3.21.110 Processing Form 1042 Withholding Returns

Manual Transmittal

November 14, 2017

Purpose

(1) This transmits revised IRM 3.21.110, International Returns and Document Analysis - Processing Form 1042 Withholding Returns.

Material Changes

(1) IRM 3.21.110 Title changed from Chapter Three Withholding Returns Form 1042 to Processing Form 1042 Withholding Returns.

(2) IRM 3.21.110 Editorial and grammatical changes have been made throughout this IRM.

(3) IRM 3.21.110 Figures, exhibits, and dates have been revised throughout this IRM as appropriate for Tax Year 2017.

(4) IRM 3.21.110 "§" symbol removed from this IRM.

(5) IRM 3.21.110 References to corresponding with Form 3696 or Letter 1791-C have been changed to Letter 1791C CAS throughout this IRM.

(6) IRM 3.21.110.1 Added Internal Controls

(7) IRM 3.21.110.2 Added PPB BMF C&E/ERS.

(8) IRM 3.21.110.3 Corrected title of the "see also" IRM reference.

(9) IRM 3.21.110.5 Deleted "Protective Refund" per BMF Consistency initiative.

(10) IRM 3.21.110.6 Revised section based on BMF consistence IRM clearance feedback.

(11) IRM 3.21.110.8 Added "Planning and Analysis" .

(12) IRM 3.21.110.9(3) Deleted "Caution" and moved information into new paragraph 4 and 5.

(13) IRM 3.21.110.9(3) Caution - Corrected IRM reference from IRM 11.3.2.6.1 to IRM 11.3.2.7.1.

(14) IRM 3.21.110.11 Spelled out ISRP, clarified edit mark descriptions.

(15) IRM 3.21.110.11(4) Chart - Added example to explain "X" ing.

(16) IRM 3.21.110.12 Revised wording and added Letter 1791C CAS. Removed (2)h as inaccurate.

(17) IRM 3.21.110.13 Added Correspondence info to match BMF Consistency initiative; Deleted instruction to include blank forms when corresponding and references to sending returns back to taxpayers. Also deleted info about faxing signatures as redundant to IRM 3.21.110.9.

(18) IRM 3.21.110.13 Added new (3) with instruction not to correspond on Dummy Returns prepared by IRS and new (6) with correspondence instructions for missing page 2.

(19) IRM 3.21.110.13.1 Added Definition of Correspondence From Taxpayer subsection to match BMF Consistency initiative.

(20) IRM 3.21.110.13.2 Added Issuing Correspondence subsection and revised instructions per BMF Consistency initiative.

(21) IRM 3.21.110.13.2(1) Added new exception not to correspond on Dummy Returns prepared by IRS and new (4) with correspondence instructions for missing page 2.

(22) IRM 3.21.110.13.3 Modified verification of edit marks; revised CIS correspondence.

(23) IRM 3.21.110.14 Chart - Added Form 7004 to chart. Reorganized chart and revised Letters 112C, 282C, 255C or 2284C info; added edit received date to Other tax returns; added Requests for Installment Agreement and Request for Form 8109, Form 14039-B (ID Theft).

(24) IRM 3.21.110.15.3 Revised instruction removing Form 13653 and adding correspondence instruction using Letter 1791C Letter, added literal for fiscal year .

(25) IRM 3.21.110.15.4(8) Revised with instruction to edit SIC 2 when CCC J is present due to VCP notation.

(26) IRM 3.21.110.15.5(1) Unrestricted Statute info to match other IRMs.

(27) IRM 3.21.110.15.5(2) Deleted Exception and moved information into new paragraph 3; all other paragraphs renumbered accordingly.

(28) IRM 3.21.110.15.6 Updated title; added info to keep reentry returns clipped together; circle out and do not use CCC G; fix edit marks; and revised wording per BMF Consistency initiative.

(29) IRM 3.21.110.15.7 (1-2) Broken into bullet points for ease of reading; added Form 3893 info.

(30) IRM 3.21.110.15.8(6)(c) Revised selected paragraphs for the 1382C letter.

(31) IRM 3.21.110.15.9(1)Note Modified to reference "Return Delinquency RD" .

(32) IRM 3.21.110.15.9.1 Also accept typed RO signatures.

(33) IRM 3.21.110.15.9.2 Added Letter 1791C CAS.

(34) IRM 3.21.110.15.9.3 Modified to say "IRS Received Date" .

(35) IRM 3.21.110.15.9.4 Added not to use CCC G, and use Letter 1791C CAS.

(36) IRM 3.21.110.15.10(3) Chart - Changed Frivolous Return "Processing" to "Program" .

(37) IRM 3.21.110.15.10.1 Added Edit Action Code 341; Unrestricted title, CI Referral Criteria, to match other IRMs; Deleted CI Referral Criteria unrelated to Form 1042.

(38) IRM 3.21.110.15.10.2 Unrestricted Exam info to match other IRMs.

(39) IRM 3.21.110.15.11 Modified title to match other IRMs; Deleted row as redundant; Added CI instructions; Restricted Refund amounts.

(40) IRM 3.21.110.15.12 Modified CY instructions into alpha list and to remove line numbers.

(41) IRM 3.21.110.15.12(2) Revised (a) to remove line numbers and add general instruction.

(42) IRM 3.21.110.15.12(3) Revised (a) to remove line numbers and add general instruction.

(43) IRM 3.21.110.15.14 Added "(e.g., Form 13934, Merge Sheet)" as part of local procedures

(44) IRM 3.21.110.16(1) Added to Form 1042 description.

(45) IRM 3.21.110.16.3.1 Added subsection for new CCC "A" for Qualified Derivatives Dealer (QDD) Subsequent subsections renumbered.

(46) IRM 3.21.110.16.3.2(6) Added reference to delinquent returns.

(47) IRM 3.21.110.16.3.6 IRM 3.21.110.16.3.6 (1) Added instruction for editing CCC J and SIC 2 when an amount is present on Line 62(b)1 for TY2017;(2) Revised with instruction to edit SIC 2 when CCC J is present due to VCP notation.

(48) IRM 3.21.110.16.3.11; added no reply info.

(49) IRM 3.21.110.16.4(2) Chart added note to paragraph (2) defining delivery services per BMF Consistency Template.

(50) IRM 3.21.110.16.4(4) Updated certified envelope instructions; deleted (5)Note; Received Date.

(51) IRM 3.21.110.16.4.1 Revised Received Date chart to conform to the BMF Consistency Template.

(52) IRM 3.21.110.16.4.1 Restricted Delinquent Return Date.

(53) IRM 3.21.110.18.1 Revised ITIN Chart to conform with BMF Consistency IRM.

(54) IRM 3.21.110.18.3 Updated in-care-of determination; added instructions for TC 014.

(55) IRM 3.21.110.18.4(2) Added instruction to 2nd Then box to delete old address.

(56) IRM 3.21.110.18.4 (3)Added instruction to 2nd Then box to delete old address; added Form 13934; updated TC 014 instructions; added Zip Code Note; added last address row; (4) updated APO/FPO/DPO chart

(57) IRM 3.21.110.18.5(4) Added "Ogden Submission Processing Center" before acronym "OSPC" .

(58) IRM 3.21.110.18.5(5) Changed wording to reference table above (5).

(59) IRM 3.21.110.18.5(6) Added additional countries to 3rd bullet.

(60) IRM 3.21.110.21(5) Removed the word "blank" from 4th bullet.

(61) IRM 3.21.110.21(6) Revised SIC 2 instructions (6) through (8) into bullet point list, added instructions for when CCC "J" is present due to VCP notation and for an entry on Line 62b(1).

(62) IRM 3.21.110.22 Section revised to remove instructions to correspond for Form 1042-S or line 61a information. Added instruction to review Form 1042-S for completeness before detaching and clarified instruction in Note to not correspond for Line 61a information.

(63) IRM 3.21.110.22(3) Deleted as no longer necessary , subsequent paragraphs renumbered and added line numbers to new (3).

(64) IRM 3.21.110.23.2 Added new (2) and note with instructions to edit CCC "J" if an amount is present.

(65) IRM 3.21.110.23.2(2) Added instruction to edit SIC 2 for an entry on Line 62b(1).

(66) IRM 3.21.110.23.5(4) Deleted as no longer necessary.

(67) IRM 3.21.110.24.6 Changed (2)-(4) into a table, and added ‘subtract Form 1042-S line 11’.

(68) IRM 3.21.110.24.6(3) Deleted as no longer necessary.

(69) IRM 3.21.110.25.1 Corrected title, added ‘TY 15 and prior to (3).

(70) IRM 3.21.110.25.2(3) Deleted alphalist and added editing instruction.

(71) IRM 3.21.110.25.3(3) Deleted as no longer necessary.

(72) IRM 3.21.110.25.3(3) Deleted alphalist and added editing instruction.

(73) IRM 3.21.110.25.5(1) Deleted correspondence instruction and added editing instructions to the 3rd and 4th Then Boxes.

(74) IRM 3.21.110.25.5(1) Added instruction to the 2nd "Then" box not to correspond on a non-taxable return. Deleted literal as unnecessary.

(75) IRM 3.21.110.25.5(1) Chart - 2nd row added "and there are no money amounts on lines 1-63e" and deleted 4th row as no longer applicable.

(76) IRM 3.21.110.28(3) Note remove and added a list outlining valid Form 1042-S to be used to substantiate amounts.

(77) IRM 3.21.110.28(3) Added to note with instruction not necessary to math verify.

(78) IRM 3.21.110.28 (4) Added instructions for accepting a substitute form for Form 1042-S claims on Line 67b and table for processing and/or corresponding; (5) deleted literal as unnecessary.

(79) IRM 3.21.110.33 Revised line numbers for TY2017.

(80) IRM 3.21.110.34 Added new subsection for Section 3, subsequent subsections renumbered.

(81) IRM 3.21.110.35 Added new subsection for new Section 4, subsequent subsections renumbered.

(82) IRM 3.21.110.37 Modified acceptable RO signature; Deleted e-File bullet; broke (8) into alpha list and Note.

(83) IRM 3.21.110.38.1 Condensed (3)-(5) into bullet list.

(84) Exhibit 3.21.110-1 Added new Exhibit for Page 1 of the 2017 Form 1042 subsequent Exhibits renumbered accordingly.

(85) Exhibit 3.21.110-2 Added new Exhibit for Page 2 of the 2017 Form 1042 subsequent Exhibits renumbered accordingly.

(86) Exhibit 3.21.110-9 Added Province, Foreign State, and Territory Abbreviations. Renumbered subsequent exhibits.

(87) Exhibit 3.21.110-10 with complete Action Code chart.

(88) Exhibit 3.21.110-11 Added new exhibit for terms and definitions related to this IRM.

Effect on Other Documents

IRM 3.21.110 dated November 16, 2016 (effective 01-01-2017) is superseded. This IRM also incorporates the following Interim Procedural Updates (IPUs) - IPU 16U0016 issued 01-04-2016, IPU 17U0205 issued 01-30-2017, IPU 17U0676 issued 04-03-2017, IPU 17U0815 issued 05-05-2017, and IPU 17U1179 issued 07-24-2017.

Audience

Wage and Investment - Document Perfection Branch of the Ogden Submission Processing Campus (OSPC Only)

Effective Date

(11-14-2017)

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

Program Scope and Objectives

  1. Purpose: The Document Perfection Operation, Code & Edit Unit, prepares paper returns for processing by reviewing and editing the documents with specialized processing codes for use downstream.

  2. Audience: Tax examiners in the International Code & Edit Unit, Ogden Submission Processing Center, Wage and Investment Division (W&I) are the primary users of this IRM.

  3. Policy Owner: The Director of Submission Processing is responsible for the policies in this IRM.

  4. Program Owner: The Code & Edit/ERS IMF Section of the Paper Processing Branch of Submission Processing is responsible for the procedures and all updates related to this IRM.

  5. Primary Stakeholders: Submission Processing (SP) and Large Business and International (LB&I).

Background

  1. IRC 1441 - IRC 1443, Chapter Three Withholding. Under IRC 1441 and IRC 1442, a person who makes a payment of U.S. source interest, dividends, royalties, and certain other types of income to a foreign person must generally deduct and withhold 30 percent from the payment. A lower rate of withholding may apply under IRC, the regulations, or an income tax treaty. Generally, a payor of these types of income must also report the payments on Form 1042-S and file a withholding tax return on Form 1042.

  2. IRC 1471-1474, Chapter Four Withholding. As of June 30, 2014, withholding began on withholdable payments under chapter 4 of the IRC pursuant to the Foreign Account Tax Compliance Act (FATCA). The 2014 Form 1042 was modified.

  3. The 911 Healthcare Bill signed January 2, 2011 (Public Law 111-347) introduced the paying, reporting and collection of a two percent (2 percent) excise tax on payments made for goods and services provided under a specified foreign procurement contract entered into after January 2011. Beginning with tax year 2011, this tax is paid via the Electronic Federal Tax Payment System (EFTPS) and reported on the Form 1042"Record Of Federal Tax Liability" (ROFTL) section of the return on Line 64d. Once a Form 1042 reporting the two (2) percent excise tax payment is processed to the Business Master File (BMF) the amount from line 64d will appear on the Integrated Data Retrieval System (IDRS) (under the transaction code (TC) 150 document locator number (DLN) next to the field name "F1042-EXCISE-TAX-AMT." This amount is an adjustable amount using Item Reference Number 198. If the withholding agent files an amended or supplemental return then the Accounts Management (AM) employees in Ogden will make the tax adjustment and update the two percent excise amount with item reference number 198.

Authority

  1. Authority for these procedures is found in the following sections of the Internal Revenue Code (IRC) and their corresponding Treasury regulations.

    • IRC 6201(a)

    • IRC 6213(b)

    • IRC 6402(a)

    • IRC 6511

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

Responsibilities

  1. The Director, SP Office 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 maintaining updated IRM procedures.

Program Objectives and Review

  1. Program Goals: To timely and accurately code and edit returns to prepare them for transcription.

  2. Program Reports: The Monitoring Section under Submission Processing Program Management/Process Assurance monitors the Code & Edit reports.

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

    • Embedded Quality Submission Processing (EQSP)

    • Balanced Measures

    • Managerial Reviews

  4. Annual Review: This IRM is updated and published annually after review by affected offices according to the clearance process established in IRM 1.11.9 Internal Management Documents, Clearing and Approving Internal Management Documents (IMDs).

Terms/Definitions

  1. See Exhibit 3.21.110-12 for a list of terms and definitions used within this IRM.

Related Resources

  1. The Submission Processing Design Center has created Job Aid 2544-701 to assist tax examiners with processing this form.

Introduction

  1. This section of the IRM provides procedures for reviewing and processing Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

  2. This IRM is designed to be used by Ogden Code and Edit Tax Examiners.

    Note:

    Form 1042 is filed at the Ogden Submission Processing Center (OSPC) only. Those erroneously filed at other locations are to be forwarded to OSPC daily .

  3. The Form 1042 is processed under:

    • Program Code: 12500

    • File Source: BMF

    • Tax class: 1

    • Master File Transaction Code (MFT): 12

    • Document Code: 25

    • DLN: XX125-ddd-501-999

    • File Location Code (FLC) 29 (Domestically filed), 60 (Internationally filed) and 78 (filed from a U.S. Possession).

♦BMF Consistency♦

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

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

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

  4. The text in normal print within a consistency subsection signifies the common processes to be used for all BMF returns. The text in bold print is form specific and applies to this IRM only.

♦IRM Deviation Procedures♦

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

♦Foreign Currency♦

  1. For returns completed in other than U.S. currency, process as filed. However, if corresponding for missing/incomplete item(s), include a request in Letter 1791C to resubmit in U.S. currency.

♦Protective Claims♦

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

    Exception:

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

♦Taxpayer Advocate Service (TAS) Case Criteria♦

  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 https://taxpayeradvocate.irs.gov/about-tas/taxpayer-rights.

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

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

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

♦TAS Service Level Agreements (SLA)♦

  1. The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage and Investment (W& I) Division, Small Business and Self-Employed (SB/SE) Division, Tax Exempt and Government Entities (TE/GE) Division, Criminal Investigation (CI), Appeals and Large Business and International (LB& I) Division, that outline the procedures and responsibilities for the processing of 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

♦IRS Employee Contacts - RRA 98 IRC 3705(a)

  1. The Restructuring and Reform Act of 1998 RRA 98 IRC 3705(a), provides identification requirements for all IRS employees working tax-related matters. IRS employees are required to give their name and unique identification number during taxpayer telephone, face to face, and written contact. In addition, a telephone number is required on all taxpayer correspondence. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax related matters.

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

    1. Telephone Contact - Their title (e.g. Mr., Mrs., Ms., 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 taxpayers 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 taxpayers inquiry. If the issue cannot be resolved, the employee should refer the inquiry using established procedures to his or her manager.

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

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

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

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

    Note:

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

♦BMF Identification (ID) Theft♦

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

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

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

    • IRM 21.1.3.2.3, Required Taxpayer Authentication

    • IRM 21.1.3.2.4Additional Taxpayer Authentication

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

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

    • IRM 11.3.1.11, Facsimile Transmission of Tax Information

Purpose of Document Perfection

  1. The purpose of Document Perfection is to code and edit (perfect) returns and other documents for input through the Integrated Submissions and Remittance Processing (ISRP) System.

