAUP is an IDRS Command Code used to delay issuance of service center notices.

    3. Annotate the document with "TC 599 cc 018" or "STAUP 6" (or similar language) in the upper left margin of the return.

      Note:

      If the document has already been annotated, no further action is required.

  5. A Transaction Code (TC) 599 is not necessary when:

    1. An Error Resolutions System (ERS) Action Code is entered. A fact of filing (TC 599) is automatically generated on IDRS to prevent delinquency notice issuance; therefore, a TC 599 is not necessary.

    2. Returns processed through Integrated Submission and Remittance Processing (ISRP). The payments have already posted on IDRS as a TC 610 (payment received with return) and this satisfies the BMF delinquency check.

      Note:

      Integrated Submission and Remittance Processing (ISRP) replaced the previous Distributed Input System (DIS) and Residual Remittance Processing System (RRPS).

    3. Returns processed through a Collections Function will show a TC 59X in the middle of the left margin of the return.

Service Center Replacement System (SCRS) - Paper Error Register Information

  1. The paper register (error register) is the physical representation of the tax document and any errors that have been identified. It is essentially a printed form of the data input from the document, and appears in a standardized format which is used for nearly every type of SCRS program. Data fields are designated with letters of the alphabet. Each section is designated with the section number.

  2. The first time a document in error prints on a register it is called a "raw" register. Tax examiners will make various corrections to the paper register (error register), trying to correct as many errors as possible. The document and error register are then sent back through the Integrated Submission and Remittance Processing (ISRP) system to be transcribed. If the correction resolves the error, the information is transmitted to the Enterprise Computing Center-Martinsburg (ECC-MTB). If all the errors do not clear, the system will generate a subsequent register (known as a “loop” register) showing the errors that are remaining. The title line will tell you if the register is a raw register or a loop register and how many times (if any) the register has looped.

  3. Each error register will have one or more sections of data. The sections will always start with Section 01. Other sections may follow in ascending order but not necessarily in consecutive order, depending upon which sections have data. For example, an error register may show Section 01 through Section 03, Section 05 and Section 07 because Section 04 and Section 06 did not contain any data.

  4. Each section will contain one or more fields. Each field is identified by a letter of the alphabet, starting at A. The fields print consecutively until the end of the section. For example, Section 02 has six fields, starting at Field 02-A (In-Care-Of Name) and going through Field 02-F (ZIP Code). Unlike the sections, the fields print on the error register whether they contain data or not.

  5. There are two types of fields. They are a variable field and a fixed field.

    1. One type of field is a variable field. For example, Field 02-A ("In-Care-Of" Name) is separated from Field 02-B (Foreign Address) by a plus sign (+). The plus sign identifies Field 02-A ("In-Care-Of" Name) as a variable field and is called a breaker; most of the time the breaker will be a plus sign or (less often) a minus sign. A variable field is a field that can contain a variable amount of data. For example, Field 02-A ("In-Care-Of" Name) can contain up to 35 letters or numbers. You may only need to enter 15 characters in Field 02-A ("In-Care-Of" Name), and that’s fine. As long as you enter less than 36 characters, the field can contain them. See IRM 3.12.16.5.1, Field 02-A, "In-Care-Of" Name.

    2. The other type of field is a fixed field. Unlike the variable field, the fixed field must contain a fixed number of spaces. A good example is an Employer Identification Number (EIN). An EIN always has nine digits, so Field 01-C (EIN) will always have nine spaces. Other examples of a fixed field are Field 01-E (Received Date), which will have eight spaces, or Field 01-B (Name Control), which will have four spaces (characters). The computer identifies a fixed field for you by leaving out the breaker.

    Note:

    You need to know the difference between a fixed field and a variable field because there are times you need to make a correction to a fixed field and the correct entry does not contain all the required spaces. For example, the name control of "COE" . The name control requires four characters. If you only enter three characters, the computer will not accept your entry and the record will loop. You must account for all the spaces in the fixed field. The way to avoid a loop is to enter the data that you have and then account for the blanks left by entering the number of blanks and circling them.

  6. A record of the taxpayer’s return will appear on the paper register (error register) when the computer has detected an error made by the taxpayer, by the Document Perfection tax examiner or by the Integrated Submission and Remittance Processing (ISRP) operator. Errors appear much differently on paper registers (error registers) than they do in ERS (error codes). The computer indicates the errors in two ways: with asterisks and underprints.

    1. One way the computer indicates an error is with an asterisk (*). The computer will place asterisks in front of the field or fields that are in error. The computer is telling you that something is wrong with this field.

    2. Another way the computer indicates an error is with an underprint. Instead of an asterisk, the computer is underprinting with what it thinks the correct information (amount, name control, etc.) should be.

    3. The Error Correction tax examiner must locate the error and correct the error condition or, in the case of a taxpayer error, issue an explanatory notice to the taxpayer. The tax examiner will also be required to manually verify the taxpayer's tax computation in those special instances where the computer is unable to compute tax.

    Note:

    Errors appear much differently on paper registers (error registers) than they do in ERS (error codes). Most errors can be located by an asterisk (*) appearing to the immediate left of the Field Designator. Some are special errors that require unique treatment. Errors can occur anywhere in every section except for the Header Section. Research IDRS with appropriate Command Codes can be used to correct some Entity errors.

General Corrective Procedures

  1. There are four general types of errors which cause a record to print on the error register.

    • Field errors.

    • Section errors.

    • Math errors.

    • Consistency errors.

  2. Field errors are indicated on the error register by an asterisk printed to the left of the field in error. This occurs when a field does not contain required data or when the contents of the field does not meet the requirements for that field. See Figure 3.12.16-1, Field Error.

    Figure 3.12.16-1

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  3. Missing section errors are identified by a (*) single asterisk printed to the left of the section number. A missing section error occurs when a section is missing that the computer identifies as necessary for the correct processing of the return. See Figure 3.12.16-2, Section Error.

    1. If the required data or section was not transcribed, enter the data with Action Code 6. If you can’t find the data by checking the return or researching, you will indicate the return is unprocessable by entering Action Code 3.

    2. Do not try to correct a missing section error by trying to delete the section with Action Code 4. There is no section present (it is missing) and the computer will cause the register to "loop."

    Figure 3.12.16-2

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  4. Extraneous section errors are a type of section error identified by a single pound sign (#) printed to the left of the section number. An extraneous section is one the computer identifies as not necessary for the complete processing of the return. To correct an extraneous section error, do the following:

    1. Examine the return and attachments and determine if the section is needed.

    2. Delete any unnecessary sections with Action Code4; or,

    3. Enter another section with Action Code5; or,

    4. Correct the section with Action Code6.

  5. Terminus section errors are a type of section error identified by two asterisks (**) printed to the left of the section number. A terminus section is a section that does not fit the prescribed requirements for the given section. See Figure 3.12.16-3, Terminus Error. Several things cause Terminus section errors:

    1. Erroneous size of a field or the entire section

    2. Non-numeric character in a numeric field

    3. Improper formatting of the section

    Figure 3.12.16-3

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  6. To correct a terminus section error, do the following:

    1. Check that all necessary sections are present. If not, enter the missing sections with Action Code 5 or correct the terminus sections with Action Code 6.

    2. Re-enter any field in the terminus section with Action Code 6 if the data is correct as it appears in the section.

    3. Delete the section with Action Code 4, if the terminus section is blank and no data is required.

  7. Integrated Submission and Remittance Processing (ISRP) section errors are a type of section error identified by a pound sign (#) and an error number printed to the left of the section number. An ISRP section error occurs after ISRP enters the data on the return into the system, the computer performs an automatic check, called a System Edit Run. If an error is detected, the computer prints a pound sign (#) and an error number to the left of the section number, identifying the type of error detected. An explanation of each error number follows.

    1. #0 - Normal.

    2. #1 - Split screen transmission - The Key Verifier attempted to change the check digits, the Key Verifier changed four or more digits of the Taxpayer Identification Number (TIN), or the Original Entry operator (ISRP operator) entered a required section as "missing" .

    3. #2 - A mixed condition exists, caused by back to back returns with the same data.

    4. #3 - Invalid section ending point.

    5. #4 - Invalid field length.

    6. #5 - Out of sequence section or duplicate section.

    This error will be shown on the error register as follows. See Figure 3.12.16-4, ISRP Error.

    Figure 3.12.16-4

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  8. All fields of an ISRP section error must be examined when this condition exists. For example, if Section 01 of a return is coded, then examine the tax data base section for error to ensure the return data is for the taxpayer whose name control is in Section 01.

  9. Even though one or more sections of a record are coded, the validity and consistency checks necessary for the record are made for all sections.

    1. If the record is correct as it appears on the error register, then use Action Code 7 to send the record to Good Tape.

  10. Corrective action for fields in error shall be taken as instructed in the applicable chapter of IRM 3.12.16.

  11. Math Errors are indicated by the presence of an underprint. A math error occurs when the taxpayer provides incorrect information or there is an editing or transcription causing a computed field to be out of balance. See Figure 3.12.16-5, Math Error.

    Figure 3.12.16-5

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    1. To correct a math error, compare all entries leading to the underprinted field with the return and correct all transcription errors, editing errors, coding and transfer errors on both the return and the error register.

    2. Total Tax Field is computer verified and underprinted only after Total Income and Total Deductions are within tolerance. Therefore, Total Tax may appear valid when either Total Income or Total Deductions are not within tolerance.

    3. After making all possible corrections to the error register and examining the return for manual computation requirements, assign the applicable Taxpayer Notice Code (TPNC).

      Note:

      The term "loop" means the register continues to reappear on the next correction cycle until every validity check has been satisfied.

    4. TPNCs can only be assigned after every validity check has been satisfied. See IRM 3.12.16.3.4.1, Taxpayer Notice Codes (TPNCs).

  12. Consistency errors are indicated by the computer when two or more fields have inconsistent information The error can happen if the input information does not match or is inconsistent with other fields on the error register. An asterisk prints before the fields involved.

    1. To correct a consistency error, check all fields marked with an asterisk for coding errors and transcription errors by comparing the data on the register with the related entry on the return.

    2. Enter Action Code 6 on the error register to the left of the corresponding section number, and correct the field on the error register to agree with the return.

Action Codes

  1. Action Codes are entered on the error register to alert the computer to the type of correction being attempted. The table below lists the Action Codes and describes when each Action Code can be used.

    Action Codes

    Action Code Type of Correction
    0
    1. Action Code 0 is used when data, as transcribed is correct. (Taxpayer's figures must be verified.)

    2. Computer Condition Code (CCC) "Y" may or may not be present. When the "Y" code is required, but has not been entered, enter CCC "Y" and use Action Code 0 on the next correction cycle.

    3. Enter Action Code 0 to the left of Section 01.

    4. No other corrective action can be used.

    1
    1. Action Code 1 is used when the taxpayer has made a math error and a TPNC will be sent.

    2. No other corrective action can be used.

    3. Enter Action Code and taxpayer notice code(s) must be separated with a hyphen (e.g., "1-90" or "1-05-90" ).

    4. Enter Action Code 1 to the left of Section 01.

    2
    1. Action Code 2 is valid for Information Return Processing (IRP) and Reject Register only to delete (D), re-enter (R), or renumber (N) records on the Service Center Control File (SCCF).

    2. Enter Action Code 2 to the left of Section 01.

    3. It is only valid when immediately followed by Error/Reject Disposition Codes D (delete), R (re-enter), or N (renumber).

    4. No other Action Code is valid with Action Code 2.

    3
    1. Action Code 3 is used to reject a record with an unprocessable condition.

    2. Enter Action Code 3 to the left of Section 01.

    3. Prepare and attach Form 3696, Correspondence Action Sheet, (or other approved Correspondence Action Sheet), Form 4227, Intra-SC Reject or Routing Slip, or Form 6882, IDRS/Master File Information Request, for campus routing, whichever is applicable.

    4. No other corrective action can be used with Action Code 3.

    4
    1. Action Code 4 is used to delete a data section that should not be part of the record.

    2. This code can be used to delete Section 02 through Section 12 of a return.

    3. Enter Action Code 4 to the left of the section number being deleted.

    4. Action Codes 4, 5, or 6 may be used on the same correction attempt.

    5
    1. Action Code 5 is used to add a section to the error register.

    2. Enter Action Code 5 to the left, followed by the section number, the alpha field designators and the data for each field.

    3. It is only necessary to enter the fields with data present.

    4. This code can be used to enter Section 02 through Section 12 of a return.

    6
    1. Action Code 6 is used to change data within fields (except remittance and computer generated fields) and to correct terminus errors.

    2. Enter Action Code 6 to the left of the section number.

    Note:

    Sometimes you will need to use Action Code 6 to change a positive field to a negative one or a negative field to a positive one. For example, ISRP may enter the remittance as a positive amount when it should be a negative amount. Use special symbols to change the sign. A positive amount is written with a comma (,) and a negative amount is written with a pound sign (#).

    7
    1. Action Code 7 is used to indicate that the data on the error record is correct. It is used to clear certain validity checks. It is not to be used when underprinted fields are present.

    2. Each correction attempt is subject to tests which ensure proper correction procedures are followed. If a correction attempt fails, the record will reappear or loop, with an Invalid Correction Attempt "AA" printed on the error register. When Error Reason Code "AA" is present, correct the error register as if no other correction attempt has been made. If no correction is necessary after reviewing return with Error Reason Code "AA" , use Action Code 7 to clear the error register.

    3. Enter Action Code 7 to the left of Section 01.

    4. No other corrective action can be used with Action Code 7.

    9
    1. Action Code 9 is used for Reject loop only. Do not use for raw input or error registers.

      Note:

      The first time a document in error prints on a register it is called a "raw" register. Tax examiners will make various corrections to the paper register (error register), trying to correct as many errors as possible. The document and register are then sent back through the Integrated Submission and Remittance Processing (ISRP) system to be transcribed. If the correction resolves the error, the information is transmitted to the Enterprise Computing Center-Martinsburg (ECC-MTB). If all the errors do not clear, the system will generate a subsequent register (known as a “loop” register) showing the errors that are remaining. The title line will tell you if the register is a raw register or a loop register and how many times (if any) the register has looped.

    2. Use Action Code 9 to re-reject a loop register for correspondence or other suspense action.

    3. No other Action Code is valid with Action Code 9.

     

Computer Condition Codes

  1. When a Computer Condition Code (CCC) is not present, and is required, it must be entered in the dotted portion of the income section, Page 1 (Lines 1-11).

  2. A maximum of ten codes can be entered, as required.

Computer Condition Code Chart
  1. Computer Condition Codes (CCCs) are assigned by tax examiners or are computer generated. Presence of one of the following Computer Condition Codes initiates action as explained below.

    Computer Condition Code Chart

    CCC Definition Validity Check or Action
    A No Estimated Tax Penalty
    • Used to suppress the Estimated Tax Penalty when the taxpayer computes zero for the penalty. Enter when the filer attaches Form 2220 showing no liability for the Estimated Tax Penalty.

    No validity check.
    B Electing out of Installment Sales No validity check.
    C Invalid Code - Fall to ERS
    • Code and Edit will edit CCC "C" and force the return to fall to ERS.

    • See IRM 3.12.16.9.5, Additional Credits, for more information.

    Delete CCC "C" and continue normal procedures.
    D Reasonable Cause for Failure to Pay Taxes Timely
    • CCC "D" is no longer edited by Code and Edit (see exception below) when a reason is given for the delay in paying taxes timely (or if the taxpayer requests abatement). Issue Letter 1382C (if Code and Edit has not done so) and continue processing the return.

      Exception:

      Secured returns, IRS prepared returns that were due before July 31, 1996, disaster returns and Reprocessing returns.

    • For secured returns (e.g., taxpayer-signed returns with an attached Form 13133, Expedite Processing Cycle), enter the applicable CCC as indicated on the return or attached form.

    • For IRS prepared returns (e.g., returns notated "6020(b)" or "SFR" (Substitute for Return)), enter the applicable CCC as indicated on the return or attached form.

      Exception:

      Do not enter CCC "D" on an IRS prepared return if the return due date is July 31, 1996, or later. Remove CCC "D" if previously entered.

    • Disaster provisions may apply if the taxpayer has identified the return as being subject to reasonable cause because of a specific disaster declaration.

    • For Reprocessing returns (e.g., returns with an attached Form 13596), enter the applicable CCC as indicated on the return or attached form.

    • The corporation attaches a statement indicating it qualifies for an automatic extension under 26 Code of Federal Regulations (CFR) 1.6081-5 (or regulations under IRC 6081). Do not enter CCC "D" if the return was not postmarked by the 15th day of the 6th month following the end of the tax year, or if the tax shown due on the return was not paid by that day ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    • A "Final" return is received after the short period due date but received timely ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ before the regular full tax period due date.

    Do not use CCC "D" if a prepaid penalty is included.
    E Potential Identify Theft Filing
    • Effective January 1, 2017, Computer Condition Code "E" may be edited on Form 1120-FSC, Form 1120-ND, and Form 1120-SF (any year) by the BMF ID Theft Liaison to identify a potential identity theft filing.

    • See IRM 3.12.16.2.4, BMF Identification (ID) Theft, for additional information.

    No validity check.
    F Final Return
    1. Enter when the "Final Return" box on Page 1 of the return is checked.

    2. Enter when there is an indication that the corporation is not liable for filing future returns. Notations may include (but are not limited to):

      • "Final" ,

      • Deceased,

      • Out of Business,

      • Liquidation,

      • Exempt under IRC 501(c)(3), or

      • Dissolved.

    A "final" return may not have CCC "Y" or a Credit Elect amount in Field 07-J (Credit to Next Years Estimated Tax).
    G Amended Return
    1. Enter when a taxpayer notes amended, superseding, duplicate, substitute, corrected, etc., on the return.

    2. If there is an incomplete return (e.g., return is missing multiple items of information, only Page 1 is present, etc.), then do the following:

      1. Research IDRS using appropriate Command Code (CC) (e.g., BRTVU, BMFOL, SUMRY and TXMOD) for the status of the return.

      2. Check to see if there is a posting (TC 150) of the return for the tax period.

      3. If there is a posting, enter "G" in Field 01-F (CCC) and delete subsequent significant entries and sections

        • Delete all fields in Section 01 past Field 01-F (CCC).

        • Delete all CCCs except "G" in Field 01-F (CCC).

        • If Field 01-E (Received Date) is blank, enter the correct received date. See IRM 3.12.16.4.9, Field 01-E, Received Date.

        • Enter Action Code 6 to the left of Section 01.

    3. If there is not a posting, correspond (e.g., Letter 118C, Corporate Return Incomplete for Processing: Form 1120, Form 1120 Series, Form 1120S) for all missing information with Action Code (AC) 3.

    4. If unable to correspond, destroy the return in accordance with classified waste procedures.

    No other code is allowed, except CCCs "U," "W," and "3" (see instructions for Computer Condition Codes for additional criteria).
    L Treaty-Based Return Position Disclosure
    • Enter when the taxpayer indicates IRC 6114 Election or Form 8833 is attached to the return.

    CCC "L" is not valid on Form 1120-ND or Form 1120-SF.
    N Joint Committee Case
    • Used when an unusual credit is claimed on the Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, and Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B).

    • See IRM 3.12.16.6.8, Audit Codes, for additional information.

    CCC "N" is not valid on Form 1120-ND.
    O Manual Refund
    • Used when the taxpayer applies for a quick refund of overpayment, or a manual refund is sent. Enter when Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax or Form 3753, Manual Refund Posting Voucher, is attached to the return.

    No validity check.
    Q Return Filed Claiming Telephone Excise Tax Refund (TETR) Only (Form 8913, Credit for Federal Telephone Excise Tax Paid)
    • CCC "Q" is no longer edited by Code and Edit. If CCC "Q" is edited in error by Code and Edit, remove CCC "Q" .

    • See IRM 3.12.16.8.14, Field 07-R, Credit for Federal Telephone Excise Tax Paid and IRM 3.12.16.16, Section 20, Data - Form 8913, Credit for Federal Telephone Excise Tax Paid, for additional information.

     
    R Reasonable Cause for Failure to File Return Timely
    • CCC "R" is no longer edited by Code and Edit (see exception below) when a reason is given for the delay in filing a return timely (or if the taxpayer requests abatement). Issue Letter 1382C (if Code and Edit has not done so) and continue processing the return.

      Exception:

      Secured returns, Disaster returns and Reprocessing returns.

    • For secured returns (e.g., returns with an attached Form 13133), enter the applicable CCC as indicated on the return or attached form.

    • Disaster provisions may apply if the taxpayer has identified the return as being subject to reasonable cause because of a specific disaster declaration.

    • For Reprocessing returns (e.g., returns with an attached Form 13596), enter the applicable CCC as indicated on the return or attached form.

    • The corporation attaches a statement indicating it qualifies for an automatic extension under 26 CFR 1.6081-5 (or regulations under IRC 6081). Do not enter CCC "D" if the return was not postmarked by the 15th day of the 6th month following the end of the tax year.

    • A "Final" return is received after the short period due date but received timely ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ before the regular tax period due date.

    No validity check.
    S Form 8883, Asset Allocation statement under section 338
    • Enter CCC "S" when Form 8883 is attached.

    Not valid on Form 1120-ND and Form 1120-SF.
    T Form 8886, Reportable Transaction Disclosure Statement
    • Enter CCC "T" when Form 8886 is attached.

     
    U Unprocessable Return Use Action Code 3.
    W Return Cleared by Statute
    • Used to bypass the statute check. Enter when the return is stamped Cleared by Statute.

    The Computer Condition Code field will asterisk if a statute return has no CCC "W," or if CCC "W" is present on a non-statute return.
    X Credit Freeze
    • Enter when the taxpayer indicates that excess remittance or overpayment is to be applied to another account. Also, use to freeze a refund.

    If there's "No Reply" on a refund return that is missing a signature, enter CCC "3" and CCC "X" .
    Y Short Period Return Due to Change of Accounting Period
    • Enter only on a short period return that is due to a "change of accounting period" . The return is accepted as submitted, and the Master File is updated.

    Do not use CCC "Y" on an "initial" or "final" return. The return must be manually verified. Clear the error register with Action Code 0.
    1 Form 8824,Like-Kind Exchanges
    • Enter when Form 8824 is attached.

    No validity check.
    2 Form 8938, Statement of Foreign Financial Assets
    • Form 8938 is to be filed by U.S. taxpayers with foreign financial assets of more than $50,000.

    If attached to the return, no action is required.
    3 No Reply
    • Used for No Reply, Reply with Some Information, and Reply with No Information. Enter to show incomplete or no reply to correspondence. Credit interest is suppressed.

    See the Note at the end of this chart.
    7 Reasonable Cause Denied
    • CCC "7" is no longer edited by Code and Edit tax examiners.

    • See CCC "D" , Reasonable Cause for Failure to Pay Taxes Timely, and CCC "R" , Reasonable Cause for Failure to File Return Timely.

    No validity check.
    8 Waiver of Estimated Tax Penalty or Estimated Tax Penalty Annualization Exception
    • Enter when the taxpayer completes Form 2220 or worksheet that shows an exception from the estimated tax penalty due to annualization.

    No validity check.

     

    Note:

    If there is an overpayment on no reply correspondence, input CCC "3" and CCC "X" . The CCC "X" will freeze the refund.

Math Error Preliminary Review

  1. A math error will occur when the taxpayer provides incorrect information (or there is a coding error or transcription error) in any of the following fields:

    • Tax Period (Field 01-D).

    • Penalty and Interest Code (Field 03-D).

  2. Take the following action during the preliminary review process:

    Math Error Preliminary Review

    If Then
    The data is inconsistent or undeterminable, Correspond with the taxpayer for clarification.
    The Taxable Income Brackets are questionable, Consult with your lead tax examiner.

     

  3. Prepare Letter 3833C, Tax Return Adjustment Explained (BMF), (or other appropriate letter) to notify the taxpayer of errors or adjustments to the return when a TPNC will not be sent.

  4. Prepare Letter 3833C (or other appropriate letter) when:

    1. An adjustment is made to income and deductions which affects the total taxable income ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the total taxable income is a loss;

    2. An adjustment to the Net Operating Loss Deduction (NOLD) changed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ in Foreign Tax Investment Credit, Work Opportunity Credit, Employer Stock Ownership Credit, Research Credit, Possessions Tax Credit, Credit for Alcohol Used as Fuel, Production Tax Credit, General Business Credit or Prior Year Minimum Tax Credit.

Taxpayer Notice Codes (TPNCs)
  1. Valid TPNCs for Form 1120-FSC, Form 1120-ND, and Form 1120-SF: 05, 10, 41, 88, 89, and 90.

