3.22.3 Individual Income Tax Returns

Manual Transmittal

November 08, 2019

Purpose

(1) This transmits revised IRM 3.22.3, International Error Resolution - Individual Income Tax Returns.

Material Changes

(1) Editorial changes have been made throughout the IRM references and links have been updated. Updated line numbers and field designators throughout the IRM to reflect TY19 changes to forms and ERS screens.

(2) Revised U.S. Possession to U.S. Territories throughout the IRM.

(3) SSPND 611 was deleted throughout the IRM for renumbering a tax return. Action code 611 is only for payments processing.

(4) For Tax Year 2019, Form 1040NR and 1040NR-EZ are revised with a addition of “Hyphen” as part of Publishing initiative. All the references in the IRM to Form 1040NR has been revised as Form 1040-NR and Form 1040NR-EZ as Form 1040-NR-EZ. Dates of a subsection are not revised if a subsection’s only change is to add a hyphen to the form name.

(5) Changed “Child Tax Credit Indicator” to “Child Tax and Other Dependent Credit Indicator” throughout the IRM.

(6) Changed “Gross IRAs Pensions and Annuities” and Taxable IRAs Pensions and Annuities” to “Gross Pensions and Annuities” and ‘Taxable Pensions and Annuities” throughout the IRM. This change is from TY19 Form 1040 and Form 1040-NR where IRAs and Pensions and Annuities are split like in the past.

(7) Changed “Estimated Tax Election” field name to “Credit Election Amount”.

(8) Updated for Tax Year 2019 annual inflation adjustments where applicable, as follows:

  • Maximum foreign earned income exclusion amount ($105,900),

  • Standard deduction for single and married filing separately taxpayer ($12,200) and

  • Social security withholding limit ($8,239.80)

(9) IRM 3.22.3.1.6 - Added links to the job aid for easy access.

(10) IRM 3.22.3.1.9 - Added instruction for TY2019 obsolete forms, a new Form 1040-SR and summary of ERS screen display changes.

(11) IRM 3.22.3.3 - Added Form 1042-S new income code 55.

(12) IRM 3.22.3.6 - Updated instructions for requirement of a valid TIN for both primary and secondary taxpayer in order to benefit the Streamline Filing Compliance Procedure.

(13) IRM 3.22.3.8 - Updated the title from U.S. Possessions and Territories to U.S. Territories.

(14) IRM 3.22.3.8.4.1.1 - Updated the Guam Department of Revenue address.

(15) IRM 3.22.3.11 - Added a reminder to the Form 13975 correspondence procedures.

(16) IRM 3.22.3.12 - Deleted Form 1040A and 1040EZ. CCC “N” only applies to current year returns.

(17) IRM 3.22.3.13.5 - Deleted Invalid Error Code since this only applied in TY2018/PY2019.

(18) IRM 3.22.3.14 - Updated changes to Section 01.

(19) IRM 3.22.3.15 - Updated changes to Section 02.

(20) IRM 3.22.3.16 - Updated changes to Section 03.

(21) IRM 3.22.3.17 - Updated changes to Section 04.

(22) IRM 3.22.3.18 - Updated changes to Section 05.

(23) IRM 3.22.3.20 - Updated changes to Section 07.

(24) IRM 3.22.3.41.1 - Added “or” at the end of the three qualifying criteria clarifying taxpayer has to meet either one of the general requirements for Form 2555.

(25) IRM 3.22.3.41.9 - Clarified Field 3414R is transcribed from C&E editing.

(26) IRM 3.22.3.41.12 - Clarified Field 3418R is transcribed from C&E editing.

(27) IRM 3.22.3.41.17 - Updated for TY 2019 the limitation on foreign housing expenses by location related to foreign earned income exclusion.

(28) IRM 3.22.3.50 - Updated changes to Section 47.

(29) IRM 3.22.3.56 - Added new Section 55 for Form 8995/Form 8995-A.

(30) IRM 3.22.3.58 - Added new Section 57 for Form 8978.

(31) IRM 3.22.3.62 - Added new Section 64 for Form 461.

(32) IRM 3.22.3.64 - Added new Section 67 for Form 6252.

(33) IRM 3.22.3.72 - Added new Section 76 for Form 965-A.

(34) IRM 3.22.3.73 - Added new Section 94 for ERS Only Verified Fields.

(35) IRM 3.22.3.83.2 - Added new procedures for returns filed using the Streamline Filing Compliance Procedures and missing secondary TIN.

(36) IRM 3.22.3.85.2 - Added new procedures for returns filed using the Streamline Filing Compliance Procedures and invalid secondary TIN.

(37) IRM 3.22.3.95 - Updated Error Code 023 as reserved.

(38) IRM 3.22.3.106.2 - Added instructions to EC 038 for substantial presence test fields 47A/B/C/D/AID are ERS only and applies only to TY17 and prior returns.

(39) IRM 3.22.3.130.1 - Added Iceland and Slovenia to list of countries with Social Security agreements with the U.S. at EC 088 for Form 1040.

(40) IRM 3.22.3.157.2 - Revised EC 190 procedures for Form 1040-PR and Form 1040-SS clarifying what is considered a complete reply. Added instructions to suspend returns to HQ when a complete reply is received.

(41) IRM 3.22.3.165.3 - Added Iceland and Slovenia to list of countries with Social Security agreements with the U.S. at EC 209 for Form 1040.

(42) IRM 3.22.3.179.2.2 - Moved TY18 and prior instruction for Domestic Production Activities Deduction from the first two paragraphs into later paragraph since this will be for PY only and clarified that Field 04DPA is now ERS only field.

(43) IRM 3.22.3.138 - Deleted all EC 114 instructions as obsolete.

(44) IRM 3.22.3.184.3 - Added new section for EC 236 on Form 1040-NR-EZ. New EC 236 ERS screen and instructions are added to avoid “Invalid Error Code Contact Supervisor” fall out in ERS. Details are in IRM 3.22.3.13.5.

(45) IRM 3.22.3.190 - Revised EC 248 invalid conditions for Qualified Business Income Deduction claims and no business activity on the return.

(46) IRM 3.22.3.191 - Added new EC 249 for applying the Qualified Business Income Deduction (QBID) limitation.

(47) IRM 3.22.3.192.3 - Revised EC 250 allowable taxpayer notice codes to add TPNC 408, 411 and 615 to the list.

(48) IRM 3.22.3.193.3 - Revised EC 252 allowable taxpayer notice codes to add TPNC 411 to the list.

(49) IRM 3.22.3.202.2 - Revised EC 266 invalid conditions to delete on of the condition “Tentative Tax is less than $7.00”.

(50) IRM 3.22.3.218.3.1 - Updated the sentence to include the SSN issued before the due date of the return.

(51) IRM 3.22.3.234.2 - Updated the Revenue Ruling numbers.

(52) IRM 3.22.3.248.5 - Added new instruction when IRC 453 codes “A” or “L” is present to enter IRC 453 tax amount in ERS only new field 05IDT.

(53) Exhibit 3.22.3-1 - Updated Treaty Table 2 to make it 508 compliant and also revised the content to match the Table 2, Compensation for Personal Services Performed in United States Exempt from U.S. Income Tax Under Income Tax Treaties on IRS.gov.

(54) Exhibit 3.22.3-3 - Updated Treaty Table 1 to match the Table 1, Tax Rates on Income Other Than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax Treaties (Rev. Feb 2019) on IRS.gov.

(55) Exhibit 3.22.3-4 - Added the following country codes to the table:

  • Aland Islands (AX)

  • Bonaire, Sint Eustatius and Saba (BQ)

  • Saint Barthelemy (TB)

  • South Sudan (SS)

(56) Exhibit 3.22.3-5 - Updated the references from Micronesia to the Federated States of Micronesia, Northern Mariana Islands to the Commonwealth of the Northern Marian Islands, and Virgin Islands to U.S. Virgin Islands.

(57) Exhibit 3.22.3-9 - New Taxpayer Notice Codes (TPNCs) were added for TY 2019 and assigned to error codes. The literals are displayed in Exhibit 3.22.3-9.

  • Form 1040-NR-EZ - 411

  • Form 1040-PR/1040-SS - 470, 498, 499, 500

(58) Exhibit 3.22.3-10 - Updated No Reply instructions to include the TY19 changes.

(59) Exhibit 3.22.3-14 - Added Form 1040-SR to the list of forms and updated the few form titles.

(60) Exhibit 3.22.3-16 - Updated the examples with correct percentage and line number references.

(61) Exhibit 3.22.3-17 - Updated table for Tax Year 2019 Return due dates

(62) IRM 3.22.3.1.2 - Updated the Servicewide Policy Statements and Delegation Authority IRM reference.

(63) IRM 3.22.3.1.6 - Updated IRM reference from IRM 3.21.25.15 to IRM 3.21.25.16.

(64) IRM 3.22.3.5 - Added a link to EC 250 for restrictions for Dual Status Taxpayers.

(65) IRM 3.22.3.257.3.5 - Updated IRM reference from IRM 3.21.25.15 to IRM 3.21.25.16.

(66) IRM 3.22.3.10 - Updated line number reference for TY18.

(67) IRM 3.22.3.186.2.2.3 - Added instructions for estates and trusts.

(68) IRM 3.22.3.229.3.1 - Updated error code.

(69) IRM 3.22.3.229.3.3 - Updated error code.

(70) IRM 3.22.3.229.3.5 - Updated error code.

(71) IRM 3.22.3.166.2.2.3 - Updated paragraph reference.

(72) IRM 3.22.3.186.2.3.2 - Updated state and local income taxes threshold amounts for Filing Status 3.

(73) IRM 3.22.3.248.2 - Updated instruction for TY 2018.

(74) IRM 3.22.3.276 - Added Exception to ACA error codes.

(75) IRM 3.22.3.13.5 - Added instructions for Invalid Error Code Screen on Form 1040-NR-EZ.

(76) IRM 3.22.3.41.19 - Added Form 2555-EZ line reference.

(77) IRM 3.22.3.184.2 - Added EC 248 - IRC 933 or Income Excluded from Puerto Rico.

(78) IRM 3.22.3.186.2.3.2 - Updated instructions to use TPNC 410 instead of TPNC 100.

(79) IRM 3.22.3.140.3 - Added tax year 2018 countries to the waiver list.

(80) IRM 3.22.3.141.3 - Added tax year 2018 countries to the waiver list.

(81) IRM 3.22.3.142.3 - Added tax year 2018 countries to the waiver list.

(82) IRM 3.22.3.166.2.3.1 - Added tax year 2018 countries to the waiver list.

(83) IRM 3.22.3.178.2 - Updated Note for residents of India.

(84) IRM 3.22.3.186.2.3.1 - Added TY18 C&E procedures for line 11 on Form 1040-NR-EZ.

(85) IRM 3.22.3.178.2 - Added Note for residents of India.

(86) IRM 3.22.3.257.3.4 - Added instructions when Form 1042-S is not attached.

(87) Exhibit 3.22.3-10 - Updated Form 1042-S withholding instructions.

(88) IRM 3.22.3.183.2 - Updated instructions for residents of India.

(89) IRM 3.22.3.186.2.2 - Clarified procedures for MeF returns.

(90) IRM 3.22.3.183.2 - Updated the field reference.

(91) IRM 3.22.3.184.1 - Updated EC 248 Fields Displayed

(92) IRM 3.22.3.10 - Updated instructions for estate and trust returns.

(93) IRM 3.22.3.84.2 - Updated correspondence paragraph.

(94) IRM 3.22.3.166.2.2.1 - Updated instruction for personal exemption amount.

(95) IRM 3.22.3.166.2.2.2 - Updated instruction for personal exemption amount.

(96) IRM 3.22.3.187.2.2.1 - Updated instructions for estate and trust returns.

(97) IRM 3.22.3.17.30 - Added Brazil and Uruguay to the list of countries.

(98) IRM 3.22.3.233.2 - Added TPNC 366 literals to Allowable Taxpayer Notice Codes EC 322 Form 1040-PR/1040-SS.

(99) IRM 3.22.3.248.2 - Filed 47PRI instructions are moved and clarified for TY 2018 returns with AGI thresholds.

(100) Exhibit 3.22.3-9 - Added TPNC 366 literal to Taxpayer Notice Codes (TPNC) table.

(101) IRM 3.22.3.14.7 - Added Note about Micronesia, the Marshall Islands, and Palau (201804747).

(102) IRM 3.22.3.184 - Updated fields displayed.

(103) IRM 3.22.3.190.6 - Updated the correct line number reference for Form 1040-NR-EZ.

(104) IRM 3.22.3.198.1 - Updated Fields displayed.

(105) IRM 3.22.3.211.1 - Updated Fields displayed.

Effect on Other Documents

IRM 3.22.3 published on November 11, 2018 (effective January 1, 2019) is superseded. The following IRM Procedural Updates (IPUs) have been incorporated into this IRM: 19U0012, 19U0057, 19U0139, 19U0200, 19U0246, 19U0298, 19U0452, 19U0523, 19U0568, 19U0639, 19U0761, 19U0774, 19U0985.

Audience

Wage and Investment International Error Resolution

Effective Date

(01-01-2020)

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

Program Scope and Objectives

  1. Purpose. This Internal Revenue Manual (IRM) provides instructions for correcting errors identified in Error Resolution System (ERS) processing of International Individual Master File (IMF) tax returns. International IMF tax returns are tax returns identified using the criteria in IRM 3.22.3.2, International Returns.

  2. Audience. Tax examiners in the Error Resolution Department of the Austin 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. Program Goals. The ERS program objective is to provide timely and accurate correction of tax returns that are in ERS error inventory after return data is input via Integrated Systems Remittance Processing (ISRP) and Modernized e-File (MEF). This IRM provides procedures for the processing of international IMF tax returns and related documents in ERS inventory.

Background

  1. The Error Resolution System (ERS) is an online computer application used by tax examiners to correct errors identified on tax returns during Generalized Mainline Framework (GMF) processing.

Authority

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

    • IRC 6213(b)

    • IRC 6201(a)

  2. Policy Statements and Delegation Orders for submission processing are contained in the following IRMs:

    • IRM 1.2.1, Servicewide Policy Statements

    • IRM 1.2.2, Servicewide Delegations of Authority

Responsibilities

  1. The Submission Processing Director is responsible for monitoring operational performance of Submission Processing.

  2. The Austin Submission Processing Input Correction Operations Manager is responsible for monitoring operational performance of Austin Error Resolution.

  3. The Error Resolution team manager and lead tax examiner are responsible for performance monitoring and ensuring tax examiners have the tools to perform their duties.

  4. Tax examiners are responsible for following the instructions in this IRM, including all IRM procedural updates (IPU) posted to the SERP (Servicewide Electronic Research Program) website.

Program Management and Review

  1. Program Reports. All ERS records are controlled by a Document Locator Number (DLN), and error records are accessed and assigned for correction by block DLN. The daily ERS Error Inventory Report ERS 13-40 lists each block of returns and the number of returns in ERS inventory by program. The ERS system displays with command ERVOL the real-time volume in inventory by status and by program. Daily, weekly and periodic reports are available to management through Control-D WebAccess to manage inventory and capture data for program planning and review. See IRM 3.12.37, Error Resolution, IMF General Instructions, Related Reports, for a listing and description of ERS reports.

  2. Quality Review. Tax examiner completed inventory is selected for quality review during real-time processing. This review is conducted according to the procedures in IRM 3.30.30, Embedded Quality for Submission Processing (EQSP) System.

  3. CARE Review. The Computer Assisted Review of ERS (CARE) is an on-line quality review of Taxpayer Notice Codes (TPNC) when assigned by tax examiners in ERS. Assigned TPNCs are reviewed and records are corrected to prevent the issuance of erroneous notices to taxpayers. Results are reported in daily and periodic reports to managers and tax examiners.

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

Program Controls

  1. All tax examiners must submit and have approved by management an Online 5081 (OL5081) to gain access to the Error Resolution System.

  2. Tax returns in ERS are worked on a First In First Out (FIFO) basis as they are received from input systems through the General Mainline Framework (GMF).

  3. Control clerks are responsible for the control of error documents. Inventory control procedures are described in IRM 3.12.37, Error Resolution, IMF General Instructions.

Related Resources

  1. The following table lists other Internal Revenue Manuals (IRM) and job aids that provide guidance for ERS processing of international tax returns.