  2. In addition, Document Perfection forwards any other documents or attachments not related to the processing of the return to the function responsible for handling it.

  3. Document Perfection is not responsible for the mathematical verification of the return or for checking the validity of the documents being processed except as noted in specific line by line instructions.

  4. The computer will perform math verification and validity and consistency checks after the returns and other documents are coded and edited as prescribed in this Section.

♦Edit Marks♦

  1. Edit marks are edited on the return for transcription to Automatic Data Processing (ADP) System through the Integrated Submission and Remittance Processing (ISRP) system. The editing can be entered in brown, red, orange or green pencil/pen.

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

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

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

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

    Note:

    If the taxpayer circles an entry, edit the entry.

    Underline Indicates that an entry is to be transcribed. (e.g. Name Control; Tax Period; and a Received Date that is other than IRS Stamped Date.
    Arrow Indicates the correct placement of a misplaced entry. An arrow may be used if the misplaced item is close to the correct line and there is no question where the entry belongs.

    Note:

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

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

    Note:

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

    Vertical Line or Decimal Point Indicates the separation of dollars and cents if no distinction has been made by the taxpayer.

    Note:

    Code and Edit is no longer required to edit a vertical line, 00, dash, or decimal point in dollars and cents fields when taxpayer has entered dollars only.

    Zero, Dash, None, or N/A ZERO, DASH, NONE, OR NA are considered valid entries except when specific instructions require editing of an entry.
    Edit Marks Made by Other IRS Functions Edit marks entered by another area (such as Collections, Entity or Accounts Management) are not to be reedited except to place the marks in the correct area or to perfect for legibility. Do not edit (or write) over another area's edit marks.

    Exception:

    Photocopied Returns

    Photocopied Returns Re-edit or underline any valid, black edit marks. See "Correspondence Imaging System (CIS) Returns" IRM 3.21.110.13.3 , and "Re-Entry Document Procedures" IRM 3.21.110.15.6
    Rocker Indicates the amount paid when drawn under a remittance amount.

Unprocessable Conditions

  1. A return must contain the following specific items before it is considered processable:

    1. A Taxpayer Identification Number (TIN) (e.g. Employer Identification Number (EIN)

    2. A legible name (for the Name Control)

    3. A valid Tax Period

    4. Legible tax data (if tax liability is indicated)

    5. Jurat and Signature

  2. Perfect all documents to the extent possible from schedules and other attachments.

  3. Conditions which make a document unprocessable are:

    1. The name is so illegible or incomplete that the Name Control cannot be determined.

    2. A social security number (SSN) or individual taxpayer identification number (ITIN) is used instead of the withholding agent's EIN and cannot be perfected from information on the return or attachments.

    3. The TIN is other than nine numeric digits and cannot be perfected from information on the return or attachments.

    4. The document has two or more different TINs.

    5. The Taxpayer has stated that they have combined liability for more than one tax period or more than one type of tax.

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

    7. The document has been mis-blocked.

    8. The return is unsigned.

    9. The return has only entity data and no other statements or attachments from the taxpayer.

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

  4. All Other Unprocessable Conditions — Initiate correspondence by preparing 1791C CAS for Letter 1791C, U.S. Annual Return Of Income Paid at Source Incomplete for Processing Form 1042, where applicable, unless other instructions are given in the IRM.

    Note:

    Service Centers will retain all refund, credit-elect, and zero balance returns In-House instead of sending the return back to the taxpayer when corresponding for signature, missing information, and supporting schedules and documentation. Document Analysis, Code and Edit should follow the instructions they currently use for correspondence when the return cannot be sent back to the taxpayer.

♦Correspondence♦

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

    1. Correspondence received from taxpayers, and

    2. Correspondence issued to taxpayers.

♦Definition of Correspondence from Taxpayers♦

  1. Correspondence is all written communications from a taxpayer or his/her representative, excluding tax returns, whether solicited or unsolicited. This includes:

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

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

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

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

    1. Is taxpayer waiting for a response from us?

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

    3. Is taxpayer asking a question?

    Note:

    A Post-It-Note, Sticky Note, or some other type of note stuck on the return by another function such as, for example - "Taxpayer (TP) requests penalties be waived" - does not constitute correspondence from the taxpayer. .

♦Issuing Correspondence♦

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

    Exception:

    Do not correspond on:
    -Returns prepared by Collections, IRC 6020(b),
    -Returns prepared by Exam, "Substitute for Return" (SFR), or
    -Dummy Returns prepared by the IRS.

  2. If the return is incomplete and appears to be a duplicate, give the return to the lead. The lead will initiate research for a Transaction Code (TC) 150 and/or any other research necessary to determine if the return should continue to be processed or other actions taken. A duplicate return could include any of the following:

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

    • Incomplete returns indicating "Payment Only" .

    • Incomplete returns indicating they have previously e-filed.

    Note:

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

  3. Correspond for ALL missing information when corresponding. Once the first correspondence condition is found, examine the return so that all of the conditions can be included in the same correspondence.

    If... And... Then...
    Correspondence is needed, Requires a response,
    1. Complete Letter 1791C CAS (or other Letter as instructed), MFT, and the appropriate paragraphs.

      Note:

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

    2. Attach Letter 1791C CAS to the front of the return below the entity area.

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

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

    Correspondence is needed, Does not require a response,
    1. Complete Letter 1791C CAS(or other Letter as instructed), MFT, and the appropriate paragraphs.

      Note:

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

    2. Photocopy first page of return and attach the Letter 1791C CAS below the entity area on the front of the copy of the return. Be sure the name and address shows clearly above the Letter 1791C CAS

    3. Forward the copy to the correspondence area.

    4. Edit an Action Trail (e.g. 1791C SENT) in the lower left corner going vertically up the side of the return.

    5. Finish editing the return and leave in batch.

    Note:

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

  4. If missing page 2, correspond using Letter 1791C CAS and mark line 11.

♦Correspondence Imaging System (CIS) Returns♦

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

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

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

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

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

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

    3. If the return comes back from AM with the information still incomplete, send the return to AM again to secure all the missing information. Indicate "Additional information needed to process incomplete CIS return," or similar language on Form 4227 (or other appropriate routing slip).

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

♦Routing Guide for Attachments♦

  1. All attachments to the return must be reviewed before the return can be considered processable.

    1. Attachments should only be detached when specifically instructed.

      Note:

      Consider a return or document an "original" if it has an original signature or has been stamped "Process as Original" .

    2. Attachments must contain Name, Address, EIN and Received Date. Edit if missing.

    3. Edit Action Trail(s) (e.g., 2848 DETACHED) in the lower left margin of the return.

  2. Follow the general guidelines below for each attachment:

    Document Detach Action
    CP -504/504B NO Pull CP to the front of the tax form and route the CP notice return to Accounts Management.
    CP 518 NO Correspondence is attached or taxpayers response indicates any of the following:
    • Taxpayer disagrees that they are required to file the return.

    • Only page one of the return is attached.

    • EIN on notice does not match EIN on return.

    • Return requested on notice not the same as return submitted.

    • Taxpayer asking question(s) or requesting IRS take action(s) on their account.

    • Case involves any other IRS action(s) C&E not trained to complete.

    Then, Route to Compliance Services Collection Operations (CSCO). Use return address on CP notice;
    • Brookhaven - Stop #662

    • Memphis - Stop #81

    • Philadelphia - 4-N31.142


    If none of the above apply, correspondence or written response to the notice is not attached and/or, "599" is notated:
    1. Move the notice to the back of the return.

    2. Continue processing the return.

    Note:

    If the return is unsigned, but the taxpayer has signed the CP notice under the jurat, it is not necessary to correspond for the signature.

    CP 259/959 (Spanish version) NO Correspondence is attached or taxpayers response indicates any of the following:
    • Taxpayer disagrees that they are required to file the return.

    • Only page one of the return is attached.

    • Employer Identification Number (EIN) on notice does not match EIN on return.

    • Return requested on notice not the same as return submitted.

    • Taxpayer asking question(s) or requesting IRS take action(s) on their account.

    • Case involves any other IRS action(s) C&E not trained to complete.

    Then, Route to Compliance Services Collection Operations (CSCO). Use return address on Computer Paragraph (CP) notice;
    • Brookhaven - Stop #662

    • Memphis - Stop #81

    • Philadelphia - 4-N31.142


    If none of the above apply, correspondence or written response to the notice is not attached and/or, "599" is notated:
    1. Move the notice to the back of the return.

    2. Continue processing the return.

    Note:

    If the return is unsigned, but the taxpayer has signed the CP notice under the jurat, it is not necessary to correspond for the signature.

    Letters 112C, 282C, 2255C or 2284C NO
    1. Identify which organization initiated the letter to the taxpayer (e.g., what organization signed the letter?).

    2. Route letters initiated by Accounts Management (AM) to Accounts Maintenance Research (AMRH):

      • Ogden - Mail Stop 6712

      • Cincinnati - Mail Stop 534G

      • Kansas City - Mail Stop N2 6800

    3. Route letters initiated by Collections as follows:

      1. If correspondence is attached or taxpayer’s response indicates any of the following:

        • Taxpayer disagrees that they are required to file the return.

        • Only page one of the return is attached.

        • EIN on letter does not match EIN on return.

        • Return requested on letter not the same as return submitted.

        • Taxpayer asking question(s) or requesting IRS take action(s) on their account.

        • Case involves any other IRS action(s) C&E not trained to complete.

        Then, Route to Compliance Services Collection Operations (CSCO). Use return address on letter;

        • Brookhaven - Stop #662

        • Memphis - Stop #81

        • Philadelphia - 4-N31.142

      2. If none of the above apply, correspondence or written response to the notice is not attached and/or, no "599" is notated:
        Then, Move the letter to the back of the return and continue processing.

    Includes Tax Liability for Multiple Tax Periods or Types of Tax . NO
    • Numbered returns route to Rejects.

    • Unnumbered returns, prepare a dummy return if possible; otherwise correspond.

    Other Tax Returns (original signature). YES
    1. Edit received date to the detached return.

    2. Route to appropriate function unless specifically directed otherwise.

    Exception:

    Returns attached to a consolidated return will NOT be detached.

    Petitions in opposition of tax law provisions YES

    Note:

    No Action Trail needs to be edited when detaching a petition.

    Route to:
    IRS
    ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1111 Constitution Avenue, NW
    Washington, DC 20224
    State Tax Returns (Original or Copy With Original Signature). YES Route to Receipt and Control
    State Tax Returns (Photocopy, facsimile, or no signature) NO Leave attached.
    Statement Establishing Reasonable Cause for Delinquent Filing. NO
    1. Issue 1382C letter.

    2. Continue editing the return.

    3. See IRM 3.21.110.15.8(6).”

    Remittance Found. NO Immediately hand carry the return and remittance to supervisor.
    Request for Acknowledgement NO No action required
    Request for information or inquiries. YES
    1. Photocopy the attachment if it contains any data necessary to continue processing the return.

    2. Attach the copy to the return.

    3. Route the original attachment to the proper office for necessary action.

    Requests for Installment Agreement YES Ogden - route to Collections.
    Request for Adjustment to another document. YES Route to the appropriate function. The attachment must contain a Name, Address, EIN, and Received Date. Edit if missing.
    Request for money transfer. YES If the taxpayer notates transfer of money to the return you are processing:
    1. Prepare Form 3465 to route the request to Accounts Management .

    2. Hold the return for 2 cycles before processing.


    If the taxpayer notates transfer of money from the return you are processing:
    1. Prepare Form 3465 to route the request to Accounts Management .

    2. Edit CCC "X" to freeze overpayment.

    3. Continue processing return.

    Request for Forms or Schedules. NO If requesting current year forms:
    1. Prepare Form 4190.

    2. Forward to National Distribution Center (NDC) for processing.


    If Requesting prior year forms:
    1. Prepare Form 6112.

    2. Forward to National Distribution Center (NDC) for processing.

    Note:

    Form 4190 and Form 6112 are generally used for Individual Master File (IMF) requests. Therefore, enter all BMF requests for forms and/or schedules in the WRITE-IN portions of the form.

    A General Power of Attorney or a Durable Power of Attorney or Tax Information Authority is submitted on any document other than Form 2848 or Form 8821 NO Take no action. Leave the Power of Attorney or Tax Authorization attached to the return. Do not route to the Centralized Authorization File (CAF) function.
    Claims for Collective Refund NO Take no action.
    W-8, Certificate of Foreign Status, Series or a substitute thereof (in the form of a statement) NO Take no action.
    Form 1000, Ownership Certificate NO Take no action.
    Form is Obsolete NO Take no action.
    Form 1042-SCopy A/Form 1042-T YES
    1. Prior to detaching Copy A:
      Verify entity and lines 61-63; Do not separate Form 1042-T from associated Form(s) 1042-S.
      Ensure that the 1042-S contains the name, EIN, and address before detaching, edit if necessary.

    2. Route to Receipt and Control for rebatch.

    Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, Copy B (C, D, and/or E) ONLY NO Leave attached to Form 1042 for verification of Line 67a/67b. See IRM 3.21.110.28
    Form 2848, Power of Attorney and Declaration of Representative YES
    • Edit taxpayer name and EIN on Form 2848 if missing.

    • Edit received date on Form 2848.

    Ogden - route to Stop 6737
    Cincinnati - route to:
    Internal Revenue Service PO Box 268, Stop 8423 Memphis, TN 38101-0268
    For Private Delivery Carriers:
    Internal Revenue Service
    5333 Getwell Road Stop 8423
    Memphis, TN 3811
    Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts YES Route to Receipt and Control for rebatch, if original signature is on Form.
    Form 3520-A, Annual Return of Foreign Trust With a U.S. Owner YES Route to Receipt and Control for rebatch, if original signature is on Form.
    Form 4224 , Form is Obsolete NO Take no action.
    Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns YES/NO If the extension is for a different period or different Form, detach and Route to Receipt and Control for re-batch. If the Form 7004 is a photocopy do not detach.
    Form 8233, Exemption from Withholding on Compensation for Independent ( and Certain Dependent) Personal Service of a Nonresident Alien Individual NO Take no action.
    Form 8288, U.S. Withholding Tax Return for Disposition by Foreign Persons of U.S. Real Property Interests YES Route to the International BMF Accounts Managements Foreign Investment Real Property Tax Act (FIRPTA) Unit.
    Form 8288A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests YES Route to the International BMF Accounts Managements Foreign Investment Real Property Tax Act (FIRPTA) Unit.
    Form 8300, Report of Cash Payments over $10,000 Received in a Trade or Business YES Route to the Detroit Computer Center (DCC). This form is used to report cash payments in excess of $10,000.
    Form 8804, Annual Return for Partnership Withholding Tax (Section 1446) YES Route to Receipt and Control for rebatch
    Form 8813, Section 1446 Payments YES Route to the International BMF Accounts Managements (FIRPTA Unit)
    Form 8821, Tax Information Authorization YES
    • Edit taxpayer name and EIN on Form 8821 if missing.

    • Edit received date on Form 8821.

    • Edit action trail on tax return.

    Ogden - route to Stop 6737
    Cincinnati - route to:
    Internal Revenue Service PO Box 268, Stop 8423 Memphis, TN 38101-0268
    For Private Delivery Carriers:
    Internal Revenue Service
    5333 Getwell Road Stop 8423
    Memphis, TN 38118
    Form 14039-B, Business Identity Theft Affidavit NO If the envelope is addressed to a specific function or a specific function is indicated by an IRS CP notice or IRS letter, place the Form 14039-B on top and route Form 14039-B and the return to the specific function.

    If either center, Cincinnati or Ogden, receives a Form SS-4, Application for an Employer Identification Number and Form 14039-B route the returns to BMF Entity:
    201 W. Rivercenter Blvd.
    Mail Stop 343
    Covington, KY 41011.

    For the following returns:
    • Loose Form 14039-B.

    • No correspondence attached (e.g., no IRS CP notice or IRS letter).

    • The envelope is not addressed to a specific function.


    Place the Form 14039-B on top of the return and route to the local Image Control Team (ICT).
    Cincinnati - Mail Stop 318G.
    Ogden - Mail Stop 6552.
    Form 14157 , Complaint: Tax Return Preparer YES Route to:
    Attn.: Return Preparer Office
    401 W. Peachtree Street NW
    Mail Stop 421-D
    Atlanta, Georgia 30308

Form 1042 Annual Withholding Tax Return for U.S. Source Income of Foreign Persons- Special Conditions

  1. For procedures when processing unusual Form 1042 conditions, This section covers the following topics:

    1. Early-Filed Returns

    2. Non-Taxable Returns With No Line Entries

    3. Fiscal Year Returns

    4. Voluntary Compliance Program (VCP)

    5. Statute Returns

    6. Re-Entry Returns

    7. Amended Returns

    8. Delinquent Returns

    9. Compliance Secured/Prepared Returns

    10. IRC 6020(b) - Prepared by Collection

    11. Collection Secured

    12. Examination Prepared

    13. Examination Secured

    14. Frivolous Argument

    15. Refund Returns (180-Day Jeopardy and Refunds $500,000 or more)

    16. Form 1042 - Prior Year Returns Processing

Early-Filed Returns

  1. Early-filed returns must be held for processing at the beginning of the appropriate processing year, see Figure 3.21.110-1.

  2. An early-filed Form 1042 for Tax Period 201812 (that is, filed before January 1, 2019) must be held for processing until January 2019.