  2. The following Taxpayer Notice Code (TPNC) table identifies the TPNC, its explanation and valid forms. See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

    Taxpayer Notice Codes (TPNCs)

    TPNC Explanation Valid Form(s)
    05 We found an error in the computation of your total income tax. ALL
    10 We found an error in the computation of the tax due or overpayment amount. ALL
    41 We computed your tax for you. ALL
    88 We changed your telephone excise tax refund amount based on the information you provided. ALL
    89 We changed your tax and/or credits because we did not receive the additional information we requested. The change includes the disallowance of all or part of your telephone excise tax refund you requested on your tax return. We previously sent you a separate letter explaining the disallowance. ALL
    90 Fill-in narrative. This math error contains fill-in free form text with maximum of 10 lines, 70 characters per line.

    Note:

    In January 2014, the Taxpayer Notice Code (TPNC) 90 Math Error (ME) Code literals/language were programmed into the OnLine Notice Review (OLNR) Retype Application for Notice Review (NR). This addition will eliminate the need for the NR tax examiner to manually type the notice literal and reduce potential copying/typing incorrect paragraphs/messages in the notices. For a full listing of the programmed TPNC 90 Math Error Codes, see TPNC 90 Math Error Code Job Aid on Servicewide Electronic Research Program (SERP) at http://serp.enterprise.irs.gov/databases/portals.dr/sp-portal/bmf.dr/bmf_ers/job_aid.dr/TPNC-90-Math-Error-Code-Job-Aid.doc

    ALL

Unprocessable Conditions

  1. Reject an error record with Action Code 3 when:

    1. It is a tax period prior to 198412 for Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Persons.

    2. It is a tax period prior to 198501 for Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation.

    3. It is a tax period prior to 199301 for Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B).

      Note:

      Prior to 1993, Form 1120-SF was Form 1120-DF, U.S. Income Tax Return for Designated Settlement Funds (Under Section 468B). Form 1120-DF is now obsolete. If Code and Edit receives a Form 1120-DF, they are required to convert it to a Form 1120-SF.

    4. It is a tax period prior to 198701 for 1120-PC.

  2. Reject an error record with Action Code 3 when it is international related and one of the following conditions is present:

    • Contains a foreign address

    • Claims Possessions Tax Credit (197601 and later)

    • Claims Credit for Income Tax Withheld (or paid) at source (Form 1042-S credit) (OSPC only)

    • Requests extension for Form 1120-FSC or

    • For Form 1120-FSC (OSPC only)

  3. Reject an error record with Action Code 3 when one of the following situations are present:

    • The return covers multiple tax periods or reports multiple types of tax.

    • The return is misblocked.

    • The return requires correspondence with the taxpayer for missing or clarifying information.

    • The return indicates Tax Exempt Status pending.

    • The return is a potential Statute case not cleared by Statute Control Group.

    • The return indicates "Pro Forma" or "Pro Forma 1120", "Pro Forma Form 1120 for New York State", or similar statement. The "Pro Forma" return should not be processed.

    1. If a "Pro Forma" return is attached to a Form 1120 series return, do not detach. Move the "Pro Forma" return to the back of the document.

    2. If a "Pro Forma" return is received and not attached to a Form 1120 series return, then delete the DLN and return the "Pro Forma" return to the taxpayer using Form 6800 (or other appropriate letter). Include the following (or similar language) in the open paragraph: "The attached form appears to have been sent to us in error. Please keep it for your tax records."

    Note:

    Pro Forma returns are an exception to the Chief Counsel opinion (effective October 5, 2009) that tax examiners will no longer send returns back to the taxpayer when corresponding for missing signature, missing information and supporting schedules and documentation on refund or zero balance returns.

  4. When a record is rejected, it will be necessary to prepare one or more of the following:

    1. Form 4227, Intra-SC Reject or Routing Slip (or other appropriate routing slip). Notate the reason for rejecting the document. See Figure 3.12.16-6, Form 4227, Intra-SC Reject or Routing Slip.

    2. Form 10886, Reject Routing Slip (or other appropriate routing slip). Check the reason (or notate the reason in the "Other" area) for rejecting the document.

    3. Form 3696, Correspondence Action Sheet, (or other approved Correspondence Action Sheet), used to correspond with the taxpayer.

    4. Form 6882, IDRS/Master File Information Request.

  5. Input Transaction Code (TC) 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49 to prevent delinquency notice from generating. Input TC 599 with cc 018 on IDRS using Command Code FRM49 if the form is being processed after the program completion date (PCD) and TC 599 with cc 017 has not already been input. IRM 3.12.16.2.19, Suppression of Erroneous Balance Due and Return Delinquency Notices - Reject/Suspense Correction, for additional information.

    1. If the EIN, Name Control, Master File Tax (MFT) or Tax Period is missing, do not input TC 599 with cc 017.

    2. If the document was secured by Compliance, do not input TC 599 with cc 017.

    Figure 3.12.16-6

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Single and Double Alpha Field Designators (AFDs)

  1. In a mixed section with both single and double alpha fields, the single alphas must have a space between the AFD and the money amount.

    Note:

    A space should be indicated by entering the number of spaces with a circle around it.

    • For single Alpha Field Designator (AFD) fields in an a single/double field section, the correction would be entered as : 608A (1 with a circle around it) 557600, where 6 is the Action Code, 08 is the section number, A is the AFD, 1 with a circle around it is the space, and 557600 is the money amount.

    • For double AFD fields in a single/double field section, the correction would be entered as: 608AB557600, where 6 is the Action Code, 08 is the section number, AB is the AFD, and 557600 is the money amount.

    • Any section with just single AFDs would be corrected as: 610B12345, which is the normal correction procedures.

Corporation Edit Sheet (Form 3892)

  1. Due to the Form 1120, U.S. Corporation Income Tax Return, redesign, the Form 3892, Corporation Edit Sheet, will no longer be used in Code and Edit. The applicable fields will be edited in the margin to the left of "Deductions" section of the return.

    Exception:

    For Form 1120-FSC, the applicable fields will be edited in the left margin near Line 2.

Introduction of Form 1120-FSC, Form 1120-ND and Form 1120-SF

  1. Form 1120-FSC - U.S. Income Tax Return of a Foreign Sales Corporation, Document (Doc). Code 07. See Exhibit 3.12.16-1, Form 1120-FSC, for the Sections and Fields.

  2. Form 1120-ND - Return for Nuclear Decommissioning Funds and Certain Related Persons, Doc. Code 08. See Exhibit 3.12.16-2, Form 1120-ND, for the Sections and Fields.

  3. Form 1120-SF - U.S. Income Tax Return for Settlement Funds (Under Section 468B), Doc. Code 06. See Exhibit 3.12.16-3Form 1120-SF, for the Sections and Fields.

Section 01, Data - Form 1120-FSC, Form 1120-ND and Form 1120-SF

  1. Section 01 shall always be present.

  2. It can’t be deleted or added. Action Codes 4 and 5 will never be used.

  3. The error indicators that apply are the asterisk, underprint, ISRP Errors and Terminus.

  4. Fields 01-A (Remittance), 01-B (Name Control), and 01-C (EIN) are fixed fields and all positions shall be accounted for. The remaining fields are variable in length.

  5. The record can be accepted (Action Code 0), rejected (Action Code 3), or changed (Action Code 6).

  6. Form 1120-FSC is processed in OSPC only.

  7. Only Section 01 will print on a "G" coded return.

    1. Manual math verification is not required.

    2. All other records must be math verified and cleared with Action Code 0 or Action Code 1.

  8. Form 1120-FSC, Form 1120-ND and Form 1120-SF require manual computations except "G" coded returns. See IRM 3.12.16.18, Manual Computations, for procedures.

Section 01, Error Register Format

  1. The chart below shows Section 01: Alpha Field Designator (AFD), Title, Field Length and Location on the Return.

    Section 01

    Section 01 AFD Title Field Length Location on the Return
    A Remittance 11 Page 1, balance due area.
    B Name Control/Check Digit 4 Page 1, first name line.
    B Name Control/Check Digit (Generated Underprint) 4  
    C Employer Identification Number 9 Page 1, EIN line.
    D Tax Period Ending 6 Page 1, edited to the right/above the title of the form.
    D Tax Period Ending (Generated Underprint) 2  
    E Received Date 8
    • Form 1120-FSC - Page 1, IRS date stamp, or edited to the dotted portion of Line 1 under Tax and Payments

    • Form 1120-ND - Page 1, IRS date stamp, or edited to the dotted portion of Lines 7 through 14

    • Form 1120-SF - Page 1, IRS date stamp, or edited to the dotted portion of Lines 9 through 13

    F Computer Condition Codes (CCC) 10
    • Form 1120-FSC - Page 1, dotted portion of Lines 3 or 4

    • Form 1120-ND - Page 1, dotted portion of Lines 1 thru 4

    • Form 1120-SF - Page 1, dotted portion of Lines 1 thru 6

    G Correspondence Received Date 8 SCRS field only.
    H Preparer Checkbox Indicator 1 Page 1, lower right margin next to the Discuss with Preparer Checkbox.
    I Preparer Phone Number 10 Bottom of Page 1.
    J Preparer Tax Identification Number (PTIN) 9 Bottom of Page 1.
    K Firm's Employer Identification Number (EIN) 9 Bottom of Page 1.
    L Entity Underprint Code (Generated Underprint) 1  
    M Taxpayer Notice Code 6 Page 1, edited in upper left corner of Page 1.
    N Tax Period Beginning 8 Page 1, edited in the area above/near the form title

     

Field 01-A, Remittance

  1. Field 01-A (Remittance) can never be changed with Action Code 6. If the remittance was transcribed incorrectly take the following action:

    1. Reject the record with Action Code 3.

    2. Prepare Form 4227 (or other appropriate routing slip) notating "Remittance in Error" or "Unidentified Remittance" and route to Rejects.

  2. This field will be blank for non-remittance returns, overpaid returns and remittance returns processed through Integrated Submission and Remittance Processing (ISRP).

    Note:

    Integrated Submission and Remittance Processing (ISRP) replaced the previous Distributed Input System (DIS) and Residual Remittance Processing System (RRPS).

  3. Field 01-A (Remittance) will asterisk if present on a non-"G" coded return when Total Tax Computed is zero or blank, or if Total Tax Taxpayer is zero or blank. Take the following action:

    If Then
    There is a math error, Enter appropriate TPNC with Action Code 1.
    There is no math error, Reject the record with Action Code 3 for transfer of payment off the record.
  4. On the loop, Field 01-A (Remittance) will not asterisk on Form 1120-FSC, Form 1120-ND and Form 1120-SF.

    Note:

    Field 07-A can never be blank if Field 01-A (Remittance) has an entry. Enter .01 (1 cent) in Field 07-A if the remittance amount in Field 01-A (Remittance) is the estimated penalty in Fields 07-H plus 07-I.

Field 01-B, Name Control

  1. This is a four position field and is used for either the check digits (two letter code preprinted on the label which is assigned to the taxpayer) or the name control (the first four significant characters of the corporation except when the first word is "the" and is followed by more than one word). For information on determining the Name Control, refer to Document 7071-A, Name Control Job Aid - For Use Outside of the Entity Area.

  2. This field must contain one to four characters. The valid characters are:

    1. Numeric

    2. Alpha

    3. Ampersand

    4. Hyphen

      Note:

      Change a slash (/) or period (.) in the name control to a dash (-).

  3. The name control field may contain one to three blanks.

    1. The name control must have an alpha or numeric in the first position.

    2. The remaining positions must be alpha, numeric, hyphen, ampersand, or blank.

    3. No character may follow a blank.

    4. If the correction contains less than 4 characters, enter the significant characters and circle the number of remaining positions.

    5. The check digit must have blanks in the first two positions and a letter other than "E," "G" or "M" in the last two positions.

    6. When the check digit is present, the computer verifies it with Field 01-C (EIN). Always enter the name control to correct invalid check digits.

  4. Take the following action:

    Field 01-B Criteria

    If Then
    There are no errors in the check digits, Enter the name control in Field 01-B (Name Control).
    The EIN is transcribed correctly, Enter the name control in Field 01-B (Name Control).
    The name control is invalid or blank,
    1. Check for coding errors and transcription errors.

    2. Enter the correct data in Field 01-B (Name Control).

    The name control can’t be determined, Research using Integrated Data Retrieval System (IDRS).

     

  5. All returns and documents input through ISRP shall have the name control and tax period validated on the EIF (Entity Index File).

  6. Field 01-B (Name Control) or Field 01-D (Tax Period) will underprint if the transcribed field and the EIF name control or tax period don’t match.

  7. Compare the entries in Field 01-B (Name Control) and 01-C (EIN) with the return, to determine the corrective action necessary.

    EIN and Name Control

    If Then
    The EIN on the return and the EIN in Field 01-C (EIN) do not agree, Correct Field 01-C (EIN) to agree with the return.
    The name control on CC INOLES and Field 01-B (Name Control) agree and it is edited properly, Enter a "1" in Field 01-L (Entity Underprint Code).
    The name control on the return and Field 01-B (Name Control) do not agree or was transcribed incorrectly, Change Field 01-B (Name Control).
    The correction does not agree with the name control underprint, Enter a "1" in Field 01-L (Entity Underprint Code).
    The EIN on the return agrees with the EIN in Field 01-C (EIN), Determine why the name control is underprinted.
    The name control edited on the return agrees with the name control Field 01-B (Name Control),
    1. Compare the name control underprint with the Field 01-B (Name Control). If it is obvious that the underprint was caused by the name being illegible, or coded wrong, change Field 01-B (Name Control) to agree with the name control underprint.

    2. If it is not an obvious error, research IDRS using Command Code (CC) INOLES, then use the following Command Codes:

      1. NAMEB/NAMEE to research for the EIN on the return.

      2. ENMOD to research for the name on the return.

      3. BMFOL for the EIN on the return or EIN found on CC ENMOD.

    The taxpayer checks the name change box, Research Integrated Data Retrieval System (IDRS) using appropriate Command Codes.
    1. If the name change has been completed or is pending, enter appropriate code in Field 01-L (Entity Underprint Code).

    2. If research indicates no name change:

      1. Reject and route the return to Entity Control following local procedures.

      2. Attach Form 4227 (or other appropriate routing slip) notating why the return is being routed.

     

  8. From the research, determine the correct EIN and name control for the return on the error register. Take the following action:

    Correction Procedures

    If Then
    Another EIN is found for the entity on the return, Change Field 01-C (EIN) to the correct EIN and follow procedures in the first table under (7) above.
    Multiple EINs are found, Forward the case to Entity Control following local procedures.
    The EIN on the return is correct and the taxpayer just rearranged the name on the return, Change Field 01-B (Name Control) to agree with the name control on the BMF.
    The EIN on the return is correct, but the name control on the BMF is not conforming to the acceptable rules for name controlling:
    1. Correct Field 01-B (Name Control) to agree with the name control on the BMF.

    2. Copy Page 1 of the return, attach any research and forward the case to Entity Control following local procedures. Notate on Form 4227 (or other appropriate routing slip) what action needs to be taken.

    3. If the EIN on return and Field 01-C (EIN) agree, but does not agree with the name on the BMF, forward the case (along with any research) to Entity Control following local procedures.

    See Figure 3.12.16-7, Entity Control Routing.

     

    Figure 3.12.16-7

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Field 01-C, Employer Identification Number (EIN)

  1. The EIN is located in the box indicated on the return or on the preprinted label.

  2. This field must:

    • Contain nine numerics.

    • Not begin with 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.

    • Not be all zeroes or all nines.

  3. Correct all misplaced entries, coding errors and transcription errors.

    Correction Procedures

    If Then
    Field 01-C (EIN) is invalid, Examine the return and attachments.
    A correct EIN is found, Enter in Field 01-C (EIN).
    Correct EIN can’t be found, Research using IDRS.
    The invalid EIN has credits that apply to the return being processed, Move the credits to the correct EIN.

     

    Reminder:

    If you change the EIN and Field 01-B (Name Control) or Field 01-D (Tax Period) is underprinting, then check to see if you must enter Field 01-L (Entity Underprint Code).

  4. If the Employer Identification Number (EIN) is changed from the one the taxpayer used, issue Letter 3875C, Missing or Incorrect EIN on Return - BMF/EPMF, as a non-suspense letter to the address on the return. Continue processing the return.

    Note:

    Do not send Letter 3875C when:
    1. Three or less digits of the EIN are transposed, different or missing, or
    2. Command Code (CC) INOLES indicates the account has been "merged to" or "merged from," or
    3. The TIN on the return is the taxpayer's Social Security Number (SSN) (check CC INOLEG).

  5. Suspense Correction:

    1. If there is an indication that Entity Control has assigned an EIN to the return, enter the Entity Assignment Date (found in the lower left corner of Page 1 of the return) in Field 01-G (Correspondence Received Date), if it is later than the received date and return due date.

    2. If the EIN is changed from the taxpayer's entry and Entity has not already issued Letter 3875C, CP 576, We Assigned an EIN, (or other appropriate EIN letter or notice), issue Letter 3875C as a non-suspense letter to the address on the return.

      Note:

      Do not send Letter 3875C when:
      1. Three or less digits of the EIN are transposed, different or missing, or
      2. Command Code (CC) INOLES indicates the account has been "merged to" or "merged from," or
      3. The TIN on the return is the taxpayer's SSN (check CC INOLEG).

Field 01-D, Tax Period Ending

  1. Field 01-D contains the ending month and year of the tax period in YYYYMM format.

  2. The following procedures address invalid tax periods for EARLY FILERS.

    1. The tax period is computer generated as a current calendar year return when ISRP inputs a blank.

    2. It can’t be after the current year and month or prior to the following periods:

      Form and Tax Period

      Form Period
      1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation 198501
      1120-ND, Return for Nuclear Decommissioning Funds and Certain Persons 198412
      1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B) 199301

       

    3. If the tax period is equal to the year and month of the process date, the tax period will asterisk.

    4. For tax periods that are later than or equal to the current month and year:

      Correction Procedures

      If Then
      Later by a year or more, Change to a current fiscal or calendar year.
      Later by not more than one month, or the taxpayer indicates "no income," Reject the record and attach Form 4227 (or other appropriate routing slip) notating "Release end of appropriate month" .
      Later by more than one month with no explanation such as "Final" or "no income," Correspond for confirmation of tax period ending.
      Later by more than one month and taxpayer indicates "Final" on the return, Reduce the tax period to the month prior to the current processing month. See Figure 3.12.16-8, Tax Period Correction.

       

    Figure 3.12.16-8

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Field 01-D - Statute Control Documents

  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. A statute control document is a document that is filed for a barred period. A barred period is a taxable period on which statutory limitations are placed for allowing refunds, credits, or for assessing additional taxes.

  3. A claim for refund must be filed or additional tax assessments must be made not later than three years from the date the original return was filed or two years from the date the tax was paid.

  4. Process non-"G" coded returns as follows:

    1. Identify a return for statute control action if the current processing date is two years and nine months, or more, after the original due date or the received date, whichever is later, and has not cleared the Statute Control Group. Reject and route the return using Form 4227 (or other appropriate routing slip).

    2. Field 01-D will asterisk for Statute check if the processing date is two years and nine months, or more, after the original due date or the received date, whichever is later and CCC "W" is not present.

  5. Process "G" coded returns as follows:

    1. Identify a return for statute control action if the current processing date is two years and nine months, or more, after the original due date or the received date, whichever is later, and has not cleared the Statute Control Group. Reject and route the return using Form 4227 (or other appropriate routing slip).

    2. Field 01-D will asterisk if the processing date is two years and nine months, or more, after the original due date or the received date, whichever is later, and CCC "W" is not present.

  6. On both non-"G" and "G" coded returns both Fields 01-D and 01-F (Computer Condition Codes) will asterisk if the processing date is less than two years after the Return Due Date and a CCC "W" is present.

    1. Correct the Tax Period or Computer Condition Code, whichever is incorrect.

  7. Statute returns must be routed to the Statute Control Group daily, or more often, if needed.

    Exception:

    Do not route to the Statute Control Group for clearance, enter CCC "W" and continue processing if any of the following conditions are present:

    • Compliance (IRC 6020(b)) returns.

    • 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 (e.g., Substitute For Return (SFR)) in top margin of the return.

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

  8. If there is an indication that the return has already been cleared through the Statute Control Group within the last ninety days, then enter CCC "W" . Code and Edit will enter CCC "W" if the return has been cleared by Statute.

    Note:

    The May 16, 1986, Federal Register published Temporary Regulations concerning returns filed with Election under IRC 338(g). Receipt of such returns where the statutory period for assessment has expired should be expeditiously processed as if the statute had not expired. Enter CCC "D" and CCC "R" if the return contains a statement indicating that it qualifies for a waiver under Treasury Regulations (Treas. Reg.) 1.338-10(b). In addition, enter CCC "W" to bypass Statute checks, if the current processing date is two years and nine months, or more, after the original due date or the received date, whichever is later.

  9. If no indication, reject the record, attach Form 4227 (or other appropriate routing slip) to return and route to Statute Control Group.

  10. If it appears that a rejected document will not reach the Statute Control Group in time for clearance, then photocopy Page 1 of the return, stamp the photocopy "Photocopy-Do not process" and forward it to the Statute Control Group.

Field 01-D - Tax Period Underprint

  1. Compare the EIN on the return with Field 01-C (EIN) and apply the following corrective procedures when the tax period underprints. See Exhibit 3.12.16-14, Tax Period Underprint Flow Chart, and Exhibit 3.12.16-15, Tax Period Underprint Flow Chart for "Reply" and "No Reply" , for additional information.

    Correction Procedures

    If Then
    The EINs do not agree,
    1. Change Field 01-C (EIN) to agree with the return.

    2. Enter the appropriate code in Field 01-L (Entity Underprint Code).

    The EINs agree, Compare the tax period on the return with Field 01-D (Tax Period).
    1. If the tax period on the return does not agree with Field 01-D, change Field 01-D to agree with the return.

    2. If the corrected tax period does not agree with the underprint, continue in (2) below.

    The EIN and tax period on the return agree with Field 01-C (EIN) and Field 01-D (Tax Period) and are transcribed correctly, but do not agree with the underprint, Continue in (2) below.

     

    Note:

    Tax periods reported under the 52-53 week rule may end not more than 6 days before, and not more than 3 days after, the end of a month. Be aware of special situations such as 52-53 week filers before changing the tax period.

  2. If the tax period on the return is for a short period, "Final," "Change in Accounting Period" or "Initial," proceed as follows:

    Correction Procedures

    If Then
    A "Final" return, Enter CCC "F" in Field 01-F (CCC).
    A "Change of Accounting Period" and Field 01-F (CCC) contains a "Y" , Return must be manually verified.
    1. Clear the error register with Action Code 0.

    2. Enter the appropriate code in Field 01-L (Entity Underprint Code).

    It is not a "Final" return or a "Change of Accounting Period" , Review the return for a statement that the taxpayer is complying with:
    1. Treasury Regulation (Treas. Reg.) 1.442-1(c) or (d), Treas. Reg. 1.1502-76, Section 444, or

    2. Revenue Procedure (Rev. Proc.) 76-10, Rev. Proc. 82-25, Rev. Proc. 85-58, Rev. Proc. 87-32, Rev. Proc. 92-13, Rev. Proc. 2000-11, Rev. Proc. 2002-37 or Rev. Proc. 2006-45, 2006-46 or

    3. IRC 898(c)(1)(A), IRC 898(c)(2) or IRC 1398.

    A statement is attached stating that the taxpayer is complying with one of the Treasury Regulations or Rev. Proc. listed above, except Treasury Regulation 1.442-1(c) or (d) or Rev. Proc. 82-25,
    1. Enter CCC "Y" in Field 01-F (CCC).

    2. Enter the appropriate code in Field 01-L (Entity Underprint Code).

    The taxpayer is complying with Treasury Regulation 1.442-1(c) or (d) or Rev. Proc. 82-25,
    1. Enter CCC "Y" in Field 01-F (CCC).

    2. Enter the appropriate code in Field 01-L (Entity Underprint Code).

    3. Verify information or research IDRS.

    The above mentioned conditions do not apply, Research IDRS using Command Code (CC) ENMOD (or other applicable CC) for the following transaction codes:
    1. TC 052 - Reverses TC 053, TC 054 and TC 055.