    Resource Title
    IRM 3.12.2 Individual Master File Error Resolution General Instructions
    IRM 3.12.3 Error Resolution, Individual Income Tax Returns
    IRM 3.12.37 Error Resolution, IMF General Instructions
    IRM 3.21.3 International Returns and Documents Analysis - Individual Tax Returns
    IRM 3.21.25.16 International Returns and Document Analysis - Miscellaneous Tax Returns, Credit Verifying Form 8288-A (FIRPTA) Credits
    ERS International IMF Job Aid 2512-001 at https://program.ds.irsnet.gov/sites/WILESPInstCrnr/ERS/ERS%20-%20IMF/ERS%20-%20International/2019%20Job%20aid/2512-001.pdf Error Resolution System (ERS) for Individual Master File Documents, International Tax Returns
    IMF Foreign Address Job Aid 2513-703 at http://core.publish.no.irs.gov/trngpubs/pdf/t2513-703--2017-10-00.pdf International Submission Processing IMF Foreign Address Job Aid
    ERS Current Year Job Aid 2515-015 at https://program.ds.irsnet.gov/sites/WILESPInstCrnr/ERS/ERS%20-%20IMF/ERS%20-%20IMF%20Domestic/2515-015_Current-Year-Job-Aid/2515-015.pdf Error Resolution System (ERS) for Individual Master File Documents
    ERS Prior Year Job Aid 2515-014 at https://program.ds.irsnet.gov/sites/WILESPInstCrnr/ERS/ERS%20-%20IMF/ERS%20-%20IMF%20Domestic/2515-014_Prior-Year-Job-Aid/2515-014.pdf Error Resolution System (ERS) for Individual Master File Documents

Forms

  1. Tax forms and internal use forms referenced in this IRM are listed in Exhibit 3.22.3-14, Tax Forms and Internal Use Forms.

Acronyms

  1. Acronyms commonly used in this IRM are listed in Exhibit 3.22.3-15, Acronyms.

General Guidelines for Tax Examiners

  1. ERS International IMF Job Aid 2512-001 and IMF Foreign Address Job Aid 2513-703 are used as references with this manual. This manual refers the tax examiner to appropriate explanatory information or exhibits in the job aids. When a conflict between any reference or training material and this manual occurs, the manual instructions take precedence.

  2. IRM 3.12.2, Individual Master File Error Resolution General Instructions, and IRM 3.12.3, Error Resolution, Individual Income Tax Returns, must be used when specific instructions are not provided in IRM 3.22.3. Error record formats and error field displays for Form 1040, Form 1040A, and Form 1040EZ are found in IRM 3.12.2 and IRM 3.12.3, except for field displays for Form 1040 errors that only generate on international returns (EC 025, EC 051, EC 148, EC 150, EC 152, EC 154, EC 156, and EC 216). The field displays for these errors are included in this IRM. Form 1040-NR, Form 1040-NR-EZ, Form 1040-PR, and Form 1040-SS record formats and field displays are included in the relevant sections and error codes in this IRM.

  3. The Form 1040A and Form 1040EZ is made obsolete for Tax Year 2018. All references to Form 1040A or 1040EZ should be used for TY2017 and prior year returns only.

  4. The Form 2555-EZ is obsolete for Tax Year 2019. All references to Form 2555-EZ should be used for TY 2018 and prior year returns only.

  5. The Schedule C-EZ is obsolete for Tax Year 2019. All references to Schedule C-EZ should be used for TY 2018 and prior year returns only.

  6. A new Form 1040-SR is introduced for TY2019. This form is identical to 2019 Form 1040 with increased font size and expanded form length. All processing instructions that apply to Form 1040 apply equally to Form 1040-SR.

  7. In tax year 2019, processing year 2020, ERS screen displays for Section 01 through Section 05 have been realigned to follow TY2019 Form 1040. This realignment caused screen display changes to similar sections on the Form 1040-NR, Form 1040-NR-EZ and Form 1040-PR/SS. Section 01, 02, 03, 04 and 05 on these forms have been realigned to follow TY2019 Form 1040 causing many changes to field names on ERS screen displays for both sections and error codes. Here is summary of Section 01 through Section 05 and how they are realigned:

    1. Section 01 - Entity portion of TY19 Form 1040

    2. Section 02 - Form 3471 Edit Sheet

    3. Section 03 - Beginning at line 1, Page 1, TY19 Form 1040 through entire Page 2, TY19 Form 1040

    4. Section 04 - Schedule 1, TY19 Form 1040

    5. Section 05 - Schedule 2 and 3, TY19 Form 1040

    Note:

    TY18 Schedule 4, 5 and 6 of Form 1040 are obsolete for TY2019.

    Reminder:

    ERS examiner are reminded to get familiarized with the changes to field names, sections and error codes.

  8. A new Section 94 is created to include all the verified fields that are applicable to the fields that are in Sections 01 through 05. This is a required section.

  9. IRM deviations must be submitted in writing following instructions from IRM 1.11.2.2, Internal Management Documents System - Internal Revenue Manual (IRM) Process, IRM Standards, and elevated through appropriate channels for executive approval.

Organization of Text

  1. The text in this manual is organized in the following order:

    • General Information

    • Correspondence Procedures

    • Special Procedures

    • Field Errors

    • Error Codes

    • Reply and No Reply Procedures

    • Exhibits

International Returns

  1. International tax returns are identified by the presence of one of the following:

    • An address outside the 50 United States and Washington D.C. (This does not include Army/Air Force Post Office/Fleet Post Office Post Office (APO/FPO) addresses.)

    • Form 1040 GUAM

    • Form W-2 from American Samoa (W-2AS)

    • Form W-2 from Commonwealth of Northern Mariana Islands (W-2CM)

    • Form W-2 from Guam (W-2GU)

    • Form W-2 from Puerto Rico (499R-2/ W-2 PR)

    • Form W-2 from United States Virgin Islands (W-2VI)

    • Form 1040-NR, U.S. Nonresident Alien Income Tax Return

    • Form 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents

    • Form 1040-PR - U.S. Self-Employment Tax Return (Including the Additional Tax Credit for Bona Fide Residents of Puerto Rico) (Spanish version)

    • Form 1040-SS - U.S. Self-Employment Tax Return (Including the Additional Tax Credit for Bona Fide Residents of Puerto Rico)

    • Form 1042-S, Form SSA 1042-S or Form RRB 1042-S

    • Form 2555 - Foreign Earned Income

    • Form 2555-EZ - Foreign Earned Income Exclusion

    • Form 4563 - Exclusion of Income for Bona Fide Residents of America Samoa

    • Form 5074 - Allocation of Individual Income Tax to Guam or the Commonwealth of Northern Mariana Islands

    • Form 8288-A - Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests

    • Form 8689 -Allocation of Individual Income Tax to the United States Virgin Islands

    • Form 8804 - Annual Return for Partnership Withholding Tax Under Section 1446

    • Form 8805 - Foreign Partner's Information Statement of Section 1446 Withholding Tax

    • Form 8813 - Partnership Withholding Tax Payment

    • Form 8833 - Treaty-Based Return Position Disclosure

    • Form 8854 - Initial and Annual Expatriation Information Statement

    • Form 8891 - U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans

      Note:

      Form 8891 is obsolete as of December 31, 2014

    • Form 8898 - Statement for Individuals Who Begin or End Bona Fide Residency in a United States Possession

    • Dual-status - Form 1040 and Form 1040-NR filed together for the same tax year; "Dual-status" or "D/S" indicated on the return

    • Nonresident Alien (NRA), primary or both taxpayers are nonresident alien

      Exception:

      The primary taxpayer is a nonresident alien (NRA) without a social security number (SSN) or an individual taxpayer identification number (ITIN), but the secondary taxpayer has an SSN/ITIN and is reporting income.

    • International Tax Treaty - taxpayer indicating exemption or exclusion of tax and/or income due to an International tax treaty

      Note:

      "American Indian" treaty returns are not considered International returns. They must be renumbered as a domestic return.

    • Treaty Trader

    • Fulbright Grantee

    • IRC 871, IRC 893, IRC 911, IRC 913, IRC 931, IRC 932, IRC 933, IRC 934 or IRC 935 of the Internal Revenue Code (IRC) is notated anywhere on the return.

      Exception:

      For electronically filed returns, if the amount of the exclusion is $0 and there are no other indications of international criteria, DO NOT send to Austin for processing as an international return.

    • Notation of "Streamlined" or other indication of Streamlined Filing Compliance Procedures on the return.

    • Form 14653 (Streamlined Foreign Offshore), Form 14654 (Streamlined Domestic Offshore), or similar certification.

    Note:

    Returns on which taxpayers convert income paid in foreign currency to U.S. currency are not considered International unless there are other international criteria.

  2. International returns are assigned the following File Location Codes (FLC):

    1. FLC 20 is assigned to any return identified as international using the criteria above, not including returns that are identified as U.S. territory returns.

    2. FLC 21 is assigned to any Form 1040, Form 1040A, Form 1040EZ, Form 1040-PR, and Form 1040-SS that is identified as a U.S. territory return. The five key U.S. Territories are American Samoa (AS), Commonwealth of Northern Mariana Islands (CNMI), Guam (GU), Puerto Rico (PR) and United States Virgin Islands (USVI).

    3. All returns with a valid Form 2555 or Form 2555-EZ (TY18 and prior) must be processed with FLC 20. A Form 1040 with a U.S. territory entity address that has a valid Form 2555 with a tax home in a foreign country is assigned to FLC 20.

Form 1042-S Income Codes

  1. Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, are used by withholding agents to report tax withheld at source under Chapter 3 of the Internal Revenue Code on certain income paid to nonresident aliens or foreign corporations not engaged in trade or business in the United States, or tax withheld at source under Chapter 4 of the Code on account holders that did not provide information to their financial institution to report as required under the Foreign Account Tax Compliance Act (FATCA). Below is a listing of income codes, description (type) of income, and where the income should be reported on Form 1040-NR or Form 1040-NR-EZ.

    Form 1042-S Income Code Form 1042-S Income Code
    Prior Year (If Different)
    Description (Type) of Income Where Income is Reported on Form 1040-NR or Form 1040-NR-EZ (unless specified on Form 1040-NR)
    01   Interest paid by United States Obligors-General Page 1, line 9a or Page 4, line 2c
    02   Interest Paid on Real Property Mortgages Page 1, line 9a or Page 4, line 2a
    03   Interest Paid to Controlling Foreign Corporations Page 1, line 9a or Page 4, line 2c
    04   Interest Paid By Foreign Corporations Page 1, line 9a or Page 4, line 2b
    05   Interest On Tax-Free Covenant Bonds No reporting required
    06   Dividends Paid By United States Corporations - General Page 1, line 10 or Page 4, line 1a
    07   Dividends Qualifying for Direct Dividends Rate Page 1, line 10 or Page 4, line 1b
    08   Dividends Paid by Foreign Corporations Page 1 line 10 or Page 4 line 1b
    09   Capital Gains Page 1, line 14 or Page 4, Lines 9 and 18
    10   Industrial Royalties Page 1, line 18 or Page 4, line 3
    11   Motion Picture or Television Copyright Royalties Page 1 line 18 or Page 4 line 4
    12   Other Royalties (e.g., Copyright, Software, Recording, Publishing, Endorsement Payments) Page 1, line 18 or Page 4, line 5
    13 New in TY 2015 Royalties paid on certain publicly offered securities Page 1, line 18 or Page 4, line 5
    14 13 (TY 2014 and prior) Real Property Income and Natural Resources Royalties Page 1, line 18 or Page 4, line 6
    15 14 (TY 2014 and prior) Pensions, Annuities Alimony, and/or Insurance Premiums Page 1, line 17b or Page 4, line 7 (pensions and annuities), line 12 (alimony)

    Note:

    Pension income reported on Form 1042-S should be reported on page 4, line 7.

    16 15 (TY 2014 and prior) Scholarship or Fellowship Grants Page 1, line 12 or 22 (Form 1040-NR) or Page 1, line 5 or 6 (Form 1040-NR-EZ)
    17 16 (TY 2014 and prior) Compensation for Independent Personal Services Page,1 line 13, 21 or 22

    Exception:

    If the income is earned by a nonresident alien for services performed outside the U.S., the income is NOT taxable. Follow the taxpayer's intent if they do not claim the income and the address on the 1040-NR is outside of the U.S.

    18 17 (TY 2014 and prior) Compensation for Dependent Personal Services Page 1, line 8 or 22 (Form 1040-NR) or Page 1, line 3 or 6 (Form 1040-NR-EZ)
    19 18 (TY 2014 and prior) Compensation for Teaching Page 1, line 8 or 22 (Form 1040-NR) or Page 1, line 3 or 6 (Form 1040-NR-EZ)
    20 19 (TY 2014 and prior) Compensation during Studying and Training Page 1, line 8 or 22 (Form 1040-NR) or Page 1, line 3 or 6 (Form 1040-NR-EZ)
    Not valid after TY 2015 21 (TY 2015 and prior) Gross Income - Capital Gain Dividend Page 1, line 14 or Page 4, line 9 and 18
    22   Interest Paid on Deposit with a Foreign Branch of a Domestic Corporation or Partnership Page 1, line 9a or line 22
    23 20 (TY 2014 and prior) Other Income Page 1, line 21 or Page 4, line 12
    24   Qualified Investment Entity (QIE) Distributions of Capital Gains Page 1, line 14 or Page 4, Lines 9 and 18
    25   Trust Distributions Subject to IRC 1445 Page 1, line 21 or Page 4, line 12
    26   Unsevered Growing Crops and Timber Distributions By a Trust Subject to IRC 1445 Page 1, line 21 or Page 4, line 12
    27   Publicly Traded Partnership Distributions Subject to IRC 1446 Page 1, line 21 or Page 4, line 12
    28   Gambling Winnings Page 4, line 10a or line 11 (depending on country of residence)
    29   Deposit Interest Page 4 line 12
    30   Original Issue Discount (OID) Page 4, line 12
    31   Short-Term OID Page 4, line 9
    32   Notional Principal Contract income Page 1 line 21 or Page 4 line 12
    33   Substitute Payment - Interest Page 1, line 9a or Page 4, line 2c
    34   Substitute Payment - Dividends Page 1, line 10 or Page 4, line 1a
    35   Substitute Payment - Other Page 1, line 22 or Page 4, line 12
    36   Capital Gains Distributions Page 1, line 14 or Page 4, Lines 9 and 18
    37   Return of capital Generally, not reported
    38   Eligible deferred compensation items subject to IRC 877A(d)(1) Page 1, line 8
    39   Distribution from a nongrantor trust subject to IRC 877A(f)(1) Page 4, line 12
    40   Other dividend equivalents under IRC 871(m) (formerly 871(l)) Page 1, line 21 or Page 4, line 12
    41   Guarantee of Indebtedness Page 1, line 21 or Page 4 line 12
    42 20 (TY 2011 and prior) Earnings as an Artist or Athlete without a central withholding agreement Page 1, line 8, 13 or 22 (Form 1040-NR) or Page 1, line 3 or 6 (Form 1040-NR-EZ)
    43   Earnings as an Artist or Athlete with a central withholding agreement Page 1, line 8, 13 or 22 (Form 1040-NR) or Page 1, line 3 or 6 (Form 1040-NR-EZ)
    44   Specified Federal procurement payments Page 1, line 21
    50   Income previously reported under escrow procedure No reporting required
    51 New in TY 2015

    Note:

    In TY 2014 Income Code 51 was “Other Income”.

    Interest paid of certain actively traded or publicly offered securities Page 1, line 9 or Page 4, line 2
    52 New in TY 2015 Dividends paid on certain actively traded or publicly offered securities Page 1, line 10 or Page 4, line 1
    53 New in TY 2015 Substitute payments - dividends from certain actively traded or publicly offered securities Page 1, line 10 or Page 4, line 1
    54 New in TY 2017

    Note:

    In TY 2015-2016, Income Code 54 was “Other Income”

    Substitute payments - interest from certain actively traded or publicly offered securities Page 1, line 9 or Page 4, line 2
    55 New in TY 2019 Taxable death benefits on life insurance contracts Page 1, line 21 or Page 4, line 12
  2. When taxpayer files a Form 1040 or Form 1040A return and the only income reported is from Form 1042-S, Code & Edit is instructed to correspond for the filer's U.S. status. If Code & Edit did NOT correspond, search the return and attachments for a statement that identifies the taxpayer as a U.S. citizen or resident alien filing Form 1040 or Form 1040A. If no statement is attached SSPND 215 and select paragraph (2) on Form 13900. (Refer to instructions at IRM 3.22.3.262.3.3 if the income or withholding is from Form SSA/RRB 1042-S.)