  3. Edit Action Code 480 on early filed returns so they can be suspended to Rejects to hold until the returns can be processed.

    Figure 3.21.110-1

    This is an Image: 34025006.gif
     

    Please click here for the text description of the image.

Non-Taxable Returns With No Line Entries

  1. Process a signed return containing no line entries as a non-taxable return. This includes a signed return with notations such as Not Liable, etc.

  2. Process as final any return that states Final, No longer in business, Do not file this form, etc. as long as the required signature is shown. A signature is not required if the taxpayer indicates that he/she received the wrong type of return, and that another type of return is filed provided the following actions are taken before CCC "F" is entered:

    1. Prepare Form 4227 (or Form 6882, IDRS/Master File Information Request, if your Center prefers), for research to be performed to determine whether the proper filing requirement has been established for the return the taxpayer states was filed. Notate in the remarks area, "research for the entity and MFT " of the appropriate return.

    2. If research shows that the taxpayer has a filing requirement for the appropriate return, process the incorrect return as final to turn off the filing requirement.

    3. If research shows that the taxpayer does not have a filing requirement for the return he/she states should be filed, attach the research papers to the invalid return and forward to Entity Control on Form 4227 for filing requirement determination. If the filing requirement is incorrect, Entity Control will change it and notate the change on Form 4227. The return will be sent back to Document Perfection to be converted to the proper return.

Fiscal Year Returns

  1. If the Form 1042 indicates that it is a Fiscal Year return:

    1. Change the return to show the current calendar year.

    2. Prepare Letter 1791C CAS to inform the withholding agent that Form 1042 must be filed on a calendar year basis with the following literal:
      “We received your Form 1042 for tax period beginning _______ and ending _______. We cannot process it because Form 1042 must cover a calendar year. Please submit a new Form 1042 covering the appropriate calendar year. If your Form 1042 reflected monies paid during two calendar years, please submit a Form 1042 for each year.”

    Note:

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

Voluntary Compliance Program (VCP)

  1. The Voluntary Compliance Program (VCP) was established by the Service to encourage tax compliance by withholding agents that may not be conforming with existing tax regulations regarding payments to aliens.

  2. The VCP program was administered by the Manhattan district and applies to Form 1042 and Form 945 only.

  3. The instructions that follow apply only to the processing of Form 1042 identified as secured under the VCP program.

  4. Beginning January 2005 for tax year 2001, 2002 and 2003 the Manhattan district began to secure and forward original and amended Form 1042 to OSPC.

    Note:

    Examination Prepared (EP)/ Examination Only (EO) work papers and/or a copy of the AIMS record may be attached to the returns secured by EP/EO.

  5. EP/EO will notate TC 59X in the bottom margin of the Form 1042 to designate a secured return. Process these returns as follows:

    1. Edit the Form 1042 VCP return with the ultimate purpose of having the return post to the BMF.

    2. Ensure that the received date is present on the return.

  6. EP/EO will either stamp the received date on the Form 1042 or will write the received date in the upper left corner of the return.

  7. To determine Received Date, See IRM 3.21.110.16.4 and IRM 3.21.110.16.4.1.

  8. Edit CCC "J" and "R" (Reasonable Cause for Late Filing of the Return) and SIC 2 in the For IRS Use Only box in the upper right corner of the Form 1042

  9. Do not:

    1. Send the return back or correspond with the withholding agent for any unprocessable condition.

    2. Instead, give the return to your manager for possible referral back to EP/EO if an unprocessable condition exists.

♦Statute Returns♦

  1. Any return with a Received Date that is two years and nine months or more after the Return Due Date is a potential Statute Control return.

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

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

    • Compliance IRC 6020(b) returns.

    • Secured by Examination/Collections, Secured by TE/GE, Secured by TE/GE EP Exam.

    • Returns with "TC 59X" or "ICS" notated on the face of the return.

    • Returns that are substitute returns prepared by Examination (SFR) in top margin of the return.

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

  4. If a Form 12412, Operations Assistance Request (OAR) is received from TAS and the return is a potential statute control return but is not stamped "Cleared by Statute" , give the return to your lead. The lead will contact the TAS employee listed on the OAR for rejection of the return and send it back to TAS for clearance by the Statute Unit.

    Note:

    If the return is within 90 days of the statute expiration date, advise the TAS employee of such and route the return directly to statute for clearance.

  5. Statute returns are unprocessable until they are cleared by Statute Control.

  6. Use the following chart for Numbered and Unnumbered Statute Returns.

    If... Then...
    Numbered Returns.
    1. Edit Action Code 310.

    2. Attach Form 4227 and check the box for Statute Control Unit.

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

    Unnumbered Returns.
    1. Do not continue processing.

    2. Pull the return from the batch.

    3. Attach Form 4227 and check the box for Statute Control Unit.

  7. Edit CCC "W" if the return has been cleared by Statute Control Unit. Statute will stamp or indicate clearance on the front of the return. If the statute cleared date is more than 90 days old, return the document to the Statute Function for clearance.

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

    If... And... Then...
    The return received date is two years and nine months or more after the Return Due Date The return is stamped, “No Statute issue” Edit a CCC "W"
    The return received date is less than two years and nine months from the Return Due Date The return is stamped, “No Statute issue” Do not edit a CCC "W"

♦Re-Entry Returns♦

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

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

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

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

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

  4. Examine Form 3893 or Form 13596 to determine the action needed to make the return processable: SeeFigure 3.21.110-2 .

    Caution:

    If the return is more than two years and nine months from the Return Due Date, refer to Statute procedures before re-entering or reprocessing the return. See IRM 3.21.110.15.5, Statute Returns.

    If... Then...
    Form 3893 is missing.
    1. Edit Action Code 610 to post the return to the proper account or module.

    2. Route to Receipt and Control using Form 4227.

    3. Leave the return in the batch.

    Form 3893 is attached. Determine if the return was edited according to current processing instructions.

    Note:

    If more than one return is in the batch and only the top Form 3893 has an entry in Box 1 (Alpha/Numeric Block Control Number), edit all returns using current processing instructions and keep all returns clipped together.

  5. If it is determined an unprocessable condition exists, edit the appropriate CCC. Circle out any incorrect CCC(s) and any other edit marks that are no longer applicable. Re-edit according to current processing instructions.

  6. Line through DLN

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

    Form 3893 Action Taken
    Box 14 (Remarks). Ensure that the information is edited to the return.
    Box 15 (Process As).
    1. Circle-out any green rockered money amounts and edit marks that may indicate a receipt of remittance.

    2. Do not change any Tax due amounts.

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

    If... Then...
    Improper perfection. 1. Edit the same correction in red to the appropriate area.
    Taxpayer error. 1. Leave the entries as shown on the document.
  9. A Received Date must be present on all Re-Entry returns:

    If... Then...
    Received Date is not present. 1. Edit a Received Date to the Dotted Portion of Line 62b(1) on the 1042 Return.
    Multiple Received Dates are present. 1. Circle-out all but the earliest date.
  10. When additional information is still needed to make the return processable, prepare Form 3696 or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

  11. When perfection is not possible, attach Form 4227 noting PERFECTION NOT POSSIBLE and return to the initiator.

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

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

  3. Circle the CCC "G" if present.

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

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

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

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

    Form 3893 Action Taken
    Box 14 (Remarks) Ensure that the information is edited to the return.
    Box 15 (Process as)
    1. Circle any green rocker and edit marks that may indicate a receipt of remittance.

    2. Do not change any tax due amounts.

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

    If... Then...
    Improper perfection, Edit the same correction in red/green (per local procedure) to the appropriate area.
    Taxpayer error, Leave the entries as shown on the document.
  9. An IRS Received Date must be present on all re-input returns.

    If... Then...
    IRS Received Date is not present, Edit an IRS Received Date to the middle of the return.
    Multiple IRS Received Dates present, Circle all but the earliest date.
  10. When additional information is still needed to make the return processable, prepare approved Correspondence Action Sheet or Form 4227 for the appropriate action (e.g. correspondence, research, etc.).

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

    Figure 3.21.110-2

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    Please click here for the text description of the image.

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

  2. Circle CCC "G" if present.

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

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

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

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

    Form 13596 Action Taken
    TIN correction Edit correct TIN on return.
    Tax Period correction Edit correct Tax Period ending on return.
    Reasonable cause Edit appropriate Computer Condition Code:
    1. Edit CCC "R" if the "FTF" (Failure to Pay) box is checked.

    2. Edit CCC "D" if the "FTP" (Failure to File) box is checked.

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

    If... Then...
    Improper perfection, Edit the same correction in red/green (per local procedure) to the appropriate area.
    Taxpayer error, Leave the entries as shown on the document.
  8. An IRS Received Date must be present on all reprocessed returns.

    If... Then...
    IRS Received Date is not present, Edit an IRS Received Date to the middle of the return.
    Multiple Received Dates are present, Circle all but the earliest date received by the IRS.
  9. Circle any green rocker and edit marks that may indicate a receipt of remittance.

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

♦Amended Returns♦

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

    • The Amended Box is checked.

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

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

      Note:

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

  2. Examine the return for attachments:

    • Do not separate any related attachments submitted to explain the reason for the Amended Return (information may be useful to Accounts Management).

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

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

    If Then
    "TC 59X" or "ICS" was entered on the return by Compliance Services Do not edit CCC "G" . Process the return as an original.
    The return is stamped "Delinquent Original Cleared for Processing" by Statute. Do not edit CCC "G" . Process the return as an original.
    Form 3893 or Form 13596 is attached, Do not edit CCC G. See IRM 3.21.110.15.6, Re-Entry Returns.
    None of the above is present Edit CCC "G" . No other codes may be used with CCC "G" except CCC "W" , or "3" .

    Exception:

    CCC "W" , CCC "3" and/or ERS Action Codes may be used with CCC "G" .

  4. The following data must be present on all amended returns:

    1. Name Control

    2. EIN

    3. Tax Period

    4. CCC G

    5. IRS Received Date

    6. Signature

Delinquent Returns

  1. A return is normally delinquent if it is not received on or before the Return Due Date (RDD). However, accept the return as timely filed if the received date is within the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . See IRM 3.10.72,Receiving, Extracting, and Sorting or IRM 3.10.73, Batching and Numbering.

  2. Accept a return as timely if:

    1. The return was mailed in time to reach the Service through normal handling within the legal period but,

    2. Through no fault of the taxpayer, it was not delivered.

  3. Consider a return timely if it appears that the Post Office might have sent it to another government agency in error, or if the original envelope bears a timely postmark or a timely date stamp by that agency. However, if the return was erroneously addressed to another agency, it will be date stamped with the current date when the IRS received it.

  4. See IRM 3.21.110.16.4.1, Received Date Chart for information on the due date of Form 1042.

  5. If a return is delivered to the IRS after the date prescribed for filing, consider the following:

    • The postmark date stamped on the envelope as the date of delivery.

      Note:

      If the postmark date falls on or before the prescribed date for filing the return, then consider the return timely and edit the timely postmark date in MMDDYY format on the dotted portion of Line 62b(1).

  6. If the return (Form 1042) is truly delinquent, check the return for an explanation of late filing. If the taxpayer attaches correspondence with a reasonable cause explanation for failure to file a timely return, take the following action:

    1. Detach the reasonable cause explanation correspondence from the return.

    2. Complete Form 3499"Informational Transmittal," and forward to Ogden International Accounts Management Campus (OAMC), BMF INT'L unit 1973 N Rulon White Blvd., Ogden, Utah 84404 M/S 6552 . In the remarks area write "Process attached Reasonable Cause Correspondence. TC 150 to post in 4 weeks."

    3. Prepare Correspondence Action Sheet for IDRS Letter 1382C (use paragraphs "A and S" ) and assign it to a clerk for input to IDRS, or follow local procedures. It may or may not include the Rejects function. Photo, LTR and attach to 1382C.

      Note:

      Do not edit CCC "R or 7" on the return. OAMC will address the taxpayers reasonable cause letter.

      Exception:

      Edit CCC "R" and continue processing if the return is stamped by the IRS: DO NOT ASSESS LATE FILE PENALTY.

      See IRM 3.21.110.16.3.7, CCC R.

    4. Continue processing Form 1042. Do not attach the Correspondence Action Sheet, Form 1382C to the return.

♦Compliance Secured/Prepared Returns♦

  1. Compliance functions secure returns from the taxpayer and also prepare returns if the taxpayer does not provide them.

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

    2. Secured tax returns are notated with "TC 59X" or "ICS" or notated "Process as Original" with an attached Form 13133, Expedite Processing Cycle. The "Delinquent Return" box on Form 13133 should be checked. If Form 13133 is attached, edit the CCC(s) that are checked on the form.

    Note:

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

♦IRC 6020(b) - Prepared by Collection♦
  1. When the taxpayer fails to file a required return, IRC 6020(b) is the authority for the IRS to prepare the return.

  2. These returns are identified by the notation: "PREPARED AND SIGNED UNDER THE AUTHORITY OF IRC REGULATION 6020(b) OF THE INTERNAL REVENUE CODE" which is located in the center bottom of Page 1 of the return.

    1. Returns must have an IRS Received Date. If no Received Date is present per the Compliance Function, follow the normal procedures for editing the Received Date. See IRM 3.21.110.16.4, Received Dates.

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

      Note:

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

    3. Edit CCC "4" .

      Note:

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

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

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

      Note:

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

    6. Edit CCC "W" if the Received Date is more than two years and nine months after the Return Due Date. Do Not send the return to Statute Control. See IRM 3.21.110.16.3.9

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

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

    2. Use Letter 1791C CAS to correspond for conditions that cannot be processed (e.g., missing signatures, etc.).

    3. Edit CCC "W" if the Received Date is more than two years and nine months after the Return Due Date. Do Not send the return to Statute Control.

    Reminder:

    If there is indication a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.21.110.16.3 , Computer Condition Codes for additional information.

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

    1. Return must have an IRS Received Date. If no Received Date is present, follow the normal procedures for editing the Received Date. See IRM 3.21.110.16.4, Received Dates

    2. Do Not correspond with the taxpayer for unprocessable conditions. If the return is completely unprocessable, use No Reply procedures and edit CCC "3" and continue processing.

    3. If Form 13133 is attached, edit the CCC(s) that are checked on the form.

      Note:

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

    4. Edit CCC "W" if the Received Date is more than two years and nine months after the Return Due Date. Do Not send the return to Statute Control.

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

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

    2. Use Letter 1791C CAS to correspond for conditions that cannot be processed (e.g., missing signatures, etc.).

    3. Edit the Computer Condition Codes that are checked on Form 13133, Expedite Processing Cycle.

    4. Edit CCC "W" if the received date is more than two years nine months after the Return Due Date. Do Not send to Statute Control function.

    Reminder:

    If there is indication a penalty or penalties should be suppressed, edit the appropriate Computer Condition Code(s). Please refer to IRM 3.21.110.16.3 , Computer Condition Codes for additional information.

♦Frivolous Argument♦

  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 can be found, in IRM 25.25.10 , Frivolous Return Program, and are shown in Exhibit 3.21.110-11.

  2. Ignore frivolous correspondence attached to an accurate return. The return is not frivolous, and the return should be processed in the normal manner. Send the frivolous correspondence to: Internal Revenue Service Attn.: FRP M/S 4450 1973 N. Rulon White Blvd. Ogden, UT 84404

  3. Review the return to determine whether it appears to be a frivolous return. See Exhibit 3.21.110-11.

    If... Then...
    The return meets any of the conditions identified as a frivolous return.

    Caution:

    If the return shows 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.

    Note:

    IRM 25.25.20.2.1, FRP Coordinator Responsibilities, requires Examination to expedite the return and make a determination whether it qualifies as a frivolous return within two (2) business days.


    If a determination is not made within the allowed time frame, the Examination examiner will edit Action Code 331 in the lower left margin of the Form.
    Examination has selected the return as frivolous,

    Example:

    Indicated by 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. However, do not circle or void the Action Code indicating a frivolous return.

    Note:

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

♦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:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

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

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

  3. Other CI Referral Criteria:

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

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

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

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

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

    1. Make a copy of the return.

    2. Attach Form 4227 to the copy.

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

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

    5. Continue processing the return.

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

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

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

♦Refund Returns (45 Day Jeopardy and $100 Million or more Refunds and 180-Day Jeopardy and Refunds $500,000 or more)♦

  1. Document Perfection is responsible for identifying refunds and for initiating requests for manual refunds. Use the chart below for manual refund procedures.

    Note:

    Expeditious processing of refund returns is critical if the 45 day or 180-day period is about to expire. Refund in this instruction means only the amount requested to be refunded to the taxpayer, not overpayments transferred to other periods.

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

    2. Pull the return from the non-refund batch using local procedures.

    Note:

    Follow the instructions below when the processing date is more than 20 days after the Received Date or the return due date OR the refund is $1,000,000 or more or when the processing date is more than 155 days after the return due date and the refund is $500,000 or more.

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

      1. Pull the return from the batch.

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

      3. Edit Action Code 341

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

    • Numbered Returns:

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

      2. Edit Action Code 341 (or

    The processing date is more than 155 days after Received Date or the Return Due Date (whichever is later) and the 180-day interest free period is in jeopardy and the refund amount is ≡ ≡ ≡ ≡ ≡ or more.
    1. Edit Action Code 341.