    2. TC 053 - Form 1128, Application to Adopt Change, or Retain a Tax Year, filed and tax period approved for other than Rev. Proc. 87-32. This code applies to all Form 1120 series

    One of the above transactions is present, and the tax period matches the taxpayer’s tax period on the return, Enter a "2" in Field 01-L (Entity Underprint Code).
    One of the above transactions is present, and the tax period underprint does not match the taxpayer’s intended tax period on the return,
    1. Route to Entity Control for validation of the transaction code.

    2. Attach Form 4227 (or other appropriate routing slip) with an explanation as to why the document is being sent to Entity Control.

    None of the transaction codes are present on the entity module, Correspond with the taxpayer for tax period approval.
    The taxpayer replies with an approved copy of 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, Forward to Entity Control so they may update the Fiscal Year Month (FYM) on the Master File.
    The taxpayer fails to reply, or does not provide tax period approval,
    1. Enter CCC "Y" in Field 01-F (CCC).

    2. Enter a "2" in Field 01-L (Entity Underprint Code).

    The taxpayer states this is an "Initial" return; it may be for a full 12 months or a short period. Normally, an "initial" return will post without matching on FYM. However, if a tax module has been established for the Master File Tax (MFT) that is on the return, it will unpost. Research using IDRS.
    Research shows no tax modules for MFT 02; this is the first return for the taxpayer, Input TC 016 to change the FYM to agree with the taxpayer’s return.
    Research shows tax modules already established for MFT 02, but no returns posted prior to the tax period of the return,
    1. Input TC 016 to change the FYM to agree with the taxpayer's return.

    2. Release the return from the error register one (1) cycle after the TC 016 is input.

    3. Move the extension, payments and credits, etc., to the correct tax period, or prepare Form 3465, Adjustment Request, for routing to Accounts Management, to request that the extension, payments and credits, etc., be moved to the correct tax period. Enter a CCC "X" in Field 01-F (CCC) and write a note on the bottom of Form 3465 to remove "X" once credits have been moved.

    4. Input a TC 590 with Closing Code (cc) 020 to the module that was established erroneously.

     

    Note:

    Tax periods reported under the 52-53 week rule may end not more than 6 days before, and not more than 3 days after, the end of a month. Be aware of special situations such as 52-53 week filers before changing the tax period.

  3. If the return covers a full 12 months and the Fiscal Year Month (FYM) in Field 01-D (Tax Period) does not agree with the underprint, research using IDRS.

    1. Research using Command Code (CC) BMFOL, CC INOLE or CC ENMOD for the entity and the MFT of the return.

    2. Review the transactions posted for the tax periods on the BMF.

    Correction Procedures

    If Then
    Returns filed (TC 150), and the TC 150 are all for the same FYM as the return:

    Note:

    There is a tax module for the same FYM as the underprint with extension, payments, credits, etc., posted, that apply to the return being processed.

    1. Input TC 016 to change the FYM on the BMF to agree with the return.

    2. Release the return from the error register one (1) cycle after the TC 016 is input.

    3. Enter a "2" in Field 01-L (Entity Underprint Code).

    4. Move the extension, payments, and credits, etc., to the correct tax period, or prepare Form 3465, Adjustment Request, for routing to Accounts Management, request that the extension, payments, and credits, etc., be moved to the correct tax period. Enter a CCC "X" in Field 01-F (CCC) and write a note on the bottom of Form 3465 to remove "X" once credits have been moved.

    5. Input a TC 590 with Closing Code (cc) 020 to the module that was established erroneously.

     

    Note:

    Tax periods reported under the 52-53 week rule may end not more than 6 days before, and not more than 3 days after, the end of a month. Be aware of special situations such as 52-53 week filers before changing the tax period.

  4. Initiate correspondence with the taxpayer, requesting a clarification of the accounting period, if the posted TC 150 are for various tax periods (no pattern), or posted TC 150 are all for the same FYM but disagree with the tax period of the return. Telephone contact may be used.

    1. The table below establishes procedures for processing correspondence.

      If Then
      The taxpayer replies and identifies the correct tax period and it agrees with the return tax period,
      1. Input TC 016 to change the FYM on the BMF to agree with the return.

      2. Release the return from the error register one (1) cycle after the TC 016 is input.

      3. Enter a "2" in Field 01-L (Entity Underprint Code).

      4. Move the extension, payments, and credits, etc., to the correct tax period, or prepare Form 3465, Adjustment Request, for routing to Accounts Management, request that the extension, payments, and credits, etc., be moved to the correct tax period. Enter a CCC "X" in Field 01-F (CCC) and write a note on the bottom of Form 3465 to remove "X" once credits have been moved.

      5. Input a TC 590 with Closing Code (cc) 020 to the module that was established erroneously.

      The taxpayer replies and identifies that the tax period on the return is not correct and gives the correct period that does not agree with the underprint, Change Field 01-D (Tax Period) and follow procedures directly above.
      No reply and the last tax period with a TC 150 is 12 months or more prior to the return tax period,
      1. Input TC 016 on IDRS CC ENMOD using CC BNCHG.

      2. Input TC 474 on CC REQ77 (using one (1) cycle delay) for the year and month prior to the beginning month of the tax period on the return being processed.

      3. Hold for one week.

      4. Correct the return and the error register one (1) cycle after the input of TC 474.

      5. When pending (PN) TC 016 generates on CC ENMOD, enter a "2" in Field 01-L (Entity Underprint Code) for "initial" returns.

      No reply to correspondence and the last tax period with a TC 150 is less than 12 months previous to the return tax period,
      1. Enter CCC "Y" in Field 01-F (CCC).

      2. Enter a "2" in Field 01-L (Entity Underprint Code).

Field 01-E, Received Date

  1. The received date can’t be earlier than:

    1. 19850201 for Form 1120-FSC.

    2. 19850101 for Form 1120-ND.

    3. 19931001 for Form 1120-SF.

  2. The received date must be printed in YYYYMMDD format, and it must be all numeric. If no received date is stamped on the return, Code and Edit may edit it in the dotted portion of the Deduction Section.

  3. Input the correct received date if Field 01-E (Received Date) asterisks.

  4. It must be equal to or earlier than the processing date. The year-month combination must be equal to or later than the tax period year-month. Otherwise, Field 01-E (Received Date) will asterisk.

  5. If the received date is earlier than the tax period:

    1. If Field 01-D (Tax Period) and Field 01-E (Received Date) are transcribed correctly and the tax period is not after the error register date, enter the received date as the first day after the tax period.

    2. If tax period is after the error register date, see IRM 3.12.16.4.6, Field 01-D, Tax Period Ending.

  6. Correct all misplaced entries, coding errors and transcription errors. Compare the date with the date stamped or edited on the face of the return and take the following action:

    Received Date

    If Then
    The month of the received date is prior to the tax period ending, Enter the month of the tax period.
    There are multiple received dates on the return, Use the earliest received date in Field 01-E (Received Date).
    The received date is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the return due date and Penalty and Interest Code is correctly entered in Field 03-D, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ month the return is due (e.g., due date is 4/15/2018, use ≡ ≡ ≡ ≡

    Note:

    Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law (P.L.) 114-41, changed the return due date for C corporations and is effective for taxable years beginning after December 31, 2015. The federal income tax return for the Form 1120 series of returns (except Form 1120-C, Form 1120S and Form 1120-IC-DISC) are due on or before the 15th day of the fourth month after the tax period ends, with one exception as follows:
    The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning after December 31, 2015, and before January 1, 2026.

     

  7. Determine the received date using the following priority when one is needed but is not stamped on the return or a valid handwritten received date is not present.

    1. Earliest legible postmark date (U.S. Postal Service, foreign or Private Delivery Service) on the envelope. Rules for using the U.S. Postal Service (USPS) postmark, foreign postmark or Private Delivery Service 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.

      Note:

      When there are multiple returns in one envelope, the envelope is attached to one return and the postmark date is stamped on the other returns.

      The postmark is missing and the envelope is certified, Look for an "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 procedures.

      • See Exhibit 3.12.16-16, USPS.com Track & Confirm.

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

      An envelope has both a USPS and private metered postmark, Use the USPS postmark.
      An envelope has a foreign and private metered postmark, Use the foreign postmark.
      An envelope has two private metered postmarks, Use the latest private 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 or other IRS official's signature date.

    4. Signature Date, if within the current year (unless other information indicates signature date is invalid).

    5. Julian Date of the Document Locator Number (DLN) minus 10 days.

  8. 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 an IRS Received Date. Enter a received date according to normal procedures.

    Caution:

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

Field 01-F, Computer Condition Codes

  1. See IRM 3.12.16.3.3, Computer Condition Codes, for a list of valid Computer Condition Codes (CCCs) and their descriptions.

  2. Field 01-F (CCC) can contain up to 10 positions.

  3. The table below identifies the forms and valid codes on the raw register.

    Note:

    The first time a document in error displays on an error register, it is called a raw register.

    Computer Condition Codes

    Form Valid Computer Condition Codes
    1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation "A" , "B" , "D" , "E" , "F" , "G" , "L" , "N" , "O" , "Q" , "R" , "S" , "T" , "U" , "W" , "X" , "Y" , "1" , "3" , "7" , and "8" .
    1120-ND, Return for Nuclear Decommissioning Funds and Certain Persons "A" , "B" , "D" , "E" , "F" , "G" , "O" , "Q" , "R" , "T" , "U" , "W" , "X" , "Y" , "1" , "2" , "3" , "7" , and "8" .
    1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B) "A" , "B" , "D" , "E" , "F" , "G" , "N" , "O" , "Q" , "R" , "T" , "U" , "W" , "X" , "Y" , "1" , "2" , "3" , "7" , and "8" .

     

  4. CCC "L" is valid on Form 1120-FSC. It must be entered when a taxpayer writes "Section 6114 Election" or "IRC 6114 Election" on the return or attaches Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), to the return.

  5. Enter CCC "8" to suppress penalties of estimated tax for Form 1120-FSC, Form 1120-ND and Form 1120-SF.

    Note:

    Suppress penalties when a taxpayer writes "waiver of estimated tax penalties" under IRC 6655 for any period before January 1, 1998, with any payment the due date of which is before January 16, 1998, enter CCC "8" .

  6. Take the following action to correct Field 01-F (CCC):

    Correction Procedures

    If Then
    An overflow condition occurs in Field 01-F (more than 10 codes), Retain codes in the following priority: "F," "D," "R," "O," "Y," "3," and others.
    Both CCCs "D" and "R" are present, CCC "7" may not be present.
    Field 01-F (CCC) is asterisked, examine the return for the correct entries. Correct any error found on the return and correct Field 01-F (CCC) as appropriate. See IRM 3.12.16.3.3, Computer Condition Codes, for additional information.
    CCC "F" is present and there is an entry in Field 07-J (Credit to Next Years Estimated Tax), Field 01-F (CCC) and Field 07-J (Credit to Next Years Estimated Tax) will asterisk.
    1. Check to see if CCC "F" has been correctly edited.

    2. Delete CCC "F" if it has not been correctly edited.

    CCC "F" was correctly edited, Delete Field 07-J (Credit to Next Years Estimated Tax) amount from the error register and on the return to allow the amount to be refunded.
    CCC "G" is present with another CCC (except CCCs "S" , "T" , "U" , "W" , and "3" ) or is not the last entry for the return except for the Correspondence Received Date and Entity Underprint Code, Field 01-F (CCC) will asterisk.
    The CCC "G" is correct, Delete other Computer Condition Code(s) (except CCCs "S" , "T" , "U" , "W" , and "3" ) and any subsequent significant entries or sections*. Otherwise, delete CCC "G" from Field 01-F (CCC) and the return.

    Note:

    *Delete all fields in Section 01 past Field 01-F (CCC). Delete all CCCs except "G" (and the CCC exceptions indicated above, if present) in Field 01-F (CCC).

     

  7. CCC "O" is entered if a quick refund has been issued or if a manual refund has been issued. Also a Reserve Code "1" must be entered when a manual refund of $1 million or more has been issued.

    Note:

    See IRM 3.12.16.2.9, Refund Returns 45-Day Jeopardy and $100 Million or More Refunds, to ensure the refund is issued timely. See IRM 3.12.16.2.10, Taxpayer Advocate Service (TAS) Manual Refunds, for TAS Manual Refunds.

  8. Field 01-F (CCC) will asterisk if CCC "W" is present and the processing date is less than two years after the return due date. Field 01-D (Tax Period) will also asterisk. See IRM 3.12.16.4.6, Field 01-D, Tax Period Ending, for corrective procedures.

  9. CCC "Y" is used to update the tax period at Master File.

  10. If CCC "Y" is present without Action Code 0 or Action Code 1, Field 01-F (CCC) will continue to asterisk. See IRM 3.12.16.18, Manual Computations, for corrective action.

  11. CCC "3" will be entered for no reply cases and used as an indicator for Master File to suppress credit interest.

Field 01-G, Correspondence Received Date

  1. This field must be blank if prior to the return due date and in YYYYMMDD format if significant and after the return due date. It can’t be later or the same as the current processing date. It can’t be earlier than the received date.

  2. If there is an indication that Entity Control has assigned an EIN to the return, enter the Entity Assignment Date in Field 01-G (Correspondence Received Date), if it is later than the received date and return due date. Field 01-G will be invalid if Entity assigned the EIN and the Entity Assignment Date is before the due date of the return. Blank Field 01-G (Correspondence Received Date).

    Note:

    The Entity Assignment Date can be found in the lower left corner of Page 1 of the return.

  3. If no reply to our correspondence, enter CCC "3" in Field 01-F (CCC). If an overpayment is indicated, enter CCC "X" to freeze the refund.

Field 01-H, Preparer Checkbox Indicator

  1. The Preparer Checkbox is located next to the taxpayer signature area. The Preparer Checkbox is used to indicate whether or not the taxpayer has elected to allow the Preparer to answer questions about the taxpayer's return as it is processed.

  2. The Preparer Indicator is located on Page 1, lower right margin, next to the Discuss with Preparer Checkbox, Form 1120-FSC, Form 1120-ND and Form 1120-SF.

  3. ISRP operators will enter a "1" if the Preparer Checkbox, "Yes" box is checked.

  4. Correction Procedures:

    1. Correct all misplaced entries, coding errors and transcription errors.

      Correction Procedures

      If Then
      The "Yes" box is checked Enter "1" in Field 01-H (Preparer Checkbox Indicator).
      • The "No" box is checked;

      • Neither box is checked; or

      • Both boxes are checked

      Delete Field 01-H (Preparer Checkbox Indicator) and Field 01-I (Preparer Phone Number) and continue processing.

       

Field 01-I, Preparer Phone Number

  1. The Preparer Phone Number is located at the bottom of Page 1 below the Firm's EIN (EIN for 2009 and prior and Form 1120-ND and Form 1120-SF) at the bottom right hand corner.

    Note:

    If the taxpayer has checked "Yes" in the Preparer Checkbox, a telephone number for the Preparer should be entered to allow contact. However, this field is not required and may be left blank.

  2. Valid Condition - Field 01-I must be alpha or numeric or a combination of alpha, numeric and blank characters, not to exceed 10 characters.

  3. Invalid Condition - This field is invalid if other than alpha, numeric and blank.

  4. Correction Procedures:

    1. Correct all misplaced entries, coding errors and transcription errors.

    2. If invalid, delete Field 01-I (Preparer Phone Number) and continue processing.

Field 01-J, Preparer Tax Identification Number (PTIN)

  1. The Preparer Tax Identification Number (PTIN) is located at the bottom of Page 1 (Preparer's SSN or PTIN box for 2009 and prior). Data may or may not be present in Field 01-J (PTIN).

    Note:

    If the Preparer information is present, either Field 01-J (PTIN) or Field 01-K (EIN) should have an entry. Only one of these fields is required.

  2. Valid Condition - Field 01-J can be blank or numeric. If numeric, it can’t be all zeros and it can’t be all nines.

    Note:

    The first position can be a "P," followed by eight numbers. These numbers can’t be all zeros or all nines.

  3. Invalid Condition - Field 01-J is invalid if any of the following conditions are present:

    • All zeros, or

    • All nines, or

    • Less than nine positions.

  4. Correction Procedures:

    1. Correct all misplaced entries, coding errors and transcription errors.

    2. If unable to determine a valid entry, delete Field 01-J (PTIN).

Field 01-K, Firm's Employer Identification Number (EIN)

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

    Note:

    If the Preparer information is present, either Field 01-J (PTIN) or 01-K (EIN) should have an entry. Only one of these fields is required.

  2. Valid Condition - Field 01-K can be blank or numeric. If numeric, it can’t be all zeros or all nines.

  3. Invalid Condition - Field 01-K is invalid if any of the following conditions are present:

    • All zeros, or

    • All nines, or

    • Less than nine characters.

  4. Correction Procedures:

    1. Correct all misplaced entries, coding errors and transcription errors.

    2. If unable to determine a valid entry, delete Field 01-K (EIN).

Field 01-L, Entity Underprint Code

  1. The Entity Underprint Code will force the computer to bypass the underprint and accept the transcribed entry for Field 01-B (Name Control) and Field 01-D (Tax Period).

  2. The underprint in Field 01-B (Name Control), and Field 01-D (Tax Period), will not clear until either an Entity Underprint Code is entered in Field 01-L or the field is corrected to agree with the underprint.

  3. When CCC "F" is entered to correct a tax period underprint, the Entity Underprint Code is not necessary to clear the tax period underprint.

  4. The computer will not recheck the Entity Index File after initial input. Enter code as follows:

    1. Code "1" - Name Control underprinting only and transcribed name control is correct; or name control and tax period both are underprinting but only transcribed name control is correct.

    2. Code "2" - Tax period underprinting only and transcribed tax period is correct; or name control and tax period both are underprinting but only transcribed tax period is correct.

    3. Code "3" - Tax period and name control underprinting and transcribed tax period and name control are both correct.

Field 01-M, Taxpayer Notice Code (TPNC)

  1. The valid Taxpayer Notice Codes for Form 1120-FSC, Form 1120-ND and Form 1120-SF are 05, 10, 41, 88, 89 and 90. See IRM 3.12.16.3.4.1, Taxpayer Notice Codes (TPNCs), for the TPNC and the explanation.

    Note:

    In January 2014, the Taxpayer Notice Code (TPNC) 90 Math Error (ME) Code literals/language were programmed into the OnLine Notice Review (OLNR) Retype Application for Notice Review (NR). This addition will eliminate the need for the NR tax examiner to manually type the notice literal and reduce potential copying/typing incorrect paragraphs/messages in the notices. For a full listing of the programmed TPNC 90 Math Error Codes, see TPNC 90 Math Error Code Job Aid on Servicewide Electronic Research Program (SERP) at http://serp.enterprise.irs.gov/databases/portals.dr/sp-portal/bmf.dr/bmf_ers/job_aid.dr/TPNC-90-Math-Error-Code-Job-Aid.doc .

  2. Enter the TPNC in the upper left entity portion of the return.

  3. Attach a TPNC 90 card/paper to the return with the exact statement to be printed on the notice.

    Caution:

    For a full listing of the programmed TPNC 90 Math Error Codes, see TPNC 90 Math Error Code Job Aid at http://serp.enterprise.irs.gov/databases/portals.dr/sp-portal/bmf.dr/bmf_ers/job_aid.dr/TPNC-90-Math-Error-Code-Job-Aid.doc .

  4. Re-enter TPNC 90 with Action Code 1, if it was transcribed incorrectly.

  5. TPNC 90 is an error explanation "fill-in" that is used if the standard TPNCs do not adequately describe an error condition or correction(s) made or when more than three or more notice codes are necessary. Ten blank lines (70 characters per line) are available to provide pertinent information to the taxpayer.

  6. Make sure that the return needing a TPNC 90 leaves Error Resolution System (ERS) with the correct TPNC 90 language for the applicable form. For questions, please contact your Lead or Manager.

  7. If Field 01-M (TPNC) is invalid (*), do not change Field 01-M. This will happen if Field 07-Z (Manually Corrected Total Tax) was not entered previously. Never change Field 01-M.

  8. When necessary to send a TPNC, you must enter the correct tax in Field 07-Z (Manually Corrected Total Tax) first, then allow it to loop to send the TPNC. On loop, the amount in Field 07-Z (Manually Corrected Total Tax) will underprint Field 07-A (Total Tax) for the notice.

Field 01-N, Tax Period Beginning

  1. The Tax Period Beginning (Field 01-N) displays in YYYYMMDD format and must contain eight numerics

  2. The Tax Period Beginning is edited on Page 1, in the middle of the top margin (close to that area), if Computer Condition Code (CCC) "F" or CCC "Y" is present. If the Tax Period Beginning is not present (not a short period or final return), programming will generate the Tax Period Beginning to be the first day of the 11th month preceding the tax period ending month. For example: Tax period ending month is 201711, so the Tax Period Beginning would be 12/01/2016 (20161201).

  3. Correct all misplaced entries, coding errors and transcription errors.

  4. Invalid Condition - Field 01-N (Tax Period Beginning) is invalid if any of the following conditions are present:

    1. Tax Period Beginning is not present with a CCC “Y” or CCC “F”

    2. Tax Period Beginning is after the Tax Period Ending, or

    3. Tax Period Beginning is earlier than 12 months prior to Tax Period Ending

  5. Correction Procedures:

    1. Correct all misplaced entries, coding and transcription errors.

    2. Compare the Tax Period Beginning on the return with Field 01-N (Tax Period Beginning) and take the following action:

      Correction Procedures

      If And Then
      The return is a final or short period, Tax Period Beginning is present on return, Enter Tax Period Beginning in YYYYMMDD format.
      The return is a final or a short period, The day is not present in the Tax Period Beginning, Enter “01” for the day.
      The return is a final or a short period, Tax Period Beginning is missing or not valid, Determine a Tax Period Beginning based on the previous tax period ending.
      The return is not a final or a short period,   Remove CCC “Y” and “F”, as applicable.

       

Section 02, Data - Form 1120-FSC, Form 1120-ND and Form 1120-SF

  1. Section 02 contains address information from Form 1120-FSC, Form 1120-ND and Form 1120-SF. It will be present when a change of address has been entered.

  2. The chart below shows Section 02: Alpha Field Designator (AFD), Title, Field Sign, and Field Length. All fields are variable length.

    Section 02

    Section 02 AFD Title Field Sign Field Length
    A "In-Care-Of" Name + 35
    B Foreign Address + 35
    C Street Address + 35
    D City + 22
    E State + 2
    F ZIP Code + 12

     

  3. This section will not be present on "G" coded returns.

  4. Action Codes 4, 5 and 6 are valid.

Field 02-A, "In-Care-Of" Name

  1. Field 02-A ("In-Care-Of" Name) is located in the Entity Section of the return.

  2. Valid Condition - Field 02-A ("In-Care-Of" Name) has 35 positions and the valid characters are alpha, numeric, ampersand (&), dash (-), slash (/), or percent (%).

  3. Invalid Condition - Field 02-A ("In-Care-Of" Name) is invalid if any of the following conditions are present:

    • The first position is % (percent) and the second position is not blank, or

    • The first position is blank, or

    • The first character of the "in-care-of" name is not alpha or numeric, or

    • There are two consecutive blanks between significant characters.

  4. Correction Procedures:

    1. Correct coding errors and transcription errors.

    Correction Procedures

    If Then
    A % (percent) is in the first position,
    1. Line through Field 02-A ("In-Care-Of" Name).

    2. Enter the "in-care-of" name beginning with an alpha or numeric in Field 02-A ("In-Care-Of" Name).

    A blank is in the first position,
    1. Line through Field 02-A ("In-Care-Of" Name).

    2. Enter the "in-care-of" name beginning with an alpha or numeric in Field 02-A ("In-Care-Of" Name).

    The first character of the "in-care-of" name is not alpha or numeric,
    1. Verify "in-care-of" name on return.

    2. Line through Field 02-A ("In-Care-Of" Name).

    3. Enter the "in-care-of" name beginning with an alpha or numeric in Field 02-A ("In-Care-Of" Name).

    Two consecutive blanks present between significant characters,
    1. Line through Field 02-A ("In-Care-Of" Name).

    2. Enter the "in-care-of" name beginning with an alpha or numeric in Field 02-A ("In-Care-Of" Name).

     

Field 02-B, Foreign Address

  1. Field 02-B (Foreign Address) is located in the Entity Address Section of the return.

    1. The computer will check for a presence in this field if Field 02-E (State Code) contains a period/space (. ).

    2. Field 02-B should not be present on "G" coded short period returns.

  2. Valid Condition - Field 02-B (Foreign Address) has 35 characters and the valid characters are alpha, numeric and special characters.