    Note:

    If a taxpayer is reporting worldwide income on a Form 1040, enter the Form 1042-S withholding in Field 05OTH and enter “S” in Field 05TYP.

    Note:

    If a taxpayer is reporting worldwide income on a Form 1040A, SSPND 610 to convert the return to a Form 1040 and enter the Form 1042-S withholding in Field 05OTH and enter “S” in Field 05TYP.

United States Income Reporting Requirements

  1. United States citizens and resident aliens (green card holders) are required to file Form 1040, and must report 100 percent of their worldwide income. Worldwide income is income from all sources and includes foreign and United States income.

  2. Nonresident aliens are generally required to report ONLY U.S. source income, and income that is effectively connected to a U.S. trade or business, on Form 1040-NR or Form 1040-NR-EZ. A nonresident alien is not required to report U.S. source income that has been withheld properly at the source or any foreign source income received unless the nonresident alien is entitled to a claim for a refund for overpaid taxes. Nonresident aliens may file Form 1040-NR in order to receive credits or refunds of taxes over withheld amounts. Income received from U.S. payers will in most cases constitute U.S. source income. In addition, income received from foreign payers may also constitute U.S. source income in certain circumstances such as income received for services performed in the United States and income received for the use of intangibles in the United States.

    Note:

    However, if the foreign individuals perform their services entirely outside of the United States, the income they receive from U.S. payers is not subject to withholding or U.S. income taxes. If the payers did withhold, then the nonresident aliens are required to file Form 1040-NR to receive credits or refunds of the taxes withheld.

  3. A taxpayer who is a U.S. citizen or resident alien and a nonresident alien within the same tax year files a dual-status tax return. Income is reported using the reporting rules that apply to the taxpayer’s residency status for each part of the year.

Dual-Status - General Information

  1. A taxpayer who is a resident alien and a nonresident alien in the United States within the same tax year files a dual-status tax return. This condition usually occurs in the year of arrival or departure from the United States. The taxpayer will file Form 1040 or Form 1040-NR for the tax year based on the taxpayer's residence status on the last day of the year.

    1. The taxpayer will file a return using Form 1040 if a resident of the United States on the last day of the tax year.

    2. The taxpayer will file a return using Form 1040-NR or Form 1040-NR-EZ if not a resident of the United States on the last day of the tax year.

    3. If the requirements are met, a dual-status alien may elect to be treated as a resident for the entire year.

    4. Follow the intent of the taxpayer and process the tax form that is identified as the "Dual-Status Return" if there is an indication they entered or left the United States in December. See question G page 5, Form 1040-NR; page 2, Form 1040-NR-EZ.

    5. Process a Form 1040-NR as dual-status if the taxpayer identifies the return as a “Dual-Status Return” and attached a Form 8854, Initial and Annual Expatriation Statement.

    6. If unable to determine which return to process from page 5 of Form 1040-NR, page 2 of Form 1040-NR-EZ, or an attached statement elsewhere on the return, process the tax form that is identified by the taxpayer as the “Dual-Status Return”.

    7. If unable to determine which tax form should be processed as the return following (a) through (f) above, correspond for dual-status dates using paragraph 1 of Form 13900 for Letter 4087C.

  2. Restrictions for Dual-Status Taxpayers -see EC 218 at IRM 3.22.3.171.2.4, EC 250 at IRM 3.22.3.191.2.4and EC 252 at IRM 3.22.3.192.2.4.

  3. Tax Treaties - In general, dual-status taxpayers may be eligible for tax treaty benefits only on income received during the period that they are nonresident aliens. The country, the amount of income exempt by a tax treaty, and the tax treaty article under which an exemption is claimed must be reported on Form 1040-NR or Form 1040-NR-EZ. See EC 218 at IRM 3.22.3.171.2.4, EC 250 at IRM 3.22.3.191.2.4.2, and EC 252 at IRM 3.22.3.192.2.4.3.

    Exception:

    Resident Aliens may be entitled to treaty benefits with respect to certain categories of income.

  4. A Form 1040-NR or Form 1040-NR-EZ (or substitute statement) may be attached to a Form 1040 dual-status return as a statement (worksheet) if the taxpayer was a resident in the United States on the last day of the tax year. Similarly, a Form 1040 (or substitute statement) may be attached to a Form 1040-NR or Form 1040-NR-EZ dual-status return as a statement (worksheet) if the taxpayer was a resident outside the United States on the last day of the tax year.

  5. Check the Form 1040, Form 1040-NR, or Form 1040-NR-EZ (or substitute statements) to ensure that Code & Edit has combined all information onto the controlling form.

  6. When processing Form 1040-NR, and Itemized Deductions are claimed on Schedule A of Form 1040 that do not have a corresponding line on Page 3 of Form 1040-NR, enter the amount(s) in Field 07OTG.

Streamlined Filing Compliance Procedures

  1. The Streamlined Filing Compliance Procedures were made available to taxpayers on September 1, 2012, and the IRS significantly expanded the procedures effective July 1, 2014. The governing documents for the Streamlined Filing Compliance Procedures consist of the pages on IRS.gov outlining the procedures and the interpretative Frequently Asked Questions (FAQ).

  2. Returns submitted using the Streamlined Filing Compliance Procedures will have blocking series from 850 - 899 and specific program numbers: 46117 (Form 1040), 46137 (Form 1040A) and 46157 (Form 1040EZ).

  3. Both primary and secondary taxpayers must have a valid TIN on a return submitted using the Streamlined Filing Compliance Procedures, either a social security number (SSN) or individual taxpayer identification number (ITIN). A TIN assigned by the IRS (IRSN) is invalid.

  4. Don’t correspond for a missing TIN on a return submitted using the Streamlined Filing Compliance Procedures. If the TIN is missing and not found after searching the return and after research, then suspend with Action Code 320 to Entity for assignment of an IRSN for primary taxpayer. When the return comes back from Entity with an IRSN, follow the instructions in EC 005 at IRM 3.22.3.78.2 before entering RPC O.

  5. If the TIN is present but invalid, follow the applicable instructions in Error Code 004 at IRM 3.22.3.77.2 and Error Code 005 before entering RPC O.

  6. Returns that are eligible for the Streamlined Filing Compliance Procedures are coded with SPC "P" . If missing, enter this code on the return and in Field 01SPC, unless directed to remove the code in EC 004, or EC 005, or after correspondence.

  7. Each taxpayer's submission must be kept together.

    Example:

    If one return needs to be cleared by Statute, send all returns as a package and do not separate. A Form 3210 will be used initially to control which returns are being sent to Statute.

  8. Returns that are eligible for the Streamlined Filing Compliance Procedures should also be coded with a CCC "M" , CCC "R" , and CCC "P" . If missing, enter these codes on the return and in Field 01CCC, unless directed to remove the codes in EC 004, EC005, or after correspondence.

Form 1040-NR, Form 1040-PR, and Form 1040-SS Submitted Using the Streamlined Filing Compliance Procedures

  1. If forms other than Form 1040 or Form 1040-X are submitted using the Streamlined Filing Compliance Procedures, then route to LB&I MS 4305 AUSC if there’s no indication of prior LB&I review.

    Note:

    If all returns submitted are Form 1040-NR, then the notation of "Streamlined" will be circled out in red. Follow normal processing and do not route to LB&I for review.

  2. Upon receipt of the returns back from LB&I, follow the procedures outlined by LB&I.

Amended or Duplicate Returns Submitted Using the Streamlined Filing Compliance Procedures

  1. If the Streamlined Certification Form 14653 or Form 14654 is marked "Amended" then the returns must be reviewed by LB&I before processing. If an amended certification form is attached to an amended return, and there isn't an indication of prior LB&I review, then route all the returns submitted to MS 4305 AUSC.

  2. Philadelphia Accounts Management processes amended returns submitted using the Streamlined Filing Compliance Procedures.

    1. Each taxpayer's submission must be kept together even if the submission includes original and amended returns.

    2. If a 1040-X is included with original returns, the 1040-X must stay with the original returns until processing is complete.

    3. If no correspondence is required, the submission can be separated, and the Form(s) 1040-X need to be routed to Image Control Team (ICT), MS 6567 AUSC with a Streamlined Accounts Management cover sheet. Be sure to keep all 1040-X returns being routed to ICT together using one cover sheet.

      Note:

      A copy of the certification must be attached to each 1040-X before routing to ICT.

    4. If correspondence is required keep the submission together until a reply is received or the suspense period has expired.

Corresponding on Returns Submitted Using the Streamlined Filing Compliance Procedures

  1. If correspondence is necessary for any return submitted under the Streamlined Filing Compliance Procedures, all returns submitted by the taxpayer must be kept together. This means that if one return needs correspondence then all returns in the submission must be kept with the suspended return(s) and held together in the Suspense area.

  2. Don’t correspond for missing information related to the streamline procedures (paragraphs A through E on Form 13900) if the primary taxpayer doesn’t have a valid TIN (SSN or ITIN). Follow the instructions in IRM 3.22.3.6 (4) and process as a return not filed using Streamlined Filing Compliance Procedures.

  3. If correspondence is needed for issues related to Streamlined Filing Compliance Procedures as listed in “Types of Correspondence” at IRM 3.22.3.6.3.1, use Letter 4087C and correspond for these issues and all required information missing on the return.

    Note:

    If a signature is missing, DO NOT send the return back to the taxpayer. Use Letter 4087C to request the taxpayer's signature.

Types of Correspondence for Returns Submitted Using the Streamlined Filing Compliance Procedures
  1. Streamlined Certification - The taxpayer is required to attach a signed certification with a submission. The required certification depends on the type of filing. Taxpayers meeting the Streamlined Foreign Offshore Procedures non-residency requirement for one of the three submission years use Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures. Taxpayers using Streamlined Domestic Offshore Procedures submit Form 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures. Follow the procedures below to correspond. SSPND 215 and select the indicated paragraphs on Letter 4087C using Form 13900.

    Note:

    Suspend all returns in the submission when corresponding with these paragraphs.

    If And Then
    Certification is missing,   SSPND 215 and correspond selecting paragraphs A and B.
    Signature(s) is missing,   SSPND 215 and correspond selecting paragraphs A and C and /.

    Note:

    If the tax return is filed Married Filing Jointly then correspond if one or both signatures are missing.

    Computation and amount of Miscellaneous Offshore Penalty (MOP) is missing, The Certification is for Streamlined Domestic Offshore (SDO) Procedures (Form 14654), SSPND 215 and correspond selecting paragraphs A and D.

    Note:

    Code & Edit detaches the certification with the original signature and routes to LB&I and ensures that a copy of the signed certification is attached to each return. If the original certification is still attached, photocopy and attach a copy to each return and route the original to LB&I at MS 4305 AUSC.

    Note:

    A substitute certification form is acceptable as long as it contains all the relevant information listed above including a signature under a jurat.

Replies to Correspondence for Returns Submitted Using the Streamlined Filing Compliance Procedures
  1. If the correspondence was issued for incomplete certification, and all required information is now completed, do the following:

    If Then
    A reply contains an original return that was missing from the initial submission,
    1. Walk the unprocessed return(s) through the pipeline to be processed.

    2. Associate the newly processed return(s) with the submission being held in Suspense and follow the IRM procedures for returns filed using the Streamlined Filing Compliance Procedures.

    Submission contains only original 1040 family returns,
    1. Edit CCC "M" , CCC "R" , and CCC "P" on each return in the submission. Delete CCC "N" if present.

    2. Ensure a copy of the completed certification is attached to each tax return.

    3. Route original certification to LB&I MS 4305 AUSC.

    Submission contains both original and amended returns (Form 1040-X),
    1. Separate the submission between original and amended returns.

    2. Edit CCC "M" , CCC "R" , and CCC "P" on each return in the submission. Delete CCC "N" if present.

      Note:

      Do not edit CCCs on Form 1040-X.

    3. Place an AM Streamlined cover sheet along with a copy of the completed certification on each Form 1040-X and route to AM.

    4. Route original certification to LB&I MS 4305 AUSC.

  2. For incomplete replies or no replies see Exhibit 3.22.3-10.

Form 1040 With Form 2555 or Form 2555-EZ Attached - Purpose of Form

  1. Form 2555 must be attached if any of the following indications are on Form 1040:

    • IRC 911

    • A notation to see Form 2555 or Form 2555-EZ

    • Foreign Housing Exclusion, Line 8, Schedule 1, of Form 1040 (negative amount)

    • Foreign Earned Income Exclusion, Line 8, Schedule 1, of Form 1040 (negative amount)

    • Foreign Housing Deduction, dotted portion of line 22, Schedule 1, of Form 1040

  2. A taxpayer with foreign earned income is entitled to claim the following exclusions and/or deductions on Form 2555 or Form 2555-EZ:

    • Foreign-Earned Income Exclusion (Part VII); and/or

    • Housing Deduction, if housing costs were paid from self-employment earnings (Part VI and IX); or

    • Housing Exclusion, if housing costs were paid for with employer-provided amounts (Part VI and VIII).

  3. A U.S. citizen or resident alien may use Form 2555 to exclude a limited amount of their foreign earned income and claim housing exclusion or deduction:

    Tax Year Maximum Foreign Earned Income Exclusion
    2019 $105,900
    2018 $103,900
    2017 $102,100
    2016 $101,300
    2015 $100,800
    2014 $99,200
    2013 $97,600
    2012 $95,100
    2011 $92,900
    2010 $91,500
    2009 $91,400
    2008 $87,600
    2007 $85,700
    2006 $82,400
    2002 through 2005 $80,000
  4. For TY18 and prior returns, a U.S. citizen or resident alien living and working in a foreign country may use Form 2555-EZ to exclude a limited amount ($103,900 for TY 2018) of his or her foreign earned income. However, if any of the below conditions apply, the taxpayer must use Form 2555:

    1. Foreign earned income is from self-employment;

    2. The total foreign earned income exclusion exceeds the maximum amount,

    3. Form 2555-EZ includes business or moving expenses; or

    4. Form 2555-EZ is used to claim housing exclusion or deduction.

  5. Foreign earned income from a foreign country is wages or compensation for any personal services performed in any foreign country. It does not include U.S. territories.

    Caution:

    Federated States of Micronesia, Marshall Islands, and Palau are treated as foreign countries for income tax purposes, and thus are eligible for the foreign earned income exclusion. These returns must be processed as FLC 20.

  6. Unearned income may not be excluded on Form 2555 or Form 2555-EZ. To avoid double taxation, foreign taxes paid on unearned income can be:

    1. Claimed as a credit on Form 1116, or

    2. Reported as a deduction on line 6 of Schedule A

  7. A taxpayer can’t claim a foreign tax credit or deduction for taxes paid on foreign earned income that was also excluded on Form 2555 or Form 2555-EZ.

  8. U.S. citizens must report their worldwide income; so, taxpayers living or working outside the United States must file a U.S. income tax return.

  9. A taxpayer qualifies for the foreign earned income exclusion under IRC 911 if the taxpayer meets the requirements of a "tax home" and is either:

    1. A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period (regardless of physical presence) which includes an entire taxable year, or

    2. A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with an applicable nondiscrimination clause and who is a bona fide resident of a foreign country for an uninterrupted period that includes an entire taxable year; or

    3. A U.S. citizen or resident alien who has been physically present in a foreign country or countries for at least 330 days during any period of 12 consecutive months

      Note:

      If the taxpayer has a partial tax year that falls within the qualifying period, the exclusion must be prorated for the partial year.

U.S. Territories - General Information

  1. The following is a list of U.S. territories:

    • American Samoa - AS

    • Commonwealth of the Northern Mariana Islands - CNMI

    • Guam - GU

    • Puerto Rico - PR

    • United States Virgin Islands - USVI

  2. To qualify for certain tax benefits, the taxpayer must be a U.S. citizen or resident alien and a bona fide resident of U.S. territory for the entire tax year. A bona fide resident of one of these U.S> territories is an individual taxpayer who:

    • Does not have a tax home outside the relevant U.S. territory,

    • Does not have a closer connection to the United States or to a foreign country.

    • Meets the presence test. To satisfy the presence test for the entire year, the taxpayer must meet one of the conditions in the table below.