    2. Attach Form 4227 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.

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

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

    3. Edit Action Code 341 or CCC U (whichever is applicable).

      Note:

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

    4. Make a copy of the return for Criminal Investigation (CI). See IRM 3.21.110.15.10.1 , Criminal Investigation (CI) Referral .

    5. Expedite processing.



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

    2. Edit Action Code 341 (or CCC U as applicable)

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

      Note:

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

    4. Make a copy of the return for Criminal Investigation (CI). See IRM 3.21.110.15.10.1, Criminal Investigation (CI) Referral .

    The W & I Submission Processing Liaison for TAS issues, walks a return through Code & Edit, In addition to normal editing, perform the actions below:
    1. Edit CCC “O” to freeze the refund only if TAS is issuing a manual refund.

    2. Edit CCC “Y” to send the return to Error Resolution Section (ERS).

    The refund is $500,000 or more,
    1. Do not leave the return in the batch.

    2. Edit Action Code 341, attach Form 12230 and give the return to the manager.

Form 1042 - Prior Year Returns Processing

  1. Upon receipt of a prior year Form 1042 return with a tax year prior to the current processing tax year, first determine if the return is for the year indicated on the return or for the current year.

  2. If the return is for the current processing tax year,

    1. edit the correct tax year,

    2. draw a line thru prior year line numbers that have been changed, and

    3. edit new Line numbers on form to conform to current year format.

    4. If necessary, dummy the current year form.

  3. If the return is for a prior tax year:

    1. Edit the prior year return to conform to current year line format

    2. Draw a line thru prior year line numbers that have been changed.

    3. Edit new Line numbers on form to conform to current year format.

    4. If not possible to edit the form, dummy the current year form

♦Action Codes♦

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

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

  3. Edit the Action Code in the bottom-left margin of the return.

  4. Assign Action Codes in the following priority order:

    1. Action Code 310 (Statute Control)

    2. Action Code 320 (Entity Control)

    3. Action Code 4XX.

    4. Action Code 6XX

    5. Action Code 3XX

    6. Action Code 2XX (Correspondence)

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

    If ... Then ...
    Action Codes include 211, 215, 225 or 226 and Action Code 341,
    1. Edit the Action Code 211, 215, 225 or 226 on the Form 1042.

    2. Edit Action Code 341 on the Form 4227.

    Action Codes have the same priority,
    1. Edit the Action Code with the shorter suspense period on the Form 1042.

    2. Edit the second Action Code on the Form 4227.

    3. See IRM 3.21.110.15.13(8), Action Codes for suspense periods.

    Action Codes have different priorities,
    1. Edit the Action Code with the higher priority on the Form 1042.

      Exception:

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

    2. Edit the second Action Code on the Form 4227.

  6. Edit the following Action Codes when a return cannot be perfected:

    Action Code Description
    211 (First Correspondence Domestic)
    • The return is so illegible, incomplete, or contradictory and therefore cannot be processed.

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

    • If the address is Domestic it is a Domestic return.

    215 (First Correspondence- International)
    • The return is so illegible, incomplete, or contradictory and therefore cannot be processed.

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

    • If the address is Foreign it is a Foreign return.

    225 (Missing Signature Domestic Correspondence)
    • Unsigned returns (only issue for correspondence)

    • If the address is Domestic , it is a Domestic return.

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

    • If the address is foreign it is a foreign return.

    480 (Early Filed Suspense)
    • Early filed return.

    610 (Renumbered Non-Remittance) or 611 (Renumbered With Remittance)
    • The return is mis-batched (e.g., Form 1065 found in a Form 1042 batch of work).

    640 (Void)
    • To delete the assigned DLN on the return (e.g., Re-Entry Returns).

    650 (AC International)
    • An International return and must be forwarded to OSPC.

  7. Continue perfecting the return after editing the Action Codes. For a complete list of Action Codes see Exhibit 3.21.110-10 .

♦Bankruptcy♦

  1. If the Form 1042 indicates bankruptcy (e.g. shows "RECEIVER" , "TRUSTEE" , or "DEBTOR IN POSSESSION" ) in the entity area or on an attachment, route to Entity Control. Follow local procedures using Form 13934, Merge Sheet).

Form 1042 - Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

  1. Form 1042 is the annual tax return used by withholding agents to report tax withheld under sections IRC 1441-IRC 1443 on certain income of foreign persons; tax withheld under chapter 4 on withholdable payments; tax withheld under section 5000C on specified federal procurement payments; certain distributions made by publicly traded trusts and qualified investment entities for section 1445 purposed; certain payments subject to section 877A; and distributions of effectively connected income made by publicly traded partnerships for section 1446 purposes. See Exhibit 3.21.110-1 .

  2. Form 1042 is to be filed by all individuals, corporations, and partnerships having the control, receipt, custody, disposal, or payment of interest, dividends, rent, salaries, etc. (amounts subject to withholding under Treas. Reg 1.1441-2(a)), to the extent that any such items constitute gross income from sources within the United States to nonresident alien individuals, foreign partnerships, or foreign corporations.

  3. Form 1042, must be filed whether or not any tax was withheld or was required to be withheld (i.e., income was exempt from withholding).

  4. Payment of Taxes - Effective January 1, 2011, taxpayers must deposit tax withheld using the EFTPS. Form 8109, Federal Tax Deposit Coupon, can no longer be used.

  5. The amount of taxes withheld determines the frequency of deposits.

    1. If at the end of any quarter-monthly period, the total amount of undeposited taxes is $2,000 or more, the taxes must be deposited within three banking days after the end of the quarter-monthly period. A quarter-monthly period ends on the 7th, 15th, 22nd and the last day of each month.

    2. If at the end of any month, the total amount of undeposited taxes is $200 or more but less than $2,000, taxes must be deposited by the 15th day of the following month.

    3. If at the end of the year, the total amount of undeposited taxes is less than $200, the entire amount must be deposited via EFTPS or remitted with Form 1042 on or before March 15 of the current tax year.

Amended Return Checkbox

  1. Identifies whether the return is an amended return or original. See IRM 3.21.110.15.7Amended Returns.

For IRS Use Only Box

  1. The IRS Use Only box is used to list Computer Condition Codes and Schedule Indicator Codes (SIC). See IRM 3.21.110.16.3, Computer Condition Codes (CCC) and IRM 3.21.110.21, Schedule Indicator Code (SIC).

♦Computer Condition Codes (CCC)♦

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

  2. Edit CCC on the CC line of the For IRS Use Only box in the upper right corner of Form 1042.

CCC A - Payments by Qualified Derivatives Dealer (QDD)
  1. CCC "A" will be edited to indicate the Page 2, Section 4 checkbox has been marked to indicate payments by a QDD.

♦CCC D – Reasonable Cause For Waiver of Failure To Pay Penalty♦
  1. Do not edit CCC "D" if the taxpayer requests abatement for "Failing to Pay Timely" when the return is submitted. Send Letter 1382C to inform the taxpayer of the proper procedure to follow to request penalty abatement if and when a penalty is assessed. IRM 3.21.110.15.8(6), Delinquent Returns.

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

    Note:

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

♦CCC E – Credit Election♦
  1. Edit CCC "E" as follows:

    If And Then
    The taxpayer has checked the credit elect box on Line 71, Form 1042 The overpayment is $1.00 or more on Lines 70a and/or 70b. Edit CCC "E"
    The taxpayer has attached a statement requesting a credit election. The overpayment is $1.00 or more on Lines 70a and/or 70b. Edit CCC "E"
    Neither the Credit Elect or Refund box is checked on Line 71. The overpayment is $1.00 or more on Lines 70a and/or 70b. Edit CCC "E"
    Both the Credit Elect and the Refund box is checked on Line 71. The overpayment is $1.00 or more on Lines 70a and/or 70b. Edit CCC "E"
    An overpayment is to be applied to another type of tax   Do not edit CCC "E" , edit CCC "X" . See IRM 3.21.110.16.3.10, CCC "X" – Refund/Credit Freeze .
    An overpayment is the result of excess remittance paid with the return,   Do not edit CCC "E"
    Only Refund box is checked,   Do not edit CCC "E"

    Note:

    If CCC "F" is edited, do not edit CCC "E" , instead edit CCC "S" .

♦CCC F – Final Return♦
  1. Edit CCC "F" when the taxpayer checks the Final Return box, or gives a positive indication that they are not liable of filing future returns. This includes notations such as (but not limited to) the following:

    • Final

    • Deceased

    • Out-of-Business

    • Liquidation

    • Exempt Under IRC 501(C)(3)

    • Dissolved

    • Cites IRC 708(b)(1)(B)

    • Notates Filed in Accordance with Rev. Proc. 2003-84

    Note:

    Do not edit CCC "F" If the date of the final income paid is after the tax period. “For example: If the tax form is submitted on a printed 2016 form, but the taxpayer made a hand written entry of paying their last income paid on March 5, 2017, it is not a final return.”

♦CCC G – Amended Return♦
  1. Edit CCC "G" if there is a clear indication on the return or on an attachment that the return being processed is not the first return filed for the tax period. See IRM 3.21.110.15.7, Amended Returns for instructions.

♦CCC J – Reasonable Cause for Failing to Make Timely Deposits♦
  1. Edit CCC "J" for tax year 2017 when an amount is present on Line 62(b)1. Also edit SIC 2.

  2. Edit CCC "J" when a notation of "3121 Agreement" or "VCP" is on the return. Also edit a Schedule Indicator Code (SIC) of 2.

  3. Do not edit CCC "J" if the taxpayer requests abatement for Failing to Make Timely Deposits. Instead, follow the step list instructions in IRM 3.21.110.15.8 (6)(6), Delinquent Returns.

♦CCC R – Reasonable Cause For Failing to Timely File Return♦
  1. CCC "R" is no longer edited when a reason is given by the taxpayer for a delay in filing a return. Issue Letter 1382C and continue editing the return.

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

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

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

    • The return indicates an assessment of a fraud penalty (IRC Section 6663 or IRC Section 6664).

    • A notation of "VCP" is on the return.

      Note:

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

    Note:

    CCC "4" cannot be used with CCC "R" . Do not edit CCC "R" if CCC "7" (Reasonable Cause Denied) is present.

♦CCC S – Refund Return♦
  1. Edit CCC "S" when the overpayment is $1.00 or more on Lines 70a and/or 70b and :

    1. The refund box, Line 71, Form 1042 is checked, or

    2. A statement requesting that the money be refunded is attached, or

    3. The return is a final return.

    4. IRM 3.21.110.31(4).

♦CCC W – Cleared by Statute Stamped on Return♦
  1. See instructions in IRM 3.21.110.15.5, Statute Returns

♦CCC X – Refund/Credit Freeze♦
  1. Edit CCC "X" when any of the following conditions occur:

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

    2. Photocopy Page 1 of Form 1042.

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

    4. Notate FORM 3465 PREPARED on the original Form 1042.

    Correspondence for a signature is returned as a No reply and a refund is due.
    1. Edit CCC's "X" and "3" .

    2. Photocopy Page 1 of Form 1042.

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

    4. Notate "FORM 3465 PREPARED" on the original Form 1042.

    If the taxpayer has requested a refund on Excise Tax Only returns. Edit CCC "X "

    Note:

    Also edit CCC “X” as noted in specific line by line instructions.

♦CCC 3 – No Reply to Correspondence♦
  1. Edit CCC "3" when the taxpayer fails to respond to a correspondence or the correspondence is returned undeliverable.

  2. Edit CCC 3 when the return is unprocessable and there is an indication that correspondence has been sent and no reply received.

  3. If the return is overpaid (refund) and the correspondence is for signature only, then also edit CCC "X" . See IRM 3.21.110.16.3.10, CCC X – Refund/Credit Freeze.

    Note:

    There may be other times that the CCC “X” is edited on Refund returns, follow specific line by line instructions.

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

    Note:

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

♦CCC 7 – Reasonable Cause Denied♦
  1. CCC "7" is used when the taxpayers statement for failing to file or for failing to pay taxes timely is not acceptable.

    Note:

    This CCC will rarely be used because code and edit tax examiners do not make decisions on reasonable cause request.

  2. Refer to the step list instructions in IRM 3.21.110.15.8 (6), Delinquent Returns.

  3. CCC "7" cannot be used with CCC's "D, R or J" .

♦Received Date♦

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

  2. A Received Date is required on all Form 1042 returns. Use the chart below to perfect the received date.

    If... Then...
    The return is received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the legal or extended due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ . The return is considered timely.
    The due date falls on a weekend or legal holiday, The return is timely if postmarked by the first business day following the weekend or legal holiday.
    The IRS received date stamp ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the legal or extended due date and the postmark or shipment date is on or before the legal or extended due date, Edit the Received Date to agree with the postmark date or shipment date.

    Note:

    The postmark or shipment date includes returns delivered by:

    • U.S. Postal Service,

    • Private Delivery Services, e.g. Federal Express Corporation (FedEx) or United Parcel Service (UPS), "designated" by the IRS. See IRM 3.10.72, Receiving, Extracting and Sorting for a list of designated private delivery services, or

    • Returns with a Foreign Postmark.

    Caution:

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

    Note:

    For certified mail only- If a postmark is not present, look for a "USPS.com Track & Confirm" record that has been attached to the return (should be before the envelope). Use the "Acceptance" date on the record to determine timeliness and follow normal editing procedures.
    If the "USPS.com Track & Confirm" record is not attached, no action is required.

  3. The Received Date may or may not be stamped on the face of the return.

  4. A valid Received Date Stamp may consist of the following (MMDDYY):

    • The word "Received"

    • Month (alpha or numeric)

    • Day (numeric 01-31)

      Example:

      "1" or "01"

    • Year (numeric) - four digits

    • "Area Office" , Campus, "Field Office" , "Taxpayer Assistance Center (TAC)" plus the city, location, or functional area within one of these sites (e.g., Compliance Services Collection Operations (CSCO), Examination, Image Control Team (ICT). Correspondence Imaging System (CIS), Accounts Management (AM), etc.).

      Note:

      Not all IRS offices are designated places for filing, and not all IRS employees are authorized to accept a tax return for processing. If a return contains a received date stamp from other than a Taxpayer Assistance Center (TAC), Lockbox, or IRS campus (Compliance, Accounts Management (AM), or Submission Processing (SP)), circle out the invalid received date and edit the correct received date according to instructions below. For example, returns received by the Taxpayer Advocate Service (TAS) or the IRS Office of Chief Counsel are not properly filed and a received date by that office is not the "IRS Received Date" .

  5. If the IRS Received Date stamp is not present or the date is illegible or invalid, edit the IRS Received Date in MMDDYY format to the dotted portion of Line 62b(1) on the Form 1042. Edit the IRS Received Date according to the following priority:

    1. The earliest legible Postmark Date (U.S. Postal Service, Foreign Postmark, or Private Delivery Service) on the envelope. Rules for using the U.S. Postal Service Postmark (USPS), Foreign Postmark, or Private Delivery Service are as follows:

      If Then
      An envelope is not attached Use the date stamped on the face of the return.
      A document was returned for insufficient postage, Use the postmark date that coincides with the correct delivery of the return.
      An envelope has a USPS and private metered postmark Always use the USPS postmark.
      An envelope marked Certified Mail and postmark is missing Look for the USPS.com Track & Confirm record that has been attached to the return (should be before the envelope). Use the Acceptance date on the record to determine timeliness and follow normal editing procedures.
      If the USPS.com Track & Confirm record is not attached, no action is required.
      An envelope has a foreign and private metered postmark Always use the foreign postmark.
      An envelope has two private metered postmarks Always use the latest private metered postmark.
      An envelope has only one private metered postmark Use the private metered postmark.

      Note:

      A private metered postmark is to be considered timely if received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the legal due date.

    2. Service Center Automated Mail Processing System (SCAMPS) digit date.

    3. Revenue Officer's signature date.

    4. Signature date (only if within current year).

      Exception:

      Use the signature date on prior year returns only when it is signed in the current year. DO NOT use the signature date stamp to determine the received date for replies to correspondence.

    5. Julian control date minus 10 days.

    6. Current date minus 10 days.

  6. Edit the Received Date as follows:

    If Then
    A timely Received Date is the only Received Date stamped on the return, No editing is required.
    Two or more dates stamped on the return.
    1. Use the earliest IRS Received Date stamped on the return.

    2. Circle all other dates (handwritten or stamped) not needed for transcription.

      Note:

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

    A Federal return is addressed to the IRS but delivered to a State agency, Use the postmark date as the IRS Received Date.
    A Federal return is addressed to a State agency Use the IRS Received Date stamp as the IRS Received Date.
    The only Received Date on the return is a TAS Received Date, Circle out the TAS or Chief Counsel received date and edit the IRS received date according to instructions. See IRM 3.21.110.16.4 (5).

    Reminder:

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

  7. If a return has been faxed to another area of the service and then sent to Submission Processing for processing, do not edit the Enterprise Electronic Fax (EEFax) Date as the IRS Received Date. Edit a Received Date according to normal procedures. See IRM 3.21.110.16.4(5), Received Date.

    Caution:

    The EEFax Date cannot legally be used as an IRS Received Date.

Received Date Chart
  1. The received date chart below provides return due date information. The dates are subject to local adjustments for State/D.C. Holidays.