  3. Invalid Condition - Field 02-B will generate as an error when the Field 02-E (State Code) contains a period/space (. ) and any of the following conditions are present:

    • The first position is blank.

    • There are two consecutive blanks followed by valid characters.

    • There are more than 35 characters present in the field.

      Note:

      ISRP operators are instructed to input a pound sign (#) as the 35th character if there are more than 35 characters present for this field on the return.

  4. Correction Procedures:

    1. Correct all misplaced entries, coding errors and transcription errors.

      Correction Procedures

      If Then
      A foreign address is present in Field 02-B (Foreign Address), Check the error register against the return to verify the address is truly a foreign address.
      It is confirmed the address on the return is a foreign address,
      1. A valid Foreign Country Code must be present in Field 02-D (City). If missing, correct Field 02-D with an Action Code 6.

        Exception:

        Use the country code based on the province in Field 02-D (City) if the foreign address is from Canada and the address contains a province name or abbreviation. See Exhibit 3.12.16-8, Province and Country Code - Canada.

      2. Delete Field 02-F (ZIP Code), if present, with Action Code 6.

      A province abbreviation is not present for Australia, Brazil, Canada, Cuba, Italy, Mexico or The Netherlands but a province name is present, Enter the province abbreviation in Field 02-B (Foreign Address). See Exhibit 3.12.16-9, Province, Foreign State and Territory Abbreviations.
      It is confirmed the address on the return is a domestic address,
      1. Reject with Action Code 3.

      2. Attach Form 4227 (or other appropriate routing slip) indicating to renumber the return with a domestic DLN.

        Reminder:

        *The period/space (. ) in Field 02-E (State) must be deleted if this is NOT a foreign address.

      A foreign address is NOT present in Field 02-B (Foreign Address), Check the error register against the return to verify whether the address was a domestic address.

      Caution:

      Do not use Field 02-B for domestic street addresses. The period/space (. ) in Field 02-E (State) will alert the computer to search for a foreign address in Field 02-B and the Foreign Country Code in Field 02-D (City).

      The address on the return is a domestic address,
      1. Draw a line through the period/space (. ) entry in Field 02-E (State) and enter the correct State Code, with Action Code 6.

      2. Enter the appropriate information in Fields 02-C (Street), 02-D (City), and 02-F (ZIP Code), with Action Code 6.

      The address on the return is truly a foreign address,
      1. Enter the foreign street address in Field 02-B, with Action Code6.

        Reminder:

        ISRP operators are instructed to use the Street Address line (Field 02-C) as a second address line, if needed.

      2. Also enter the valid Foreign Country Code in Field 02-D (City), with Action Code6.

      The Foreign Country Code is missing or incorrect,
      1. Compare the information on the error register to the information on the return.

      2. Enter the Foreign Country Code in Field 02-D (City), if missing, with Action Code6.

      3. To correct, draw a line through the entry in Field 02-D and write the correct information above the lined-out entry, with Action Code6.

      A foreign address is present in Field 02-B and a ZIP code is present in Field 02-F,
      1. Verify the information on the error register against the return.

      2. If the return truly contains a foreign address, line through the entry in Field 02-F (ZIP Code) on the error register.

      3. Enter the Foreign Country Code in Field 02-D (City), with Action Code6.

       

      Note:

      See Exhibit 3.12.16-7, Foreign Country Codes, for a list of the valid Foreign Country Codes or Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

  5. This field will asterisk (*) if other than specified above.

  6. If Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party - Business, is attached to the return, compare the name and address information on the Form 8822 (or Form 8822-B) to the return.

    Note:

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

    Caution:

    These instructions will apply to Error Resolution only if Document Perfection has not detached and sent the Form 8822 (or Form 8822-B) to Entity Control.

    Form 8822 Criteria

    If And Then
    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/Form 8822-B, Line 7

    • No entry on Form 8822-B, Line 8 or Line 9

    Take no action and continue processing.
    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 the different

    • Location address is listed on Form 8822/Form 8822-B, Line 7

    • An entry is indicated on Form 8822-B, Line 8 or Line 9

    1. Enter address shown on Form 8822 (or Form 8822-B) in Field 02-C (Street Address).

    2. Notate "Form 8822 (or Form 8822-B) detached" on tax return.

    3. Detach Form 8822 (or Form 8822-B) and route to Entity Control using Form 4227 (or appropriate routing slip).

    4. Notate on Form 4227, "Change of Address per Form 8822 (or Form 8822-B)."

     

    Note:

    The lead tax examiner is required to batch all Form 8822 (or Form 8822-B) daily and hand carry to Entity Control for expedite processing.

Field 02-C, Street Address

  1. Field 02-C (Street Address) is located in the Entity Section of the return.

  2. Valid Condition - Field 02-C (Street Address) has 35 characters and the valid characters are alpha, numeric, blank, hyphen (-), and slash (/).

  3. Invalid Condition - Field 02-C (Street Address) will error when any of these conditions are present:

    • The first position is blank.

    • Any characters are not alpha, numeric, blank, hyphen (-) or slash (/).

    • There are two consecutive blanks followed by valid characters.

  4. Correct all coding errors and transcription errors.

  5. If Field 02-D (City) contains a Major City Code (MCC), a street address must be present.

  6. If a Major City Code (MCC) is used and no address is present, enter the city in "city format," not in MCC format.

  7. Check returns and attachments if the address is not present.

    Address Criteria

    If Then
    Address is not found, Research IDRS using Command Code (CC) INOLE or CC ENMOD.
    If an address is still not found,
    1. Reject with Action Code 3 and attach research.

    2. Attach Form 4227 (or other appropriate routing slip) and notate "No Address" and route to Entity Control.

     

    Note:

    See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

  8. This field will asterisk if other than specified above. Correct this field accordingly.

    Reminder:

    If inputting a foreign address, this field may be used as a second address line for entering the foreign city, province, and postal code.

  9. If Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party - Business, is attached to the return, compare the name and address information on the Form 8822 (or Form 8822-B) to the return.

    Note:

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

    Caution:

    These instructions will apply to Error Resolution only if Document Perfection has not detached and sent the Form 8822 (or Form 8822-B) to Entity Control.

    Form 8822 Criteria

    If And Then
    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/Form 8822-B, Line 7

    • No entry on Form 8822-B, Line 8 or Line 9

    Take no action and continue processing.
    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/Form 8822-B, Line 7

    • An entry is indicated on Form 8822-B, Line 8 or Line 9

    1. Enter address shown on Form 8822 (or Form 8822-B) in Field 02-C (Street Address).

    2. Notate "Form 8822 (or Form 8822-B) detached" on tax return.

    3. Detach Form 8822 (or Form 8822-B) and route to Entity Control using Form 4227 (or appropriate routing slip).

    4. Notate on Form 4227, "Change of Address per Form 8822 (or Form 8822-B)."

     

    Note:

    The lead tax examiner is required to batch all Form 8822 (or Form 8822-B) daily and hand carry to Entity Control for expedited processing.

Field 02-D, City

  1. Valid characters are alpha and blank (22 positions).

  2. First position can’t be blank.

  3. Second and third positions can’t both be blank.

  4. There can’t be two consecutive blanks within significant data.

  5. When a Major City Code (MCC) has been used:

    1. Field 02-E (State Code) must not be present.

    2. Field 02-C (Street Address) must be present.

    3. Field 02-F (ZIP Code) must be compatible with Major City Code.

  6. If a valid MCC can’t be used, then the entire City must be input with Action Code 6. When the entire city name is used, Field 02-E (State) must be present.

  7. This field will asterisk if the MCC does not agree with the first three digits of the ZIP Code. Field 02-F (ZIP Code) will also asterisk.

  8. The ZIP Code will require ZIP Code look-up if the Major City has multiple ZIP Codes. Correct Field 02-F (ZIP Code).

  9. See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries. See Exhibit 3.12.16-10, U.S. Possessions ZIP Codes, for use with address corrections.

  10. IMPORTANT: If there is a foreign address, the country must be present in this field. Do not abbreviate the name of the country. See Exhibit 3.12.16-7, Foreign Country Codes, for a list of the valid foreign country codes or Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

City - Special to Foreign Address
  1. If the Foreign Address is present, the City Error Indicator will error for the following reasons:

    1. The Foreign Country Code is blank.

    2. The Foreign Country Code is invalid.

    3. The Foreign Country Code is present, but the remaining positions in Field 02-D (City) are not blank.

    4. The City field is blank.

Field 02-E, State

  1. If present, this field must contain a State Code of two alpha characters (two positions).

  2. This field will asterisk for the following conditions:

    1. The State is not valid. Enter the correct State Code in Field 02-E.

      Note:

      See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

    2. The State is present and a Major City Code is present in Field 02-D. If the Major City Code is correct, then delete Field 02-E (State).

    3. If the Major City Code is not correct or determinable, then enter the complete city name in Field 02-D.

  3. The State Code does not agree with the first three digits of the ZIP Code. Field 02-F (ZIP Code) will also asterisk:

    1. If the State Code is not correct, then correct Field 02-E.

    2. If the State Code is correct, check the return and attachments for the ZIP Code. If no data found, see Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

  4. OSPC will delete Section 02 if a Non-U.S. Possession Foreign Address.

  5. IMPORTANT: Field 02-E must contain a period/space (. ) if the address is foreign.

Field 02-F, ZIP Code

  1. Field 02-F is the entity ZIP information (12 positions).

  2. Correction Procedures:

    • Correct all misplaced entries, coding errors and transcription errors.

  3. If a valid ZIP Code is not available from the return or attachments to the return, see Exhibit 3.12.16-10, U.S. Possessions ZIP Codes, for a valid ZIP Code. See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

  4. All ZIP Codes are standardized at Martinsburg Computing Center (MCC) before the return posts to the Master File. A program called "Finalist" matches the taxpayers Street Address and City Address to the ZIP Code on the return with the latest ZIP Code updates received from the U.S. Postal Service (USPS).

    1. If the ZIP Code is correct, the program standardizes the ZIP Code to a 12 digit ZIP Code and passes the record (return) on to Master File for posting to the taxpayer's account.

    2. If the ZIP Code is incorrect, but there is a match to the taxpayer's Street and City address, the program corrects and standardizes the ZIP Code, and passes the record (return) on to Master File for posting to the taxpayer's account.

  5. If you have an incomplete ZIP Code (partial) on the return, but it contains a Street and City address, no research is necessary, take the following action:

    1. Enter the Major State Code that includes the last two digits of "01" . See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

    2. If there is a match by the program, the ZIP Code is standardized at MCC for posting to Master File.

    3. If there is no match by the program, MCC passes the return on to Master File for posting, but an Error Listing is generated and sent to the Campus for correction.

  6. If you have an incomplete ZIP Code on the return and the Street or City address is incomplete or missing, then research is needed for the complete address.

    • Follow local campus procedures for research.

  7. If only the first three digits of the ZIP Code can be determined, enter "01" for the fourth and fifth digits.

  8. If the first three digits of the ZIP Code can’t be determined, see Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

  9. The U.S. Postal Service (USPS) established new address requirements for Army Post Office (APO), Diplomatic Post Office (DPO), and Fleet Post Office (FPO) addresses. If the old address appears (e.g., APO New York, NY 091XX), convert to the new state code abbreviation based on the ZIP Code (e.g., the previous example would be converted to APO AE 091XX). APO/DPO/FPO addresses are considered domestic addresses. Refer to conversion chart below:

    APO/DPO/FPO Criteria

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

     

  10. IMPORTANT: Field 02-F must be blank if the address is foreign.

Section 03, Data - Form 1120-FSC, Form 1120-ND and Form 1120-SF

  1. Section 03 must be present for Form 1120-FSC, except for a valid "G" coded return.

  2. The only error indicator that applies to Section 03 is the asterisk which will appear to the left of the invalid field or section error indicators.

  3. If a field is asterisked, check to determine if that field is valid for that return and document code.

  4. All Section 03 fields are variable in length.

  5. Corrections are made with Action Code6. Section 03 can be added or deleted with Action Code5 or Action Code 4.

    Note:

    Action Code 4 is used only when CCC "G" is present.

Section 03, Error Register Format

  1. The chart below shows Section 03: Alpha Field Designator (AFD), Title, Field Length and Location on the Return.

    Note:

    The Form 1120-L and Form 1120-PC moved to the Error Resolution System (ERS). To keep the error register in the same format and prevent additional programming, various fields are "Reserved" .

    Section 03

    Section 03 AFD Title Field Length Location
    A ABLM Code 3 Reserved
    B North American Industry Classification System (NAICS) Code 6
    • Form 1120-FSC, Page 1, above Box A

    • Computer generated for Form 1120-ND 525920) and Form 1120-SF (999000)

    C Missing Schedule Code (MSC) 2 Reserved. See IRM 3.12.16.6.4, Field 03-C, Missing Schedule Code, for more information.
    D Penalty and Interest Code 1
    • Form 1120-FSC, left margin near Line 2

    • Form 1120-ND, left margin near Line 5

    • Form 1120-SF, left margin near Line 9

    E Reserve Code 1
    • Form 1120-FSC, left margin near Line 2

    • Form 1120-ND, left margin near Line 5

    • Form 1120-SF, left margin near Line 9

    F Tax Preference Code 1 Form 1120-FSC, Page 1, bottom center margin
    H Audit Codes 9
    • Form 1120-FSC, left margin near Line 2

    • Form 1120-ND, left margin near Line 5

    • Form 1120-SF, left margin near Line 9

    I Installment Sale Indicator 1 Form 1120-FSC, left margin near Line 2
    K Principal Shareholder Name 4 Form 1120-FSC, Page 1, Line 1a
    L Principal Shareholder EIN 9 Form 1120-FSC, Page 1, Line 1b
    M Subsidiary Filer Code 1 Form 1120-FSC, Page 1, Line 2 box checked
    N Parent Name 4 Form 1120-FSC, Page 1, Line 2a
    O Parent EIN 9 Form 1120-FSC, Page 1, Line 2b
    P Type of Election Code 1 Form 1120-FSC, Page 1, Box B
    Q Kind of Business Code 1 Reserved
    V Foreign Country Code 2 Form 1120-FSC, Page 1, left of Line 1a
    W Parent Total Assets 13 Form 1120-FSC, Page 1, Line 2, Box D
    X Types of Liabilities 5 Form 1120-SF, Page 2, Line 5a
    Y Empowerment Zone Indicator 1 Reserved

     

Field 03-A, ABLM Code

  1. This field is Reserved.

Field 03-B, North American Industry Classification System (NAICS) Code

  1. The six digit North American Industry Classification System (NAICS) Code (which is based on the Principal Business Activity (PBA) is computer generated for Form 1120-ND (525920) and Form 1120-SF (999000).

  2. The NAICS Code is entered on Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, Page 1, left corner, above Form 1120-FSC.

  3. Field 03-B (NAICS) will asterisk if blank, all zeroes or if Field 03-B does not contain six numeric digits on Form 1120-FSC only, on other than an Amended (CCC "G" ) return. See Figure 3.12.16-9, Blank Field 03-B (NAICS).

    Figure 3.12.16-9

    This is an Image: 33660711.gif
     

    Please click here for the text description of the image.

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

    NAICS Procedures

    If Then
    An Amended (CCC G) return, The NAICS Code is not needed. No action is required.
    The NAICS Code is missing,
    1. Check Form 1120-FSC, Page 2, Schedule A, Additional Information, Line 1a;

    2. Enter the six digit code.

    If the NAICS Code is missing and there is more than one NAICS Code on Form 1120-FSC, Page 2, Schedule A, Additional information, Line 1a, Enter the first NAICS Code listed.
    The correct code can’t be determined, Enter NAICS Code 999000.

     

  5. Field 03-B (NAICS) must always be present on Form 1120-FSC.

    1. A Missing Section will generate if this field and Section 03 are not present.

    2. Enter the appropriate code with Action Code 6, if missing.

Field 03-C, Missing Schedule Code

  1. Code and Edit will no longer edit the Missing Schedule Code (MSC) in the left margin near Line 5 (Form 1120-ND) and near Line 2 (Form 1120-FSC). Code and Edit will correspond for the missing form and/or schedule if the entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Exception:

    Form 1120-ND, Page 1, Line 2 contains any significant entry and Schedule D or similar schedule is not attached.

    Missing Schedule Codes

    Code Explanation Valid Form(s)
    29 Foreign Tax Credit - Corporations is present on Form 1120-FSC and Form 1118 is not attached. Form 1120-FSC
    30 Personal Holding Company Tax is present on Form 1120-FSC and Schedule PH (Form 1120) is not attached. Form 1120-FSC (2004 and prior tax returns)
    32 Schedule D (Form 1120) is present on Form 1120-ND, Page 1, Line 2 and Schedule D (Form 1120) is not attached. Form 1120-ND
    34 Form 1120-FSC, Schedule J, Line 3* has an entry and the Form 4626, Alternative Minimum Tax, is not attached.*(Line 4 for 2005-2000) Form 1120-FSC

     

  2. Check for coding errors, transcription errors, and correct Field 03-C (Missing Schedule Code) accordingly.

  3. If the required form(s) and schedule(s) are not present and there is no indication Code and Edit corresponded for the missing form(s) and schedule(s):

    1. Delete the entry in Field 03-C (Missing Schedule Code).

    2. Reject the record with Action Code 3 for correspondence.

    3. Prepare Form 3696 (or other approved Correspondence Action Sheet) and request all information that is missing or incomplete.

    4. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49.

    5. Edit an action trail "L118C Sent" (or similar language) in the lower left corner going vertically up the side of the return.

    6. Circle out the Missing Schedule Code on the return, if present.

  4. If no reply to our correspondence:

    1. Disallow the credit. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

    2. Delete the credit from the error register and the return.

    3. Enter CCC "3" in Field 01-F (CCC).

    4. Enter CCC "X" to freeze the refund, if an overpayment is indicated.

    5. Enter Action Code 1 and send TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.

    6. See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

Field 03-D, Penalty and Interest Code

  1. Penalty and Interest Code is edited in the left margin near "Deductions" (Form 1120-ND, near Line 5; Form 1120-SF, near Line 9) when the return indicates an amount for Penalty and Interest, and the return is received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the original due date. Code and Edit will edit "4 - 1" .

    Exception:

    For Form 1120-FSC, it is edited in the left margin near Line 2.

  2. CCC "R" must be present in Field 01-F (CCC), if interest only is indicated.

  3. Field 03-D must be blank or "1" .

    • If "1" is present, Field 01-E (Received Date), must be ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Otherwise, both fields will asterisk.

  4. Check the return for all coding errors and transcription errors.

    • Correct Field 01-E (Received Date), Field 01-F (Computer Condition Code) and Field 03-D (Penalty and Interest Code) and return as appropriate.

Field 03-E, Reserve Code

  1. Reserve Code is edited in the left margin near "Deductions" (Form 1120-ND, near Line 5; Form 1120-SF, near Line 9). Code and Edit will edit "5 -" followed by the appropriate Reserve Code.

    Exception:

    For Form 1120-FSC, it is edited in the left margin near Line 2.

  2. Code and Edit may enter a "9" to force the record to the error register and will attach an explanation to the return.

    1. Since the "9" is invalid, it must be deleted from Field 03-E (Reserve Code) when the problem is resolved.

  3. If Field 03-E is asterisked, correct the field as appropriate.

  4. Enter Reserve Code "1" when a $1 million or more refund has been issued. The "1" is valid on correction only.

  5. Enter Reserve Code "4" if Form 2220, Underpayment of Estimated Tax by Corporations, is attached and the taxpayer has checked the box on Part II, Line 8, "Large Corporations" .

  6. Priority of Reserve Codes are as follows:

    1. "1"

    2. "4"

    3. "9" - will be deleted by Error Correction after proper action is taken.

Field 03-F, Tax Preference Code

  1. Field 03-F (Tax Preference Code) applies only to Form 1120-FSC.

  2. The Tax Preference Code is edited to the bottom center margin of Page 1.

  3. Tax Preference Code "1" is required when Form 4626 or substitute is attached or, when an amount is present for Alternative Minimum Tax computation on Form 1120-FSC, Schedule J, Line 3 (Line 4 for 2005 - 2000, Line 7 for 1999 - 1996).

  4. Field 03-F (Tax Preference Code) must be blank or "1" . Check for coding errors and transcription errors and correct accordingly.

Field 03-H, Audit Code

  1. Field 03-H (Audit Code) is edited in the left margin near "Deductions" (Form 1120-ND, near Line 5; Form 1120-SF, near Line 9). Code and Edit will edit "2 -" followed by the appropriate Audit Code(s).

    Exception:

    For Form 1120-FSC, it is edited in the left margin near Line 2.

  2. This field may be blank or contain digits 1 through 6. Only three codes can be entered. The following table lists the valid Audit Codes:

    Audit Codes

    Form Valid Audit Code
    1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation All codes are valid.
    1120-ND, Return for Nuclear Decommissioning Funds and Certain Persons Audit Code "3" is the only valid code and must be present.
    1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B) Audit Codes "1" , "3" , and "4" are valid.

     

  3. The Audit Codes and conditions are listed in the following table:

    Audit Codes

    Audit Code Condition
    Audit Code 1 Disclosure Statement or Inconsistent Filer
    Form 1120-FSC, Form 1120-SF
    • Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), is attached; or

    • The return contains an attachment with the statement, "Notice of Inconsistent Treatment under IRC 6222(b);" or

    • Form 8275, Disclosure Statement, or Form 8275-R, Regulation Disclosure Statement, is attached, or a statement referring specifically to IRC 6662 (Disclosure).

    • Form 8886, Reportable Transaction Disclosure Statement, is attached.

    Audit Code 2 International Income or Credit
    Form 1120-FSC Form 5472 is attached to the return.
    Audit Code 3

    Note:

    Attach Form 4227, Intra-SC Reject or Routing Slip, (or other appropriate routing slip) with an explanation as to why the Audit Code was used.

    Examination Classification Criteria
    Form 1120-FSC
    • "Unusual Refundable Credits" are claimed.

    • Taxpayer quotes "Change of Accounting Period" under Headquarters Grant Letter, Revenue Procedure (Rev. Proc.) 2006-46, Rev. Proc. 2006-45, Rev. Proc. 82-25 or Treasury Regulations 1.442-1(c) or (d).

    Form 1120-ND Edit on all Form 1120-ND.
    Form 1120-SF
    1. An "Unusual Credit" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is claimed on Lines 16a through 16e. Enter CCC "N" (Joint Committee Case).

    2. "Unusual Credits" are defined as:

      • A credit claimed under IRC 1341 or a "Claim of Right" for refund of excessive prior year taxes.

      • Credits claimed by minority shareholder corporations under IRC 337(d).

      • Credits claimed under IRC 1383 in a later year for a refund of excessive prior year taxes.

      • Randomly entered credits notated as "Claim of Right" , "Reg. 1.1341" , or "Reg. 1.337" .

    3. Taxpayer quotes "Change of Accounting Period" under Headquarters Grant Letter, Revenue Procedure (Rev. Proc.) 2006-46, Rev. Proc. 2006-45, Rev. Proc. 82-25 or Treasury Regulations 1.442-1c) or (d).

    Audit Code 4 Joint Committee Case
    Form 1120-FSC
    1. An "Unusual Credit" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is claimed on Lines 2a through 2g. Enter CCC "N" (Joint Committee Case).

    2. "Unusual Credits" are defined as:

      • A credit claimed under IRC 1341 or a "Claim of Right" for refund of excessive prior year taxes.

      • Credits claimed by minority shareholder corporations under IRC 337(d).

      • Credits claimed under IRC 1383 in a later year for a refund of excessive prior year taxes.

      • Randomly entered credits notated as "Claim of Right" , "Reg. 1.1341" , or "Reg. 1.337" .

    Audit Code 5 Reserved
    Audit Code 6 Reserved

     

  4. If Field 03-H (Audit Code) is asterisked, check for coding errors and transcription errors. Correct Field 03-H as appropriate.

Field 03-I, Installment Sale Indicator

  1. Field 03-I (Installment Sale Indicator) is edited in the left margin near Line 2 (Form 1120-FSC). Code and Edit will edit "6 -" followed by the appropriate Installment Sale Indicator.

  2. This field must be 1, 2, 3 or blank. The codes are based on the response to Question "3" on Form 6252, Installment Sale Income.

  3. Valid codes for Installment Sale Indicator are:

    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 blank responses.
    3 "Yes" and "No" are checked or Question 3 is blank Question 3 is blank on all forms.