    Present in the relevant U.S. territory for at least 183 days during the tax year,
    Present in the relevant U.S. territory for at least 549 days during the three-year period consisting of the current taxable year and the preceding two tax years, provided the taxpayer was also present in the U.S. territory for at least 60 days during each tax year of the three-year period,
    Present in the United States for no more than 90 days during the tax year,
    Earned income (pay for personal services performed, such as wages, salaries or professional fees) from the United States of no more than $3,000 and was present for more days in the U.S. territory than the United States during the tax year.
    No significant connection to the United States during the tax year, such as a permanent home, voter registration or spouse/minor child in the United States.

    Note:

    It is often difficult to determine bona fide residency based on the test above. Therefore, for the purpose of processing income tax returns the following additional guidance is being given. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Exception:

    For members of the U.S. Armed Forces see paragraph (4) below. For spouses of U.S. servicemembers see paragraph (5) below.

  3. Taxpayers that reside in any of the U.S. territories cannot claim the Earned Income Credit except in limited circumstances. Refer to EC 337 at IRM 3.22.3.250.1 and EC 338 at IRM 3.22.3.251.1.

  4. The Servicemembers Civil Relief Act of 2003 (SCRA) provides special rules relating to a servicemember's residence for tax purposes. Under SCRA, a servicemember retains his or her jurisdiction of residence with the Department of Defense or equivalent for income tax purposes. A servicemember's residence is his or her "state of legal residence" (SLR), which is also known as home state, home of record, state of domicile, or state of residence. When the SLR is not a U.S. territory and the servicemember resides in a U.S. territory solely in compliance with military orders, the servicemember must file an income tax return with the IRS. When the SLR is a U.S. territory and the servicemember resides outside that territory solely in compliance with military orders, the servicemember must file an income tax return with the SLR territory. For further information, see Publication 570, Tax Guide for Individuals With Income from U.S. Possessions.

  5. The Military Spouses Residency Relief Act of 2009 (MSRRA) provides special rules relating to civilian spouses of U.S. servicemembers for tax purposes. Under MSRRA, a civilian spouse of an active duty servicemember can choose to keep his or her prior residence or domicile for income tax purposes when accompanying the servicemember spouse who is relocating under military orders to a new military duty station in one of the 50 states, the District of Columbia, or a U.S. territory. Before relocating, the civilian and military spouse must have the same tax residence. For further information, See Pub 570, Tax Guide for Individuals With Income From U.S. Possessions. Bona fide residents of American Samoa and Puerto Rico who are civilian spouses of servicemembers who are stationed in one of the 50 states or the District of Columbia in compliance with military orders, have non-U.S. government income, are subject to U.S. withholding, and are claiming a refund of federal income taxes should follow the procedures in Notice 2010-30, Notice 2011-16, and Notice 2012-41.

The American Jobs Creation Act of 2004

  1. The American Jobs Creation Act of 2004 (AJCA) clarified and supplemented the U.S. tax rules dealing with U.S. territories for determining if a taxpayer is a bona fide resident of a U.S. territory and whether income is from a territory source or effectively connected with the conduct of a U.S. territory trade or business.

  2. Residence Rules - In general, IRC 937(a) provides rules for determining whether a taxpayer is a bona fide resident of a U.S. territory.

  3. Source Rules - In general, IRC 937(b) provides that the principles for determining whether income is U.S. source and whether income is effectively connected with the conduct of a United States trade or business are applicable for purposes of determining whether income is U.S. territory source and whether income is effectively connected with the conduct of a trade or business in a U.S. territory. The regulations also generally provide that under the "U.S. Income Rule" of IRC 937(b)(2):

    • Income from United States sources is not treated as income that is U.S. territory source or effectively connected with the conduct of a U.S. territory trade or business, and

    • Income that is effectively connected with the conduct of a United States trade or business is not treated as U.S. territory source or effectively connected with U.S. territory trade or business.

  4. The regulations provide the following exceptions to these rules:

    • The regulations preserve the existing treatment of income from the sale of goods manufactured in a U.S. territory, which provides for the allocation of this income between U.S. territory sources.

    • The regulations provide that gains from the disposition of certain property by a United States citizen or resident who owned the property on the date they became a bona fide resident of the U.S. territory may not be treated as from sources within a U.S. territory. This special gain rule applies to the disposition of certain property such as stocks, bonds, debt instruments, and other property that is held for investment. However, the taxpayer may elect to split the source of gains from the disposition of appreciated property subject to this rule by using a market-to-market allocation for marketable securities and a time-based allocation for other property.

    • The regulations also provide certain anti-abuse rules for determining the source of dividends and interest from U.S. territory corporations.

Form 8898 - Statement for Individuals Who Begin or End Bona Fide Residence in a United States Possession
  1. Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a United States Possession, is used to notify the IRS that an individual became or ceased to be a bona fide resident of a U.S. Territory.

  2. The form must be filed by individuals who have worldwide gross income in the tax year greater than $75,000 and who:

    1. Take a position for United States tax purposes that they became a bona fide resident of a U.S. territory after a tax year for which they filed a United States tax return as a citizen or resident of the United States, but not as a bona fide resident of the U.S. territory,

    2. Are a citizen or resident of the United States and take the position for United States tax purposes that they ceased to be a bona fide resident of a U.S. territory after a tax year for which they filed an income tax return as a bona fide resident of a U.S. territory,

    3. Take a position for United States tax purposes that they became a bona fide resident of Puerto Rico or American Samoa after a tax year for which they were required to file an income tax return as a bona fide resident of the United States Virgin Islands, Guam or the CNMI.

American Samoa - General Information

  1. American Samoa has its own separate and independent income tax system.

  2. Bona fide residents of American Samoa are generally exempt from United States tax on their American Samoa source income.

  3. United States Armed Forces - Bona fide residents of American Samoa include military personnel whose official home of record (i.e., SLR) is American Samoa. See instructions at IRM 3.22.3.8 above.

American Samoa (AS) - Which Returns To File
  1. Generally, returns will be filed with both the American Samoa (AS) and the United States. The income reported on each return depends on the taxpayer's residency status in American Samoa.

    1. Bona Fide residents may have to file 2 returns:
      • AS with worldwide income
      • U.S. with worldwide income excluding AS income

    2. Non-Bona Fide residents may have to file 2 returns:
      • AS with only AS income
      • U.S. with worldwide income

  2. If the taxpayer is a United States citizen, resident alien or nonresident alien and a bona fide resident of AS during the entire tax year, they generally must file the following returns:

    1. An AS tax return to report gross income from worldwide sources.

    2. A United States tax return to report income from worldwide sources, but exclude income from sources within AS (IRC 931). Form 4563 can be attached. See IRM 3.22.3.8.2.1.2

      Note:

      A taxpayer who is a bona fide resident of AS and has only income derived from sources in AS, doesn’t have a United States income tax filing obligation.

      Exception:

      Income received for services performed as an employee of the United States Government or any of its agencies cannot be excluded from the United States tax return. If the United States Government wages are reported on both the United States and AS tax returns, Form 1116 can be attached to the United States tax return to claim credit for the taxes paid to AS.

  3. If the taxpayer is a United States citizen, resident alien or nonresident alien and not a bona fide resident of AS during the entire tax year, they generally must file the following returns:

    1. An AS tax return to report only income from sources within AS.

    2. A United States tax return to report income from worldwide sources. Form 1116 can be used to claim a credit for income taxes paid to American Samoa on American Samoa source income subject to double taxation for income taxes.

      Exception:

      Nonresident aliens report only U.S. source and U.S. effectively connected income.

Processing Form 1040/Form 1040A/Form 1040EZ With Income or Address From American Samoa
  1. If it appears the taxpayer is a bona fide resident of American Samoa (AS) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ all income is from AS:

    1. SSPND 640 to send the return to Rejects to delete the DLN out of the system.

    2. Prepare Form 3696A to initiate Letter 86C to inform the taxpayer that his/her return has been transshipped to the Tax Division Government of American Samoa for processing

    3. Send the return to:
      American Samoa Tax Office
      Executive Office Building
      First Floor
      Pago Pago AS 96799

  2. If there is no indication that the taxpayer is a bona fide resident of American Samoa, continue processing the return.

Form 4563 - Exclusion of Income for Bona Fide Residents of American Samoa
  1. Form 4563, Exclusion for Bona Fide Residents of American Samoa, is used to figure the amount of income from sources within American Samoa that may be excluded in accordance with IRC 931 from gross income on Form 1040.

  2. This exclusion generally may be claimed if a taxpayer is a United States citizen, resident alien or nonresident alien and a bona fide resident of AS. Eligible taxpayers will file Form 1040 and:

    • Attach Form 4563, and

    • Report worldwide income

  3. Income that can be excluded in accordance with IRC 931:

    • Income received from sources in AS, and

    • Income effectively connected with the conduct of a trade or business in AS.

    Caution:

    Income received for services performed as an employee of the United States Government or any of it's agencies is not excluded from gross income under IRC 931.

  4. If the taxpayer claims the exclusion in accordance with IRC 931, the following are examples of deductions and credits that will be limited on Form 1040:

    • The standard deduction

    • Certain itemized deductions such as medical and dental expenses, gifts to charity, and real estate taxes and mortgage interest on personal residence.

Commonwealth of the Northern Mariana Islands (CNMI) - General Information

  1. The CNMI has its own income tax system based partly on the same tax laws and tax rates that apply to the United States, and partly on local taxes imposed by the CNMI government.

  2. In general, all individuals with income from the CNMI will file only one return, either with CNMI or the United States. The taxpayer's residency status under IRC 937(a) with respect to the CNMI determines which return they will file.

    Exception:

    See below for procedures for active and reserve military members.

    1. Bona Fide residents with worldwide income -- if properly filed with CNMI, a taxpayer will not have to file a return with the U.S.

    2. Non-Bona Fide residents with worldwide income -- taxpayer is instructed to claim withholding from both U.S. and CNMI on a U.S. income tax return.

  3. Taxpayers that reside in any of the U.S. territories cannot claim Earned Income Credit except in limited circumstances. Refer to IRM 3.22.3, EC 337 and EC 338.

  4. Members of the U.S. Armed Forces who:

    1. Qualify as a bona fide resident of the CNMI in a prior tax year, and are absent from the CNMI solely in compliance with military orders must file with CNMI

    2. Did not qualify as a bona fide resident of the CNMI in a prior tax year, and are present in the CNMI solely in compliance with military orders must file with the IRS.

CNMI - Which Returns To File
  1. If the taxpayer is a United States citizen, resident alien or nonresident alien and a bona fide resident of the CNMI during the entire tax year, they must file their income tax return with the CNMI.

  2. If the taxpayer is a United States citizen or resident alien and not a bona fide resident of the CNMI during the entire tax year, they must file their income tax return with the United States. The tax return will include:

    1. Form 1040 reporting income from worldwide sources

    2. All income tax withheld by either the United States or CNMI

    3. Any credit for overpayment of income tax to either the United States or CNMI

    4. Any payments of estimated tax to either the United States or CNMI

    5. Payment of any balance of tax due

    6. Form 5074 if the adjusted gross income is $50,000 or more for the tax year and gross income of $5,000 or more is from sources within the CNMI.

      Exception:

      Military employees do not require a Form 5074.

  3. If the taxpayer is a nonresident alien of the United States and not a bona fide resident of CNMI during the entire tax year, they must do the following:

    1. File a CNMI income tax return to report only their CNMI source income.

      Note:

      In this situation CNMI source income is any income received for services performed in CNMI, even if they were paid by the U.S. Government.

    2. A United States tax return (Form 1040-NR) to report U.S. source income.

Processing Form 1040/Form 1040A/Form 1040EZ With Income or Address From CNMI
  1. If there is an indication that the taxpayer is a bona fide resident of CNMI, see IRM 3.22.3.8 and follow the instructions below:

    1. SSPND 640 to send the return to Rejects to delete the DLN out of the system.

    2. Prepare Form 3696A to initiate Letter 86-C to inform the taxpayer that his/her return has been transshipped to the Division of Revenue and Taxation of CNMI for processing.

    3. Send return to:
      Commonwealth of the Northern Mariana Islands
      Division of Revenue and Taxation
      P.O. Box 5234, CHRB
      Saipan, MP 96950

  2. If there is no indication that the taxpayer is a bona fide resident of CNMI, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ continue processing the return allowing any withholding from CNMI.

Form 5074 - Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI)
  1. Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI), provides information to the United States so that the IRS can figure the individual income tax that is due to Guam or CNMI.

  2. Taxpayers must file Form 5074 when all three of the following apply:

    • Taxpayer files a United States income tax return on Form 1040,

    • Taxpayer reports adjusted gross income of $50,000 or more, and

    • At least $5,000 of the gross income on their return is from Guam or CNMI sources

  3. When Form 5074 is attached, Code & Edit will enter Audit Code "L" on the return.

    If Then
    Code & Edit did not edit Audit Code "L" , Enter "L" in Field 01ACD.
    Section 02 is present, Delete the entries in the unallowable fields and make the necessary adjustments to prevent the computer from generating unallowable codes.

    Note:

    When Form 5074 is attached, all amounts on it must be included on the Form 1040. Enter amounts in appropriate fields as necessary. Form 5074 is not filed with the U.S. territories per form instructions.

Guam - General Information

  1. Guam has its own income tax system based partly on the same tax laws and tax rates that apply to the United States

  2. In general, all individuals with income from Guam will file only one return, either with Guam or the IRS. The taxpayer's residency status regarding Guam determines which return they will file.

  3. Members of the U.S. Armed Forces who:

    1. Qualify as a bona fide resident of Guam in a prior tax year, and are absent from Guam solely in compliance with military orders, must file with Guam

    2. Did not qualify as a bona fide resident of Guam in a prior tax year, and are present in the Guam solely in compliance with military orders, must file with the IRS.

Guam - Which Returns To File
  1. If the taxpayer is a United States citizen, resident alien or nonresident alien and a bona fide resident of Guam during the entire tax year, they must file their income tax return with Guam.

  2. If the taxpayer is a United States citizen or resident alien and not a bona fide resident of Guam during the entire tax year, they must file their income tax return with the IRS. The tax return will include:

    1. Form 1040 reporting income from worldwide sources

    2. All income tax withheld by either the United States or Guam

    3. Any credit for overpayment of income tax to either the United States or Guam

    4. Any payments of estimated tax to either the United States or Guam

    5. Payment of any balance of tax due

    6. Form 5074 if the adjusted gross income is $50,000 or more for the tax year and gross income of $5,000 or more is from sources within Guam.

      Exception:

      Military employees do not require a Form 5074.

  3. If the taxpayer is a nonresident alien of the United States and not a bona fide resident of Guam during the entire tax year, they must do the following:

    1. File a Guam income tax return to report only their Guam source income.

      Note:

      In this situation Guam source income is any income received for services performed in Guam, even if they were paid by the U.S. Government.

    2. A United States tax return (Form 1040-NR), to report U.S. source income.

Processing Form 1040/Form 1040A/Form 1040EZ With Income or Address From Guam
  1. If there is an indication that the taxpayer is a bona fide resident of Guam, see IRM 3.22.3.8 and follow instructions below:

    1. SSPND 640 to send the return to Rejects to delete the DLN out of the system.

    2. Prepare Form 3696A to initiate Letter 86-C to inform the taxpayer that his/her return has been transshipped to the Department of Revenue and Taxation of Guam

    3. SSPND 640

    4. Send the return to:
      Department of Revenue and Taxation
      Taxpayer Services Division
      P.O. Box 23607
      Barrigada, GU 96921

  2. If there is no indication that the taxpayer is a bona fide resident of Guam, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ continue processing the return.

Form 5074 - Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI)
  1. Form 5074 - Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI), provides information to the United States so that the IRS can figure the individual income tax that is due to Guam or CNMI.

  2. Taxpayers must file Form 5074 when all three of the following apply:

    • Taxpayer files a United States income tax return on Form 1040,

    • Taxpayer reports adjusted gross income of at least $50,000 or more, and

    • At least $5,000 of the gross income on their return is from Guam or CNMI sources

  3. When Form 5074 is attached, Code & Edit will enter Audit Code "L" on the return.

    If Then
    Code & Edit did not edit Audit Code "L" , Enter "L" in Field 01ACD.
    Section 02 is present, Delete the entries in the unallowable fields and make the necessary adjustments to prevent the computer from generating unallowable codes.