    Ending Date Due Date Weekends and Holiday Considered Delinquent (7004) EXT. Due Date Weekend and Holidays Considered Delinquent Return
    12-31-2017 3-15-2018 ≡ ≡ ≡ ≡ ≡ ≡ 9-17-2018 ≡ ≡ ≡ ≡ ≡ ≡ ≡

Penalty and Interest Code (P/I Code)

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

  2. Valid characters are 1 and blank.

  3. Edit this code on the I line of the For IRS Use Only box in the upper right corner of Form 1042 when the pre-computed delinquency penalty and/or interest is shown on a return with a Received Date (stamped or improvised) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Schedule Indicator Code (SIC)

  1. SeeIRM 3.21.110.21Schedule Indicator Code (SIC), for instructions for SIC code instructions.

Chapter 3 Status Code - Chapter 4 Status Code

  1. The Chapter 3 and Chapter 4 status code boxes are located in the entity portion of the return.

  2. This is a 2 digit code entered by the taxpayer from the list of Status Codes provided in the Form 1042-S and its Instructions.

    Note:

    If the taxpayer has entered a single digit number in the box, it is not necessary to edit a “0” in front of the number.

  3. If blank and 1042-S is attached, edit the code from 1042-S Line 12b or 12c; if not present on Line 12b and/or Line 12c, take no action unless you are corresponding for other missing information then, correspond for Status Code if both Chapter 3 and Chapter 4 are blank. Use the following literal when corresponding: “Please provide the missing Chapter 3 and/or Chapter 4 Status Code on Page 1.

♦Entity Perfection – General♦

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

    1. Employer Identification Number

    2. Name

    3. Address

♦Entity Perfection – Employer Identification Number (EIN)♦

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

  2. The EIN is located in the upper right of Form 1042.

    1. Form 1042 cannot be processed with an SSN or an IRS ITIN.

    2. Do not accept an SSN or ITIN in place of an EIN.

  3. Determine the EIN as follows:

    If ... And ... Then ...
    If Form 1042 is filed with an SSN or ITIN instead of an EIN or QI-EIN,  
    1. Circle out the SSN/ITIN.

    2. Research for EIN.

    3. If not found attach Form 4227 to route to Entity Control.

    The EIN is missing You can determine the correct EIN from the attachments Arrow or edit the EIN to the appropriate location.
    The EIN is either a Preparer Tax Identification Number (PTIN) or Individual Tax Identification Number (ITIN), Unnumbered Return,
    1. Remove return from batch.

    2. Route to Entity Control following local procedures using Form 13934, Merge Sheet for EIN assignments.

    The EIN is either a PTIN or ITIN, Numbered Return.
    1. Edit Action Code 320.

    2. Leave return in batch.

    Multiple EIN's are present. Unnumbered Return. See Figure 3.21.110-3.
    1. Remove return from batch.

    2. Route to Entity Control following local procedures using Form 13934, Merge Sheet for EIN assignments.

    Multiple EIN's are present. Numbered Return Edit Action Code 320.
    The EIN contains any of the following conditions and cannot be determined from attachments or schedules:
    • Illegible;

    • Missing;

    • Other than 9 digits;

    • All zeroes; or,

    • All nines.

    Unnumbered Return. See Figure 3.21.110-4.
    1. Research IDRS.

    2. If found edit to the proper location.

    3. If not found, route to Entity Control (e.g., Form 13934, Merge Sheet).

    The EIN contains any of the following conditions and cannot be determined from attachments or schedules:
    • Illegible;

    • Missing;

    • Other than 9 digits;

    • All zeroes; or,

    • All nines.

    Numbered Return
    1. Circle out all illegible EIN's, zeroes or nines.

    2. Research IDRS

    3. If not found edit Action Code 320.

    PENDING, APPLIED FOR, etc., is indicated in the EIN area. Unnumbered Return.
    1. Research Integrated Data Retrieval System (IDRS).

    2. If found, edit to the proper location.

    3. If not found, route to Entity Control following local procedures using Form 13934, Merge Sheet.

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

    Figure 3.21.110-3

    This is an Image: 34025008.gif
     

    Please click here for the text description of the image.

    Figure 3.21.110-4

    This is an Image: 34025009.gif
     

    Please click here for the text description of the image.

  4. Listed below are the most common conditions indicating an entity change requiring a new EIN.

    1. Individual owner dies and estate takes over business.

    2. Individual owner dies, Surviving Spouse takes over when no estate is involved.

    3. Individual ownership changes to a corporation.

    4. Individual ownership changes to a partnership.

    5. Partnership changes to individual ownership or disregarded entity (except where the resulting Business changes from an individual owner to another individual owner).

    6. Partnership changes to corporation (except for elective change caused by filing Form 8832).

    7. There is a sale or exchange of 50 percent or more of the interests in a partnership within a 12 month period.

    8. Corporation changes to an individual ownership or disregarded entity (except where the resulting owner already has an EIN).

    9. Corporation changes to a partnership (except for elective change caused by filing Form 8832 ).

    10. Sole proprietor indicates bankruptcy.

♦Entity Perfection - Name Control♦

  1. The type of entity present on the return determines the Name Control procedures.

    1. Individuals;

    2. Corporations;

    3. Partnerships;

    4. Trusts and Estates; and,

    5. Other organizations.

  2. The Name Control consists of four characters or less.

    1. Valid characters are alpha, numeric, ampersand (&), hyphen (-), and blank. However, blanks are only valid in the last three positions.

    2. Disregard the word "THE" in the Name Control only when more than one word follows.

    Note:

    If an individual and a trade name are present and it can be determined that the trade name is for a corporation or partnership, follow the Name Control procedures for corporations or partnerships. If other than a corporation or partnership, follow the name control procedures for individuals, regardless of which line the individual owner's name is listed.

  3. See Document 7071A BMF Name Control Job Aid to properly determine the Name Control.

  4. Edit the Name Control as follows:

    If ... And ... Then ...
    A second name line is present and begins with "FKA" (formerly known as). Unnumbered Return.
    1. Remove return from batch.

    2. Attach Form 4227 or follow local procedures.

    3. Route to Entity Control.

    A second name line is present and begins with "FKA" (formerly known as). Numbered Return. Edit Action Code 320.
    A second name is present and begins with "AKA" (also known as) or "DBA" (doing business as).   Circle out the abbreviations.
    Able to determine the Name Control,   Underline the Name Control.
    Unable to determine the Name Control. Unnumbered Return.
    1. Research IDRS.

    2. If not found, Route to Entity Control.

    Unable to determine the Name Control. Numbered Return. Edit Action Code 352 (Name Research).

    Note:

    If a return indicates the taxpayer has filed bankruptcy (e.g. shows "receiver" , "trustee" , or "debtor in possession" in the entity area, signature line or an attachment), route to Entity.

♦Entity Perfection – In-Care-of Name♦

  1. An in-care-of name can be identified by the words "in-care-o" f or the symbols "c/o" or "%" (percent).

    Note:

    Always circle out the in-care of symbol (c/o or %) if it is present with an address. Do not use the ampersand (&) or the percent sign (%) when editing address information.

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

    If ... Then ...
    The in-care-of name is located on the street address line preceding the street address, No editing is required.
    The in-care-of name is located above the first name line or below the street address, Arrow the in-care-of name so it appears below the first name line and above the street address.
    The In-care of name is shown on an attachment,
    1. Edit the In-care-of name above the street address beginning with the % or c/o in the first position.

    2. Continue editing the return.

    The street address for the "in-care-of" name is different from the street address of the filer,
    1. Arrow the in-care-of street address below the in-care-of name or edit the in-care-of street address below the in-care-of name if included on an attachment.

    2. Circle the business address and edit TC 014.

    3. Completely edit the return.

    4. Pull from batch, place in designated area.

  3. A change in the in-care-of name can be determined by any of the following:

    • A check mark in the "Name Change" box, or

    • A check mark in the "Address Change" box, or

    • An indication that the "in-care-of" name is changed (e.g. the taxpayer crossed out the original "in-care-of" name and added the new name or has entered a new "in-care-of" name in brackets).

    If Then
    An "in-care-of" name is changed but there is no indication of an address change
    1. Edit the "in-care-of" name as per table above .

    2. Continue editing the return.

    An "in-care-of" name is present and there is an indication of an address change.
    1. Edit the "in-care-of" name as shown above.

    2. Correct the address. See IRM 3.21.110.18.4 , Entity Perfection – Domestic Address.

    3. Continue editing the return.

  4. "Special Considerations"

    1. APO/FPO/DPO addresses us the following format:

      Line EXAMPLE: Applicable Field
      Payee Name PVT. Willard J. Doe 02ADD
      Mailing Address Company F. PSC Box 100 167 Infantry REGT 02ADD
      Payee City APO, FPO or DPO 02CTY
      Payee State AE, AA, or AP* 02ST
      Payee ZIP Code 09801 02ZIP

      Note:

      *AE is the designation for ZIPs beginning with 090-098, AA for ZIP 340, and AP for ZIPs 962-966

♦Entity Perfection – Domestic Addresses♦

  1. Perfection of the address is necessary when the mailing address (Street or P.O. Box) is not easily identified.

    Note:

    Do not perfect the address on amended returns (CCC G).

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

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

    If ... And ... Then ...
    The Address contains information other than a Street Address or P.O. Box.   No perfection is necessary. ISRP will enter the complete Address.
    There is an indication on an attachment that the Address has been changed.   Edit the new Address in the entity section of the return. Delete old address.
    Form 8822, Change of Address, or Form 8822-B , Change of Address or Responsible Party- Business, is attached, All of the following applies:
    • Mailing address information is the same,

    • No location address is listed on Form 8822/8822-B, Line 7,

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

    1. Take no action.

    2. Continue processing the return.

    Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party- Business, is attached, Any of the following applies:
    • Mailing address information is different,

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

    • An entry is listed on Form 8822-B, Lines 8 or 9,

    Detach Form 8822/ Form 8822-B and route to Entity Control following local procedures using Form 13934 , Merge Sheet .
    Both a P.O. Box and a Street Address are shown.  
    1. 1. Underline the P.O. Box

    2. Notate "TC 014" in the upper-left margin of the return.

    3. Completely edit the return.

    4. Pull from batch, place in designated area.

    See Figure 3.21.110-6.
    Two street addresses are shown An "in-care-of" name includes a street address other than the withholding agents street address
    1. Circle the withholding agents street address.

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

    3. Completely edit the return.

    4. Pull from batch, place in designated area.

    Two Street Addresses are shown.  
    1. Underline the second Street Address.

    2. Notate "TC 014" in the upper-left margin of the return.

    3. Completely edit the return.

    4. Pull from batch, place in designated area.

    See Figure 3.21.110-5
    One Street Address is shown. The taxpayer changed the Address to a P.O. Box.
    1. Notate "TC 014" in the upper-left margin of the return.

    2. Completely edit the return.

    3. Pull from batch, place in designated area.

    The City and State are not shown on the return, but are shown on an attachment.   Edit the City and State on the form in the entity section.
    The Zip Code is missing or illegible. Is not available from the return or attachments. Determine the zip code by using Exhibit 3.21.110-8.
    Only the first three digits of the Zip Code can be determined.   Edit "01" for the fourth and fifth digits.
    The National Change of Address (NCOA) label is present.   Underline the Name Control.
    No address is shown on the return or attachments You must research IDRS for an address. If no address is found route the return to Entity Control following local procedures using Form 13934 , Merge Sheet.
    The address contains information other than a street address or P.O. Box,   No perfection is necessary. ISRP will enter the complete address.

    Note:

    Always circle out the In Care of symbol (c/o or %) if it is present with an Address. Do not use the ampersand (&) and the percent symbol (%) when editing Address information.

  4. The U.S. Postal Service established new address requirements for APO/FPO/DPO addresses. If the old address appears (i.e. APO New York, NY 191XX), convert to the new state code abbreviation based on the zip code (i.e. the previous example would be converted to APO AE 091XX). APO/FPO/DPO addresses are considered domestic addresses. Refer to the Conversion Chart below:

    If Then
    Only the first three digits of the Zip Code can be determined Edit 01 for the fourth and fifth digits.
    No address is shown on the return or attachments Route the return to Entity.

    "Special Considerations"

    1. APO/FPO/DPO addresses use the following format:

      Line: EXAMPLE:
      Payee Name PVT. Willard J. Doe
      Mailing Address Company F. PSC Box 100 167 Infantry REGT
      Payee City APO, FPO or DPO
      Payee State AE, AA, or AP*
      Payee ZIP Code 09801

      Note:

      *AE is the designation for ZIPs beginning with 090-098, AA for ZIP 340, and AP for ZIPs 962-966

    2. The following table is an APO/FPO/DPO Conversion Chart.

      City Code: APO/FPO/DPO State Code: AA/AE/AP State Location ZIP Code
      APO AA Americas 34000–34049
      FPO AA Americas 34050–34099
      DPO AA Americas 340XX-340XX
      APO AE Europe 090XX-094XX and 096XX
      FPO AE Europe 095XX
      DPO AE Europe 090XX-098XX
      APO AP Pacific 962XX–965XX and 98700-98759
      FPO AP Pacific 966XX and 98760-98799
      DPO AP Europe 962XX-966XX

    Figure 3.21.110-5

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    Figure 3.21.110-6

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♦Entity Perfection – Foreign Address♦

  1. Use Job Aid 2324–002 to edit foreign addresses.

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

  3. Returns with APO/FPO/DPO addresses are considered domestic addresses.

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

    • A two-character alpha code must be edited for the Possession/Territory name:

    U.S. Possession/Territory Abbreviation
    American Samoa AS
    Federated States of Micronesia FM
    Guam GU
    Marshall Islands MH
    Northern Mariana Islands MP
    Palau PW
    Puerto Rico PR
    Virgin Island (U.S.) VI
  5. Returns with addresses in the following possessions are considered to be a foreign address for processing purposes but are edited in the same way as domestic addresses.

    1. A ZIP code must be present. Edit the appropriate ZIP code if one is not provided. See Exhibit 3.21.110-7.

  6. Foreign addresses are similar in editing to domestic addresses, but with the following exceptions:

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

    • Circle out the foreign country and edit the country code preceded by a / and followed by a /$See Document 7475 for official foreign country codes.

    • If the foreign address is from Australia, Brazil, Canada, Cuba, Italy, Mexico, China, El Salvador, India, Malaysia, Thailand, or the Netherlands, check if the address contains a province, state or territory.

      Note:

      Submission Processing BMF Foreign Address Job Aid provides examples for editing foreign addresses.

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

      2. Edit appropriate abbreviation.

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

      Note:

      ISRP will enter the two digit state code

    • A Zip code is not required on a foreign address. Foreign addresses use a postal code that is entered before the foreign country and is part of the address.

Entity Perfection of Tax Period

  1. All returns must have a tax period. If it is missing, incomplete, or illegible, search the return or attachments for the correct period. Edit the tax period to the left of the printed Tax Year in YYYY format.

  2. The tax period is preprinted on this current annual return. Therefore, editing usually is not required unless the tax period is changed by the taxpayer, or is other than the tax period being processed (i.e., Prior Year, Delinquent, or Early Filed).

    1. If the taxpayer has indicated a tax period other than the period shown on the preprinted return, edit the tax period based on the taxpayer's indication.

    2. After searching, if you are still unable to determine the tax period, process the return for the annual year currently being processed.

Record of Federal Tax Liability (ROFTL) (Lines 1 through 60)

  1. These Lines are 15 position fields that may or may not be present.

  2. These lines contain the Tax Liabilities for each week of the tax year.

  3. If present, only numeric characters are valid.

  4. Entries must be present in the weekly Tax Liability lines when the monthly Tax Liability lines exceed ≡ ≡ ≡ ≡ ≡

  5. Beginning with Tax Year 2011, a 2 percent (%) tax on specified federal procurement payments will be included in the ROFTL. The total liability for specified federal procurement payments will only be reflected on Line 64d.

  6. If an entry on any monthly Tax Liability line is ≡ ≡ ≡ ≡ ≡ ≡ ≡ , and the weekly Tax Liability Lines for that month are blank, double arrow the amount from the monthly total to the last weekly Tax Liability line for that month.

    Note:

    Do not edit SIC 1 after monthly liability has been arrowed to weekly liability.

  7. If an entry on any monthly Tax Liability line exceeds ≡ ≡ ≡ , and if no amounts are entered on the weekly Tax Liability lines for that month, correspond.

    Exception:

    If the taxpayer has notated a specific Revenue Section on the Form 1042 (for example: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ), subtract Line 64d from Line 64e and edit the amount to Line 59.

  8. If there is an entry for the Total Net Tax Liability (Line 64e) and if Lines 1 thru 60 are blank, correspond for the missing ROFTL amounts.

    1. Do not correspond for Lines 1 thru 60 if the total amount for line 64e is less than or equal to ≡ ≡ ≡ ≡ ≡

    Caution:

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

  9. Entries on Lines 1 thru 60 cannot contain negative amounts. If any negative entries are present,

    1. Edit SIC 1 and continue processing the return.

    2. ISRP will not input the quarterly liability amounts.

Schedule Indicator Code (SIC)

  1. A SIC is used to notify the computer that the ROFTL is:

    1. Incomplete,

    2. Unnecessary, or

    3. That a penalty should not be assessed.

    4. Monthly totals are missing.

  2. This is a 1 - position field that may or may not be present.

  3. Valid characters are 1, 2, or blank.

  4. Edit the Schedule Indicator Code to the SIC line of the For IRS Use Only box in the upper right-hand corner of Form 1042.