     

  4. The following table provides instructions for resolving Field 03-I (Installment Sale Indicator).

    Correction Procedures

    If Then
    Field 03-I (Installment Sale Indicator) asterisks, check for coding errors and transcription errors, Correct Field 03-I (Installment Sale Indicator) as appropriate.
    The return is a Form 1120-FSC, but the Document Code is not 07, Reject with Action Code 3 and indicate on Form 4227 (or other appropriate routing slip) incorrectly numbered, renumber as a Form 1120-FSC.

     

Field 03-K, Principal Shareholder Name (Form 1120-FSC)

  1. Field 03-K (Principal Shareholder Name) is transcribed from Form 1120-FSC, Page 1, Line 1a. The field must contain one to four characters. The valid characters are:

    1. Numeric

    2. Alpha

    3. Ampersand

    4. Hyphen

      Note:

      Change a slash (/) or period (.) in the name control to a dash (-)

  2. The name field must contain one to four characters and may contain from one to three blanks.

    1. The name must have an alpha or numeric in the first position.

    2. The remaining positions must be alpha, numeric, hyphen, ampersand, or blank.

    3. No character may follow a blank.

  3. Take the following action:

    Correction Procedures

    If Then
    The name is invalid or blank, Check for coding errors and transcription errors. Enter the correct data in Field 03-K (Principal Shareholder Name).
    The correct name can’t be found, Research using Integrated Data Retrieval System (IDRS)
    A correct name can’t be determined, Delete Field 03-K (Principal Shareholder Name).

     

Field 03-L, Principal Shareholder EIN (Form 1120-FSC)

  1. Field 03-L (Principal Shareholder EIN) is transcribed from Form 1120-FSC, Page 1, Line 1b.

  2. Field 03-L (Principal Shareholder EIN) must contain an EIN.

  3. If Field 03-L (Principal Shareholder EIN) is an EIN, it can’t begin with 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.

  4. Take the following action to correct the field:

    Correction Procedures

    If Then
    The EIN is invalid or blank, Check for coding errors and transcription errors. Enter the correct EIN in Field 03-L (Principal Shareholder EIN).
    The correct EIN can’t be found, Research using IDRS.

    Reminder:

    EIN can’t begin with 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.

    The correct EIN can’t be determined, Delete Field 03-L (Principal Shareholder EIN).

     

Field 03-M, Subsidiary Filer Code

  1. Field 03-M (Subsidiary Filer Code) is edited from Form 1120-FSC, Page 1, Line 2 box checked.

  2. Field 03-M (Subsidiary Filer Code) is a transcribed field which must contain a blank or 1 through 3.

    1. Code "1" - "Yes" box checked.

    2. Code "2" - "No" box checked.

    3. Code "3" - Both box 1 and 2 are checked.

  3. If this field asterisks, check for coding errors and transcription errors.

  4. Field 03-M (Subsidiary Filer Code) will asterisk if the Parent Name Control or Parent EIN is not present on the return, when code "1" or "3" is entered in this field. A correct entry in Field 03-N (Parent Name Control) and Field 03-O (Parent EIN) will eliminate the asterisk.

Field 03-N, Parent Name Control

  1. Field 03-N (Parent Name Control) is transcribed from Form 1120-FSC, Page 1, Line 2a.

  2. Field 03-N (Parent Name Control) must contain one to four characters. The valid characters are:

    1. Numeric

    2. Alpha

    3. Ampersand

    4. Hyphen

      Note:

      Change a slash (/) or period (.) in the name control to a dash (-)

  3. The name field must contain one to four characters and may contain from one to three blanks.

    1. The name must have an alpha or numeric in the first position.

    2. The remaining positions must be alpha, numeric, hyphen, ampersand, or blank.

    3. No character may follow a blank.

  4. If name control is invalid or blank, check for coding errors and transcription errors and correct accordingly.

  5. Field 03-N (Parent Name Control) will asterisk if Field 03-M (Subsidiary Filer Code) is coded "1" or "3" and Field 03-N (Parent Name Control) is blank. Take the following action:

    Correction Procedures

    If Then
    This field is invalid, Examine the return and attachments for valid name control.
    No Parent Name is found, Enter "XXXX" in Field 03-N (Parent Name Control) if Field 03-M (Subsidiary Filer Code) is coded "1" or "3" .

     

Field 03-O, Parent EIN

  1. The table below contains transcription information for Field 03-O (Parent EIN):

    Parent EIN

    Form Page Line
    1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation 1 2b

     

  2. Take the following action for Form 1120-FSC only:

    Correction Procedures

    If Then
    Field 03-O (Parent EIN) was edited and transcribed, The EIN must be present in this field.
    The Field 03-O (Parent EIN) is not present, Then it will be substituted with Field 03-L (Principal Shareholder EIN), if present, unless Field 03-L is a SSN.

     

  3. The table below lists pertinent information for Field 03-O (Parent EIN).

    Parent EIN

    Form Field 03-O Can’t Begin With The Following Numerics
    1120-FSC 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 78, 79, or 89.

     

  4. Field 03-O (Parent EIN) will asterisk if the EIN is the same as the EIN for the return. They can’t be the same.

  5. Examine the return and attachments for a valid EIN, if this field is invalid. Take the following action:

    Correction Procedures

    If Then
    A valid EIN is found, Enter the correct EIN in Field 03-O (Parent EIN).
    A valid EIN is not found, Enter "129999999" in Field 03-O (Parent EIN), if Field 03-M (Subsidiary Filer Code) is coded "1" or "3" .

     

Field 03-P, Type of Election Code (Form 1120-FSC)

  1. Field 03-P (Type of Election Code) is transcribed and edited from Form 1120-FSC, Page 1, Box B.

  2. Valid codes are 1, 2, or blank.

    1. Code "1" must be present if the FSC box is checked.

    2. Code "2" must be present if the Small FSC box is checked.

    3. If neither box is checked (Box B is blank), then no code is applicable.

    4. Correct accordingly.

  3. Field 03-P (Type of Election Code) will asterisk if present on any return other than Form 1120-FSC. Delete this field if present on any other form.

Field 03-Q, Kind of Business Code

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Field 03-V, Foreign Country Code (Form 1120-FSC)

  1. The Foreign Country Code is a code transcribed from Form 1120-FSC, Page 1, left of Line 1a.

  2. This field must be blank or a two character alpha. See Exhibit 3.12.16-7, Foreign Country Codes, for a list of valid foreign county codes or Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries.

Field 03-W, Parent Total Assets (Form 1120-FSC)

  1. Field 03-W (Parent Total Assets) must be present if Field 03-N (Parent Name Control) was edited and transcribed.

    1. It is transcribed in dollars only.

    2. Delete Field 03-W (Parent Total Assets) if it is negative.

    3. The field must be blank or all numeric.

  2. Delete this field when an asterisk is present on Form 1120-SF.

  3. Enter the amount from Box 1d into Field 03-W (Parent Total Assets), when the amount in Box 1d is greater than the amount present in Box 2d, Page 1.

  4. Copy any significant amount on Line 1d to Line 2d, when the amount on Line 2d is blank and the Common Parent’s Name and EIN are blank.

Field 03-X, Type of Liabilities (Form 1120-SF)

  1. Field 03-X (Type of Liabilities) is a five digit field transcribed from Page 2, Additional Information, Line 5a on Form 1120-SF only.

  2. The field must be 1 through 5 or blank. All five codes do not have to be present.

  3. A blank can’t be in the first position, if a valid code is present.

  4. The valid codes for Field 03-X (Type of Liabilities) are:

    Type of Liabilities (Form 1120-SF)

    Code Description
    1 Tort
    2 Breach of Contract
    3 Violation of Law
    4 Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
    5 Other

     

Field 03-Y, Empowerment Zone Indicator

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Section 04, Data - Form 1120-FSC, Form 1120-ND and Form 1120-SF

  1. Section 04 contains the information fields for Form 1120-FSC, Form 1120-ND and Form 1120-SF.

  2. If a field is asterisked, check to determine if that field is valid for that return and document code.

  3. The fields are variable in length and are money amounts.

  4. Fields 04-A, 04-B, 04-C, 04-D, 04-E and 04-F are transcribed in dollars only.

  5. Fields 04-A, 04-C and 04-F may be positive or negative.

  6. The remaining fields must be positive only.

Section 04, Error Register Format

  1. The chart below shows Section 04: Alpha Field Designator (AFD), Title, Field Length, Dollars and Cents ($ / ¢), and the Location on the Return.

    Section 04

    Section 04 AFD Title Field Length $ / ¢ Location on the Return
    A Total Assets-End 15 $ Form 1120-FSC, Box E
    B Total Assets-Begin 15 $ Form 1120-SF, Schedule L, Line 6, Beginning Column
    C Modified Gross Income 11 $ Form 1120-SF, Page 1, Line 14
    D Total Liabilities-End 13 $ Form 1120-SF, Schedule L, Line 9, End Column
    E Total Liabilities-Begin 13 $ Form 1120-SF, Schedule L, Line 9, Beginning Column
    F Taxable Income 15 $
    • Form 1120-FSC, Page 3, Line 18

    • Form 1120-ND, Page 1, Line 12

    H Depreciation (Administrative Pricing Rules) 11 $ / ¢ Form 1120-FSC, Schedule G, Line 4, Column (a)
    I Depreciation (Non-Administrative Pricing Rules) 11 $ / ¢ Form 1120-FSC, Schedule G, Line 4, Column (b)

     

Field 04-A, Total Assets - End

  1. Field 04-A (Total Assets - End) is transcribed from Form 1120-FSC, Box E.

  2. Code and Edit will edit the amount in dollars.

  3. The field must be all numeric or blank.

  4. Field 04-A (Total Assets - End) will asterisk when Fields 04-F through 04-J are present on Form 1120-SF.

  5. Delete the invalid fields for Form 1120-ND or Form 1120-SF.

  6. Check for misblocking, if the return is not a Form 1120-ND or Form 1120-SF.

    1. Reject with Action Code 3.

    2. Prepare Form 4227 (or other appropriate routing slip) indicating reason for reject (e.g., return is misblocked, renumber as Form 1120-FSC, etc.).

Fields 04-B through 04-E (Form 1120-SF)

  1. Fields 04-B through 04-E are valid on Form 1120-SF.

  2. The table below shows Field, Name and Location on the Form 1120-SF.

    Fields 04-B through 04-E (Form 1120-SF)

    Field Name Location on the Return
    04-B Total Assets -Beginning of Year Schedule L, Line 6, Beginning Column
    04-C Modified Gross Income Page 1, Line 14
    04-D Total Liabilities -End of Year Schedule L, Line 9, End Column
    04-E Total Liabilities -Beginning of Year Schedule L, Line 9, Beginning Column

     

  3. These fields must be all numeric or blank.

  4. Field 04-C may be positive or negative.

Field 04-F, Taxable Income

  1. The table below shows Form and Location on the Return for Field 04-F (Taxable Income).

    Field 04-F, Taxable Income

    Form Location on the Return
    1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation Page 3, Line 18
    1120-ND, Return for Nuclear Decommissioning Funds and Certain Persons Page 1, Line 12

     

  2. This field must be all numeric or blank.

  3. Field 04-F (Taxable Income) may be positive or negative.

Field 04-H and Field 04-I, Depreciation

  1. The table below shows Field, Name and Location on the Form 1120-FSC.

    Field 04-H and Field 04-I, Depreciation

    Field Name Location on the Return
    04-H Depreciation (Administrative Pricing Rules) Schedule G, Line 4, Column (a)
    04-I Depreciation (Non-Administrative Pricing Rules) Schedule G, Line 4, Column (b)

     

  2. Fields 04-H (Depreciation (Administrative Pricing Rules)) and 04-I (Depreciation (Non-Administrative Pricing Rules)) must be edited in dollars and cents.

  3. These fields must be all numeric or blank.

  4. They must be a positive amount only.

Tax Rates for Form 1120-SF

  1. The table below shows Tax Period and Tax Rate for the Form 1120-SF.

    Tax Rates for Form 1120-SF

    Tax Period Tax Rate
    201312 and subsequent 39.6% (percent)
    200301 through 201311 35%
    200201 through 200212 38.6%
    200101 through 200112 39.1%
    200012 and prior 39.6%

     

Section 07, Data - Form 1120-FSC, Form 1120-ND and Form 1120-SF

  1. Section 07 contains tax information, credits and other taxes.

  2. If a field is asterisked, check to determine if that field is valid for that return and document code.

  3. Action Codes 4, 5, and 6 are applicable.

  4. All fields are positive except the following fields, which may be positive or negative.

    1. Field 07-I (Balance Due/Overpayment)

    2. Field 07-T (Salaries and Wages)

  5. Take the following action if an error reduces the correctly transcribed Total Tax, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    1. Examine the return for a possible typing error.

    2. Check all the lines leading to the math computation.

    3. Search for omitted or incorrectly transferred amounts from attachments.

    4. If it appears that the error is not necessarily a true error condition, reject the record with Action Code 3 for correspondence with the taxpayer. Ask for clarification of the area in doubt.

  6. If there is an increase in Total Tax, then check if the taxpayer has any unused carryover credits. If so then apply them to the maximum amount available in the following order.

    Correction Procedures

    If Then
    For Tax Periods beginning 199512 and subsequent: Apply as follows:
    1. Foreign Tax Credit

    2. Possessions Tax Credit

    3. Production Tax Credit

    4. General Business Credit

    5. Prior Year Minimum Tax Credit

    For Tax Periods 198801 through 199511: Apply as follows:
    1. Foreign Tax Credit

    2. Possessions Tax Credit

    3. Orphan Drug Credit

    4. Production Tax Credit

    5. General Business Credit

    6. Prior Year Minimum Tax Credit

    The taxpayer has not applied the credits in the proper order: Recompute in the order above. Refer to the supporting forms to determine the available amounts.

     

  7. Adjust the amount reported on the return to reflect the actual amount applied; and, change the appropriate fields on the error register.

  8. If an adjustment is made to any carryover credit ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and no math error notice is required to be sent, send Letter 3833C, Tax Return Adjustment Explained (BMF), (or other appropriate letter) explaining the adjustment and stating the corrected carryover amount.

  9. The valid taxpayer notice codes for Form 1120-FSC, Form 1120-ND and Form 1120-SF are TPNCs 05, 10, 41, 88, 89 and 90.

    Note:

    See IRM 3.12.16.3.4.1, Taxpayer Notice Codes (TPNCs), for the TPNC and the explanation. For a full listing of the programmed TPNC 90 Math Error Codes, see TPNC 90 Math Error Code Job Aid at http://serp.enterprise.irs.gov/databases/portals.dr/sp-portal/bmf.dr/bmf_ers/job_aid.dr/TPNC-90-Math-Error-Code-Job-Aid.doc .

  10. Manually Corrected Tax is used when neither the transcribed amount nor the underprinted amount for total tax is correct. All fields leading up to Field 07-A (Total Tax) must be corrected when applicable. If manually corrected tax is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Section 07, Error Register Format

  1. Section 07 contains information fields that are variable in length and are money amounts.

  2. If a field is asterisked, check to determine if that field is valid for that return and document code.

  3. The chart below shows Section 07: Alpha Field Designator (AFD), Title, Field Length, Dollars and Cents ($ / ¢), and the Location on the Return.

    Note:

    The Form 1120-L and Form 1120-PC moved to the Error Resolution System (ERS). To keep the error register in the same format and prevent additional programming, various fields are "Reserved" .

    Section 07

    Section 07 AFD Title Field Length $ / ¢ Location on the Return
    A Total Tax 15 $ / ¢
    • Form 1120-FSC, Line 1

    • Form 1120-ND, Line 13

    • Form 1120-SF, Line 15

    A Total Income Tax (Generated Underprint) 15 $ / ¢  
    B Estimated Tax Credit 15 $ / ¢
    • Form 1120-FSC, Line 2d

    • Form 1120-ND, Line 14d

    • Form 1120-SF, Line 15

    C Form 7004 Credit 15 $ / ¢
    • Form 1120-FSC, Line 2e

    • Form 1120-ND, Line 14e

    • Form 1120-SF, Line 16e

    D Regulated Investment Credit/Reciprocal Credits 11 $ / ¢ Reserved
    E Refundable Credits from Form 3800 and Form 8827 15 $ / ¢ Reserved
    F 1042-S Credit (Form 1120-FSC) 15 $ / ¢ Form 1120-FSC, Line 2g
    G Foreign Investment Real Property Tax Act (FIRPTA) Credit 11 $ / ¢ Form 1120-FSC, space to the right of Line 2g
    H Estimated Tax Penalty 15 $ / ¢
    • Form 1120-FSC, Line 3

    • Form 1120-ND, Line 15

    • Form 1120-SF, Line 17

    I Balance Due/Overpayment 15 $ / ¢
    • Form 1120-FSC, Line 4/Line 5

    • Form 1120-ND, Line 16/Line 17

    • Form 1120-SF, Line 18/Line 19

    I Balance Due/Overpayment (Generated Underprint) 15 $ / ¢  
    J Credit to Next Year’s Estimated Tax 15 $ / ¢
    • Form 1120-FSC, Line 6 (center)

    • Form 1120-ND, Line 18 (center)

    • Form 1120-SF, Line 20, (center)

    N Gross Income 15 $ Reserved
    O Special Deduction 15 $ Reserved
    R Credit for Federal Telephone Excise Tax Paid (For 2006 tax form revision.) 15 $ / ¢
    • Form 1120-FSC, edited amount in the dotted area left of Line 2h

    • Form 1120-ND, Line 14f, edited amount in dotted area

    • Form 1120-SF, Line 16f, edited amount in dotted area

    R Credit for Federal Telephone Excise Tax Paid (Generated Underprint) 15 $ / ¢ Generated total of Form 8913, Line 15, Columns (d) and (e)
    S Credit for Federal Telephone Excise Tax Paid (verified amount) 15 $ / ¢ SCRS field only
    T Salaries and Wages 15 $ Reserved
    W Tax Exempt Interest 13 $ Form 1120-SF, Page 2, Additional Information Line 2
    X Interest Exempt Under Section 103 11 $ Reserved
    Y Refundable Credits (Computer Generated) 15 $ / ¢
    • Form 1120-FSC, Line 2h

    • Form 1120-ND, Line 14f

    • Form 1120-SF, Line 16f

    Z Manually Corrected Total Tax 13 $ / ¢
    • Form 1120-FSC, Line 1 left

    • Form 1120-ND, Line 13

    • Form 1120-SF, Line 15 left

     

Field 07-A, Total Tax

  1. Field 07-A (Total Tax) has a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. The form(s) and the appropriate transcription line(s) are identified in the table below:

    Field 07-A, Total Tax

    Form Transcription Line(s) Math Verify
    1120-FSC Page 1, Line 1 YES
    1120-ND Page 1, Line 13 YES
    1120-SF Page 1, Line 15 NO

     

    Note:

    See IRM 3.12.16.10, Manual Verifications, for additional information.

  3. Take the following action:

    Correction Procedures

    If Then
    The return is a Form 1120-ND and any of the following fields are present:
    • Field 07-D (Regulated Investment Credit),

    • 07-F (1042-S Credit/Other Credit),

    • 07-G Foreign Investment Real Property Tax Act (FIRPTA) Credit),

    Delete the fields.
    The return is a Form 1120-SF and any of the following fields are present:
    • Field 07-D (Regulated Investment Credit),

    • 07-F (1042-S Credit/Other Credit),

    • 07-G (FIRPTA Credit),

    Delete the fields.

     

  4. The return is a Form 1120-SF and the total tax does not equal 39.6% (percent) of the Modified Gross Income (Field 04-C), Field 07-A (Total Tax) will underprint. Take the following action:

    Correction Procedures

    If Then
    Field 07-A (Total Tax) is underprinting and the underprint is correct, Use the computer’s figure and enter Action Code 1 and TPNC 05.
    Field 07-A (Total Tax) is underprinting and the underprint is incorrect, and the taxpayer’s figure has been verified as correct, Enter Action Code 0 to clear the register.
    Neither the taxpayer’s figure nor the underprint are correct, Enter the corrected figure in Field 07-Z (Manually Corrected Total Tax) with Action Code 6. On loop, enter Action Code 1 and TPNC 05.

     

  5. Take the following action for Form 1120-SF:

    Correction Procedures

    If Then
    The tax period straddles the 1992 and 1993 tax year, Manually compute the income tax using the two rates. See IRM 3.12.16.19, Annualization Computations.
    No other errors are present, and there is no underprint in Field 07-A (Total Tax), Enter Action Code 0 to clear the register.

     

    Note:

    Field 07-A (Total Tax) can never be blank if Field 01-A (Remittance) has an entry. Enter .01 (1 cent) in Field 07-A (Total Tax) if the remittance amount in Field 01-A (Remittance) is the estimated penalty in Fields 07-H (Estimated Tax Penalty) plus 07-I (Balance Due/Overpayment).

  6. Taxpayers who file an approved Form 1128, Application to Adopt, Change, or Retain a Tax Year, are required to annualize. If the taxpayer does not annualize, enter the correct annualized tax in Field 07-Z (Manually Corrected Total Tax). On loop, enter Action Code 1 and TPNC 05 to inform the taxpayer of the error.

  7. Taxpayers annualizing their tax due to a short period "initial" or "final" return is not permitted. Assess tax at the regular rate based on their taxable income.

Field 07-B, Estimated Tax Credit

  1. The form(s) and the appropriate transcription line(s) are identified in the table below:

    Field 07-B, Estimated Tax Credit

    Form Transcription Line(s)
    1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation Page 1, Line 2d
    1120-ND, Return for Nuclear Decommissioning Funds and Certain Persons Page 1, Line 14d
    1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B) Page 1, Line 16d

     

  2. Field 07-B (Estimated Tax Credit) is the total of:

    • Form 1120-FSC, Line 2d equals = Line 2a plus 2b minus 2c.

    • Form 1120-ND, Line 14d equals = Line 14a plus 14b minus 14c.

    • Form 1120-SF, Line 16d equals = Line 16a plus 16b minus 16c.

  3. Reject to Accounting: If prepaid credits are claimed on Form 1120-FSC (Lines 2a, 2b, 2e), Form 1120-ND (Lines 14a, 14b, 14e), or Form 1120-SF (Lines 16a, 16b, 16e) and the return is one of the following conditions:

    1. A short period return,

    2. A "Final" , or

    3. A "Change of Accounting Period" .

  4. Prepare Form 4227 (or other appropriate routing slip) with a notation "Short Period with ES Credits" .

  5. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49 as defined below.

    1. Input for the short period if a copy of attached Form 7004 shows short period.

    2. Input for a full period (ending 12 months after beginning of the short period) if no Form 7004 is attached or use the underprinted Fiscal Year Month (FYM) in Field 01-D (Tax Period).

Field 07-C, Form 7004 Credit

  1. The form(s) and the appropriate transcription line(s) are identified in the table below:

    Field 07-C, Form 7004 Credit

    Form Transcription Line(s)
    1120-FSC Page 1, Line 2e
    1120-ND Page 1, Line 14e
    1120-SF Page 1, Line 16e

     

  2. On prior year returns (1982 and prior), if an amount is entered for Form 7005 credits, add to Form 7004 credits.

Field 07-D, Regulated Investment Credit

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Field 07-E, Refundable Credits from Form 3800 and Form 8827

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Field 07-F, U.S. Income Tax Paid or Withheld at Source (Form 1042-S Credit)

  1. The form and the appropriate transcription line are identified in the table below:

    Field 07-F, U.S. Income Tax Paid or Withheld at Source (Form 1042-S Credit)

    Form Transcription Line(s)
    1120-FSC Page 1, Line 2g, U.S. Income Tax Paid or Withheld at Source

     

  2. Correct all misplaced entries, coding errors and transcription errors.

  3. OSPC must take the following action to correct Field 07-F:

    Note:

    If the taxpayer's name is not listed as the recipient in Box 13 of Form 1042-S (Box 13 can’t be a Withholding Rate Pool), then reduce Field 07-F by this amount.

    Correction Procedures

    If Then
    Field 07-F (U.S. Income Tax Paid or Withheld at Source) and Field 07-G (Foreign Investment Real Property Tax Act (FIRPTA) Credit) are present at the same time, Edit the Form 1042-S Credit to Form 1120-FSC, to the left of Line 2g.

    Note:

    Form 1042-S, Box 13, can’t be a Withholding Rate Pool. If present, reduce Field 07-F by this amount and continue processing.

    The total credit on Form 1120-FSC, Field 07-F (U.S. Income Tax Paid or Withheld at Source) is supported by Form 1042-S, Accept the taxpayer’s figures.

    Exception:

    Form 1042-S, Box 13, can’t be a Withholding Rate Pool. If present, reduce Field 07-F by this amount and continue processing.