Puerto Rico (PR) - General Information

  1. The Commonwealth of Puerto Rico has its own separate independent income tax system.

  2. Generally, the taxpayer will file returns with both Puerto Rico and the IRS. The income reported on each return depends on the taxpayer's residency status in Puerto Rico. See IRM 3.22.3.8 for instructions in determining if the taxpayer is a bona fide resident of Puerto Rico.

Puerto Rico (PR) - Which Returns To File
  1. Generally, returns will be filed with both Puerto Rico and the United States. The income reported on each return depends on the taxpayer's residency status in Puerto Rico.

    1. United States citizens or resident aliens who are also bona fide residents of PR during the entire tax year may have to file 2 returns:
      • PR with worldwide income
      • U.S. with worldwide income, excluding PR income

      Note:

      If all the income is from PR sources, a U.S. tax return is not required. However, taxpayers who have effectively connected net business income of more than $400 from a trade or business in PR must file a Form 1040-PR/Form 1040-SS to pay self-employment tax.

    2. U.S. citizens or resident aliens who aren’t bona fide residents may have to file 2 returns
      • PR with only PR income
      • U.S. with worldwide income, claiming a foreign tax credit for income taxes paid to PR.

  2. If the taxpayer is a United States citizen or resident alien and a bona fide resident (as explained in IRM 3.22.3.8) of Puerto Rico during the entire tax year, they must do the following:

    1. File a Puerto Rican return to report income from worldwide sources.

    2. If the taxpayer has income from other than PR sources, they must also file a United States tax return to report income from worldwide sources, but exclude Puerto Rico source income (IRC 933). The taxpayer will not be allowed any deductions or credits that are directly or indirectly allocable to exempt income.

      Exception:

      Income received for services performed as an employee of the United States Government or any of its agencies cannot be excluded from the IRS tax return. If United States Government wages are reported on both the IRS and Puerto Rican tax returns, Form 1116 can be attached to the IRS tax return to claim a credit for income taxes paid to Puerto Rico.

      Note:

      U.S. government cost of living allowances are excludable from U.S. income tax.

    3. If the taxpayer doesn’t have any income other than PR source income, they are only required to file a Puerto Rican return.

  3. If the taxpayer is a nonresident alien of the United States and a bona fide resident of Puerto Rico during the entire tax year, they must file the following returns:

    1. A Puerto Rican tax return to report income from worldwide sources.

    2. A United States tax return to report income from worldwide sources, but exclude Puerto Rican source income (IRC 933). The taxpayer isn’t allowed to claim the standard deduction, cannot file a joint return, and is not allowed deductions for dependents unless the person is a citizen or national of the United States, a resident of the United States, or a resident of a country contiguous to the United States.

      Exception:

      Income received for services performed as an employee of the United States Government or any of its agencies cannot be excluded. If United States Government wages are reported on both the IRS and Puerto Rican tax returns, Form 1116 can be attached to IRS tax return to claim a credit for the taxes paid to Puerto Rico.

  4. If the taxpayer is a United States citizen or resident AND not a bona fide resident of Puerto Rico during the entire tax year, they must file the following returns:

    1. A Puerto Rican tax return to report income from Puerto Rican sources.

    2. A United States tax return to report income from worldwide sources. Form 1116 can be attached to claim credit for income taxes paid to Puerto Rico or Puerto Rico source income subject to double taxation.

  5. If the taxpayer is a nonresident alien of the United States AND does NOT qualify as a bona fide resident of Puerto Rico, the taxpayer must file the following returns:

    1. A Puerto Rican tax return to report income from Puerto Rican sources.

    2. A United States tax return, Form 1040-NR, according to the rules for a nonresident alien, reporting only U.S. source and U.S. effectively connected income.

Processing Form 1040/Form 1040A/Form 1040EZ With Income or Address From Puerto Rico (PR)
  1. If the taxpayer is filing Form 1040, Form 1040A, or Form 1040EZ with a PR address or PR income, continue processing the return if the taxpayer is a U.S. Government employee, or reporting income from outside of PR (worldwide income), or notates IRC 933 anywhere on the return. Do not SSPND 640 to send the return back to the taxpayer.

  2. If it appears the taxpayer is a bona fide resident of Puerto Rico (PR)≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , follow the steps below if the instruction in paragraph (1) above doesn’t apply:

    1. SSPND 640 to send the return to Rejects to delete the DLN out of the system.

    2. Prepare Form 9143 and mail the return back to the taxpayer with the following narrative: "Since you appear to be a bona fide resident of PR with only PR income, you do not have a U.S. tax filing obligation. However, if you have self-employment income from Puerto Rico and or you wish to claim the Additional Child Tax Credit you must do so on a Form 1040-PR/Form 1040-SS. Otherwise, if you have not already done so, you should file a return with the Departamento de Hacienda, PO Box 9022501, San Juan, PR 00902-2501"

      Note:

      If the return was filed electronically, DO NOT print out copy of the return for the taxpayer. Prepare Form 9143 as indicated above.

  3. If the return was previously rejected per (2) above and the taxpayer resubmits his/her return with no changes or indications as to why they are filing a Form 1040/Form 1040A, follow the steps below:

    1. SSPND 640 to send the return to Rejects to delete the DLN out of the system.

    2. Prepare Form 9143 and mail the return back to the taxpayer with the following narrative: Usted no está obligado a radicar una planilla de impuestos de los EE.UU, ya que usted parece ser residente bona fide de PR y tiene ingresos solamente de PR. Sin embargo, si tiene ingresos del trabajo por cuenta propia de Puerto Rico y/o usted desea reclamar el Crédito tributario adicional por hijos, usted tiene que completar el Formulario 1040-PR/SS. De lo contrario, si usted no lo ha hecho, debe radicar una planilla con el Departamento de Hacienda, PO Box 9022501, San Juan, PR 00902-2501.

  4. If there is no indication that the taxpayer is a bona fide resident of Puerto Rico (as indicated above), continue processing the return.

United States Virgin Islands (USVI) - General Information

  1. The USVI system of income taxation is based upon the United States Internal Revenue Code as amended. An important factor in USVI taxation is whether, during the entire taxable year, the taxpayer is a bona fide resident of USVI.

  2. In general, a bona fide resident of the USVI pays tax only to the USVI.

  3. A United States citizen or resident alien who is not a bona fide resident of the USVI, but has USVI source income, is required to pay the allocable portion of the tax to each jurisdiction.

United States Virgin Islands - Which Returns To File
  1. In general, bona fide residents of the USVI pay taxes only to the USVI. U.S. citizens or resident aliens (but not bona fide residents of the USVI) with USVI source income, pay a portion of tax to each jurisdiction:

    1. Bona fide residents -- include your worldwide income on your USVI return. If properly filed with the USVI, a taxpayer will not have to file a return with the United States.

      Note:

      Taxpayers who have income that is effectively connected net business income of more than $400 from a trade or business in USVI, must file Form 1040-SS with the United States to pay self-employment tax.

    2. Non-bona fide residents with worldwide income -- taxpayer must file identical returns with USVI and the U.S. Form 8689 must be attached to both returns.

  2. If the taxpayer is a United States citizen, resident alien, or nonresident alien and a bona fide resident of the USVI (as explained in IRM 3.22.3.8) during the entire tax year, and their gross income is less than $75,000 the taxpayer must file with the USVI and report worldwide income.

  3. For taxable years ending before December 31, 2006, if the taxpayer is a United States citizen, resident alien, or nonresident alien and a bona fide resident of the USVI during the entire tax year, and their gross income is $75,000 or more the taxpayer must file with:

    1. The USVI and report worldwide income and

    2. The IRS, in order to start the U.S. statute of limitations on assessment, as described in Notice 2007-19

      Note:

      The tax return filed with the IRS will include taxpayer's name, address, Taxpayer Identification Number (TIN) and signature.

  4. For taxable years ending on or after December 31, 2006, all United States citizens, resident aliens, and nonresident aliens who are bona fide residents of the USVI must file with the USVI and report worldwide income.

  5. If the taxpayer is a United States citizen or resident alien and not a bona fide resident of the USVI during the entire tax year, the taxpayer must file identical tax returns with the IRS and the USVI if the taxpayer has:

    1. Income from sources in the USVI or

    2. Income effectively connected with the conduct of a trade or business in the USVI.

    Note:

    The taxpayer will complete and attach Form 8689 to both returns to determine how much tax to pay to the U.S. and to the U.S. Virgin Islands.

Processing Form 1040/Form 1040A/Form 1040EZ With Income or Address From United States Virgin Islands
  1. If there is an indication that the taxpayer is a bona fide resident of USVI ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. SSPND 640 to send the return to Rejects to delete the DLN out of the system.

    2. Prepare Form 3696A to initiate Letter 86-C to inform the taxpayer that his/her return has been transshipped to the Virgin Islands Bureau of Internal Revenue for processing and

    3. Send the return to:

      Virgin Islands Bureau of Internal Revenue

      6115 Estate Smith Bay

      Suite 225

      St. Thomas, VI 00802

      Caution:

      If Form 8689 is attached or there is an indication on the dotted portion of total payments line that the taxpayer is reporting taxes paid to the USVI, or the taxpayer is filing in compliance with Notice 2007-19 (zero return, taxpayer's name, address, TIN and signature), DO NOT SEND THESE RETURNS TO THE USVI. See processing instructions below.

  2. If there is no indication that a taxpayer is a bona fide resident of the USVI, continue processing the return.

Form 8689 - Allocation of Individual Income Tax to the United States Virgin Islands
  1. Form 8689 - Allocation of Individual Income Tax to the United States Virgin Islands is used to figure the amount of United States tax allocable to the USVI.

    Caution:

    If Form 8689 is attached, or there is an indication on the dotted portion of line 19 of Form 1040 (or Schedule 3, line 14) that the taxpayer is either reporting taxes paid to the USVI or filing in compliance with Notice 2007-19 (zero return, taxpayer's name, address, TIN and signature), do not send these returns to the USVI. See IRM 3.22.3.8.6.1.3 below.

  2. Form 8689 must be attached to take the credit for United States tax allocated to the USVI when the amount is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . The taxpayer should add lines 40 and 45 of Form 8689 and include that amount in the total portion of line 19 of Form 1040. See IRM 3.22.3.262.3.9, EC 355, Form 8689 - Allocation of Income Tax to the U.S. Virgin Islands. SSPND 215 and correspond for Form 8689 when the amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Form 1040 in Compliance With Notice 2007-19
  1. If you can determine that the taxpayer is filing in compliance with Notice 2007-19, then process the return. Some indications could be:

    1. Notation on the return "Notice 2007-19"

    2. Zero tax return (no dollar entries)

    3. Affirmation statement indicating filed a USVI Form 1040

    4. Statement of gross income of $75,000 or more

    5. Statement affirming the taxpayer's bona fide residency in the USVI along with a summary of facts on which the residency is based

Processing Form 1040 Filed With the IRS in Compliance With Notice 2007-19
  1. These returns must be hand carried from function to function.

  2. Code & Edit is instructed to "X" all entries except:

    1. Caption information

    2. Computer Condition Code (CCC) and Return Processing Code (RPC)

    3. Received Date

      Caution:

      If the return includes both Notice 2007-19 and Form 8689, use only the instructions to process Form 1040 with Form 8689.

  3. If data is present other than the caption information, CCC, RPC or received date, delete entries and/ or section(s).

    Note:

    Always use the received date stamped by compliance.

Form 1040 in Compliance with Notice 2007-31
  1. The USVI Bureau Internal Revenue (BIR) will send to the IRS copies of the taxpayers' returns for 2006 and later when the taxpayer files a return with the USVI BIR and they meet each of the following conditions:

    1. Bona fide resident of USVI

    2. Gross income of $75,000 or more

  2. The return will be only page 1 of Form 1040 and include a watermark "Filed due to VI Notice 2007-31" in the upper left corner of page 1 Form 1040.

Processing Form 1040 in Compliance with Notice 2007-31
  1. These returns must be hand carried from function to function. Code & Edit is instructed to "X" all entries except:

    • Caption information

    • RPC "L"

    • RPC "V"

    • Received Date

  2. If data is present other than the caption information, RPC "L" and RPC "V" or received date, delete entries and/or section.

    Note:

    DO NOT CORRESPOND or ISSUE Taxpayer Notice Codes (TPNC)

Processing U.S. Virgin Islands (VI) Cover Over Program Form 1040 and Form 1040A

  1. The Virgin Islands Bureau of Internal Revenue (BIR) sends Form 1040 and Form 1040A tax returns to the IRS that require special handling and editing, a process identified in Submission Processing as the VI Cover Over Program. These returns are batched together and hand carried to each function, including ERS.

  2. Code & Edit is instructed to X all entries except:

    • Caption information

    • Computer Condition Codes (CCCs) and Return Processing Codes (RPCs)

    • Received Date

  3. Follow these instructions when processing these returns in ERS.:

    If Then
    A U.S. address is entered in Section 01, Delete the address and enter 00801 in Field 01ZIP.
    Field 01CCC is blank, GTSEC 01 and enter "3" and "O" in Field 01CCC.

    Note:

    CCC "3" must be entered first.

    The received date is missing in Field 01RCD, GTSEC 01 and enter the correct received date in Field 01RCD.

    Note:

    Always use the USVI Received Date if present. If not present, use the signature date.

    Field 01RPC is blank, GTSEC 01 and enter B and L. in Field 01RPC. Also enter RPC K for Statute years.

    Note:

    USVI Cover Over returns don’t require Statute review, but RPC K is required for the returns to close in ERS.

    Entries are present in fields other than Section 01, Delete the entries.
  4. Don’t correspond or assign TPNCs on a VI Cover Over return. If an error code generates and a TPNC is required to resolve the error, assign TPNC 100 with the following literal instead of the TPNC specified in the error code instructions: “VI Cover Over return - Void Notice”.

Form 1040-PR and Form 1040-SS

  1. Form 1040-PR is filed by a taxpayer residing in Puerto Rico and Form 1040-SS is filed by a taxpayer residing in AS, CNMI, GU, PR and the USVI. Both Form 1040-PR and Form 1040-SS are filed to:

    1. Report net earnings from self-employment and pay self-employment taxes.

    2. Pay any household employment taxes.

    3. Claim excess social security taxes withheld.

    4. Pay any employee social security and Medicare tax on unreported tips or uncollected employee social security and Medicare tax on tips or group term insurance.

    5. Claim additional child tax credit. (Only if qualified bona fide resident of Puerto Rico with 3 or more qualifying children).

    6. Claim the health coverage tax credit. (Only if qualified bona fide resident of Puerto Rico)

  2. Form 1040-PR/Form 1040-SS is a 4-page return.

  3. All Form 1040-PR and Form 1040-SS are processed under FLC 21.

  4. See chart below to determine Document Code and return due Date:

    Form Filed Document Code Return Due Date
    Form 1040-PR 27 15th day of the fourth month
    Form 1040-SS 26 15th day of the fourth month

    Note:

    If the Return Due Date falls on a weekend or legal holiday, the return will be due the first business day following the weekend or legal holiday. The return will be considered timely filed if received on the next business day following the weekend or legal holiday. See Exhibit 3.22.3-17 for current year return due dates.

Form 1040-NR and Form 1040-NR-EZ

  1. Form 1040-NR and Form 1040-NR-EZ are filed by:

    1. Nonresident aliens who have United States source income or income effectively connected with a U.S. trade or business.

    2. Nonresident aliens who are temporarily present in the United States

    3. Dual-status taxpayers in the year of entry into or departure from the United States

    4. Dual-status taxpayers in the year that status changed due to expatriation.

  2. All Form 1040-NR and Form 1040-NR-EZ are processed under FLC 20.

  3. Income reported on Form 1040-NR is classified as either effectively connected with a United States trade or business or not effectively connected with a United States trade or business.

  4. See Chart below to determine Document Code and Return Due Date:

    Form Filed Criteria Document Code Return Due Date
    Form 1040-NR Wages on line 8 73 15th day of fourth month
    Form 1040-NR No wages 72 15th day of the sixth month
    Form 1040-NR-EZ Wages on line 3 73 15th day of the fourth month
    Form 1040-NR-EZ No wages 72 15th day of the sixth month

    Note:

    If the Return Due Date falls on a weekend or legal holiday, the return will be due the first business day following the weekend or legal holiday. See Exhibit 3.22.3-17 for current year return due dates.