  5. Edit a SIC 1 if any of the following conditions exist:

    • Negative entries are present on Lines 1 thru 60.

    • Monthly Money totals are missing.

    • The Gross Income amounts were entered instead of the Total Tax Liability (the total of the ROFTL equals Line 62c).

    • There are money amounts shown on a nontaxable return. A nontaxable return is when line 64e says "None" , "Dash (-)" or a "zero" is present on it.

    • The return is prepared under Section 6020(b).

    • The ROFTL is unnecessary (i.e. Line 64e (Total Tax Liability) equals 0).

    • The ROFTL is unnecessary (i.e. the only entry for Lines 64 a-e is on Line 64a and it equals Line 64e.

    Note:

    No editing of the ROFTL is necessary if SIC 1 is edited.

    Edit a SIC 2 if the taxpayer did not notate"3121 Agreement" on top of Form 1042, but included a reasonable cause statement for Tax Year 2010 and prior. Follow the step list instructions in IRM 3.21.110.15.8 (6), Delinquent Returns.

  6. Edit a SIC 2 if any of the following conditions exist:

    • CCC "J" was edited due to a notation of 3121 Agreement or VCP on the return.

    • TY 2017 only: CCC "J" was edited for an amount present on Line 62b(1).

    • TY 2010 and prior: The taxpayer noted "3121 Agreement" on Form 1042 and any monthly tax liability (line 5, 10, 15, etc) is ≡ ≡ ≡ ≡ or more.

    • TY 2010 and prior: The taxpayer did not notate"3121 Agreement" on top of Form 1042, but included a reasonable cause statement. Follow the step list instructions in IRM 3.21.110.15.8 (6), Delinquent Returns.

    • TY 2010 and prior: The 90 Percent Rule checkbox is checked (the checkbox is located below the entity portion of Form 1042) and any monthly Tax Liability (Lines 5, 10, 15, etc...) exceeds ≡ ≡ ≡ ≡ ≡ and the weekly tax liability for that month is also present.

    • TY 2010 and prior: both TY 2010 and prior conditions exist at the same time.

  7. Edit SIC Code 2 in the rare event that both conditions exist at the same time on TY 2010 and prior returns.

Number of Form 1042-S Filed: Line 61a and 61b.

  1. Line 61a contains the number of Form 1042-S Copy A filed.

    1. Always verify the taxpayer’s information by counting the paper Forms 1042-S "Copy A" attached and comparing the number attached with the entry on Form 1042 Line 61a and on Form 1042-T Line 1d.

    2. If the entry on Line 61a is correct, take no action.

    3. If the entry on Line 61a is incorrect, delete the entry and edit the correct number to the line.

    4. If blank, edit the number of Form 1042-S Copy A attached.

    5. Do not correspond for line 61a information or Form 1042-S if not attached..

    Note:

    Always verify all information on the Form 1042 prior to detaching the Form 1042-S Copy A and Form 1042-T If entity information is missing on Form 1042-S and/or Form 1042-T, edit from Form 1042 prior to detaching.

  2. Line 61b contains the number of electronically filed Form 1042-S. Accept the taxpayer’s entry.

  3. If Line 61a and 61b are blank and there is no indication of the number of Form 1042-S filed (paper or electronic), on either the Form 1042 or any attachments, correspond.

    Note:

    Do not correspond on a non-taxable return as indicated by the words none or zero, or a dash (-) on line 64e. See IRM 3.21.110.15.2, Non-Taxable Returns with No Line Entries.

    Note:

    If a prior year Form 1042 is submitted and references Magnetic Media, place that data under electronically filed on Line 61b.

    Figure 3.21.110-7

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Total gross amounts reported on all Forms 1042-S and 1000 - Line 62

  1. Line 62 is not for reporting, header information only.

  2. Reporting components are broken down into 62a, b(1), b(2), c, and d.

Total FDAP U.S. Income Amount - Line 62a

  1. "X" any negative entries.

  2. If blank take the following action:

    1. Enter the amount from Form 1042-T, Line 2.

    2. If no Form 1042-T is attached, total the amounts from Box 2 of all Form 1042-S Copy A, attached and edit the total to Form 1042 Line 62a. DO NOT include any amounts from Form 1042-S Copy B (C, D, and/or E).

  3. If required to edit, entries should be made in Dollars and Cents.

Total U.S. Source Substitute Dividend Payments Reported - Line 62b(1)

  1. May or may not be present.

  2. If there is an amount present, edit CCC "J" .

    Note:

    You may also see "Notice 2016-76" notated on the top of the return.

  3. "X" any negative entries.

Other U.S. Source Substitute Payments Reported - Line 62b(2)

  1. May or may not be present.

  2. "X" any negative entries.

Total Gross Amounts Reported - Line 62c

  1. May or may not be present.

  2. If blank and there are entries leading to a total, compute and enter by adding lines 62a-b.

  3. If required to edit, entries should be made in dollars and cents.

  4. "X" any negative entries.

Gross Amounts Paid - Line 62d

  1. All amounts must be positive.

  2. "X" a negative entry.

  3. If required to edit, entries should be edited in dollars and cents.

  4. If the return is completely blank, follow instructions in IRM 3.21.110.15.2, Non-Taxable Returns With No Line Entries.

Total Tax Reported as Withheld or Assumed on all Forms 1042-S and 1000 - Line 63

  1. Line 63 is not a reporting field, it contains header information only.

  2. Reporting information is broken down in 63a, b(1), b(2), c, d, and e

Taxes Withheld by Withholding Agent - Line 63a

  1. May or may not be present.

  2. "X" any negative entry.

For Payments Other Than Substitute Dividends - Line 63b(1)

  1. May or may not be present.

  2. "X" any negative entry.

Payments for Substitute Dividends - Line 63b(2)

  1. May or may not be present.

  2. "X" any negative entry.

Adjustments To Withholding- Line 63c

  1. Line 63c is not a reporting field, it contains header information only.

  2. Reporting information is broken down in 63c(1) and 63c(2).

Adjustments To Overwithholding - Line 63c(1)
  1. Entry is ALWAYS a negative number.

  2. May or may not be present, accept taxpayer’s entry.

Adjustments To Underwithholding - Line 63c(2)
  1. Entry is always positive

  2. May or may not be present, accept taxpayer’s entry.

Tax Paid by Withholding Agent - 63d

  1. May or may not be present.

  2. "X" any negative entry.

  3. Delete entry if it appears that line is being used as a subtotal line. (i.e. Line 63a=63d=63e)

Total Tax Reported as Withheld or Paid - Line 63e

  1. "X" a negative entry.

  2. If Line 63e is blank:

    And... Then...
    there are entries on Lines 63a-d, compute and edit to Line 63e.
    Lines 63a-d are blank, and Form 1042-T is attached, edit the amount from Line 3a or 3b on Form 1042-T to Line 63e.
    Lines 63a-d are blank, Form 1042-T is NOT attached, and one or more Form 1042-S Copy A are attached
    1. add up the amounts on Form 1042-S Copy A Lines 7a-9,

    2. subtract the amounts on Form 1042-S Copy A Line 11, then

    3. edit the total to Line 63e of Form 1042.

Total Net Tax Liability - Line 64

  1. Line 64 is not a reporting field, it contains header information only.

  2. Reporting information is broken down in 64a, b, c, d, and e.

Adjustments to Total Net Tax Liability - Line 64a

  1. May or may not be present.

  2. May be positive or negative.

  3. TY15 and prior: A statement justifying the adjustment must be attached. Correspond if missing.

    Note:

    Any document stating the reason for underwithholding is acceptable.

Total Net Tax Liability Under Chapter 3 - Line 64b

  1. May or may not be present.

  2. "X" any negative entries.

  3. If Line 64a-64d are blank and 64e has an entry, edit the Line 64e amount to Line 64b.

Total Net Tax Liability Under Chapter 4 - Line 64c

  1. May or may not be present.

  2. "X" any negative entries.

Excise Tax On Specified Federal Procurement payments - Line 64d

  1. May or may not be present.

  2. "X" any negative entry.

Total Net Tax Liability - Line 64e

  1. Perfect Line 64e as follows:

    If.... Then....
    Line 64e is blank Compute Line 64e by adding Line 64a thru 64d. Edit to Line 64e
    Line 64e is blank and Lines 64a through 64d are blank and there are money amounts on Lines 1-63e Correspond for missing information on Lines 64a - 64e. Use 1791C Letter, use paragraph K.

    Note:

    Do not correspond on a non-taxable return as indicated by the words "none" or "zero" , or a "dash (-) " on Line 64e.

    Line 64e has entry and Lines 64a-64d are blank Edit the Line 64e amount to Line 64b.
    Line 64e is negative "X" Line 64e

Total Paid by EFTPS - Line 65

  1. Line 65 is not a reporting field, it contains header information only.

  2. Reporting information is broken down in 65a and 65b.

Total Paid during Calendar Year - Line 65a

  1. May or may not be present.

  2. X a negative amount.

Total Paid During Subsequent Year - Line 65b

  1. May or may not be present.

  2. X a negative amount.

Overpayment Applied as Credit - Line 66

  1. May or may not be present.

  2. "X" a negative amount.

Credit for Amounts Withheld by Other Withholding Agents - Lines 67a and 67b

  1. All amounts must be positive and may or may not be present.

  2. "X" a negative amount.

  3. All entries on Lines 67a and Line 67b must be substantiated by attaching a copy of Form 1042-S Copy B (C, D, and/or E). Review Form 1042 for supporting 1042-S.

    1. The Recipient name on the Form 1042-S must be the same as the filer name on the Form 1042 and the Recipient Chapter 3 Status Code (Box 13f for 2017) must be 09, 11, or 12 or

    2. The Intermediary or Flow-through entity’s name (Box 15d for 2017) must be the same as the filer name on the Form 1042 and the Recipient Chapter 3 Status Code must be other than 09, 11, or 12.

    3. If neither a or b above apply, delete the amount claimed on Line 67a or 67b.

    Note:

    It is not necessary to math verify amounts on Lines 67a and 67b.

  4. If the Form 1042-S is missing and a credit is claimed for U.S. source substitute dividends paid from a withholding agent that has not issued a Form 1042-S, the filer may attach a statement to Form 1042 to support the amount on Line 67b with all the following info:

    • The withholding agent's name, address, and EIN (if known).

    • The amount of U.S. source substitute dividends received from the withholding agent.

    • The amount of credit forward included in connection with these substitute dividends.

    If.... Then....
    all of the information is present, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    any of the information is missing, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ allow the credit.
    any of the information is missing, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , follow instructions in (5).
  5. If Form 1042-S Copy B (C, D, and/or E) are missing, and no acceptable substitute statement is attached, prepare Letter 1791C CAS for Form 1042-S Copy B.

  6. Form 1042-S Copy B must remain attached to Form 1042 to substantiate the amount of withholding at source claimed on lines 67a and 67b. See Figure 3.21.110-9a

    Figure 3.21.110-8a

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    Figure 3.21.110-8b

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    Figure 3.21.110-9a

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    Figure 3.21.110-9b

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    Figure 3.21.110-9c

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  7. Intermediary Form 1042-S:

    If... and... Then...
    Form 1042-S Copy A is attached It was issued by another withholding agent
    1. Line thru the "A"

    2. Edit a "B" to the right side of the "A"

    3. Attach the 1042-S to the 1042.

    Form 1042-S Copy A, B, C, D or E is attached, Form 1042-T is also attached Detach Form 1042-T and Form 1042-S Copy A and forward them to Batching and Numbering for processing. See Figures 3.21.110-9a, 3.21.110-9b, and 3.21.110-9c.

    Note:

    Leave Form 1042-S Copies B. C. D or E attached to the 1042 return.

    Form 1042-S is attached The taxpayer is an Intermediary BUT the supporting 1042-S documentation for the entry on lines 67a and 67b is not a different withholding agent (e.g. it is the same withholding agent/taxpayer), Prepare Letter 1791C CAS to correspond for the correct Form 1042-S document that does not list the taxpayer as the withholding agent and recipient.

Total Payments - Line 68

  1. If Line 68 is blank or negative, and there are entries on Lines 65 thru 67, calculate and edit the amount on Line 68.

    1. If the total is 0 or greater, edit the amount on Line 68.

    2. If the total is less than 0 (negative), "X" Line 68.

    Note:

    If you identify a potential Erroneous Refund Return (refer to IRM 3.12.38, BMF General Instructions for additional instructions), you should contact your manager, as you may be advised to place the return in the locally designated basket for further review by Examination.

Balance Due - Line 69

  1. An entry may or may not be present.

  2. Perfect Line 69 by subtracting Line 68 from Line 64e.

  3. If the taxpayer has included penalty or interest in the amount for balance due, then subtract the penalty/interest from Line 69 and edit the correct amount to Line 69.

Overpayment - Lines 70a and 70b

  1. These lines may or may not be present.

  2. Perfect Line 70a by subtracting Line 64e from Line 68, then subtract Line 64d from the total and enter results on Line 70a.

  3. Line 70b should be equal to the amount on Line 64d. If blank, edit from Line 64d.

  4. Take the following actions if Line 70a and/or 70b is $1.00 or more and the following conditions exist:

    If Then
    The "Credit" box is checked on Line 71. Edit CCC "E" on the CC line of the "For IRS Use Only" box in the right corner of Form 1042.
    The "Refund" box is checked. Edit CCC "S" on the CC line of the "For IRS Use Only" box in the right corner of Form 1042.
    Neither box or both boxes are checked and the return is not final. Edit CCC "E" on the CC line of the "For IRS Use Only" box in the right corner of Form 1042.
    Neither box or both boxes are checked and the return is a final. Edit CCC "F" and CCC "S" on the CC line of the "For IRS Use Only" box in the right corner of Form 1042.
    Attachment requesting that money be refunded. Edit CCC "S" on the CC line of the "For IRS Use Only" box in the right corner of Form 1042.

    Caution:

    If this is an Excise Tax only return and the Refund box is checked, edit a CCC "X" . See IRM 3.21.110.16.3.10, CCC X.

Credit Elect or Refund Checkbox - Line 71

  1. This is a one position field that identifies whether the Withholding Agent has elected to apply their overpayment as a credit on next year’s Form 1042 account, or request a refund of their overpayment. See IRM 3.21.110.31, Overpayment – Lines 70a and 70b for possible CCC “E” or CCC “S” editing.

Section 2 - Reconciliation of Payments of U.S. Source FDAP Income

  1. This section was added to the 2014 Form 1042 in order for withholding agents to reconcile amounts of U.S. source FDAP income that are reportable under chapter 4 with amounts of U.S. source FDAP income reported on all Forms 1042-S. This section was OPTIONAL for 2014 and required for 2015 and later.

  2. Do Not Correspond for missing or incomplete information.

Section 2 Line 1 - Total U.S. Source FDAP Income Required to be Withheld Under Chapter 4

  1. Accept taxpayer's entry.

Section 2 Line 2a-e - U.S. Source FDAP Income Reported With No Withholding Requirement Under Chapter 4

  1. Section 2 Line 2 is not a reporting field, it contains header information only.

  2. Reporting components are broken down into Lines 2a, 2b, 2c, 2d, and 2e.

Section 2 Line 2a - Amount of Income Paid to recipients with no Chapter 4 Withholding Requirements.
  1. Accept taxpayer's entry.

Section 2 Line 2b - Amount of Excluded Nonfinancial Payments
  1. Accept taxpayer's entry.

Section 2 Line 2c - Amount of Income Paid With Respect to Grandfathered Obligations
  1. Accept taxpayer's entry.

Section 2 Line 2d - Amount of Income Connected With the Conduct of a Trade or Business in the U.S.
  1. Accept taxpayer's entry.

Section 2 Line 2e - Total U.S. Source FDAP Income Required to be Reported Under Chapter 4

  1. Accept taxpayer's entry.

  2. If blank and there are entries leading to a total, compute and edit by adding Lines 2a-2d.

Section 2 Line 3 - Total U.S. Source FDAP Income Reportable Under Chapter 4

  1. Accept taxpayer's entry.

  2. If blank and there are entries leading to a total, compute and edit by adding Lines 1 and 2e.

Section 2 Line 4 - Total U.S. Source FDAP Income Reported on all Forms 1042–S

  1. Accept taxpayer's entry.

  2. If blank, compute and edit by adding Lines 62a, 62b(1) and 62b(2) in Section 1.

    Note:

    Do not compute and enter if Section 2 is blank. IRM 3.21.110.33 ;

Section 2 Line 5 - Total Variance

  1. Accept taxpayer's entry.

  2. If blank, compute and edit by subtracting Line 3 from Line 4.

  3. Entry may be positive or negative.

    Note:

    If Line 5 is other than zero, an explanation is required on Line 6. Do not correspond if missing.

Section 2 Line 6 - Variance Explanation Indicator

  1. If explanation is present, edit a "1" in the right margin area of Line 6.

  2. If explanation is NOT present, but is required, edit a "0" in the right margin area of Line 6.

Section 3 - Potential Section 871(m) Transactions

  1. This section contains a checkbox but requires no editing.

Section 4 - Dividend Equivalent Payments by Qualified Derivatives Dealer (QDD)

  1. This section contains a checkbox for QDD.

  2. If box is checked, edit CCC "A" .

Third Party Designee

  1. The Third Party Designee election was created to allow a withholding agent or an individual paid preparer of the return to discuss the Form 1042 with the IRS should questions arise during processing.