    There is an amount present in Field 07-F (U.S. Income Tax Paid or Withheld at Source) and no Form 1042-S or supporting statement is attached,
    1. Enter Action Code 3 on the error register.

    2. Prepare Form 3696, Correspondence Action Sheet (or other approved Correspondence Action Sheet) and request supporting documentation.

    3. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49.

    4. Edit an action trail "L118C Sent" (or similar language) in the lower left corner going vertically up the side of the return.

    No response to the request for verification of withholding is received from the taxpayer,
    1. Disallow the withholding credit.

      Note:

      See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

    2. Delete the credit from the error register and the return.

    3. Enter CCC "3" in Field 01-F (CCC).

    4. Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.

    5. See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

     

    Note:

    See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

  4. OSPC must refer any questionable verification of the withholding documents to Examination (Exam).

Field 07-G, Foreign Investment Real Property Tax Act (FIRPTA) (Form 8288-A)

  1. The FIRPTA credit is located on Form 1120-FSC, Page 1, to the right of Line 2g.

  2. Correct all misplaced entries, coding errors and transcription errors.

  3. If FIRPTA credit is claimed on Form 1120-FSC, OSPC must take the following action to correct Field 07-G (FIRPTA):

    1. Look for an approval from the OSPC Document Perfection, Foreign Team on the total amount of credit claimed on Form 13698, International Credit(s) Verification Slip.

    2. The credit must be claimed on Form 8288-A or a statement from the payor/withholding agent which identifies the amount of tax withheld, the withholding rate (including 0% (percent), if exempt), and the country involved.

    Note:

    Form 13698, International Credit(s) Verification Slip, must be present when a FIRPTA credit (e.g., Form 8288-A) is indicated. If Form 13698 is not attached, reject the record with Action Code 3 and route the return to the OSPC Document Perfection, Foreign Team for verification of these credits on the International National Standard Application (NSA) database.

  4. Follow the instructions in the table below for FIRPTA credit.

    Field 07-G, Foreign Investment Real Property Tax Act (FIRPTA) Procedures

    If Then
    The total amount of FIRPTA credit claimed on Form 1120-FSC is verified by OSPC Document Perfection, Foreign Team, Accept the taxpayer’s figure.
    The total amount of FIRPTA credit claimed on the return is not approved by OSPC Document Perfection, Foreign Team, Check the attachments for a Form 1042-S withholding credit to make up the difference.

    Note:

    Form 1042-S, Box 13, can’t be a Withholding Rate Pool. If present, reduce Field 07-F by this amount and continue processing.

    Attachments are present, Accept taxpayer figures.

    Exception:

    Form 1042-S, Box 13, can’t be a Withholding Rate Pool. If present, reduce Field 07-F by this amount and continue processing.

    Attachments are not present, and there is an indication that Code and Edit corresponded,
    1. Disallow the credit. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

    2. Delete the credit from the error register and the return.

    3. Enter CCC "3" in Field 01-F (CCC).

    4. Enter CCC "X" to freeze the refund, if an overpayment is indicated.

    5. Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.

    6. See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

    Attachments are not present, and there is no indication that Code and Edit corresponded,
    1. Enter Action Code 3 on the error register and reject the record.

    2. Prepare Form 3696, Correspondence Action Sheet (or other approved Correspondence Action Sheet) and request supporting documentation.

    3. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49.

    4. Edit an action trail "L118C Sent" (or similar language) in the lower left corner going vertically up the side of the return.

    A reply is received, Route the return and attachments to the OSPC Document Perfection, Foreign Team for verification per local procedures.
    There is no reply,
    1. Disallow the credit. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

    2. Delete the credit from the error register and the return.

    3. Enter CCC "3" in Field 01-F (CCC).

    4. Enter CCC "X" to freeze the refund, if an overpayment is indicated.

    5. Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.

    6. See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

     

    Note:

    Input CCC "L" when taxpayer writes "Section 6114 Election" on the return or attached Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), to the return.

  5. OSPC must refer any questionable verification of the withholding documentation to Examination (Exam).

Field 07-H, Estimated Tax Penalty

  1. The form(s) and the appropriate transcription line(s) are identified in the table below:

    Field 07-H, Estimated Tax Penalty

    Form Transcription Line(s)
    1120-FSC Page 1, Line 3 (2005 through current year)
    1120-ND Page 1, Line 15 (2005 through current year)
    1120-SF Page 1, Line 17 (2005 through current year)

     

  2. Field 07-H (Estimated Tax Penalty) is edited from Form 2220, Underpayment of Estimated Tax by Corporations, Line 38 (Form 2220 prior year line number: 2005 through 2007: Line 34) and must always be included in the Balance Due/Overpayment total.

  3. Enter Reserve Code "4" when a large corporation is indicated on Form 2220, Part II, Line 8. See IRM 3.12.16.6.6, Field 03-E, Reserve Code.

    Note:

    Enter CCC "8" when a taxpayer writes "waiver of estimated tax penalties" under IRC 6655 for any period before January 1, 1998, with any payment the due date of which is before January 16, 1998.

Field 07-I, Balance Due/Overpayment

  1. The form(s) and the appropriate transcription line(s) are identified in the table below:

    Field 07-I, Balance Due/Overpayment

    Form Transcription Line(s)
    1120-FSC
    • Line 4, Tax Due

    • Line 5, Overpayment

    1120-ND
    • Line 16, Tax Due

    • Line 17, Overpayment

    1120-SF
    • Line 18, Tax Due

    • Line 19, Overpayment

     

  2. Field 07-I (Balance Due/Overpayment) will underprint if it is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Correct all misplaced entries, coding errors and transcription errors.

  4. The table below identifies the form and provides the computation for Field 07-I (Balance Due/Overpayment).

    Field 07-I, Balance Due/Overpayment Procedures

    Form Balance Due Or Overpayment Is Equal To:
    1120-FSC
    1. Field 07-A (Total Tax) minus Field 07-B (Estimated Tax Credit), Field 07-C (Form 7004 Credit), Field 07-F (1042-S Credit), Field 07-G (FIRPTA), and 07-R (Credit for Telephone Excise Tax Paid), plus

    2. Field 07-H (Estimated Tax Penalty), minus

    3. Field 15-A (Total Gas Tax Credit) on the error register.

    Note:

    Delete Fields 07-D and 07-E, if present. They are invalid fields.

    1120-ND
    1. Field 07-A (Total Tax) minus Field 07-B (Estimated Tax Credit), Field 07-C (Form 7004 Credit), and 07-R (Credit for Telephone Excise Tax Paid), plus

    2. Field 07-H (Estimated Tax Penalty), minus

    3. Field 15-A (Total Gas Tax Credit) on the error register.

    Note:

    Delete Fields 07-D, 07-E, 07-F and 07-G, if present. They are invalid fields.

    1120-SF
    1. Computer’s underprint amount minus Field 07-B (Estimated Tax Credit), Field 07-C (Form 7004 Credit), and 07-R (Credit for Telephone Excise Tax Paid), plus

    2. Field 07-H (Estimated Tax Penalty), minus

    3. Field 15-A (Total Gas Tax Credit) on the error register.

    Note:

    Delete Fields 07-D, 07-E, 07-F and 07-G, if present. They are invalid fields.

    Note:

    A ripple type error will cause an underprint in Field 07-I (Balance Due/Overpayment) on Form 1120-SF.

     

    Note:

    The total of the applicable Field 07-B (Estimated Tax Credit), Field 07-C (Form 7004 Credit), Field 07-F (1042-S Credit), Field 07-G (FIRPTA), and 07-R (Credit for Telephone Excise Tax Paid), plus Field 15-A (Total Gas Tax Credit) will be computer-generated into Field 07-Y (Refundable Credits).

  5. Field 07-I (Balance Due/Overpayment) will underprint when a refundable credit is present, but not claimed on a refundable credit line. Follow local campus procedures to allow the credit.

  6. Delete all penalties and interest that are included in Field 07-I (Balance Due/Overpayment), except for the amount from Field 07-H (Estimated Tax Penalty).

  7. Occasionally, the taxpayer will enter tax only on the total income tax line or only on the tax due line.

    1. If this happens, deduct any penalties and interest from the total income tax line ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Enter the correct tax in Field 07-A (Total Income Tax) or Field 07-I (Balance Due/Overpayment), whichever is appropriate.

  8. Field 07-I (Balance Due/Overpayment) may underprint if Field 07-I is out of tolerance. If the out of tolerance was caused by an adjustment to the Credit for Federal Telephone Excise Tax Paid, Field 07-S (Credit for Federal Telephone Excise Tax Paid, Verified Amount) has a significant entry, then:

    1. Enter Action Code 1 and TPNC 88 if the credit was partially denied (Field 07-S amount is less than Field 07-R, Letter 106C, Claim Partially Disallowed, issued). See IRM 3.12.16.8.14, Field 07-R, Credit for Federal Telephone Excise Tax Paid.

    2. Enter Action Code 1 and TPNC 89 if the credit was fully denied (Field 07-S entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Letter 105C, Claim Disallowed, issued). See IRM 3.12.16.8.14, Field 07-R, Credit for Federal Telephone Excise Tax Paid.

  9. When no other errors are discovered, take the following action:

    1. Change Field 07-I (Balance Due/Overpayment) to the underprinted amount.

    2. Enter the revised figure on the return.

Refund Returns
  1. Field 07-I (Balance Due/Overpayment) will asterisk as a precautionary flag whenever there is a refund for review and manual verification.

    1. Returns will not be forced to the error register solely because of the presence of a refund amount in Field 07-I.

    2. Field 07-I will asterisk on initial input and on all subsequent loops. Once all true error conditions are corrected, Field 07-I will automatically clear.

  2. Field 07-I will also asterisk, until Reserve Code "1" is entered if the overpayment amount minus credit elect per computer (not taxpayer’s amount) is $1 million or more.

    1. Check for coding errors and transcription errors.

    2. If the refund is $1 million or more, but less than $10 million, and the return has been in processing for less than 20 days from the received date or return due date (whichever is later), verify that the transcribed refund amount is the same as the return refund line. If the amounts are the same, then input "1" in Field 03-E (Reserve Code) to allow the systemic refund to be generated.

      Caution:

      If the return has been in processing for 20 days or more from the received date or return due date (whichever is later), reject and flag the return for issuance of a manual refund, if the refund has not been issued. Once the manual refund has been issued, enter a "1" in Field 03-E (Reserve Code).

    3. If the refund is $25,000 or more and the return has been in processing for 20 days or more from the received or return due date (whichever is later), reject and flag the return for issuance of a manual refund, if the refund has not been issued. Once the manual refund has been issued, enter a "1" in Field 03-E (Reserve Code).

      Caution:

      Because of the tendency for SCRS returns to loop over and over, it is up to the campus to determine if they want to continue to process SCRS refund returns over $25,000 or more automatically as manual refunds as they are potentially in interest jeopardy.

    4. Reject and flag the return for issuance of a manual refund, if the refund is truly $10 million or more and the refund has not been manually refunded. Once the manual refund has been issued, enter a "1" in Field 03-E (Reserve Code).

  3. Refund returns have a 45-day interest free period (180 days for any overpayment resulting from tax deducted and withheld under Chapter 3 or Chapter 4). The interest free period is the 45 calendar day span of time between the return due date, received date or processable date (whichever is later) and the actual date of the refund check.

    1. The due date of the return is generally the 15th day of the fourth month after the end of the tax year.

      Example:

      The due date for a 2017 calendar year return is April 17, 2018.

      Note:

      Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law (P.L.) 114-41, changed the return due date for C corporations and is effective for taxable years beginning after December 31, 2015. The federal income tax return for the Form 1120 series of returns (except Form 1120-C, Form 1120S and Form 1120-IC-DISC) are generally due on or before the 15th day of the fourth month following the close of the C corporation’s tax year, with several exceptions, including:
      The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning after December 31, 2015, and before January 1, 2026.

    2. The return is in jeopardy when 20 or more days have elapsed since the received date or the return due date.

    3. If it is apparent that the 45-day interest free period is in jeopardy or that the interest free period has expired on a return with a refund of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ then bring the matter to the immediate attention of your supervisor and follow local campus procedures.

    4. Interest is never payable on "No Replies."

    5. If a date is correctly present in Field 01-G (Correspondence Received Date), interest is payable 45 days from the Correspondence Received Date.

    6. If a manual refund must be issued, reject the record with Action Code 3 and flag the return for expedite issuance of the manual refund.

  4. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49 to prevent delinquency notice from generating when a refund return is pulled for a manual refund. IRM 3.12.16.2.19, Suppression of Erroneous Balance Due and Return Delinquency Notices - Reject/Suspense Correction, for additional information.

  5. Handle the return on an EXPEDITE basis, when a manual refund is necessary.

  6. Enter CCC "0" in Field 01-F (CCC), when a manual refund has been issued.

    Note:

    See IRM 3.12.16.2.9, Refund Returns 45-Day Jeopardy and $100 Million or More Refunds, to ensure the refund is issued timely. See IRM 3.12.16.2.10, Taxpayer Advocate Service (TAS) Manual Refunds, for TAS Manual Refunds.

Field 07-J, Credit to Next Years Estimated Tax

  1. The form(s) and the appropriate transcription line(s) are identified in the table below:

    Field 07-J, Credit to Next Years Estimated Tax

    Form Transcription Line(s)
    1120-FSC Page 1, Line 6, center
    1120-ND Page 1, Line 18, center
    1120-SF Page 1, Line 20, center

     

  2. CCC "F" is incompatible with an amount in Field 07-J (Credit to Next Years Estimated Tax) and both will asterisk.

    1. Determine which is correct.

    2. Delete the other.

Field 07-N, Gross Income

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Field 07-O, Special Deduction

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Field 07-R, Credit for Federal Telephone Excise Tax Paid - Field 07-S, Credit for Federal Telephone Excise Tax Paid Verified Amount

  1. 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.

  2. The credit claimed is for the tax paid on service that was billed after February 28, 2003, and before August 1, 2006.

  3. Corporations claiming this credit must complete and submit Form 8913, Credit for Federal Telephone Excise Tax Paid, with the tax return.

    Note:

    Announcement 2012-16 provides that the Service will not process requests for refund of the wrongfully collected telephone excise taxes submitted after July 27, 2012.

  4. An Invalid Condition will asterisk when any of the following conditions are present:

    • Tax Period is prior to 200612, or after 200711.

    • There are entries in Fields 20-A (Tax Refund) and 20-B (Interest on Tax Refund) and there is no entry in Field 07-R.

    • Field 20-B is greater than Field 07-R and the total claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • The transcribed amount for telephone excise tax refund amount (return amount) differs from the computer amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Correction Procedures:

    1. Code and Edit will no longer edit the Telephone Excise Tax Refund (TETR) amount. This will allow all TETR claims filed on original returns to fall out to ERS.

    2. Change all TETR fields to zero (0) and remove the Computer Condition Code "U", if applicable.

    3. Detach Form 8913 and make a copy of the signature page from the return. Staple the copy of the signature page to the back of the original Form 8913 and route to Accounts Management.

    4. Enter Action Code 1 and TPNC 90 with the following language: Due to processing constraints, your Credit for Federal Telephone Excise Tax Paid could not be processed with your tax return. Your claim for this credit has been forwarded to another area to be processed.

Field 07-T, Salaries and Wages

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Field 07-W, Tax Exempt Interest

  1. The form and the appropriate transcription line are identified in the table below:

    Field 07-W, Tax Exempt Interest

    Form Transcription Line(s)
    1120-SF Page 2, Additional Information, Line 2

     

  2. Correct all misplaced entries, coding errors and transcription errors.

Field 07-X, Interest Exempt Under Section 103

  1. This field is Reserved.

  2. This will prevent the error register from being renumbered/reformatted and will eliminate new programming.

Field 07-Y, Refundable Credits (Computer Generated)

  1. This field is computer generated and can’t be changed.

  2. It can be used to identify math errors.

Field 07-Z, Manually Corrected Total Tax

  1. Field 07-Z is used when a manual computation return has a math error.

  2. This often indicates that neither the transcribed amount nor the underprinted (generated) amount is correct except for "Y" coded returns (short period).

  3. Enter the correct amount of tax in Field 07-Z and change the appropriate line on the return to the corrected amount. When the manually corrected tax is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ in Field 07-Z.

  4. On loop, enter Action Code 1 and TPNC 05 to inform the taxpayer of the error.

  5. When a taxpayer files a consolidated return with a "Mixed Component Member," ensure Audit Code "3" has been entered. Accept the taxpayer entries for taxable income and tax and enter in Field 07-Z.

    Note:

    Field 07-Z must be entered on Form 1120-SF if there is a math error in tax. Field 07-A (Total Tax) will underprint. Enter correct tax in Field 07-Z with Action Code6. When document loops, enter Action Code 1 and TPNC 05.

    See Figure 3.12.16-10, Manually Correct Tax.

    Figure 3.12.16-10

    This is an Image: 33660712.gif
     

    Please click here for the text description of the image.

Section 08, Data - Form 1120-SF

  1. Section 08 contains information fields that are variable in length and are money amounts.

  2. Fields 08-A through 08-C are valid for Form 1120-SF.

  3. Fields 08-A and 08-B are transcribed in dollars only.

  4. If a field is asterisked, check to determine if that field is valid for that return and document code.

Section 08, Error Register Format

  1. The chart below shows Section 08: Alpha Field Designator (AFD), Title, Field Length, Dollars and Cents ($ / ¢), and the Location.

    Section 08

    Section 08 AFD Title Field Length $ / ¢ Location
    A Transfer’s Fund 13 $ Form 1120-SF, Page 2, Additional Information, Line 1a
    B Direct/Indirect Payment 13 $ Form 1120-SF, Page 2, Additional Information, Line 3b
    C Distribution Indicator 1   Form 1120-SF, Page 2, Additional Information, Dotted portion of Line 4a

     

Field 08-A, Transfer’s Fund

  1. Field 08-A is transcribed from Form 1120-SF, Page 2, Additional Information, Line 1a.

  2. Field 08-A must be all numeric or blank.

  3. Field 08-A must be transcribed in dollars only.

  4. Field 08-A must be positive.

Field 08-B, Direct/Indirect Payment

  1. Field 08-B is transcribed from Form 1120-SF, Page 2, Additional Information, Line 3b.

  2. Field 08-B must be all numeric or blank.

  3. Field 08-B must be transcribed in dollars only.

  4. Field 08-B must be positive.

Field 08-C, Distribution Indicator

  1. Field 08-C is transcribed from Form 1120-SF, Page 2, Additional Information, the dotted portion Line 4a.

  2. This is a one digit numeric field.

    Field 08-C, Distribution Indicator Code

    Code Description
    1 Yes
    2 No

     

Additional Credits

  1. Additional credits that may be attached or indicated on a return are shown below.

Non-Qualifying Vehicles
  1. Non-Qualifying Vehicles - As a result of erroneous credits being allowed for Non-Qualifying Vehicles, Code and Edit will edit Computer Condition Code "C" on any return with an invalid in service date listed on the attached forms:

    Non-Qualifying Vehicles

    Form Valid In Service Date
    8834 (Qualified Plug-in Electric Vehicle Credit) After 2/17/2009
    8936 (Credit Under Section 30D) After 12/31/2008
    8936 (Qualified 2 and 3-wheeled plug-in electric vehicles) After 12/31/2011
    8910 (Plug-in conversion credit) After 2/17/2009
    8910 (Credit Under Section 30B) After 12/31/2005

     

    Note:

    Form 8834, Qualified Electric Vehicle Credit, Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, and Form 8910, Alternative Motor Vehicle Credit, reflect the expiration of the qualified plug-in electric vehicle credit per Public Law (P.L.) 111-312, Section 101; Internal Revenue Code (IRC) 30(f).

  2. ERS will remove the CCC "C" and disallow the credit. Delete the credit from the error register and the return.

    Note:

    IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

  3. Enter CCC "3" in Field 01-F (CCC).

  4. Enter Action Code 1 and TPNC 90 with the following language (as applicable to the credit/form):

    • We disallowed the Form 8834 credit due to an invalid in service date. Refer to the Instructions for Form 8834, Qualified Electric Vehicle Credit, for additional information.

    • We disallowed the Form 8910 credit due to an invalid in service date. Refer to the Instructions for Form 8910, Alternative Motor Vehicle Credit, for additional information.

    • We disallowed the Form 8936 credit due to an invalid in service date. Refer to the Instructions for Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, for additional information.

    Note:

    See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

Qualified Cellulosic Biofuel known as "Black Liquor"
  1. Qualified Cellulosic Biofuel known as Black Liquor - If Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit, has a significant amount on Line 5* Column (c) or Line 8*, *(Line 5(c) or Line 7 for 2009, Line 7(c) or Line 9 for 2008), and indicates "Cellulosic Biofuel Refund (CBR)," with a significant amount on Form 6478 (as indicated above), Code and Edit will edit CCC "U" and attach Form 4227 (or other appropriate routing slip) and route to Rejects for a special review. Not applicable for revisions not listed.

  2. If a return is identified with the above criteria:

    1. Reject the record with Action Code 3.

    2. Prepare Form 4227 (or other appropriate routing slip) notating "CBR" and route to Rejects for a special review.

  3. These instructions apply to 2009 tax year only, including fiscal years (200901 through 201011).

    Reminder:

    Do not reject the record with Action Code 3 for tax period 201012.

  4. SBSE Exam and LB&I Exam will provide someone (Revenue Agent/Classifier) to perform review of the claim. The Revenue Agent/Classifier will then indicate (stamp) that the return has been reviewed.

  5. ERS/Rejects will not make any adjustments, send a letter or send a notice specifically for this project. Any other notices or letters to be generated, as a result of the taxpayer filing the return, still need to be issued.

  6. Rejects will continue processing the return.

Manual Verifications

  1. Math verification of Form 1120-FSC and Form 1120-ND is limited to the following instructions:

    1. On "G" coded returns, math verification is not required.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. Check the transfer of summary figures from related sections and schedules. Verify the computation and if there is a discrepancy between the two figures, correct when required.

Form 1120-FSC

  1. Check the transfer of figures from Schedule J to Page 1.

  2. Math verify Page 3, Schedule B, Part I, Columns (a) and (b) and Part II, Lines 16 through 20.

  3. Math verify Page 4, Schedule F.

  4. Math verify Page 5, Schedule J.

  5. Use Action Code 0 to clear the register, if tax agrees with Line 1.

  6. Enter correct tax in Field 07-Z (Manually Correct Total Tax), if tax disagrees. Enter Action Code 1 and TPNC 05 to notify the taxpayer of the error.

Form 1120-ND

  1. Check the transfer of figures from related schedules to Page 1.

  2. Math verify Page 1.

  3. Math verify tax computation work sheet if attached (Line 13 amount). See IRM 3.12.16.22, Corporate Income Tax Rates, for tax rates.

  4. Use Action Code 0 to clear the register, if tax agrees with Line 13.

  5. Enter correct tax in Field 07-Z (Manually Correct Total Tax), if tax disagrees. Enter Action Code 1 and TPNC 05 to notify the taxpayer of the error.

Form 1120-SF

  1. Form 1120-SF is math verified by the computer.

  2. Use Action Code 0 to clear the register when no other errors are present.

Section 14, Data - Form 1120-FSC

  1. Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, Page 2, Additional Information, Questions 5 and 6, are valid for tax periods beginning after 199912. Questions 5 and 6 are identical to questions on Schedule N. Form 1120-FSC filers are not required to file a Schedule N.

  2. The Form 1120-L and Form 1120-PC moved to the Error Resolution System (ERS). To keep the error register in the same format and prevent additional programming, various fields are "Reserved" .

Section 14, Error Register Format

  1. The chart below shows Section 14: Alpha Field Designator (AFD), Title, Field Length, and the Location on the Return.

    Note:

    The Form 1120-L and Form 1120-PC moved to the Error Resolution System (ERS). To keep the error register in the same format and prevent additional programming, Field 14-B (Number of Forms 8865) is "Reserved" .