  5. Form 1040-NR must be transshipped to Kansas City Submission Processing Center (KCSPC). SSPND 640 if any of the following conditions exist:

    1. TIN is an Employee Identification Number (EIN) formatted xx-xxxxxxx or

    2. The name line has other than an individual's name (such as an estate or trust) or

    3. TY19/TY18 Line 39 (TY17 Line 40) is $300 or $100 (Trust) or $600 (Estate) or

    4. Taxpayer quotes IRC 642(b)(2)(c) and enters $4,150 on line 39 for TY19/TY18 ($4,050 on line 40 for TY17).

  6. In some instances, the taxpayer may file a short period Form 1040-NR before the end of the tax year due to the date of final departure from the United States. These early filed returns must be processed as 202012 (calendar-year returns). SSPND 480 and attach Form 4227 to the return, notating "Hold for 2020 processing."

    Exception:

    If the return is received prior to August 1, SSPND 640 and use Form 9143 to advise the taxpayer that they must refile in January.

  7. When a refund Form 1040-NR or Form 1040-NR-EZ has an address written on line 73e of Form 1040-NR (line 21e, Form 1040-NR-EZ) that differs from the entity address, see the EC 260 instructions for manual refunds at IRM 3.22.3.195.6.

  8. Rev. Rul. 68-500 allows Form 1040-NR to include a facsimile signature signed for the taxpayer by an agent. Accept the facsimile signature and process the returns that are signed for the taxpayer by an agent. (Attorney-in-Fact)

  9. See IRM 3.22.3.13.1,Refund Schemes, for instructions on when to code Form 1040-NR refund returns with Computer Condition Code “O” (CCC O).

Resident Alien - General Information

  1. A taxpayer can be considered a Resident Alien of the United States for tax purposes and must file Form 1040 if they meet either the "green card test" or the "substantial presence test" for the calendar year. If they do not meet either of these tests, they file Form 1040-NR or Form 1040-NR-EZ, if applicable.

    Note:

    If certain conditions are met, a nonresident alien may make a first year choice to be treated as a resident alien for part of the tax year.

  2. Green Card Test is met when a taxpayer is a lawful permanent resident of the United States at any time during the calendar year and has been issued an alien registration card (Form I-551), also known as a "green card" . All references made throughout this IRM to "green card" include Form I-551 for all years after 1996. Form I-151 is only acceptable as proof of permanent residency for TY96 and prior. See 2512-001, International Tax Returns Job Aid.

  3. To meet the Substantial Presence Test the taxpayer must be physically present in the United States on at least

    1. 31 days during the tax year of the return, and 183 days during the 3 year period that includes the tax year of the return and the 2 years prior to the tax year of the return.

      Example:

      Taxpayer is filing a 2019 tax return and was present in the United States 150 days in 2019, 150 days in 2018 and 150 days in 2017 the total days would be 225 days. See chart below:

    2. Use the following table to determine Substantial Presence.

      The taxpayer will count each day they were present in the United States during the tax year of the return (If present in the United States 150 days in 2019, then 2019 = 150 days.), AND
      Add 1/1 of the days they were present in the United States during the first year prior to the tax year of the return (If present in the United States 150 days in 2018, then 150/150 = 50 days for 2018. The days in the United States are 200 days. 150 days (for 2019) + 50 days (for 2018) = 200 days.), AND
      Add 1/1 of the days they were present in the United States during the second year prior to the tax year of the return (If present in the United States 150 days in 2017, then 150/150 = 25 days for 2017. The total days in the United States for the three year period is 225 days. 150 days (for 2019) + 50 days (for 2018) + 25 days (for 2017) = 225 days.)

      Exception:

      For purposes of meeting the Substantial Presence Test to be considered a United States Resident, certain exceptions apply. See Exhibit 3.22.3-7 for types of Visas.

Nonresident Alien - General Information

  1. Nonresident Aliens report only U.S. source income and income that is effectively connected with a U.S. trade or business on Form 1040-NR and Form 1040-NR-EZ. U.S. source income is reported on Form 1042-S, Form W-2, Form 1099 series, Form 8805, Form 8288-A, Form SSA/RRB 1042-S, or statement of income and received from:

    1. U.S. payer or

    2. Foreign payers for services performed in the U.S.

    3. Financial institutions because the account holder failed to provide the required information for the financial institution to report under FATCA

  2. United States tax law exempts nonresident aliens from United States taxation on interest from deposits in United States bank accounts if such interest is not effectively connected with a U.S. trade or business.

  3. Effectively Connected Income, after allowable deductions, is reported on page 1 of the Form 1040-NR and is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents.

  4. Non-Effectively Connected Income is reported on page 4 of Form 1040-NR and is taxed at a flat 30 percent rate or at a lower treaty rate if a tax treaty exists between the United States and the taxpayer's foreign country of residence, and no deductions are allowed against such income.

    Note:

    Non-Effectively Connected (NEC) Income can’t be reported on Form 1040-NR-EZ. If the taxpayer attempts to report NEC income on Form 1040-NR-EZ the return must be converted to a Form 1040-NR.

  5. When a taxpayer performed services as an employee both inside and outside the United States, the taxpayer must allocate their compensation between the United States and non-U.S. sources.

    Note:

    Only the U.S. source income is included on line 8 of Form 1040-NR (line 3, Form 1040-NR-EZ) as effectively connected wages.

Form 1040-NR and Form 1040-NR-EZ Country of Residence

  1. Determine the country of permanent residence of a nonresident alien by using the taxpayer’s information on the return, in the following order:

    1. Schedule OI, Line B (page 5 Form 1040-NR, page 2 Form 1040-NR-EZ)

    2. Schedule OI, Line A (page 5 Form 1040-NR, page 2 Form 1040-NR-EZ))

    3. Address from the Entity section of Form 1040-NR or Form 1040-NR-EZ

    4. Review of any attachments

Scholarship or Fellowship Grants Income

  1. When Scholarship or Fellowship Grants income is paid to a resident of a country with a tax treaty that exempts this type of income from taxation, the exempt income may be reported on line 22, Form 1040-NR, or line 6, Form 1040-NR-EZ. See the instructions for verifying Scholarship or Fellowship Grants income treaty claims in EC 218 at IRM 3.22.3.171.2.2.1(5) (Form 1040-NR) and IRM 3.22.3.171.2.2.2(3) (Form 1040-NR-EZ).

    Caution:

    When it can be determined that the taxpayer's income is from an occupation other than student (Form W-2 issued from other than a qualified education institution, occupation area of the return indicates intern, technical supporter, doctor, etc.), do not allow the treaty claim for a Scholarship or Fellowship Grant.

  2. When Scholarship or Fellowship Grant income is paid to a resident of a country without a tax treaty exemption:

    • The income may not be exempted under a tax treaty.

    • The income must be reported on line 12, Form 1040-NR or line 5, Form 1040-NR-EZ.

    • If the taxpayer is a "Degree Candidate" , amounts received from a qualified educational institute for education related expenses (books, fees, tuition) may be deducted on line 31, Form 1040-NR or line 8, Form 1040-NR-EZ.

Article XXV - United States and Canada Income Tax Treaty

  1. When a Form 1040-NR is received from a married Canadian resident who has U.S. source wages that are subject to tax in the United States, he or she may be able to compute his or her U.S. tax liability in accordance with the special provision contained in Article XXV(3) of the U.S.- Canada Tax Treaty.

  2. Review Form 1040-NR from Canadian resident taxpayers for the following indications that they are computing their U.S. tax on wages using Article XXV(3):

    1. Two names are present in the entity section of the return; or

    2. Hypothetical married filing joint tax computation using worldwide income for both taxpayers (Form 1040 or statement); or

    3. A statement is attached indicating that a special computation permitted by the U.S.- Canada Tax Treaty has been used; or

    4. A notation of "Article XXV" is found on the return or its attachments.

  3. Article XXV(3) limits the Canadian resident taxpayer’s U.S. liability with respect to his or her U.S. source employment income to an amount computed using the following formula: (Form 1040-NR Taxable Income/Form 1040 Taxable Income) × Form 1040 Tentative Tax. The tentative tax reported on Form 1040 or statement is the total U.S. tax payable by the taxpayer and his or her spouse as if both were U.S. citizens and all of their income arose in the United States. An income deficit (or loss) of the spouse shall not be taken into account.

  4. EC 265 generates on Form 1040-NR when the taxpayer uses this special tax calculation. See EC 265 at IRM 3.22.3.200.2.

  5. Article XXV(3) does not provide a basis for Canadian residents who are not U.S. citizens to claim on their actual Form 1040-NR a standard deduction or any credits for which they would not be eligible under the Internal Revenue Code.

Expatriation and Form 8854

  1. Taxpayers that are subject to expatriation tax must attach Form 8854, Initial and Annual Expatriation Statement, to their regular filing of Form 1040 or Form 1040-NR, whichever is applicable, for the year of expatriation and in certain circumstances for subsequent years. Taxpayers may elect to defer all or a portion of the expatriation tax and may attach two hypothetical Form 1040 returns to Form 8854 to support their calculations. Taxpayers making this election must file Form 8854 annually up to and including the year in which the full amounts of deferred tax and interest are paid.

  2. If Form 8854 is attached to a tax return, GTSEC 01 and enter Audit Code "K" in Field 01ACD. Continue to process the tax return with normal processing procedures.

    Note:

    If a taxpayer indicates "Expatriation Return" on the tax return do not enter Audit Code K unless Form 8854 is attached.

    Note:

    Process a Form 1040-NR as dual-status if the taxpayer identifies the return as a “Dual-Status Return” and attached a Form 8854.

Community Property - General Information

  1. Taxpayers that are subject to the community property laws of a foreign country, a United States state, or a United States territory, generally must follow those laws to determine the income of each taxpayer for United States tax purposes. However, they must disregard certain community property laws if:

    1. Both taxpayers are nonresident aliens, or

    2. One taxpayer is a nonresident alien and the other taxpayer is a United States citizen or resident and they do not choose to be treated as United States residents (as explained in Chapter 1 under Nonresident Spouse Treated as a Resident). In these cases, both taxpayers must report community income as explained below.

  2. Earned Income of each taxpayer, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the taxpayer whose services produced the income. That taxpayer must report all on a separate tax return.

  3. Trade or business income, other than a partners’ distributive share of partnership income, is treated as the income of the person who exercises substantially all of the management and control over the trade or business. That taxpayer must report all on a separate return.

  4. Partnership income (or loss). A partner's distributive share of partnership income is treated as the income (or loss) of the partner. The partner must report all of it on a separate tax return.

  5. Income derived from the separate property of the taxpayer (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that taxpayer. That taxpayer must report all on a separate tax return. Use the appropriate community property law to determine what is separate property.

  6. All other community income is treated as provided by the applicable community property laws.

    Note:

    If a determination cannot be made, SSPND 370 for Examination review.

  7. For additional information see EC 260 at IRM 3.22.3.196.5

Tax Treaties - General Information

  1. The United States has income tax treaties (conventions) with many foreign countries. Under these treaties, residents of foreign countries are taxed at a reduced rate, or are exempt from United States income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and with specific items of income. In certain limited circumstances, resident aliens may be entitled to treaty benefits.

  2. Tax treaties may, under certain circumstances, permit foreign individuals who are residents of the treaty country to visit the United States, practice their profession and earn income (sometimes in limited amounts) for a limited period of time without having to pay United States tax.

  3. Tax treaty tables are found in this IRM at Exhibit 3.22.3-1, Tax Treaty Table 2, Compensation for Personal Services Performed in United States Exempt from U.S. Income Tax Under Income Tax Treaties, and Exhibit 3.22.3-3, Tax Treaty Table 1, Tax Rates on Income Other than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax Treaties.

  4. Refer to IRM 3.22.3.17.10,Field 0422/0406 - Total Income Exempt by Treaty, for instructions for validating treaty exemption claims on Form 1040-NR and Form 1040-NR-EZ. Refer to IRM 3.22.3.18.16, Field 0554 Tax on Not Effectively Connected Income (NEC), for instructions for validating treaty tax rates.

Types of Visas - General Information
  1. A visa is assigned to an individual by the United States Citizenship and Immigration Services. See Exhibit 3.22.3-7.

  2. The method of taxation of a visa holder depends primarily upon whether the individual is classed as a resident or a nonresident.

    1. If the visa-holder is determined to be a nonresident alien, he is generally taxed on all United States Source income and on all income that is effectively connected with the conduct of a trade or business in the United States, unless specifically excluded under a U.S. tax treaty provision.

    2. Resident aliens are generally taxed the same as citizens.

  3. The following are types and definitions of visas most frequently encountered in tax return processing:

    VISA Definition of VISA
    A Diplomat or foreign government official
    F-1 International Student
    H-1B Temporary Professional Worker
    H-1C Temporary Registered Nurse
    H-2A Temporary Agriculture Worker
    H-2B Temporary worker whose skills are needed in the U.S.
    H-3 Trainee or participant in a special education exchange program
    I Representative of foreign information media, and their dependents
    J-1 Student Student in the U.S. under Exchange Visitor Program
    J-1 Scholar Researcher/Professor under Exchange Visitor Program
    J-1 Au Pair Individuals in the U.S. under the auspices of the U.S. Information Agency and the Designated Program Sponsor
    M-1 Student at vocational schools
    Q-1, Q2 Participant in an international cultural exchange program
    TC Professional business worker admitted under United States - Canada Free Trade Act (CUSTA)
    TD NAFTA allows temporary entry to certain dependents of TN visa holders
    TN Professional business worker admitted under North American Free Trade Agreement (NAFTA)

    Note:

    This is not an all-inclusive listing. There are other VISA types used to enter the United States.

Survivor Benefit Annuities (SBAs) and Survivor Benefit Plans (SBPs)
  1. A member of the United States military reaching retirement age may elect to receive, during his/her lifetime, a reduced United States military pension in order that his/her surviving spouse may continue to draw a United States military pension after his/her death. After the death of the United States military retiree, the pension which is paid to the retiree's surviving spouse is called a Survivor Benefit Annuity (SBA) or a Survivor Benefit Plan (SBP).

    Note:

    The SBA or SBP income will be reported on a Form 1042-S with Income Code 15 from Office of Personnel Management. United States tax law holds that these benefits represent United States - sourced taxable income unless United States tax law is overridden by a tax treaty between the United States and the country in which the nonresident alien recipient is a resident.

  2. SBAs/SBPs paid to nonresident aliens who reside in the following countries are not subject to U.S. tax under current treaties, provided they meet any requirements listed below or, if the country below is marked with an asterisk, they are a national of the country in which they reside:

    List of Countries List of Countries
    Australia Lithuania *
    Austria Luxembourg *
    Bangladesh * Malta*
    Barbados Mexico*
    Belgium * Morocco
    Bulgaria * Netherlands *
    China * New Zealand (must also be a citizen of New Zealand)
    Cyprus Norway
    Czech Republic (decedent must have been resident of Czech Republic) Pakistan
    Denmark * Portugal *
    Egypt Romania
    Estonia * Russia (must also be a citizen of Russia)
    Finland * Slovak Republic (decedent must have been a resident of Slovak Republic)
    Germany * Slovenia *
    Hungary * South Africa *
    Iceland* South Korea
    India * Spain *
    Ireland * Sri Lanka
    Israel Sweden (must also be a citizen of Sweden)
    Italy * Switzerland *
    Jamaica* (decedent must have been a national of Jamaica at the time the services were rendered) Thailand *
    Japan * Tunisia
    Kazakhstan (must also be a citizen of Kazakhstan) Turkey *
    Latvia * United Kingdom *(England, Northern Ireland, Scotland, and Wales) *
      Venezuela *
  3. SBAs/SBPs paid to residents and citizens of the following countries are taxable in the United States at the following tax rates under current tax treaties (or in the absence of a treaty):

    Country Name Percentage
    Canada 15 percent
    All other countries 30 percent

Correspondence Procedures

  1. Suspend international returns for first correspondence with Action Code 215. All missing required information must be requested when corresponding. Follow correspondence instructions in IRM 3.12.2, Individual Master File Error Resolution General Instructions, and IRM 3.12.3, Error Resolution, Individual Income Tax Returns, when specific instructions are not provided in IRM 3.22.3.

    Exception:

    When IRM 3.12.3 has instructions to suspend with Action Code 211, Action Code 213, Action Code 224, or Action Code 225, always use Action Code 215. DO NOT use Action Code 224 for ACA Correspondence or Action Code 213 for Health Coverage Tax Credit, or Action Code 225 for EC 157 on international returns.