Third Party Designee Indicator

  1. the Third Party Designee checkbox is located above the taxpayer signature line. It indicates whether the taxpayer has elected to allow the third party Designee to answer questions about the taxpayers return as it is processed. No action is required.

Third Party Designee Phone Number

  1. The Third Party designee phone number is located below the checkbox. No action is required.

Third Party Designee Personal Identification Number (PIN)

  1. Circle out if illegible. This field can be up to 5 characters long. The entry may be any alpha (i.e. A to Z) numeric (0 to 9), or any combination of both. The PIN number is self-selected by the taxpayer or designee. It is not assigned by IRS.

♦Signature♦

  1. A signature and jurat is required for all returns except the following:

    Note:

    If a signature does not appear on the designated line for the taxpayer's signature, follow the procedures in the "If/Then" table below.

    • Returns prepared under IRC 6020(b). These returns must be signed by a Compliance Function Representative. See IRM 3.21.110.15.9.1, IRC 6020(b) – Prepared by Collection for additional information.

      Note:

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

    • Returns prepared by Examination, for example SFR (Substitute for Return) or "SUBSTITUTE RETURN" .

      Note:

      Returns secured by Examination do require a signature and jurat. See IRM 3.21.110.15.9.4, Examination Secured for additional information.

    • Dummy returns prepared by IRS.

    • Returns filed under IRC 501(d) (Religious or Apostolic Organization).

    • Correspondence containing a signature and jurat is attached showing that the taxpayer is responding to an IRS letter. See paragraph (5) below.

  2. Do not correspond for a signature on "CIS" returns that have Form 13596 attached. SeeIRM 3.21.110.13.3, Correspondence Imaging System (CIS) Returns for processing instructions on CIS Returns.

  3. If a signature is missing correspond:

    If... Then...
    • The return is not signed on the line designated for the 1042 signature, or

    • The jurat is not present on the line designated for the 1042 signature (non-standard return), or

    • Only the entity information is present and there are no attachments containing tax data,

    1. Edit Action Code 225 (Correspondence for Signature only) or 226 (International Correspondence for Signature only).

    2. Leave in batch and continue editing.

    Note:

    Paper returns sent in by the filer that states their return was rejected through the E-file system require a signature. Form 8879 or Form 8453 is not an acceptable substitute for a paper return.

  4. If the jurat is altered or stricken (crossed-out), see IRM 3.21.110.15.10, Frivolous Arguments for frivolous return instructions.

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

    1. If the jurat is altered or stricken (crossed-out), see IRM 3.21.110.15.10, Frivolous Arguments for frivolous return instructions.

    2. If the taxpayer responds with a self-prepared "signature declaration" it must contain the same language as the jurat on the tax return; e.g. "UNDER PENALTIES OF PERJURY, I DECLARE THAT I HAVE EXAMINED THIS RETURN, INCLUDING ACCOMPANYING SCHEDULES AND STATEMENTS, AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, IT IS TRUE, CORRECT AND COMPLETE."

  6. Since tax examiners are not expected to be handwriting experts, IRC Regulation 301.6064-1 allows the service to presume that the signature on a return, statement or other document is the true signature of the person who actually signed the document.

    Note:

    A "✓" or "X" used to designate where the taxpayer should sign the return is not considered a valid signature. However, signatures of ink, rubber stamp, mechanical device, Xerox, computer generated software, and similar devices are considered acceptable.”

  7. Only one correspondence attempt is required for a signature. If you do not receive a reply after the prescribed suspense period, input the return:

    If... Then...
    The return has an overpaid condition Edit CCC "3" and CCC "X" and continue processing.
    The return is a balance due or zero condition Edit CCC "3" and continue processing.
  8. Facsimile Signature -

    1. Rather than providing a handwritten signature, an owner, partner, corporate officer or duly authorized agent may use a "facsimile" (e.g., computer generated, mechanical device, or rubber stamp) signature when filing Form 1042.

      Note:

      If a facsimile signature is used, the person filing the form must retain a letter, signed by the individual authorized to sign the return(s) declaring under penalties of perjury that the facsimile signature appearing on the form is the signature adopted by the authorized person and that the signature was placed there by the authorized person or under the authorized person’s direction.

    2. Correspond if no signature is found.

♦Preparer Signature♦

  1. A signature may or may not be present; do not correspond if not present.

  2. Do not correspond for a missing signature on any return prepared by a Compliance function.

  3. Do not question any signature on the return. IRC 301.6064-1 allows the Service to presume that the signature on the return, statement or other document is the true signature of the person who actually signed the document.

  4. A constructive signature (that is, a signature on an accompanying check, letter, etc.) is not acceptable unless the signature follows a perjury statement containing the same language as the jurat of the tax return.

Paid Preparer Tax Identification Number (PTIN)

  1. The Preparer's EIN or PTIN is located to the right of the Preparer's Signature at the bottom of Form 1042.

    Reminder:

    If the return is for 2009 or prior, then the PTIN box will be named Preparer's SSN or PTIN.

  2. No action is required on amended returns.

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

  4. Valid characters are numeric (0 thru 9) and alpha "P" only.

  5. Circle the entry if:

    • it does not begin with a "P" ,

    • it is an SSN,

    • it has all zeroes or nines, or

    • it has invalid characters

Paid Preparer FIRM's Employer Identification Number (EIN)

  1. The FIRM's EIN (Paid Preparer's EIN - 2009 and prior revisions) must be a nine-digit numeric number. The FIRM's EIN is entered in NN-NNNNNNN format. The FIRM's EIN cannot be all zeroes or all nines.

  2. No action is required on amended returns.

  3. Circle the FIRM's EIN (Paid Preparer's EIN - 2009 and prior revisions) if all zeroes or all nines.

♦Paid Preparer Phone Number♦

  1. The Paid Preparer's Phone Number is located below the Paid Preparer's EIN at the bottom right corner of Form 1042.

    Note:

    ISRP will input the first 10-digits only.

    If... Then...
    A complete Paid Preparer Telephone Number is located elsewhere on the return or attachments Edit to the "Phone No." line.
    The return is amended, No action required
    The Preparer’s Phone Number is more than 10 digits, No action required
    The Preparer’s Phone Number is illegible or less than 10 digits, Circle the incomplete or illegible phone number.
  2. If the return is for a tax period prior to 2001, circle the telephone number.

2017 Form 1042, Page 1, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, Transcription Lines.

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2017 Form 1042, Page 2, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, Transcription Lines.

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2016 Form 1042, Page 1, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons Transcription Lines

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2016 Form 1042, Page 2, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons Transcription Lines

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2013 Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons Transcription Lines

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2010 and Prior Years Form 1042 - Transcription Lines

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U.S. Possessions ZIP Codes

U.S. Possessions ZIP Codes

American Samoa (AS)

City Zip Code
Faga'itua 96799
Leone 96799
Olosega Manua' 96799
Pago Pago 96799
 

Federated States of Micronesia (FM

City Zip Code
Chuuk 96942
Kosrae 96944
Pohnpei 96941
Yap 96943
 

Marshall Islands (MH)

City Zip Code
Ebeye 96970
Majuro 96960
 

Palau (PW)

City Zip Code
Koror 96940
Palau 96940
 

Northern Mariana Islands (MP)

City Zip Code
Capitol Hill 96950
Rota 96951
Saipan 96950
Tinian 96952
 

Virgin Islands (VI)

City Zip Code
Charlotte Amalie 00802
Christiansted 00820
Cruz Bay 00830
Downtown 00840
Frederiksted 00840
Kingshill 00850
Saint Croix 00820
Saint John 00830
Saint Thomas 00805
Sunny Isle 00850
Veterans Annex 00820
 

Guam (GU)

City Zip Code
Agana 96910
Inarajan 96917
Merizo 96916
Tamuning 96931
Umatac 96915
Yona 96915
 

Puerto Rico (PR)

City Zip Code
Adjuntas 00601
Aguada 00602
Aguadilla 00603
Agnes Buenas 00703
Aguirre 00704
Aibonito 00705
Anasco 00610
Angeles 00611
Arecibo 00612
Arroyo 00714
Bajadero 00616
Barceloneta 00617
Barranquitas 00794
Barrio Obrero Station 00935
Bayamon 00956
Boqueron 00622
Cabo Rojo 00623
Caguas 00725
Camuy 00627
Canovanas 00729
Caparra Heights 00920
Carolina 00982
Catano 00962
Cayey 00736
Ceiba 00735
Cerro Gordon 00754
Ciales 00638
Cidra 00739
Coamo 00769
Comerio 00782
Condado 00907
Corozal 00783
Coto Laurel 00780
Culebra 00775
Dorado 00646
Ensenada 00647
Esperanza 00765
Fajardo 00738
Fernandez Juncos 00936
Florida 00650
Fort Buchanan 00934
Garrachales 00652
Guanica 00653
Guayama 00784
Guayanilla 00656
Guaynabo 00965
Gurabo 00778
Hatillo 00659
Hato Rey 00936
Hormigueros 00660
Humacao 00791
Isabela 00662
Jayuya 00664
Juana 00795
Juncos 00777
La Cumbre 00926
Lajas 00667
La Plata 00786
Lares 00669
Las Marias 00670
Las Piedras 00771
Levittown 00949
Loiza 00772
Loiza Street Station 00936
Luquillo 00773
Manati 00674
Maricao 00606
Maunabo 00707
Mayaguez 00680
Mercedita 00715
Minillas Center 00936
Moca 00676
Morovis 00687
Naguabo 00718
Naranjito 00719
Orocovis 00720
Palmer 00721
Patillas 00723
Penuelas 00624
Ponce 00731
Puerta de Tierra 00936
Puerta Real 00740
Punta Santiago 00741
Quebradillas 00678
Ramey 00603
Rincon 00677
Rio Blanco 00744
Rio Grande 00721
Rio Piedras 00927
Rosario 00636
Sabana Grande 00637
Sabana Hoyos 00688
Sabana Seca 00952
Saint Just 00978
Salinas 00751
San Antonio 00690
San Francisco 00927
San German 00683
San Juan 00936
San Lorenzo 00754
San Sebastian 00685
Santa Isabel 00757
Santurce 00936
Toa Alta 00953
Toa Boa 00949
Trujillo Alto 00976
University 00936
Utuado 00641
Vega Alta 00692
Vega Baja (box 1-9049) 00694
Vieques 00765
Villalba 00766
Yabucoa 00767
Yauco 00698

State Abbreviations and Zip Code Ranges Including APO/FPO/DPO Zones

State AbbreviationsZip Code RangesAPO/FPO/DPO Zones
State Name State Abbreviation Zip Code Range
Alaska AK 995-999
Alabama AL 350-369
Arizona AZ 850-865
Arkansas AR 716-729
California CA 900-908, 910-968
Colorado CO 800-816
Connecticut CT 060-069
Delaware DE 197-199
District of Columbia DC 200-205
Florida FL 320-340, 342, 344, 346, 347, 349
Georgia GA 300-319, 399
Hawaii HI 967-968
Idaho ID 832-838
Illinois IL 600-629
Indiana IN 460-479
Iowa IA 500-528
Kansas KS 660-679
Kentucky KY 400-427
Louisiana LA 700-714
Maine ME 039-049
Maryland MD 206-219
Massachusetts MA 010-027, 055
Michigan MI 480-499
Minnesota MN 550-567
Mississippi MS 386-397
Montana MT 590-599
Nebraska NE 680-693
Nevada NV 889-898
New Hampshire NH 030-038
New Jersey NJ 070-089
New Mexico NM 870-884
New York NY 004, 005, 090-098, 100-149
North Carolina NC 270-289
North Dakota ND 580-588
Ohio OH 430-459
Oklahoma OK 730-732, 734, 749
Oregon OR 970-979
Pennsylvania PA 150-196
Rhode Island RI 028-029
South Carolina SC 290-299
South Dakota SD 570-577
Tennessee TN 370-385
Texas TX 733, 750-799
Utah UT 840-847
Vermont VT 050-054, 056-059
Virginia VA 201, 220-246
Washington WA 980-994
West Virginia WV 247-258
Wisconsin WI 530-549
Wyoming WY 820-831

APO/FPO/DPO ZONE

Name Zip Code Range
AA 340
AE 090-098
AP 962-966

♦Province, Foreign State, and Territory Abbreviations♦

Australia State

Australia State Abbreviation
Australian Capital Territory ACT
New South Wales NSW
Northern Territory NT
Queensland QLD
South Australia SA
Tasmania TAS
Victoria VIC
Western Australia WA
 

Brazil State

Brazil State Abbreviation
Acre AC
Alagoas AL
Amapa AP
Amazonas AM
Bahia BA
Ceara CE
Distrito Federal DF
Espirito Santo ES
Goias GO
Maranhao MA
Mato Grasso MT
Mato Grosso do Sul MS
Minas Gerais MG
Para PA
Paraiba PB
Parana PR
Pernambuco PE
Piaui PI
Rio de Janeiro RJ
Rio Grande do Norte RN
Rio Grande do Sul RS
Rondonia RO
Roraima RR
Santa Catarina SC
Sao Paulo SP
Sergipe SE
Tocantins TO
 

Canada Province/Territory

Canada Province/Territory Abbreviation
Alberta AB
British Columbia BC
Manitoba MB
New Brunswick NB
Newfoundland and Labrador NL
Northwest Territories NT
Nova Scotia NS
Nunavut NU
Ontario ON
Prince Edward Island PE
Quebec QC
Saskatchewan SK
Yukon YT
 

Cuba Province

Cuba Province Abbreviation
Camaguey CG
Ciego de Avila CA
Cienfuegos CF
Ciudad de La Habana CH
Granma (Bayamo) GR
Guantanamo GT
Holguin HO
La Habana HA
Matanzas MT
Municipio Especial Isla de La Juventud IJ
Pinar del Rio PR
Sancti Spiritus SS
Santiago de Cuba SC
(Victoria de) Las Tunas LT
Villa Clara VC
 

Italy Province

Italy Province Abbreviation
Agrigento AG
Alessandria AL
Ancona AN
Aosta/Aoste AO
Arezzo AR
Ascoli Piceno AP
Asti AT
Bari BA
Belluno BL
Benevento BN
Bergamo BG
Biella BI
Bologna BO
Bolzano Bozen BZ
Brescia BS
Brindisi BR
Cagliari CA
Caltanissetta CL
Campobasso CB
Caserta CE
Catania CT
Catanzaro CZ
Chieti CH
Como CO
Cosenza CS
Cremona CZ
Crotone KR
Cuneo CV
Enna EN
Ferrara FE
Firenze FI
Foggia FG
Forli FO
Frosinone FR
Genoa GE
Gorizia GO
Grosseto GR
Imperia IM
Isernia IS
L'Aquila AQ
La Spezia SP
Latina LT
Lecce LE
Livorno LI
Lodi LO
Lucca LU
Macerata MC
Mantova MN
Massa-Carrara MS
Matera MT
Messina ME
Milan MI
Modena MO
Napoli NA
Novara NO
Nuoro NU
Oristano OR
Padova PD
Palermo PA
Parma PR
Pavia PV
Perugia PG
Pesaro-Urbino PS
Pescara PE
Piacenza PC
Pisa PI
Pistoia PT
Pordenone PN
Potenza PZ
Prato PO
Ragusa RG
Ravenna RA
Reggio de Calabria RC
Reggio nell'Emilia RE
Rieti RI
Rimini RN
Roma RM
Rovigo RO
Salerno SA
Sassari SS
Savona SV
Siena SI
Siracusa SR
Sondrio SO
Taranto TA
Teramo TE
Terni TR
Torino TO
Trapani TP
Trento TN
Treviso TV
Trieste TS
Udine UD
Varese VA
Venezia VE
Verbania VB
Vercelli VC
Verona VR
Vibo Valentia VV
Vicenza VI
Viterbo VT
 

Mexico State

Mexico State Abbreviation
Aguascalientes AGS
Baja California Norte BCN
Baja California Sur BCS
Campeche CAM
Chiapas CHIS
Chihuahua CHIH
Coahuila COAH
Colima COL
Distrito Federal DF
Durango DGO
Guanajuato GTO
Guerrero GRO
Hidalgo HGO
Jalisco JAL
Mexico MEX
Michoacan MICH
Morelos MOR
Nayarit NAY
Nuevo Leon NL
Oaxaca OAX
Puebla PUE
Queretaro QRO
Quintana Roo QROO
San Luis Potosi SLP
Sinaloa SIN
Sonora SON
Tabasco TAB
Tamaulipas TAMPS
Tlaxcala TLAX
Veracruz VER
Yucatan YUC
Zacatecas ZAC
 

The Netherlands Province

The Netherlands Province Abbreviation
Drenthe DR
Flevoland FLD
Friesland FR
Gelderland GLD
Groningen GN
Limburg LB
North Brabant NB
North Holland NH
Overijssel OV
South Holland ZH
Utrecht UT
Zeeland SLD

Action Codes

Action Code Description Workday Suspense Period
211 First Taxpayer Correspondence 40
212 Second Taxpayer Correspondence 25
215 International Correspondence 45
225 Taxpayer Correspondence (signature only) 40
226 International Correspondence (signature only) 40
310 Statute Control 10
320 Entity Control 10
331 Frivolous Review 3
341 Manual Refund 10
342 Credit Verification 10
352 Name Research 3
360 Other-in-House Research 10
420 Management Suspense A 5
450 Management Suspense D 20
480 Early Filed Suspense 150
610 Renumber Non-remit 0
611 Renumber Remit 0
640 Void 0
650 International 0

♦Frivolous Arguments Criteria♦

Exhibit3.21.110-10Frivolous Arguments Criteria

Potential Frivolous Arguments for Examination Review

Frivolous Arguments Explanation
Alleged Churches/First Amendment Income from non-religious sources and may claim a vow of poverty.
Altered Form Altering any or all line items with the intent of facilitating non-compliance with the tax laws.
Altered Jurat/UCC (Uniform Commercial Code) 1-207 or UCC 1-308 Return contains income and deductions but the jurat has been altered or stricken. May include reference to UCC 1-207/UCC 1-308 or a statement that the return was not signed under penalties of perjury.
Amended Returns/Form 843 Claim Amended return or a Form 843 filed to obtain a total refund of all taxes paid in prior years, based on a tax avoidance argument.
C-Filings This frivolous position includes the following four categories:
  1. Files a return claiming various types of deductions, credits, or overpayments/refunds that have no relation to reality and because of their outrageous character, qualify as frivolous returns.