    Section 14

    Section 14 AFD Title Field Length Location
    A Disregarded Entity 1 Form 1120-FSC, Page 2, Additional Info, Question 4
    B Number of Forms 8865 3 Reserved
    C Direct/Indirect Interest 1 Form 1120-FSC, Page 2, Additional Info Question 5

Field 14-A, Disregarded Entity

  1. Field 14-A (Disregarded Entity) is transcribed from Form 1120-FSC, Page 2, Additional Information, Question 4.

  2. The valid characters for this field are 1, 2, 3, or blank.

  3. If Field 14-A (Disregarded Entity) asterisks, check for all coding errors and transcription errors.

  4. Take the following action:

    Correction Procedures

    If Then
    Form 1120-FSC, Page 2, Additional Information, Question 4, box is checked "Yes" , Enter a "1" in Field 14-A (Disregarded Entity).
    Form 1120-FSC, Page 2, Additional Information, Question 5, box is checked "No" , Enter a "2" in Field 14-A (Disregarded Entity).
    Form 1120-FSC, Page 2, Additional Information, Question 4, has both the "Yes" and "No" box checked, Enter a "3" in Field 14-A (Disregarded Entity).
    Form 1120-FSC, Page 2, Additional Information, Question 4, has neither the "Yes" nor "No" box checked, Delete entry in Field 14-A (Disregarded Entity).

Field 14-B, Number of Forms 8865

  1. This field is Reserved.

Field 14-C, Direct/Indirect Interest

  1. Field 14-C is transcribed from Form 1120-FSC, Page 2, Additional Information, Question 5.

  2. The valid characters for this field are 1, 2, 3, or blank.

  3. If Field 14-C asterisks, check for all coding errors and transcription errors.

  4. Take the following action:

    Field 14-C Correction Procedures

    If Then
    Form 1120-FSC, Page 2, Additional Information, Question 5, box is checked "Yes" , Enter a "1" in Field 14-C (Direct/Indirect Interest).
    Form 1120-FSC, Page 2, Additional Information, Question 5, box is checked "No" , Enter a "2" in Field 14-C (Direct/Indirect Interest).
    Form 1120-FSC, Page 2, Additional Information, Question 6, has both the "Yes" and "No" box checked Enter a "3" in Field 14-C (Direct/Indirect Interest).
    Form 1120-FSC, Page 2, Additional Information, Question 5, has neither the "Yes" nor "No" box checked, Delete the entry in Field 14-C (Direct/Indirect Interest).

     

Section 15, Data - Form 4136, Credit for Federal Tax Paid on Fuels

  1. Section(s) 15, 16, 17 and 18 contain credit information from Form 4136, Credit for Federal Tax Paid on Fuels. Section 15 does not have to be present; therefore, it will never be error coded as missing.

  2. If Section 15 is present, Field 15-A will display the Total Gas Tax Credit (Form 4136), computer generated amounts of Section(s) 15, 16, 17 and 18.

  3. Fields 15-B through 15-Y must consist of only money amounts and Credit Reference Numbers (CRNs).

  4. Action Codes 4, 5 and 6 are applicable to this section.

  5. Section 15 may be present.

  6. All fields are variable in length and the money amounts are transcribed in dollars and cents.

  7. The maximum field length is 10 positions and significant positions must be numeric.

  8. All negative amounts are computer-forced positive.

  9. See Exhibit 3.12.16-12, Form 4136 - Prior Year Conversion Charts, for prior years 2000 - 1997.

Section 15, Error Register Format

  1. Form 4136 is transcribed using the credit amount (amount of claim) and corresponding Credit Reference Number (CRN) until all amounts and CRNs are entered. The first 12 credit amounts and CRNs will display in Section 15.

  2. The first credit amount (amount of claim) transcribed from Form 4136 will display in Field 15-B and the corresponding CRN will display in Field 15-C. The second credit amount will display in Field 15-D and the corresponding CRN will display in Field 15-E, etc.

  3. The error register format for Section 15 is as follows:

    Section 15

    Section 15 Field Title
    15-A Total Gas Tax Credit (Computer Generated)
    15-B Amount of Claim 1
    15-C Credit Reference Number 1
    15-D Amount of Claim 2
    15-E Credit Reference Number 2
    15-F Amount of Claim 3
    15-G Credit Reference Number 3
    15-H Amount of Claim 4
    15-I Credit Reference Number 4
    15-J Amount of Claim 5
    15-K Credit Reference Number 5
    15-L Amount of Claim 6
    15-M Credit Reference Number 6
    15-N Amount of Claim 7
    15-O Credit Reference Number 7
    15-P Amount of Claim 8
    15-Q Credit Reference Number 8
    15-R Amount of Claim 9
    15-S Credit Reference Number 9
    15-T Amount of Claim 10
    15-U Credit Reference Number 10
    15-V Amount of Claim 11
    15-W Credit Reference Number 11
    15-X Amount of Claim 12
    15-Y Credit Reference Number 12

     

    Note:

    All transcription lines are located in Column (d), "Amount of Credit" .

  4. This section supports the credit from Form 4136 and part of Field 07-I (Balance Due/Overpayment).

    1. Correspond if Form 4136 is not attached.

    2. If no reply to our correspondence:
      Disallow the credit. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.
      Enter CCC "3" in Field 01-F (CCC).
      Enter CCC "X" to freeze the refund, if an overpayment is indicated.
      Disallow the credit when the taxpayer fails to reply to our correspondence.
      Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.
      See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

Correction Procedures

  1. The following table identifies corrective procedures for Section 15, Form 4136.

    Correction Procedures

    If Then
    Section 15 is terminus,
    1. Determine the correct data from Form 4136.

    2. Enter the correct data in the appropriate fields with Action Code 6.

    3. If data is correct, re-enter a field with Action Code 6.

    No data is present for any of the fields, or if CCC "G" is present in Field 01-F (CCC), Delete Section 15 with Action Code 4.
    The section is not present for an original return (non "G" coded) and Form 4136 is attached, Add Section 15 with Action Code 5.
    Any of the fields in Section 15 are asterisked (*), Check for coding errors and transcription errors and correct the field(s) as appropriate.
    Field 07-A (Total Tax) is underprinted.
    1. Compare Field 15-A with the applicable "Total income tax credit claimed" (e.g., Form 4136, Line 17 for 2011 - 2008, Line 18 for 2007, Line 20 for 2006, Line 15 for 2005, Line 10 for 2004-2001, Line 9 for 2000-1997).

    2. If different, verify that the fields in Section(s) 15, 16, 17 and 18 were correctly transcribed.

    3. If so,

    Bring up the underprint in Field 07-A (Total Tax) and correct the applicable line on the return. Otherwise, correct any fields transcribed incorrectly.

     

  2. Field 01-D (Tax Period) and the Credit Reference Number (CRN) field will asterisk if a CRN is present for an invalid tax period.

    1. Correct all misplaced entries, coding errors and transcription errors.

    2. Verify prior year CRNs (e.g., tax year 2000 and prior) are converted to current year CRNs. See Exhibit 3.12.16-12, Form 4136 - Prior Year Conversion Charts, for prior years 2000 - 1997.

    3. Verify the CRN and Form 4136 credit amount is claimed for a valid tax period. See Exhibit 3.12.16-13, Form 4136 - Valid Tax Period Chart.

  3. If the Credit Reference Number (CRN) is not valid,

    1. Delete the entries from the CRN and Form 4136 credit amount fields.

    2. Enter Action Code 1 and TPNC 90. See Exhibit 3.12.16-11, Form 4136 - Invalid Credit Reference Number (CRN) and TPNC 90 Literal, for the applicable literal/language.

      Note:

      See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

  4. The Form 4136 credit amount field and the Credit Reference Number (CRN) field will asterisk when a Form 4136 credit amount is present and the corresponding CRN is not present or a CRN is present and the corresponding Form 4136 credit amount is not present.

    1. Correct all misplaced entries, coding errors and transcription errors.

      Correction Procedures

      If Then
      A Form 4136 credit amount is present with no CRN (prior year form revisions when no CRN printed on the form),
      1. Enter the credit amount from Form 4136, if present, or

      2. Delete the CRN if a credit amount is not present on Form 4136.

      A CRN is present without a Form 4136 credit amount,
      1. Enter the credit amount from Form 4136, if present, or

      2. Delete the CRN if a credit amount is not present on Form 4136.

       

  5. The following table identifies what line the credit is reported on.

    Form 4136 Credit

    Form Line Number
    Form 1120-FSC Page 1, Tax and Payments, Line 2f.

     

  6. The following table provides corrective procedures for Form 4136.

    Correction Procedures

    If Then
    Form 4136 is missing,
    1. Enter Action Code 3 on the error register and reject the record for correspondence.

    2. Prepare Form 3696, Correspondence Action Sheet (or other approved Correspondence Action Sheet).

    3. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49.

    4. Edit an action trail "L118C Sent" (or similar language) in the lower left corner going vertically up the side of the return.

    The taxpayer does not reply to correspondence,
    1. Delete the credit from the error register and the return.

      Note:

      See IRM 3.12.16.17, General "No Reply" Procedures, for additional information

    2. Enter CCC "3" in Field 01-F (CCC).

    3. Adjust Field 07-A (Total Tax) accordingly.

    4. Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.

    The "Total income tax credit claimed" (e.g., Form 4136, Line 18 for 2007, Line 20 for 2006, Line 15 for 2005, Line 10 for 2004-2001, Line 9 for 2000-1997) is the only amount available,
    1. Enter Action Code 3 on the error register and reject the record for correspondence.

    2. Prepare Form 3696, Correspondence Action Sheet (or other approved Correspondence Action Sheet).

    3. Input TC 599 with Closing Code (cc) 017 on IDRS using Command Code FRM49.

    4. Edit an action trail "L118C Sent" (or similar language) in the lower left corner going vertically up the side of the return.

     

Section 16, Data - Form 4136, Credit for Federal Tax Paid on Fuels

  1. Section 16 is the second of four sections that contains credit information from Form 4136, Credit for Federal Tax Paid on Fuels. Section 16 does not have to be present; therefore, it will never be error coded as missing.

  2. If Section 16 is present, it must consist of only money amounts and Credit Reference Numbers (CRNs).

  3. Action Codes 4, 5 and 6 are applicable to this section.

  4. Section 16 may be present.

  5. All fields are variable in length and the money amounts are transcribed in dollars and cents.

  6. The maximum field length is 10 positions and significant positions must be numeric.

  7. All negative amounts are computer-forced positive.

  8. The total of these fields is computer generated into Field 15-A (Total Gas Tax Credit).

  9. See Exhibit 3.12.16-12, Form 4136 - Prior Year Conversion Charts, for prior years 2000 - 1997.

Section 16, Error Register Format

  1. Form 4136 is transcribed using the credit amount (amount of claim) and corresponding Credit Reference Number (CRN) until all amounts and CRNs are entered. Section 16 will consist of the thirteenth through twenty-fourth credit amounts and CRNs.

  2. The thirteenth credit amount transcribed from Form 4136 will display in Field 16-A and the corresponding CRN will display in Field 16-B. The fourteenth credit amount will display in Field 16-C and the corresponding CRN will display in Field 16-D, etc.

  3. The error register format for Section 16 is as follows:

    Section 16

    Section 16 Field Title
    16-A Amount of Claim 13
    16-B Credit Reference Number 13
    16-C Amount of Claim 14
    16-D Credit Reference Number 14
    16-E Amount of Claim 15
    16-F Credit Reference Number 15
    16-G Amount of Claim 16
    16-H Credit Reference Number 16
    16-I Amount of Claim 17
    16-J Credit Reference Number 17
    16-K Amount of Claim 18
    16-L Credit Reference Number 18
    16-M Amount of Claim 19
    16-N Credit Reference Number 19
    16-O Amount of Claim 20
    16-P Credit Reference Number 20
    16-Q Amount of Claim 21
    16-R Credit Reference Number 21
    16-S Amount of Claim 22
    16-T Credit Reference Number 22
    16-U Amount of Claim 23
    16-V Credit Reference Number 23
    16-W Amount of Claim 24
    16-X Credit Reference Number 24

     

    Note:

    All transcription lines are located in Column (d), "Amount of Credit" .

  4. This section supports the credit from Form 4136 and part of Field 07-I (Balance Due/Overpayment).

    1. Correspond if Form 4136 is not attached.

    2. If no reply to our correspondence:
      Disallow the credit. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.
      Delete the credit from the error register and the return.
      Enter CCC "3" in Field 01-F (CCC).
      Enter CCC "X" to freeze the refund, if an overpayment is indicated.
      Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.
      See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

Correction Procedures

  1. Follow Section 15 correction procedures.

Section 17, Data - Form 4136, Credit for Federal Tax Paid on Fuels

  1. Section 17 is the third of four sections that contains credit information from Form 4136, Credit for Federal Tax Paid on Fuels. Section 17 does not have to be present; therefore, it will never be error coded as missing.

  2. If Section 17 is present, it must consist of only money amounts and Credit Reference Numbers (CRNs).

  3. Action Codes 4, 5 and 6 are applicable to this section.

  4. Section 17 may be present.

  5. All fields are variable in length and the money amounts are transcribed in dollars and cents.

  6. The maximum field length is 10 positions and significant positions must be numeric.

  7. All negative amounts are computer-forced positive.

  8. The total of these fields is computer generated into Field 15-A (Total Gas Tax Credit).

  9. See Exhibit 3.12.16-12, Form 4136 - Prior Year Conversion Charts, for prior years 2000 - 1997.

Section 17, Error Register Format

  1. Form 4136 is transcribed using the credit amount (amount of claim) and corresponding Credit Reference Number (CRN) until all amounts and CRNs are entered. Section 17 will consist of the twenty-fifth through thirty-sixth credit amounts and CRNs.

  2. The twenty-fifth credit amount will display in Field 17-A and the corresponding CRN will display in Field 17-B. The twenty-sixth credit amount will display in Field 17-C and the corresponding CRN will display in Field 17-D, etc.

  3. The error register format for Section 17 is as follows:

    Section 17

    Section 17 Field Title
    17-A Amount of Claim 25
    17-B Credit Reference Number 25
    17-C Amount of Claim 26
    17-D Credit Reference Number 26
    17-E Amount of Claim 27
    17-F Credit Reference Number 27
    17-G Amount of Claim 28
    17-H Credit Reference Number 28
    17-I Amount of Claim 29
    17-J Credit Reference Number 29
    17-K Amount of Claim 30
    17-L Credit Reference Number 30
    17-M Amount of Claim 31
    17-N Credit Reference Number 31
    17-O Amount of Claim 32
    17-P Credit Reference Number 32
    17-Q Amount of Claim 33
    17-R Credit Reference Number 33
    17-S Amount of Claim 34
    17-T Credit Reference Number 34
    17-U Amount of Claim 35
    17-V Credit Reference Number 35
    17-W Amount of Claim 36
    17-X Credit Reference Number 36

     

    Note:

    All transcription lines are located in Column (d), "Amount of Credit"

  4. This section supports the credit from Form 4136 and part of Field 07-I (Balance Due/Overpayment).

    1. Correspond if Form 4136 is not attached.

    2. If no reply to our correspondence:
      Disallow the credit. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.
      Enter CCC "3" in Field 01-F (CCC).
      Enter CCC "X" to freeze the refund, if an overpayment is indicated.
      Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.
      See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

Correction Procedures

  1. Follow Section 15 correction procedures.

Section 18, Data - Form 4136, Credit for Federal Tax Paid on Fuels

  1. Section 18 is the fourth of four sections that contains credit information from Form 4136, Credit for Federal Tax Paid on Fuels. Section 18 does not have to be present; therefore, it will never be error coded as missing.

  2. If Section 18 is present, it must consist of only money amounts and Credit Reference Numbers (CRNs).

  3. Action Codes 4, 5 and 6 are applicable to this section.

  4. Section 18 may be present.

  5. All fields are variable in length and the money amounts are transcribed in dollars and cents.

  6. The maximum field length is 10 positions and significant positions must be numeric.

  7. All negative amounts are computer-forced positive.

  8. The total of these fields is computer generated into Field 15-A (Total Gas Tax Credit).

  9. See Exhibit 3.12.16-12, Form 4136 - Prior Year Conversion Charts, for prior years 2000 - 1997.

Section 18, Error Register Format

  1. Form 4136 is transcribed using the credit amount (amount of claim) and corresponding Credit Reference Number (CRN) until all amounts and CRNs are entered. Section 18 will consist of the thirty-seventh through forty-third credit amounts and CRNs.

  2. The thirty-seventh credit amount will display in Field 18-A and the corresponding CRN will display in Field 18-B. The thirty-eighth credit amount will display in Field 18-C and the corresponding CRN will display in Field 18-D, etc.

  3. The error register format for Section 18 is as follows:

    Section 18

    Section 18 Field Title
    18-A Amount of Claim 37
    18-B Credit Reference Number 37
    18-C Amount of Claim 38
    18-D Credit Reference Number 38
    18-E Amount of Claim 39
    18-F Credit Reference Number 39
    18-G Amount of Claim 40
    18-H Credit Reference Number 40
    18-I Amount of Claim 41
    18-J Credit Reference Number 41
    18-K Amount of Claim 42
    18-L Credit Reference Number 42
    18-M Amount of Claim 43
    18-N Credit Reference Number 43

     

    Note:

    All transcription lines are located in Column (d), "Amount of Credit" .

  4. This section supports the credit from Form 4136 and part of Field 07-I (Balance Due/Overpayment).

    1. Correspond if Form 4136 is not attached.

    2. If no reply to our correspondence:
      Disallow the credit. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.
      Enter CCC "3" in Field 01-F (CCC).
      Enter CCC "X" to freeze the refund, if an overpayment is indicated.
      Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.
      See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

Correction Procedures

  1. Follow Section 15 correction procedures.

Section 20, Data - Form 8913, Credit for Federal Telephone Excise Tax Paid

  1. Section 20 contains data from Form 8913, Credit for Federal Telephone Excise Tax Paid.

  2. All fields are positive only, dollars and cents, and may contain 15 digits.

  3. Fields must be numeric or blank.

  4. The chart below shows Section 20: Alpha Field Designator (AFD), Title, Field Length and Location on the Form 8913. See Exhibit 3.12.16-4, Form 8913, Credit for Federal Telephone Excise Tax Paid, for field locations.

    Section 20

    Section 20 AFD Title Field Length Location on the Form 8913
    A Tax Refund 15 Line 15, Column (d)
    B Interest on Tax Refund 15 Line 15, Column (e)

     

  5. Refer to attached Form 8913 to correct all coding errors and transcription errors.

General "No Reply" Procedures

  1. If there is no reply or an incomplete reply to correspondence, perfect the document from available information using the procedures in the IRM.

  2. Disallow unsubstantiated credits where substantiation is required.

  3. When unable to identify an excess remittance, transfer the remittance to the Unidentified Remittance File (URF).

  4. Enter CCC "3" in Field 01-F (CCC).

  5. Enter CCC "X" in Field 01-F (CCC) on refund returns.

  6. Refer to the "No Reply" Conditions Table below.

    No Reply Conditions

    Condition(s) Required Action
    Tax Period
    One to six months later than current date.
    Hold one to six months as necessary.
    More than 12 months. Research for the correct period ending and change the tax period.
    Unexplained short year or unauthorized change in accounting period.
    1. Process, post to tax period or return, after corresponding with taxpayer.

    2. Enter Audit Code "3" with an explanation (valid for Form 1120-FSC, Form 1120-ND and Form 1120-SF).

    Multiple tax periods. Use earliest tax period.
    Future Tax period. Hold and process for the tax period indicated on the return.
    Tax period differs from Master File and last tax period with a TC 150 is more than 12 months prior to the return tax period.
    1. Input TC 016 so that the TC 474 will post.

    2. Input TC 474 on CC REQ77 (using one cycle delay) for one year prior to the tax period on the return being processed.

    3. Hold for one week.

    4. Correct the return and the register one cycle after the input of TC 474.

    Tax period differs from Master File and last tax period with a TC 150 is less than 12 months prior to the return tax period.
    1. Enter CCC "Y" in Field 01-F (CCC)

    2. Enter the appropriate code in the Entity Underprint Code.

    Signature
    1. Enter CCC "X" (on refund returns only) in Field 01-F (CCC).

    2. Enter CCC "3" in Field 01-F (CCC).

    Unsubstantiated Credits
    • Form 1118, Foreign Tax Credit - Corporations

    • Form 4136, Credit for Federal Tax Paid on Fuels

    • Form 4626, Alternative Minimum Tax

    • Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit

    • Schedule D (Form 1120), Capital Gains and Losses

    • Form 8834, Qualified Electric Vehicle Credit

    • Form 8910, Alternative Motor Vehicle Credit

    • Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit

    1. Disallow the credit when the taxpayer fails to reply to our correspondence.

    2. Delete the credit from the error register and the return.

    3. Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.

    4. See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

    Controlled Group - No Apportionment Schedule.
    • 5% (percent) and 3% (percent) Additional Tax

    • Allocation of income - Section 1561 Lines 2ai-iv, 2bi and 2bii

    1. Assess maximum tax. Manually compute the 5% (percent) and 3% (percent) Additional Tax. See IRM 3.12.16.20.4, Controlled Group Returns, for additional information.

    2. Enter Action Code 1 and TPNC 90 with the following language: We adjusted your tax and/or credits because we did not receive a reply to our request for additional information.

    3. See IRM 3.12.16.4.17, Field 01-M, Taxpayer Notice Code (TPNC), for additional information.

    Note:

    Refer to Schedule O (Form 1120), Consent Plan and Apportionment Schedule, for a Controlled Group for returns filed for tax periods beginning January 1, 2007, and later.

    Form 8913, Credit for Federal Telephone Excise Tax Paid
    1. Follow IRM procedures for possible disallowance of Federal Telephone Excise Tax Paid Credit.

    2. See IRM 3.12.16.8.14, Field 07-R, Credit for Federal Telephone Excise Tax Paid for additional information.

    3. IRM 3.12.16.16, Section 20, Data - Form 8913, Credit for Federal Telephone Excise Tax Paid, for additional information.

     

Remittance

  1. When a remittance is submitted with a Corporate Income Tax Return, take the following action:

    Remittance Procedures

    If Then
    The remittance was transcribed incorrectly, Reinput the document to correct the remittance amount.
    A remittance is present and total tax is not significant, Determine the purpose of the remittance.
    The remittance was obviously made in error (for example equal to the overpayment amount),
    1. Prepare Form 3244, Payment Posting Voucher, to post the amount to the module for the return tax period.

    2. Renumber and process the return as a non-remittance.

    The taxpayer has indicated on the return the purpose of the payment,
    1. Prepare Form 3465, Adjustment Request, for routing to Accounts Management, request that the payments, etc. be moved to the correct tax period

    2. Enter a CCC "X" in Field 01-F (CCC) and write a note on the bottom of Form 3465 to remove "X" once credits have been moved.

    No explanation is attached to the return, Research and correspond with the taxpayer and apply the payment accordingly.
    No reply and research is unsuccessful, Transfer the money to Unidentified Remittance File (URF).

     

Return Secured by Audit

  1. If a return secured by Audit is unprocessable due to missing information, do not correspond. Reject and route the return to Examination

Tax Exempt Status Pending by Audit

  1. Transfer any credits present in the module.

  2. Void the reject register and send the return to the Examination Division in the applicable Exempt Organization (EO) Area Office, Attention: EO Coordinator as indicated in the following chart.

    Exam Exempt Organization Area Office

    EO Area Office Office Code State of Jurisdiction State Abbreviation
    Northeast Area 01 Connecticut CT
    Northeast Area 01 Maine ME
    Northeast Area 01 Massachusetts MA
    Northeast Area 01 New Hampshire NH
    Northeast Area 01 New York NY
    Northeast Area 01 Rhode Island RI
    Northeast Area 01 Vermont VT
     

    Exam Exempt Organization Area Office

    EO Area Office Office Code State of Jurisdiction State Abbreviation
    Mid-Atlantic Area 02 Delaware DE
    Mid-Atlantic Area 02 District of Columbia DC
    Mid-Atlantic Area 02 Maryland MD
    Mid-Atlantic Area 02 New Jersey NJ
    Mid-Atlantic Area 02 North Carolina NC
    Mid-Atlantic Area 02 Pennsylvania PA
    Mid-Atlantic Area 02 South Carolina SC
    Mid-Atlantic Area 02 Virginia VA
    Mid-Atlantic Area 02 Washington DC DC
     

    Exam Exempt Organization Area Office

    EO Area Office Office Code State of Jurisdiction State Abbreviation
    Great Lakes Area 03 Illinois IL
    Great Lakes Area 03 Indiana IN
    Great Lakes Area 03 Kentucky KY
    Great Lakes Area 03 Michigan MI
    Great Lakes Area 03 Ohio OH
    Great Lakes Area 03 West Virginia WV
    Great Lakes Area 03 Wisconsin WI
     

    Exam Exempt Organization Area Office

    EO Area Office Office Code State of Jurisdiction State Abbreviation
    Gulf Coast Area 04 Alabama AL
    Gulf Coast Area 04 Arkansas AR
    Gulf Coast Area 04 Florida FL
    Gulf Coast Area 04 Georgia GA
    Gulf Coast Area 04 Louisiana LA
    Gulf Coast Area 04 Mississippi MS
    Gulf Coast Area 04 Oklahoma OK
    Gulf Coast Area 04 Tennessee TN
    Gulf Coast Area 04 Texas TX
     

    Exam Exempt Organization Area Office

    EO Area Office Office Code State of Jurisdiction State Abbreviation
    Central Mountain Area 05 Arizona AZ
    Central Mountain Area 05 Colorado CO
    Central Mountain Area 05 Iowa IA
    Central Mountain Area 05 Kansas KS
    Central Mountain Area 05 Minnesota MN
    Central Mountain Area 05 Montana MT
    Central Mountain Area 05 Nebraska NE
    Central Mountain Area 05 Nevada NV
    Central Mountain Area 05 New Mexico NM
    Central Mountain Area 05 North Dakota ND
    Central Mountain Area 05 South Dakota SD
    Central Mountain Area 05 Utah UT
     

    Exam Exempt Organization Area Office

    EO Area Office Office Code State of Jurisdiction State Abbreviation
    Pacific Coast Area 06 Alaska AK
    Pacific Coast Area 06 California CA
    Pacific Coast Area 06 Hawaii HI
    Pacific Coast Area 06 Idaho ID
    Pacific Coast Area 06 Oregon OR
    Pacific Coast Area 06 Washington WA

Replies to Correspondence

  1. Enter the stamped correspondence received date in Field 01-G (Correspondence Received Date), if it is prior to the return due date.