  2. For Second Correspondence use Action Code 216. See IRM 3.22.3.281, Second Correspondence.

  3. The ERS tax examiner who identifies the need for correspondence on Form 1040-NR or Form 1040-NR-EZ will prepare a Form 13900, Correspondence Action Sheet International Returns to select paragraphs in Letter 4087C. Fill-in paragraphs for Letter 4087C are in Exhibit 3.22.3-12. Form 13900 should be used in lieu of Form 6001 for Form 1040/A/EZ when selected paragraphs are available. Prepare Form 13975, Form 1040-SS (or Form 1040-PR) Correspondence Action Sheet - International Returns, to select paragraphs in Letter 2894C for Form 1040-SS or Letter 2894C/SP for Form 1040-PR. Fill-in paragraphs for Letters 2894C and 2894C/SP are in Exhibit 3.22.3-13.

    Reminder:

    Examiners are reminded to select the box at the top of Form 13975 to indicate form type.

Missing Signature

  1. An original signature is required, below the jurat (perjury statement), on most returns. Without the taxpayer's signature, the return is not an official document and may not be processed. ERS examiners are required to inspect returns for missing original signatures. If a return is unsigned, SSPND 640 to send the return to Rejects. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, Signature Requirements, for specific procedures regarding missing signatures.

    Exception:

    If a signature is missing on a return filed using the Streamlined Filing Compliance Procedures, DO NOT send the return back to the taxpayer. Use Letter 4087C to ask for the taxpayer's signature.

    Exception:

    Rev. Rul. 68-500 allows bulk filings of Form 1040-NR to include a facsimile (rubber stamp) signature signed for the taxpayer by an agent. Accept the facsimile signature and process the returns that are signed for the taxpayer by an agent (Attorney-in-Fact).

Late Filed Returns/Reasonable Cause

  1. Enter "N" in Field 01CCC on Form 1040 when the tax return or attachments indicate that the taxpayer meets any of the conditions in (a) through (i) below. Taxpayers that meet these conditions qualify for a special extension. Form 1040-NR and Form 1040-NR-EZ filers do not qualify. Don’t edit CCC N on Form 1040-NR or Form 1040-NR-EZ.

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

    2. The taxpayer is in the military or naval service on duty outside the United States and Puerto Rico

    3. APO/FPO address

    4. Taxpayer is qualified for an automatic two-month extension

    5. Form 2555/Form 2555-EZ dates indicate still there or continuing, and/or 1040 address is foreign

    6. Form 2555/Form 2555-EZ has an ending date later than the calendar year

    7. Taxpayer is abroad

    8. Taxpayer is overseas

    9. Return indicates Treasury Regulation 1.6081-5(a)

Special Procedures

  1. This subsection addresses special situations which may not be covered in any other section of this IRM.

Refund Schemes

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for guidance on identifying possible refund schemes and frivolous and fraudulent returns.

Amount Reported in Foreign Currency on U.S. Individual Tax Return

  1. All amounts on U.S. individual tax returns are to be reported in U.S. currency only. If amounts on the tax return are reported in foreign currency, and Code & Edit has not converted to U.S. dollars, then convert the amounts using the official rate in effect at the end of the tax year of the return as reported on the exchange rate chart published by the U.S. Treasury for the tax period of the filer’s tax return (see https://www.fiscal.treasury.gov/fsreports/rpt/treasRptRateExch/historicalRates.htm).

  2. If a Taxpayer Notice Code (TPNC) is required to resolve an error on a return after foreign currency is converted to US dollars, also assign a TPNC 100 with the following literal: "You must express the amounts you report on your United States tax return in U.S. dollars. We have used the exchange rates found at website www.fiscal.treasury.gov to convert to U.S. dollars the amounts reported in foreign currency on your return."

Conversion of Form 1040-NR-EZ to Form 1040-NR

  1. In some instances, it is necessary to convert a Form 1040-NR-EZ to a Form 1040-NR to process the return.

    Note:

    Instructions for conversion of Form 1040A and Form 1040EZ to Form 1040 are found in IRM 3.12.2, Individual Master File Error Resolution General Instructions, Conversion of Returns

  2. If a TPNC is required to resolve an error on Form 1040-NR-EZ after conversion to Form 1040-NR, assign TPNC 311 as the first notice code to inform the taxpayer that the return has been converted.

  3. If any of the following conditions are present on Form 1040-NR-EZ, convert to Form 1040-NR.

    Note:

    If missing information, correspond before converting the return.

    • Tax period other than calendar year

    • Withholding from Form 8805 or Form 8288-A

    • Taxable income without an appropriate line on the form (e.g., Social Security, pension income, dividends, gambling winnings)

    • Taxable non-effectively connected income

    • Transcribable Form 1040-NR forms or schedules attached to return (e.g., Schedule A)

    • Indication taxpayer is claiming adjustments to income (other than scholarship and fellowship grants excluded or student loan interest deduction)

    • Indication taxpayer is claiming a tax credit other than for Form 1040C

    • Indication taxpayer is filing an “Expatriation Return”, or Form 8854 is attached

Multiple Filers on the Same Return Form 1040-NR and Form 1040-NR-EZ

  1. Each taxpayer must complete a separate Form 1040-NR or Form 1040-NR-EZ and include the income and withholding for self only, even if the taxpayer is married. If there are two names on the name line of the return see Field 01NL1 First Name Line at IRM 3.22.3.14.4 for instructions.

  2. If the return includes wages or other income or withholding that doesn’t belong to the taxpayer filing the return, then adjust the return to include only the taxpayer’s income and withholding. Assign TPNC 100 with this literal: "We adjusted your tax return allowing only the income and withholding for the taxpayer filing the tax return. The other person(s) must file their own tax return to report their income and withholding."

Section 01 Data-Entity and Miscellaneous Information

  1. Section 01 contains entity data, fields for codes, received date, and miscellaneous information.

Error Record Format-Section 01

  1. Section 01 contains the following fields

    Note:

    The "Location on the Form" applies to Form 1040-NR, Form 1040-NR-EZ, Form 1040-PR, and Form 1040-SS unless specified otherwise:

    Form 1040-NR Form 1040-NR-EZ Form 1040-PR/Form 1040-SS Field Title
    01PNC 01PNC 01PNC Primary Name Control
    01PS 01PS 01PS Primary SSN
    01SNC 01SNC 01SNC Secondary Name Control
    01SS 01SS 01SS Secondary SSN
    01NL1 01NL1 01NL1 Name Line 1
    01NL2 01NL2 01NL2 Name Line 2
    01ADD 01ADD 01ADD Street Address
    01C/S 01C/S 01C/S City/State
    01ZIP 01ZIP 01ZIP ZIP Code
    01TXP 01TXP 01TXP Tax Period
    01COU 01COU 01COU Country Code
    01SPC 01SPC 01SPC Special Processing Code
    01FSC 01FSC 01FSC Filing Status Code
    01CCC 01CCC 01CCC Computer Condition Code
    01EXC 01EXC 01EXC Exemption Code Field
    01DSI     Dependency Status Field
    01DN1   01DN1 Dependent Name Control-1
    01DS1   01DS1 Dependent SSN-1
    01CT1   01CT1 Child Tax and Other Dependent Credit Indicator-1
    01DN2   01DN2 Dependent Name Control-2
    01DS2   01DS2 Dependent SSN-2
    01CT2   01CT2 Child Tax and Other Dependent Credit Indicator-2
    01DN3   01DN3 Dependent Name Control-3
    01DS3   01DS3 Dependent SSN-3
    01CT3   01CT3 Child Tax and Other Dependent Credit Indicator-3
    01DN4   01DN4 Dependent Name Control-4
    01DS4   01DS4 Dependent SSN-4
    01CT4   01CT4 Child Tax and Other Dependent Credit Indicator-4
    01RCD 01RCD 01RCD Received Date
    01RPC 01RPC 01RPC Returns Processing Code
    01ACD 01ACD 01ACD Audit Code

    Note:

    The additional foreign address fields are not transcribed.

Correction Procedures Section 01

  1. The following describes correction procedures for Section 01 that are unique to processing International returns. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for general Section 01 correction procedures.

  2. Correct coding and transcription errors and misplaced entries on displayed fields.

Field 01PS - Primary TIN

  1. Return Filed Using Streamlined Filing Compliance Procedures with Missing Primary TIN (P-TIN) - Don’t correspond for a missing TIN on a Streamlined return. If the TIN is missing and not found after searching the return and after research, then suspend with Action Code 320 to Entity for assignment of an IRSN. When the return comes back from Entity with an IRSN follow the instructions in EC 005 at IRM 3.22.3.78.2 before entering RPC O.

Field 01NL1 First Name Line - 35 Positions

  1. Form 1040-NR and Form 1040-NR-EZ can have only one name in the caption on page 1. If two names are present, determine if two incomes are present or if withholding documentation (Form W-2, Form 1042-S, etc.) is included for both names and follow these instructions.

    If Then
    All income and withholding belong to one taxpayer, Delete the name of the taxpayer who has no income or withholding from Field 01NL1.
    Both taxpayers report income or withholding, SSPND 215 and select paragraph V on Form 13900 for separate Form 1040-NR
    The box on page 1, Form 1040-NR is checked Estate or Trust and, the first name line has the name of other than an individual (such as an estate, etc.) and, there is an EIN instead of a SSN SSPND 640 to transship return to Kansas City Submission Processing Center (KCSPC).

    Note:

    If the Form 1040-NR or Form 1040-NR-EZ has only one name on the return, but income or withholding from multiple persons, then see Special Procedures at IRM 3.22.3.13.4.

Field 01NL2 Second Name Line - 35 Positions

  1. The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

    Exception:

    For TY18, this information is found on Schedule 6, Form 1040.

  2. Foreign Address - Field 01NL2 may be used when the entity is a foreign address. Field 01NL2 is limited to 35 characters.

    Exception:

    See IRM 3.22.3.112 EC 051.

    Note:

    Field 01NL2 can include other mailing address information if it allows the complete address to be entered. Some mailing address information (states, provinces and territories) must be abbreviated. See Exhibit 3.22.3-6 and IMF Foreign Address Job Aid 2513-703.

  3. If a domestic and foreign address are both present in the entity area of the return then enter the domestic address.

  4. For TY18 only, if the address on page 1 of Form 1040 is for a foreign country, and no domestic address is present, enter the foreign address in Section 01. Don’t correspond for Schedule 6.

  5. For Puerto Rico only, the following are different types of address formats:

    1. Four-line address containing Name, Urbanization, House Number and Street Name, City, State and Zip Code.

    2. Three-line address containing Name, House Number and Street Name, City, State and Zip Code.

      Exception:

      Some areas in Puerto Rico do not have street names or repetitive house numbers. The urbanization name substitutes as the street name and becomes the primary identifier.

      Example:

      Name, House Number and Urbanization Name, City, State and Zip Code.

    3. Public Housing Projects (residenciales) without street names or repetitive apartment numbers. In these cases, the apartment number is the primary number and the public housing project becomes the street name.

      Example:

      Name, Apartment Number and Residential Name, City, State and Zip Code.

    4. Apartment Buildings and Condominiums with a physical (street) address containing Name, Building Name, Street Number Apartment Number, City, State and Zip Code.

    5. Buildings without a physical address. Certain Condominiums are located on an unnamed street and may not have an assigned number. The name of the Condominium substitutes as the street name and the number 1 is used when no building number exists.

    6. Numbered streets must always contain a street prefix.

    7. House numbers - always place the house number before the street prefix. When the house number is an alpha numeric, do not use a hyphen to separate the letter from the number. See table below.

      Incorrect Form Correct Form
      Calle 12 C-19 C19 Calle 12
      A-17 Calle Ampapola A17 Calle Ampapola
      B-40 Calle 1 B40 Calle1
    8. Post Office Box - always use PO Box to identify Post Office Boxes. Do not use the Spanish words.

    9. Do not substitute the prefix Calle with the suffix street. Such substitutes render the address Undeliverable.

    10. Urbanization -- denotes an area, sector or residential development within a geographic area. Commonly used in Puerto Rico urban areas, it is an important part of the addressing format, as it describes the location of a specific street. In Puerto Rico, identical street names and address number ranges can be found within the same Zip Code. In these cases, the urbanization name is the only element that correctly identifies the location of a particular address. Generally, the abbreviation URB is placed before the urbanization name.

    11. Below is a table of examples of correct address formatting. The first line in the correct format column represents the entry for Field 01NL2. The second line represents the entry that goes into Field 01ADD:

      Tax Return Address Correct Format
      Estancias Detortuger, 521 Calle Tulpia Estancias Detortuger
      521 Calle Tulpia
      Bo Rocha Comunidad LaSalle HC 02 Box 12811 Bo Rocha Comunidad LaSalle
      HC 02 Box 12811
      Puerto Nuevo 512 Calle Aragon Puerto Nuevo
      512 Calle Aragon
      Cond. Hato Rey Plaza Jesus T Pinero #200 Apt 6-M Cond. Hato Rey Plaza Jesus T Pinero
      #200 Apt 6-M
      URB Cuidad Jardin de Bairoa 88 Calle Franca URB Cuidad Jardin de Bairoa
      88 Calle Franca
  6. When Field 01NL2 is required (deceased taxpayer, Power of Attorney (POA), minor, etc.) and a foreign address is present, follow the instructions at EC 260 to issue a manual refund. See IRM 3.22.3.195.6.

    Caution:

    If any of the conditions exist in paragraph 2 of IRM 3.22.3.195.6do not issue a manual refund.

Field 01ADD Street Address 35 Positions

  1. A foreign address is any address outside of the 50 states of the United States and the District of Columbia.

  2. The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

    Exception:

    For TY18, this information is found on Schedule 6, Form 1040.

  3. A U.S. territory address must be entered using the same format as a domestic address as described in IRM 3.12.2, Individual Master File Error Resolution General Instructions. See IRM 3.22.3.14.5 for additional instructions for addresses in Puerto Rico.

  4. If a domestic and foreign address are both present in the entity area of the return then enter the domestic address.

  5. For TY18 only, if the address on page 1 of Form 1040 is for a foreign country, and no domestic address is present, enter the foreign address in Section 01. Don’t correspond for Schedule 6.

  6. For an address in a foreign country Field 01ADD should contain the city, state, territory or province, and postal code, if present. Field 01NL2 may be used to allow for a more complete address (see Field 01NL2, IRM 3.22.3.14.5, for exceptions). When shortening the foreign address to fit the limitations of Field 01NL2 and Field 01ADD:

    • Do not remove a postal code.

    • If a postal code is present and the address can’t be shortened, delete the address information according to major (e.g., province) to minor (e.g., city, town) subdivisions of the address.

      Note:

      Some countries prefer that the postal code follow and others prefer it precede the city or town name. Follow the order as edited on the return.

  7. The following states, provinces and territories for the countries listed below must be abbreviated. See Exhibit 3.22.3-6 to enter the abbreviation:

    1. Australia

    2. Brazil

    3. Canada

    4. Cuba

    5. Italy

    6. Mexico

    7. Netherlands

    Note:

    Refer to the IMF Foreign Address Job Aid 2513-703 for additional abbreviations.

Field 01C/S City/State - 24 Characters

  1. The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

    Exception:

    For TY18, this information is found on Schedule 6, Form 1040.

  2. A foreign country name entered in Field 01C/S must be in the required format. Twenty-four (24) characters may be entered in this field, which includes the slashes (/) and period. The required space in position 25 is not visible on the ERS screen.

  3. If a domestic and foreign address are both present in the entity area of the return then enter the domestic address.

  4. For TY18 only, if the address on page 1 of Form 1040 is for a foreign country, and no domestic address is present, enter the foreign address in Section 01. Don’t correspond for Schedule 6.

  5. For foreign addresses, this field should contain ONLY the country in the correct format:

    If Then
    Correction is needed on a foreign address, Enter a slash (/), the country's name, followed by a slash (/) and a period (.). (i.e., /CHINA/.).

    Note:

    The name of all countries must be spelled out, see Exhibit 3.22.3-4, unless it is listed in (3) below.

    A foreign mail routing code is entered after the country, Enter the routing code after the state or province in Field 01ADD.

    Reminder:

    Leave Field 01ZIP blank. Do not enter the mail routing code in Field 01ZIP.

    Note:

    Refer to Foreign Address Job Aid for additional information to enter a foreign address.