  2. Files a return containing the filers identifying information but does not request a refund, often lacking sufficient information to determine a tax liability.

  3. Files a return with various types of rambling dialogue and/or confusing arguments that no one could reasonably view as a good faith attempt to comply with the law.

  4. Files a return that attempts to send some type of message or protest to the IRS, but fails to include sufficient identifying information for the Service to either determine the identity of the taxpayer or correspondent or return address.

Challenges to Authority/Due Process Questions various administrative authorities such as delegation orders, summons authority, privacy act, etc. Argues that they must be afforded a hearing or a trial before taxes can be assessed or before property can be seized.
Challenges to Authority/Title 26 or "law" in Other Documents Argues that Title 26 of the United States Code is not law because it was never enacted as named.
Collection Issues Files frivolous documents contending that various collections issues are invalid (e.g. Offers in Compromise, Collection Due Process Requests, Installment Agreements, Appeals Requests, etc.) because they are not filed and/or signed by someone with delegated authority. They may have no certificate of assessment attached, do not comply in form or content with a State or Local law, are not in a certain format or lack a valid OMB (Office of Management and Budget) number or other frivolous positions.
Disclaimer Submits a disclaimer stating, "disclaims the liability for the tax due" , making the liability on the return zero.
Fifth Amendment Assertion of the Fifth Amendment right against self-incrimination as a basis for not providing any financial information.
Foreign Income Argues that United States citizens and residents are not subject to tax on their wages or other income derived from sources within the United States, as only foreign-based income or income received by nonresident aliens and foreign S Corporations from sources within the United States is taxable.
Form 1099-OID
(Original Issue Discount)
An individual or business files a return reporting false amounts of income (generally "Other or Miscellaneous" income) and claims a false amount of income tax withholding approximately equal to the amount of falsely reported income. Although the returns report income, they do not calculate any tax due. Some of the returns have Form 1099-OID attached and some have Form 1096 . Other false financial instruments may be filed in the place of or in addition to the Form 1099-OID such as Form 2439 , promissory notes, bonds, sight drafts, etc.
IRC 861 Business
Employment Tax (BMF 861)
Argument targets employers and advises them that wages are exempt from withholding. Based on 26 Code of Federal Regulations (CFR) Section 1.861, promoters of this scheme advise employers to stop withholding and paying payroll taxes on their employee's wages. In addition, some employers file amended payroll tax returns and request refunds of previously paid payroll taxes.
IRS is a Private Organization/Collects Tribute, Not Taxes Argues that the IRS is an entity named the Internal Revenue and Tax Service, Inc., which was incorporated in Delaware in 1933, it is a collection agency for the Federal Reserve Bank, or is part of the United Nations and is clandestinely leading the tax-paying public into a "new world order."
Not a Person Argues that a taxpayer is not a "person" within the meaning of IRC 7701(a)(14) .
Obscene, Vulgar, Harassing Submits documents or other materials indicating that non-filing is due to dissatisfaction with tax policies or taxation in general. Often, this argument is expressed with obscene, vulgar, or crude language and characters in an extremely demeaning manner.
Protest Against Government Action/Inaction Argues that refusal to file or pay is justified because they disagree with government policies or spending plans.
Sixteenth Amendment Argues the Sixteenth Amendment was not properly ratified and therefore the federal government does not have the legal authority to collect an income tax without apportionment.
Straw Men Argues the government has created an entity separate and distinct from the taxpayer - a "straw man" and any tax obligations are exclusively those of the "straw man" .
Taxes are Voluntary/Law Does Not Require Submits a return, amended return or correspondence that argues income taxes are voluntary.
U.S. vs. Long Submits a return with zero money amounts. To explain the zeroes inserted on the form the individual references U.S. vs. Long.
Unsigned Returns The individual completes a return but fails to sign, a statement indicating disagreement with the tax system is attached or added to the return.
Valuation Income is not taxable because of the declining fair market value of the dollar, because the dollar is not backed by gold/silver, because the value of services is offset by the value of the labor (barter income), etc.
Zero Returns (ZERO) Submits a return with zero money amounts on all or most of the line items on the form (e.g. IRC 861, Form 2439, OID, and other BMF filings that claim no income and request refunds). See Rev. Rule. 2004-34. A statement is attached claiming there is no section of the Internal Revenue Code that established an income tax liability. The statement may also contain arguments regarding the definition of income. There are several variations on this type of filing such as those bearing the words "nunc pro tunc" and "not liable" .

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Other All others including those listed in Notice 2010-33 or any subsequent superseding notice. See also http://www.irs.gov/Tax-Professionals/The-Truth-About-Frivolous-Tax-Arguments-Introduction on irs.gov. This category includes non-filer accounts resulting from initial compliance check such as cross-reference TINs.

Note:

Frivolous arguments citing "Collection Due Process" (CDP) should be reviewed by Collections for possible referral to Appeals. Refer to IRM 5.19.8, Collection Appeal Rights, for additional information.

Form 1042 Glossary

Exhibit3.22.110-2Form 1042 Glossary Form 1042 Glossary AlienBack-Up WithholdingChapter Three WithholdingFiduciaryFiscal YearForeign PersonsFlow-Through EntityForm 1042-SForm 1042-TNon-Qualified IntermediaryQualified IntermediaryWithholding Agent

Form 1042 Glossary Definitions

Alien- An individual who is not a citizen of the United States. The person can be either a resident or non-resident alien. Resident aliens are taxed just like U.S. citizens. Form 1042 is concerned with non-resident aliens. Complete information on aliens can be found in Publication 519.
Back-Up Withholding- The 28 percent withholding rate on income to a person who has not provided a valid TIN.
Beneficial Owner- The recipient (owner) of an amount of income.
Calendar Year - A year ending December 31st (see Fiscal Year). This is the only type of tax year allowed on Form 1042 .
Chapter Three Withholding - This refers to tax withheld from income under Title 26, Subtitle A, Chapter 3, Subchapter A, Section 1441-3 of the U.S. Code.
Chapter Four Withholding - This refers to tax withheld on withholdable payments pursuant to Title 26, Subtitle A, Chapter 4, Sections 1471-1474 of the U.S. Code (Foreign Account Tax Compliance Act).
Collective Refund - Procedures that allow a QI/WP/WT, PFFI, or a Reporting Model 1 FFI to obtain a refund on behalf of their account holders, partners, owners, or beneficiaries pursuant to their respective agreement with the IRS. The collective refund is claimed using a Form 1042 and generally requires the QI/WP/WT to provide additional information.
CTW - The abbreviation for Chapter Three Withholding.
EDC Line - A line which appears in the For IRS Use Only box in the URHC of Form 1042. This line is not in current use.
EIN - See TIN.
Fiduciary - A person who is responsible for handling money for someone else who cannot, for various reasons. Examples are a trustee for a trust, executor for an estate, or a receiver in a bankruptcy.
52/53 Week Filer - A tax year which can begin or end on a day other than the first or last day of a month (with certain restrictions). It is not allowed on Form 1042.
Fiscal Year - A tax year (12 months) which ends on the last day of a month other than December, e.g., September 1, 2005 through August 31, 2006. While common on other BMF returns, a fiscal year cannot be used on Form 1042.
Foreign Persons - Not just foreign individuals (as the name might imply), but includes Non-Resident Alien individuals, foreign corporations, partnerships, trusts, estates or any other person that is not a U.S. person. It also includes a foreign branch or office of a U.S. financial institution in certain circumstances.
Flow-Through Entity - An entity that does not pay income tax itself, but through which income "flows" to another partner, beneficiary, or owner who does pay the tax. Examples include certain trusts, partnerships, S-corporations, etc.
For IRS Use Only Box - An outlined area in the URHC of Form 1042 into which various dates, codes and amounts are entered by the IRS, not taxpayers. It takes the place of a separate Edit Sheet (there is no edit sheet for Form 1042).
Form 1000 - A document that is filed with the withholding agent (not to the IRS) by persons with interest on certain types of bonds. These are retained by the withholding agent but the amounts thereon are summarized on the Form 1042.
Form 1040-NR - An Individual Master File (IMF) tax return (similar to Form 1040) filed by a Non-Resident Alien with the recipient's copy of Form 1042-S attached. It is used to report income received and tax withheld, and to pay any additional tax or claim a refund.
Form 1042-S - A form similar in function to a Form W-2 that shows the individual amount of income received by a foreign person, the tax withheld and other information. Each receipt of income by a foreign person is recorded on a separate Form 1042-S. It is the TOTAL amount of income and tax withheld amounts from a group of Form 1042-S which appear on a Form 1042. A copy of each Form 1042-S is sent to the IRS and another copy is given to the recipient to file with his/her tax return.
Form 1042-T - A form used as a transmittal for a group of Form 1042-S , the amounts from which are summarized on the Form 1042-T. The Form 1042-T is filed and processed separately from the Form 1042.
Form W-8BEN - A form that an individual provides to a withholding agent to certify to foreign status and to claim a reduced rate of withholding pursuant to a treaty (if applicable).
Form W-8BEN-E - A form that an entity provides to a withholding agent to certify to its foreign status and its status for purposes of chapters 3 and 4, and to claim a reduced rate of withholding pursuant to a treaty (if applicable).
Form W-8ECI - A form that a beneficial owner provides to a withholding agent to certify that certain payments that it receives constitute income effectively conducted with a trade or business in the U.S. (and thus is not subject to chapter 3 or 4 withholding).
Form W-8IMY - A form which is filed with the IRS indicating that the person is a Qualified or Non-Qualified Intermediary or a foreign flow-through entity.
Hong Kong - Treated as a separate country apart from China for tax purposes (see Publication 515). Treaties which apply to China may not apply to Hong Kong, or vice versa (see Publication 901).
Income, Foreign-Source - Income from sources outside of the United States. Not taxable to foreign persons by the IRS.
Income, U.S.-Source - Income from sources within the United states. Potentially (depending on Treaty provisions) taxable to foreign persons by the IRS.
Intermediary - A custodian, broker, nominee or any person (U.S. or foreign) that acts as an agent for another person. A foreign intermediary is either Qualified or Non-Qualified and indicates which by the EIN used on the return and checking the applicable box on the intermediary line of Form 1042.
ITIN - - Individual Taxpayer Identification Number assigned by the Internal Revenue Service Austin Campus as a result of an accepted Form W-7/Form W-7SP/ application. This is a nine digit valid permanent number beginning with 9 and fourth and fifth digits being 50 through 65, 70 through 88, 90 through 92, and 94 through 99. Appears on MCC or IDRS transcripts with an asterisk and pound sign differentiating it from Temporary SSN which are invalid. See also: TIN.
Jurat - A certification on an affidavit declaring when, where and before whom it was sworn. It remains attached to the tax return.
Non-Resident Alien (NRA) - A citizen of a foreign country who has not fulfilled the requirements to be a resident alien. An NRA is subject to tax on U.S.-sourced income only. Form 1042 summarizes the amounts of income paid and the taxes withheld from a group of NRAs (or other foreign persons) for whom the withholding agent is responsible. The NRA will file a Form 1040-NR with a copy of his/her Form 1042-S attached. This is basically the same as a U.S. citizen filing a Form 1040 with a Form W-2 attached.
Participating Foreign Financial Institution (PFFI) - A foreign financial institution that has agreed to comply with the requirements of an FFI agreement with the IRS with respect to its chapter 4 withholding obligations. A withholding agent that is a PFFI will use a chapter 4 status code of 08 or 09. A PFFI can claim a collective refund using Form 1042 and following the applicable procedures.
Possessions, U.S. - Primarily Guam, U.S. Virgin Islands (NOT the British Virgin Islands), American Samoa and the Commonwealth of the Northern Mariana Islands (CNMI). Puerto Rico is not actually a U.S. possession, but is included in IRS information on possessions (such as Publication 570). The Palau Islands are now (since 1993) an independent country but are treated as a U.S. possession for tax purposes. A complete list of U.S. possessions can be found in Publication 570.
QI EIN Valid Range - A range of 100,000 available EINs assigned to Qualified Intermediaries by the IRS in Manhattan (NY). A QI must use one of these EINs on Form 1042.
Qualified Intermediary - A QI is any foreign intermediary (or a foreign branch of a U.S. intermediary) which has entered into a QI withholding agreement with the U.S. (see Form W-8IMY). The QI must use an EIN in the QI valid range and check the first little block on the intermediary line on Form 1042.
Recipient - A nonresident alien, fiduciary, withholding foreign partnership or withholding foreign trust , foreign corporation, qualified intermediary, or certain U.S. branches of U.S. persons that received payments from a withholding agent. It does not include a non-qualified intermediary.
Reimbursement Procedures - Procedures that allow a withholding agent to repay a beneficial owner for an overwithheld amount (by the earlier of the date on which a Form 1042-S is filed or the due date for filing such Form), and then reimburse itself by reducing any subsequent deposits made before the end of the following calendar year. The reduced tax liability is reported on Lines 1-60 of the Form 1042 for the period during which the reimbursement occurred, and the total tax withheld is reported as total deposits.
ROFTL - The Record of Federal Tax Liability found in the center of Form 1042 showing a breakdown of tax withheld during each month of the tax year by the withholding agent.
Special Character - Any character used in a field on the error register that is NOT a numeric, alpha or blank (such as a slash, hyphen, period, ampersand, etc).
Taxpayer Identification Number (TIN) - A nine digit number that identifies a taxpayer and must appear on every IRS form. There are several types of TINs:
EIN - Employer Identification Number is a nine digit number used to identify business taxpayers on the Business Master File. The first two represent the district office code.
SSN - Social Security Number is a nine digit number issued by the Social Security Administration used to identify individual taxpayers on the Individual Master File.
ITIN - Assigned by the Internal Revenue Service Austin Campus as a result of an accepted Form W-7/Form W-7SP/ application. This is a nine digit valid permanent number beginning with 9 and fourth and fifth digits being 70 thru 80. Appears on MCC or IDRS transcripts with an asterisk and pound sign differentiating it from Temporary SSN which are invalid.
Tax Liability - Foreign persons are subject to U.S. tax at a 30 percent rate on certain fixed or determinable annual or periodical (FDAP income received from U.S. sources. Income includes interest, dividends, rents, royalties, premiums, capital gains, annuities, compensation, etc. The 30 percent rate can be reduced depending on tax treaty provisions.
Tax Treaty - An agreement modifying the tax requirements between the United States and another country, such as the reduction of the usual 30 percent tax rate on income. Complete information on tax treaties can be found in Publication 901.
Title 26 - A title is a large division or portion of a still-larger work. Title 26 is that portion of the U.S. Code that is the Internal Revenue Code (IRC).
U.S. Code - The arrangement (codification) by subject matter of the general and permanent laws of the United States. It is divided by broad subjects into fifty titles (Title 26 is the Internal Revenue Code). It is published every six years, with annual supplements, by an office in the U.S. House of Representatives.
Withholdable Payment - A payment defined in Treas. Reg. section 1.1473-1(a) that is subject to withholding under chapter 4 of the Code. Generally, these are payments of U.S. source fixed determinable annual or periodical income (not effectively connected with a trade or business within the United States).
Withholding Agent - A person who has control, receipt, custody, disposal or payment of any income of a foreign person who is subject to withholding, and is responsible for withholding the tax on payments made to the foreign person. The agent may be an individual, corporation, trust, estate, association or partnership.
Withholding Foreign Partnership (WP) - A partnership that has entered into a withholding agreement with the IRS to assume responsibility for withholding on payments to its partners.
Withholding Foreign Trust - A trust that has entered into a withholding agreement with the IRS to assume responsibility for withholding on payments to its owners or beneficiaries.
Withholding Partnership/Withholding Trust (WP/WT) - A foreign partnership or trust that has entered into withholding agreement with the IRS in which it agrees to assume primary withholding responsibility for payments made to its partners, beneficiaries or owners. The first block on the intermediary line will identify a WP/WT. (See Form W-8IMY)
Withholding Rate - The percentage of income that is withheld as tax. The rate can be modified by treaty.