  2. Process the return according to the information received.

  3. If the taxpayer sends in a partial reply, follow "No Reply" procedures for the missing information. See IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

  4. If the taxpayer's correspondence addresses issues not related to the return being processed, photocopy the request and forward to the appropriate area.

  5. If there is an Entity Assignment Date and a correspondence received date, enter the latest date in Field 01-G (Correspondence Received Date).

Manual Computations

  1. The computer will accurately compute the tax on most returns if they have been properly filled out, edited, and transcribed.

  2. It is imperative that tax examiners be able to determine a return requiring manual computation. If the tax examiner fails to identify such returns, incorrect settlement with the taxpayer will result.

  3. A "manual computation" return requires an Action Code 0 or an entry of corrected tax in the Manually Corrected Tax Field and Action Code 1.

    Note:

    These corrections override the computer determination of what is the correct Total Income Tax. You may, therefore, never use this code unless and until the transcribed Total Income Tax printed on the error register agrees with the correct Total Income Tax ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ as you have computed it, and all other transcription is correct.

  4. Code and Edit is instructed to enter CCC "Y" for returns that have a "change of accounting period" on a short period return.

  5. Other returns will print out on the register because of the underprint in the Total Tax Field. Therefore you must examine the entire return to determine if it requires manual verification or not. Before performing the computation, everything must be present and correct on the register.

  6. Returns that require manual computations are more frequent in years when the tax rates change as they did in 1982, 1983, 1984 and 1993 (corporations with $1 million or more in Taxable Income), tax periods straddling July 1, 1987, and Control Group Corporations with $100,000 or more in Taxable Income with tax periods 198707-198811.

  7. Returns that are 52-53 week filers and those that are "initial" or "final " short year need to be manually computed only when they straddle two different tax rates. For these returns as well as "change of accounting period" returns, the tax must be computed on the actual days or months used.

Rule of Two

  1. Under normal circumstances, the computer and the taxpayer or the taxpayer and the tax examiner agree on the computation of the tax. This satisfies the Rule of Two.

  2. On most returns with TRUE MATH ERRORS, the computer and the tax examiner will agree on the computation of the tax. This satisfies the Rule of Two.

  3. On a manually computed return with a TRUE MATH ERROR, the Rule of Two is not satisfied until two tax examiners arrive at the same tax computation.

Specifically Quoted Sections

  1. When a taxpayer has quoted specific sections of the Internal Revenue Code, and his tax computation is mathematically verified as correct, it is preferable to accept this computation than to send a taxpayer a notice.

  2. If the reference is questionable, refer the record to the manager for research of the Internal Revenue Code. A large (erroneous) refund or a large increase in tax could create bad taxpayer relations.

Corrective Procedures

  1. Compute the tax using the corporate manual computation requirements.

  2. Use the credits and additional taxes as you normally would. Compute tax from the Taxable Income through Total Tax Field. If there is no error, use Action Code 0.

  3. If there is an error:

    1. Enter the correct tax in Manually Corrected Tax Field.

    2. Attach your tape with two stamps on it or two individual tapes (this applies the Rule of Two). When verifying the 5% (percent) or 3% surcharge, a tape is not required.

    3. Correct the document from the point of error.

      Exception:

      The Total Tax Field must always reflect the taxpayer’s figure. Change only the fields on the register that are being changed to achieve the figure entered in the Manually Corrected Tax Field, an adjustment in the credits used before the Total Tax Field.

    4. On loop, if there are no transcription errors, enter Action Code 1 and TPNC 05.

  4. If the correct tax ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the underprint in the Total Tax Field, use the computer’s figures and enter Action Code 1 and TPNC 05, except with CCC "Y" returns. On "Y" coded returns, the Manually Corrected Tax Field must always be used when the taxpayer has made an error.

Returns Requiring Manual Computation

  1. Follow these procedures for returns requiring manual computation.

    Manual Computations Methods

    Methods Types of Return
    Annualization
    1. Treasury Regulation 1.442-1(c) or (d)

    2. "Y" Coded, "Change of Accounting Period"

    Manual Verifications Form 1120-FSC, Form 1120-ND and Form 1120-SF
    1. Minimum tax

    2. Treasury Regulation Section 1.1502 - "Y" coded inclusion in consolidated

    3. Fields over maximum number of digits

    4. Controlled Group Returns

     

Annualization Computations

  1. "Y" Coded, "Change of Accounting Period" returns cover a period of less than 12 months or 52-53 weeks. These returns are not "Initial" or "Final" returns.

  2. Proof of permission of the change must be attached, such as one of the following:

    1. Form 1128 with approval space signed.

    2. Copy of grant letter giving permission to change its taxable year.

    3. Statement that the taxpayer is changing the accounting period, including a list of citations to the relevant authorities relied upon by the taxpayer for making the requested change.

      Note:

      If Revenue Procedure (Rev. Proc.) 2006-46, Rev. Proc. 2006-45, or Treasury Regulations 1.442-1(c) is stated, Audit Code "3" must be present (Form 1120-FSC, Form 1120-ND and Form 1120-SF).

  3. If proof of permission is not attached, initiate research of the Form 1128 file maintained by Entity Control.

  4. If proof of permission is not attached and not found in Entity, correspond with taxpayer for reason for short period.

  5. CCC "Y" must be present on all returns that have a "Change of Accounting Period" to update the tax period on the Master File.

  6. A subsidiary prior to its inclusion in a consolidated return (IRC 1502) is "Y" coded but not annualized.

Optional Method of Annualization

  1. IRC 443 requires a taxpayer to file a short period return if it changes its accounting period. In completing the short period return, the taxable income and corresponding tax liability for the short period must be annualized under IRC 443(b)(1).

    1. Under the IRC 443(b)(1) method, the modified taxable income for the short period is annualized by multiplying the short period income by 12 and then dividing that amount by the number of months in the short period.

    2. Next, applicable tax rates are used to compute an annualized tax liability.

    3. The annualized tax liability is then multiplied by a fraction, the numerator of which is the number of months in the short period and the denominator of which is 12.

    4. The result is the short period tax liability under IRC 443(b)(1).

      Note:

      See the Example in the table below.

  2. An alternate short period tax liability may also be computed under IRC 443(b)(2) if the taxpayer timely applies to use that alternate method of calculation and if the alternate method results in less tax liability. The short period tax liability determined under IRC 443(b)(2) is the greater of the amount determined under IRC 443(b)(2)(A)(i) or the amount determined under IRC 443(b)(2)(A)(ii). The amount determined under IRC 443(b)(2)(A)(i) is based on the modified taxable income from the 12 month period beginning on the first day of the short period.

    1. First, applicable tax rates are used to compute the tax liability for the 12 month period.

    2. Second, the short period tax liability is determined by multiplying the tax liability for the 12 month period by a fraction, the numerator of which is the income for the short period and the denominator of which is the modified taxable income for the 12 month period.

      Note:

      See the Example in the table below.

  3. The amount determined under IRC 443(b)(2)(A)(ii) is the actual tax computed on the short period income. See the Example in the table below.

    Example:

    Assume the tax period is 201712; the taxable income for the five month short period is $40,000; and the tax rates are as follows:

    • 15% (percent) of income up to $50,000

    • 25% of income from $50,000 to $75,000

    • 34% of income in excess of $75,000

    Note:

    Assume also that in doing the IRC 443(b)(2) alternate 12 month calculation, the income for the seven month period following the five month short period is $50,000. For example, tax period 201712; the taxable income for the five month short period is $40,000; the income for the seven month period following the five month short period is $50,000; taxable income for 12 month period is $90,000. See table below.

    Step Example Calculation Process
    Step 1 Regular annualization (IRC 443(b)(1))
    $40,000 x 12 ÷ 5 = $96,000 (annualized income)
    $96,000 x tax rate (34% (percent) - $11,750) = $20,890 (annualized tax)
    $20,890 x 5 ÷ 12 = $8,704 (gross tax)
    Step 2 12 month period calculation (IRC 443(b)(2)(A)(i))
    $90,000 x tax rate (34% - $11,750) = $18,850 (actual tax)
    $18,850 x 40,000 ÷ 90,000 = $8,378
    Step 3 Short period calculation (IRC 443(b)(2)(A)(ii))
    $40,000 x tax rate (15%) = $6,000
    Step 4 Take the greater of Step 2 ($8,378) and Step 3 ($6,000), which in this example is $8,378.
    Step 5 The tax liability for the short period is the lesser of Step 1 ($8,704) and Step 4 ($8,378), which in this example is $8,378.

Short Period Returns Due To Change of Accounting Period

  1. Annualized Tax with One Tax Rate - The formula for computing tax with one rate due to "Change of Accounting Period" is as follows:

    Step Item Applicable Period/Rate Equals
    Step 1 Taxable income × Number of months in tax period
    12
    = Annualized Income
    Step 2 Annualized income × Applicable Tax Rate = Annualized Tax
    Step 3 Annualized tax × Number of months in tax period
    12
    = Gross Tax

    Note:

    Compute using rounded figures.

  2. Example - The tax on a single corporation with the taxable income of $115,572.00 for the tax period beginning January 1, 2017, and ending September 30, 2017, is computed as follows:

    Step Example Calculation Process
    Step 1 $115,572.00 x 12 = $1,386,864.00 ÷ 9 = $154,096.00
    Step 2 $154,096.00 x tax rate (39% (percent) - $16,750.00) = $43,347.44
    Step 3 $43,347.44 x 9 ÷ 12 = $32,510.68
  3. Days versus Months - If the taxpayer has used days to compute tax, verify the computation using days. This applies to the short period when a taxpayer is changing to/from a 52-53 week tax year, but not if such change results in a short period of more than 359 days, but less than seven days. The following is an example of a single corporation with a "change of accounting period" with 1 tax rate, taxable income of $10,501.00 and tax period from September 1, 2017, to December 31, 2017.

    Days versus Months
    $10,501.00 × 365 = $3,832,865.00 ÷ 122 = $31,416.93
    $31,416.93 × .15 = $4,712.54
    $4,712.54 × 122 = $574,929.76 ÷ 365 = $1,575.15
  4. In the next example, the taxable income is $75,000 for 90 days of business in 2017.

    Days versus Months
    $75,000 × 365 = $27,375,000.00 ÷ 90 = $304,166.67
    $304,166.67 × .39 - $16,750 = $101,875.00
    $101,875 × 90 = $9,168,750 ÷ 365 = $25,119.86

Manual Verifications

  1. The information provided within this section will provide a breakdown of different types of manual verifications.

"Y" Coded, Treasury Regulation Section 1.1502 Return

  1. A "Y" coded, Treasury Regulation Section 1.1502, return is computed under normal corporate tax rates. The return is the last return of a subsidiary prior to its inclusion in a consolidated return. The Computer Condition Code "Y" must be entered to change the fiscal year ending.

Personal Service Corporations

  1. If the return is for a Personal Service Corporation and the tax year begins in 1993 or later, tax will be computed at a flat 35% (percent).

Regulated Investment Companies

  1. For tax periods 198701 and subsequent, the Regulated Investment Company taxpayers will file Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies. Form 1120-RIC is on the Error Resolution System (ERS). See IRM 3.12.251, Error Resolution - Corporation Income Tax Returns.

Controlled Group Returns, Tax Period Beginning 01-01-1993

  1. A controlled group is a group of two or more corporations treated as one for determining the group's tax rates.

  2. For tax years beginning January 1, 1993, and later, a corporation with Taxable Income over $100,000:

    1. Besides paying its regular tax, they will pay an additional 5% tax on income that exceeds $100,000 up to $15,000,000, (not to exceed $11,750 in tax).

    2. Any corporation or members of a corporation of a controlled group that has Taxable Income that exceeds $15,000,000 will pay the above tax; plus an additional tax of 3% (not to exceed $100,000 in tax).

    3. Corporations who are members of a controlled group are also supposed to attach Schedule O (Form 1120), Consent Plan and Apportionment Schedule.

    Note:

    Refer to Schedule O (Form 1120), Consent Plan and Apportionment Schedule, for a Controlled Group for returns filed for tax periods beginning January 1, 2007, and subsequent.

  3. Corporations that are members of a controlled group are instructed to check a particular box on their tax returns. On Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, the box is on Page 1 of the return ("Parent-subsidiary controlled group." ) and Page 5, Schedule J ("Check if the FSC is a member of a controlled group..." ). See IRM 3.12.16.6.12, Field 03-M, Subsidiary Filer Code, for additional information.

  4. For purposes of determining tax rates, members of a controlled group will be treated as one corporation.

    1. If the Taxable Income exceeds $100,000, each member will pay the additional tax based on the portion of the tax allocated above and agreed upon by each member.

    2. Each member should attach a schedule showing the computation of each member of the controlled group.

    3. When taxable income exceeds a $100,000, and there is no additional tax present, correspond to the taxpayer for an apportionment plan or schedule for each member of the Controlled Group.

    4. When the taxpayer fails to reply to our correspondence, see IRM 3.12.16.17, General "No Reply" Procedures, for additional information.

    Note:

    Refer to Schedule O (Form 1120), Consent Plan and Apportionment Schedule, for a Controlled Group for returns filed for tax periods beginning January 1, 2007, and subsequent.

Legislative Changes Affecting Tax Computations

  1. The information within this section explains how tax computations are affected by legislative changes.

Omnibus Budget Reconciliation Act of 1993 (OBRA)

  1. Omnibus Budget Reconciliation Act of 1993 (OBRA) made changes to the tax rates and the estimated tax rules that affected tax periods beginning after January 1, 1993.

  2. The Act also mandated a retroactive tax increase on corporate tax returns with tax periods of 199301-199311.

  3. This legislation established a new corporate tax rate structure – 15% marginal tax rate on taxable income up to $50,000; 25% on taxable income exceeding $50,000 up to $75,000; 34% on taxable income exceeding $75,000 up to $10,000,000; 35% on taxable income exceeding $10,000,000. Additionally, a 5% or 3% surtax may apply to certain levels of income as provided in the flush language of IRC 11(b). The flush language provides: “In the case of a corporation which has taxable income in excess of $100,000 for any taxable year, the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of (i) 5 percent of such excess, or (ii) $11,750. In the case of a corporation which has taxable income in excess of $15,000,000, the amount of the tax determined under the foregoing provisions of this paragraph shall be increased by an additional amount equal to the lesser of (i) 3 percent of such excess, or (ii) $100,000.”

  4. The tax rate for Form 1120-ND decreased to 20%; under OBRA (Omnibus Budget Reconciliation Act of 1993) for tax period 199601 and subsequent. If the taxpayer’s return straddles two tax periods with different rates, the return must be manually verified.

  5. The tax rate for Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Persons, decreased to 22% under OBRA for tax period 199401 through 199512. If the taxpayer’s return straddles two tax periods with different rates, the return must be manually verified.

    1. The tax rate for Form 1120-ND increased to 35% under OBRA for tax period 199301-199312.

    2. The tax rate for Form 1120-ND increased after the 1992 tax returns were filed, which made the tax for tax period ending in 199301-199311 retroactive.

  6. Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B), which replaced Form 1120-DF, was included in OBRA. The Act increased the tax rate for Form 1120-SF to a maximum tax rate of 39.6%. It is also retroactive for tax periods 199301-199311.

  7. All the rules and regulations that applies to Form 1120-DF, apply to Form 1120-SF.

  8. Each of the above retroactive tax forms will require prorated computation for tax period 199301-199311.

Corporate Income Tax Rates

  1. The following corporate income tax rates apply to tax periods 199312 through present:

    Corporate Income Tax Rates

    If Taxable Income on Page 1 is Over But Not Over Tax Is Of The Amount Over
    $0 $50,000 15% (percent) $0
    $50,000 $75,000 $7,500 + 25% $50,000
    $75,000 $100,000 $13,750 + 34% $75,000
    $100,000 $335,000 $22,250 + 39% $100,000
    $335,000 $10,000,000 $113,900 + 34% $335,000
    $10,000,000 $15,000,000 3,400,000+ 35% $10,000,000
    $15,000,000 $18,333,333 $5,150,000 + 38% $15,000,000
    $18,333,333 ..... 35% $0

     

    Note:

    Do not use this table for Controlled Groups or Personal Service Corporations.

  2. The following corporate income tax rates apply to a Personal Service Corporation:

    Corporate Income Tax Rates for Personal Service Corporation

    Tax Period Tax Rate
    199312 to present Taxable Income x 35% (percent)
    199301 through 199311 Pro-rate
    199212 and prior Taxable Income x 34%

     

  3. The following corporate income tax rates apply toForm 1120-SF:

    Corporate Income Tax Rates for Form 1120-SF

    Tax Period Tax Rate
    201312 and subsequent Taxable Income x 39.6% (percent)
    200301 through 201311 Taxable Income x 35%
    200201 through 200212 Taxable income x 38.6%
    200101 through 200112 Taxable income x 39.1%
    200012 and prior Taxable income x 39.6%

     

    Note:

    Section 101(b) of American Taxpayer Relief Act (ATRA) of 2012 permanently extends the maximum tax rate in effect of 39.6%.

  4. Beginning in 1993, Form 1120-DF, U.S. Income Tax Return for Designated Settlement Funds (Under Section 468B), became Form 1120-SF. Prior year Form 1120-SF, use the Form 1120-DF rate for that year. The following corporate income tax rates apply to Form 1120-DF:

    Corporate Income Tax Rates for Form 1120-DF

    Tax Period Tax Rate
    199101 through 199212 Taxable income X 31% (percent)
    198812 through 199012 Taxable income X 28%
    198712 through 198811 Taxable income X 38.5%
    198412 through 198711 Taxable income X 50%

     

  5. The following corporate income tax rates apply to Form 1120-ND:

    Corporate Income Tax Rates for Form 1120-ND

    Tax Period Tax Rate
    199601 through present Taxable income x 20% (percent)
    199412 through 199512 Taxable income x 22%
    199401 through 199411 Taxable income prorated between 35% and 22%
    199301 through 199312 Taxable income x 35%
    198806 through 199212 Taxable income x 34%

     

Internal Revenue Codes

  1. The following table identifies some of the Revenue Procedures, Internal Revenue Code (IRC) Sections and Treasury Regulations identified throughout this manual and the corrective action.

    Internal Revenue Codes

    Revenue Procedures, IRC Sections and Treasury Regulations Corrective Action
    Revenue Procedures: 76-10, 85-58, 2006-45 or 2006-46 Enter CCC "Y" . Annualize tax.
    IRC 38(c)(2) Accept taxpayer's entry.
    IRC 443(b)(2) Enter CCC "Y" . Use optional method of annualization.
    IRC 444 Election Enter CCC "Y" . Annualize tax.
    IRC 444 Termination Enter CCC "Y" . Annualize tax.
    IRC 453A Accept taxpayer's entry.
    IRC 453(d) & (e) Accept taxpayer's entry.
    IRC 898(c)(1)(A) or IRC 898(c)(2) Enter CCC "Y" . Annualize tax.
    IRC 1398 Enter CCC "Y" . Annualize tax.
    IRC 1561 See IRM 3.12.16.6.12, Field 03-M, Subsidiary Filer Code, for additional information.
    IRC 6114 Enter CCC "L" .
    IRC 6222(b) Enter Audit Code "1" .
    IRC 6662 Enter Audit Code "1" .
    Treasury Regulation 1.442-1(c) Enter CCC "Y" . Enter Audit Code "3" Annualize tax.
    Treasury Regulation 1.1502-76 Enter CCC "Y" . Do not annualize tax.

     

Form 1120-FSC

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Form 1120-ND

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Form 1120-SF

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Form 8913, Credit for Federal Telephone Excise Tax Paid

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Acronyms and Abbreviations

The table lists commonly used acronyms, abbreviations and their definitions.

Acronyms and Abbreviations

Acronyms and Abbreviations Definition
ADP Automated Data Processing
AFD Alpha Field Designator
AM Accounts Management
APO Army Post Office
ATRA American Taxpayer Relief Act
BMF Business Master File
c/o Care of
C&E Code and Edit
CADE Customer Account Data Engine
CAS Correspondence Action Sheet
CC Command Code
cc Closing Code
CCC Computer Condition Code
CDP Collection Due Process
CFOL Corporate Files On Line
CFR Code of Federal Regulations
CI Criminal Investigation
CIS Correspondence Imaging System
CP Computer Paragraph
CRN Credit Reference Number
CSPC Cincinnati Submission Processing Center or Cincinnati Submission Processing Campus
CTDWA Control-D WebAccess
DLN Document Locator Number
Doc. Document
DPO Diplomatic Post Office
ECC-MTB Enterprise Computing Center-Martinsburg
EEFax Enterprise Electronic Fax
e.g. For Example
EIN Employee Identification Number
EO Exempt Organization
EQSP Embedded Quality Submission Processing
ERS Error Resolution System
etc. Et Cetera
Exam Examination
Fax Facsimile
FedEx Federal Express Corporation
FIRPTA Foreign Investment Real Property Tax Act
FPO Fleet Post Office
FRP Frivolous Return Program
HIRE Hiring Incentives to Restore Employment
IAT Integrated Automation Technologies
ICS Integrated Collection System
ID Identification or Identity
IDAP IDRS Decision Assisting Program
IDRS Integrated Data Retrieval System
IRP Information Return Processing
ISRP Integrated Submission and Remittance Processing

Note:

Integrated Submission and Remittance Processing (ISRP) replaced the previous Distributed Input System (DIS) and Residual Remittance Processing System (RRPS).

IMF Individual Master File
IPU IRM Procedural Update
IRC Internal Revenue Code
IRS Internal Revenue Service
IT Information Technology
LB&I Large Business and International
MCC Martinsburg Computing Center
MSC Missing Schedule Code
MFT Master File Tax
N/A Not Applicable
NAICS North American Industry Classification System
NSA National Standard Application
OAR Operations Assistance Request
OBRA Omnibus Budget Reconciliation Act
OC Other Country
OID Original Issue Discount
OMB Office of Management and Budget
OSPC Ogden Submission Processing Center or Ogden Submission Processing Campus
P&A Planning and Analysis
PBA Principal Business Activity
PCD Program Completion Date
P.L. Public Law
PTIN Preparer Tax Identification Number
R&C Receipt and Control
Rev. Proc. Revenue Procedure
RO Revenue Officer
RRA98 Restructuring and Reform Act of 1998
SBSE Small Business Self-Employed
SCAMPS Service Center Automated Mail Processing System
SCCF Service Center Control File
SCRS Service Center Replacement 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
TAS Taxpayer Advocate Service
TBOR Taxpayer Bill of Rights
TC Transaction Code
TE Tax Examiner
TEGE Tax Exempt and Government Entities
TETR Telephone Excise Tax Refund
TIN Taxpayer Identification Number
TPNC Taxpayer Notice Code
U.S. United States
UCC Uniform Commercial Code
URL Unidentified Remittance File
USC United States Code
USPS United States Postal Service
W&I Wage and Investment
YYYYMMDD Year Year Year Year Month Month Day Day
ZIP Zone Improvement Plan