  6. The following are examples of country names that too are long and the abbreviation below must always be used.

    Note:

    This list is NOT all inclusive. Document 7475 shows the complete list of acceptable abbreviations.

    Country Abbreviation
    Ashmore and Cartier Islands /Ashmore and Cartier/.
    Bosnia and Herzegovina /Bosnia Herzegovina/.
    British Indian Ocean Territory /British Indian Oc Terr/.
    British Virgin Islands /British V I/.
    Central African Republic /Central African Rep/.
    French Southern Antarctic Lands /Fr Southern Antarctic/.
    Heard Island and McDonald Islands /Heard Is McDonald Is/.
    Macedonia, the Former Yugoslav Republic of /Macedonia/.
    Saint Pierre and Miquelon /St Pierre Miquelon/.
    Saint Vincent and the Grenadines /St Vincent Grenadines/.
    Serbia and Montenegro /Serbia Montenegro/.
    South Georgia and the South Sandwich Islands /S Georgia S Sandwich/.
    Turks and Caicos Islands /Turks and Caicos Is/.
  7. For United States territory addresses: The following are valid state abbreviations for U.S. territories:

    1. AS - American Samoa

    2. MP - Commonwealth of Northern Mariana Islands

    3. GU - Guam

    4. PR - Puerto Rico

    5. VI - United States Virgin Islands

      Note:

      Although Micronesia, the Marshall Islands, and Palau are not U.S. territories, they are listed in 3.22.3-5 because they use the same addressing methods as U.S. territories.

Field 01ZIP Zip Code- 5 Positions

  1. The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

    Exception:

    For TY18, this information is found on Schedule 6, Form 1040.

  2. For FLC 20 with a foreign address:

    1. This field must be blank

    2. If a foreign mail routing code is entered after the country or in Field 01ZIP, GTSEC 01 and enter the mail routing after the state or province in Field 01ADD. Delete mail routing code from Field 01ZIP.

  3. All U.S. territory addresses must contain a valid zip code. See Exhibit 3.22.3-5

Field 01TXP Tax Period - 6 Positions

  1. Valid tax period endings are as follows:

    1. Form 1040-NR, Form 1040-NR-EZ, Form 1040-PR and Form 1040-SS - Current year tax period is not less than 201912 or more than current year and month.

    2. Form 1040-NR, Form 1040-NR-EZ, Form 1040-PR and Form 1040-SS - Prior year tax period is 196212 through 201911.

  2. Residents of Australia and New Zealand often use a June (06) fiscal tax period ending date that coincides with their country’s accounting period. Follow taxpayer intent and enter YYYY06 for the tax period when June 30th is indicated as the tax period ending date on the tax return for a resident of Australia or New Zealand.

  3. Correction Procedures -Verify the tax period on the return or attachments and correct any transcription errors. If the tax period is invalid, correct as follows:

    Exception:

    Any future tax period later than the current processing year and month, refer to Lead Tax Examiner for manual process. For early-filed decedents, refer to IRM 3.12.3, Error Resolution, Individual Income Tax Returns, EC 260.

    The tax period is Form is Then
    201912 (current) Form 1040-NR Blank Field 01TXP (computer will generate 201912)
    For fiscal or short year tax period Form 1040-NR Process as calendar year unless otherwise indicated
    For a future tax period later than the current processing year and month Form 1040-NR Refer to Lead Tax Examiner
    201912 (current) Form 1040-NR-EZ Blank Field 01TXP (computer will generate 201912)
    Prior to 199612 Form 1040-NR-EZ SSPND 610 to renumber to 1040-NR
    For fiscal or short year tax period, Form 1040-NR-EZ Process as calendar year unless otherwise indicated.
    For a future tax period later than the current processing year and month Form 1040-NR-EZ Refer to Lead Tax Examiner
    201912 (current) Form 1040-PR or Form 1040-SS Blank Field 01TXP (computer will generate 201912)
    For fiscal or short year tax period Form 1040-PR or Form 1040-SS Process as calendar year unless otherwise indicated
    For a future tax period later than the current processing year and month Form 1040-PR or Form 1040-SS Refer to Lead Tax Examiner

Field 01COU Country Code - 2 Positions

  1. The Country Code Field is a two-position field which is designed to identify treaty countries whose residents are entitled to refunds of U.S. withholding on U.S. sourced income. The Country Code will assist in identifying erroneous claims for refunds of Social Security (Form SSA-1042-S) withholding. See Exhibit 3.22.3-4 for a listing of Country Codes.

  2. Code & Edit edits the Country Code to the right of the Entity Section of Form 1040-NR and Form 1040-NR-EZ. Determine the country of permanent residence using the information on the tax return in this order:

    1. Line B, page 5 (line B, page 2 Form 1040-NR-EZ)

    2. Line A, page 5 (line A, page 2 Form 1040-NR-EZ)

    3. Address from the Entity section of Form 1040-NR or Form 1040-NR-EZ

    4. Review of any attachments

    If Then
    The country entered on line B is “US”, Enter “XX” in Field 01COU.
    The taxpayer indicates "Same" on line B and A, Determine the Country Code by using the address information in the Entity section.
    The country in which the taxpayer was a permanent resident can’t be determined and the taxpayer uses a United States address in the entity section of Form 1040-NR or Form 1040-NR-EZ, Enter “XX” in Field 01COU.
    The country in which the taxpayer was a resident isn’t listed in Exhibit 3.22.3-4 Enter "XX" in Field 01COU.

Field 01SPC Special Processing Code

  1. A special processing code (SPC) is an alphabetic or numeric character entered by a Code & Edit examiner to alert the computer to a special condition or computation. The number of SPCs in a return may not exceed ten. These codes are used for campus processing and do not post to the Master File. This field was created as an overflow for return processing codes.

  2. The list of Special Processing Codes is in IRM 3.12.2, Individual Master File Error Resolution General Instructions, Exhibit 3.12.2-4, Special Processing Code.

    • The valid SPC for Form 1040-NR and Form 1040-NR-EZ are B, C, D, E, F, G, J, L, M, N, P, Q, R, S, T, U, V, W, X, 2, 3, 8, and 9.

      Note:

      SPC U is generated by Modernized E-File (MeF) on Form 1040-NR. See instructions in EC 215 at IRM 3.22.3.168.2

    • The valid SPC for Form 1040-PR and Form 1040-SS are B, D, J, M, S, T, V, 2, 3, 8, and 9.

Field 01FSC Filing Status Code - 1 Position

  1. An entry in Field 01FSC is invalid if the Filing Status Code is other than:

    • Form 1040-NR all tax years: 1, 3, 5

    • Form 1040-NR TY17 and prior year only: 1, 3, 5, 6

    • Form 1040-NR-EZ: 1, 3

  2. Form 1040-NR:

    If And Then
    Box 1 (TY17 and prior year only) is checked TY17 and prior year return,

    Note:

    Box 1 is reserved in TY19/TY18.

    Code & Edit will edit FSC "1"
    Box 2 is checked   Code & Edit will edit FSC 1
    Box 3 or 4 (TY17 and prior year only) is checked
    • TY17 and prior year return, and

    • Spouse's exemption is not claimed,

    Note:

    Box 3 and 4 are reserved in TY19/TY18.

    Code & Edit will edit FSC "3"
    Box 3 or 4 (TY17 and prior year only) is checked
    • TY17 and prior year return, and

    • Spouse's exemption is claimed,

    Note:

    If both taxpayers have income, SSPND 215 and select paragraph V on Form 13900 for separate income tax returns.

    Code & Edit will edit FSC 6

    Note:

    FSC 6 is valid only on TY17 and prior year returns.

    Box 5 is checked   Code & Edit will edit FSC "3"
    Box 6 is checked Date of death is less than 2 years and the taxpayer is a resident of Canada, Mexico or South Korea, Code & Edit will edit FSC "5" .
    Box 6 is checked Date of death is less than 2 years and the taxpayer is not a resident of Canada, Mexico or South Korea, Code & Edit will edit FSC "1" .
    Box 6 is checked Date of death is more than 2 years, Code & Edit will edit FSC "1" .
    No box is checked   Code & Edit will edit FSC "1" .
  3. Form 1040-NR-EZ:

    If Then
    Box "1" is checked, Enter "1" in Field 01FSC.
    Box "2" is checked, Enter a "3" in Field 01FSC.
    No box is checked, Enter a "1" in Field 01FSC.
  4. Filing Status Code for Dual-Status - Filing Status (FS) can be 1, 3, or 5; and FS 6 in TY17 and prior year.

    Reminder:

    A dual-status taxpayer cannot claim Head of Household or Married Filing Jointly on dual-status Form 1040 or Form 1040-NR.

    Note:

    The taxpayer can elect to file a Married Filing Jointly (FSC 2) return and report worldwide income under IRC 6013(g) and (h). To qualify under IRC 6013(g) or (h), one taxpayer must be a resident alien or U.S. citizen. See instructions in EC 250 at IRM 3.22.3.191.2.4.1 or EC 252 IRM 3.22.3.192.2.4.1 to determine filing status corrections on dual-status returns.

Field 01CCC Computer Condition Code (CCC) - 10 Positions

  1. The Computer Condition Code (CCC) is transcribed in Field 01CCC from the following area on the return:

    1. Form 1040-NR and Form 1040-NR-EZ - upper portion of the filing status

    2. Form 1040-PR and Form 1040-SS - upper portion of Part I, Self-Employment Tax

    Note:

    Some CCC are generated by the computer on the error record to indicate a special condition or computation and will post to the Master File

  2. An entry in Field 01CCC is invalid if the Computer Condition Code is other than the following:

    1. Form 1040-NR - 1, 2, 3, 4, 7, 8, B, C, E, F, G, H, I, J, L, M, N, O, P, R, U, V, W, X, Y, or Z.

    2. Form 1040-NR-EZ - 1, 2, 3, 7, 8, B, C, F, G, H, I, J, L, M, N, O, P, R, U, V, W, X, Y, or Z.

    3. Form 1040-PR or Form 1040-SS - 1, 3, 4, 7, 9, A, B, E, F, G, H, L, M, N, O, P, Q, R, U, V, W, X, Y, or Z.

  3. Correction Procedures- Determine and enter the correct code, if needed.

    1. A CCC "3" must be in the first position.

    2. CCC "5" or "6" must always be preceded by CCC "G" .

    3. SSPND 610, for renumbering, when a Form 1040-X has CCC "5" or "6" preceded by CCC "G" and is not in blocking series 990-999 or vice versa.

  4. The list below describes Computer Condition Codes commonly used on international returns. For a complete list of Computer Condition Codes see IRM 3.12.2, Individual Master File Error Resolution General Instructions, Exhibit 3.12.2-2, Computer Condition Codes.

    Code Explanation
    1 Edited by RICS IVO to freeze overpayment of account at Master File
    3 Freezes release of overpayment of account at Master File.
    C Form 1040-NR/Form 1040-NR-EZ with Form 8833 (Treaty-Based Return Disclosure Under IRC 6114 or 7701(b))
    E Delete filing requirements for taxpayers who are not deceased
    J NRA spouse
    H Form 8938, Statement of Foreign Financial Assets, is attached.
    M Reasonable cause for failure to pay tax by due date.
    N Taxpayer qualifies for a 2-month extension from due date for filing return (Form 1040/A/EZ only)
    P Reasonable cause for underpayment of estimated tax.
    R Reasonable cause for delinquent filing.
    U Indicates no reply to correspondence and prevents generation of credit interest.
    Y Causes return to generate EC 260 for ERS review (see IRM 3.22.3.195)

Field 01RCD Received Date - 8 Positions

  1. If an international Form 1040, Form 1040-NR, Form 1040-NR-EZ, Form 1040-SS, or Form 1040-PR is transshipped to AUSPC from another IRS Campus, Territory Office, or IRS foreign post, take the following action:

    If Then
    Code & Edit has not circled out the original IRS received date, Circle out the original received date and leave the AUSPC received date.
    There is no Austin Submission Processing Center (AUSPC) received date, Enter the received date using the Julian Date from the DLN minus 10 days.
  2. Refer to IRM 3.12.2, Individual Master File Resolution General Instructions, Field 01RCD, Received Date, for additional procedures on determining received dates.

  3. If a received date is needed but not stamped or written on the return, and there’s no indication that the return was transshipped as described above, then determine the received dates by following the priorities in IRM 3.12.2.4.3.20 paragraph (9).

  4. ALWAYS review each return for the words "Sent Back for Signature" or similar statement and a date present in the lower left-hand corner of the return. These are returns that were originally received missing a signature and were mailed back to the taxpayer from Receipt and Control. If a date and the notation, "Sent Back for Signature" is present, follow the instructions below for determining the received date:

    1. If the return is Balance Due and a received date is present showing a date within 45 days of the "Returned for signature date stamp" , honor the date the return was sent back for signature. Delete any later received date(s) that may be present

    2. If the return is Balance Due and a received date is present showing a date MORE than 45 days after the "Returned for signature date stamp" , honor the latest received date. Delete any earlier received date(s) that may be present.

    3. If the return is a Refund, Credit Elect or Zero balance return, honor the latest received date. Delete any earlier received date(s) that may be present.

    Note:

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

Field 01EXC Exemption Codes

  1. The exemption amount that can be claimed on an individual’s Form 1040-NR in TY 201812 and later is $0. Exemption coding (Field 01EXC and Field 94EXV) is retained for determining family size in certain calculations.

    Note:

    TY18 and later, an exemption that is allowed based on country of residence is also an allowable dependent.

  2. For TY18 and later Form 1040-NR, the exemption line (TY19 line 39) is only to allow for exemptions when the form is filed by an Estate or Trust. These returns are processed at the Kansas City Submission Processing Center.

  3. Form 1040-NR - Dependents (TY18 and later) and Exemptions (TY17 and prior) are limited by country of residence. The country of residence is determined by using taxpayer information on page 5 (Schedule OI) of Form 1040-NR or on other attachments.

    1. Residents of South Korea can claim an exemption for self, spouse or children, however the children must live with the parents in the United States.

    2. Residents of Canada, Mexico and United States National may claim exemptions for self, spouse, and/or other dependents.

    3. Residents of India who are students or business apprentices may claim exemptions for self, spouse and/or dependents on the same basis as United States citizens.

    4. All others are allowed only one exemption for self only. Delete the name control and TIN if present for all others than the primary taxpayer.

  4. Form 1040/Form 1040A use exemption positioning as if the taxpayer lived in the United States. For example, if the taxpayer lists children who lived with them, enter that number of exemptions in position 3 regardless of the address on the return.

  5. Form 1040-PR/Form 1040-SS the computer will generate Field 01EXC based on filing status.

    Caution:

    Do not edit Field 01EXC on Form 1040-PR/Form 1040-SS.

Field 01RPC Return Processing Code (RPC) - 8 Positions

  1. Return Processing Codes (RPC) are edited as follows:

    • Form 1040-NR - near the right of line 23

    • Form 1040-NR-EZ - near the right of line 19

    • Form 1040-PR or Form 1040-SS - near the right of line 5

  2. An entry in Field 01RPC is invalid if the Return Processing Code is other than:

    1. Form 1040-NR/Form 1040-NR-EZ (Doc. Code 72/73) and RPC is other than A, B, C, D, F, G, H, I, J, K, L, N, O, Q, R, S, T, U, V, W, X, Y, Z, 1, 2, 3, 4,5, 6, 7, or 9

    2. Form 1040-PR/Form 1040-SS (Doc. Code 26/27) - RPC other than E, K, L, O, Q, R, V, Y, or 6.

  3. Correction Procedures- Take the following actions to correct Field 01RPC:

    1. Check for coding and transcription errors and correct, if needed.

    2. Determine and enter the correct code.

    3. Blank the field when the RPC written on the return is illegible and/or you cannot determine the correct RPC from the explanations in (4) below.

  4. Return Processing Codes - The number of Return Processing Codes may not exceed ten. The codes and their meanings are listed below:

    Code Explanation
    F Taxpayer has included IRC 965 claims or payments on the return.
    G Forces computer to bypass Error Code 118 Check.
    H Other Contributions equal to or greater than $500 are present on Schedule A, and Form 8283 or equivalent statement is attached.
    I Taxpayer enters "Died" in the SSN area for a dependent or EIC child and a supporting birth certificate (or death certificate with a date of birth) is present.
    J Total Tax exceeds 50 percent of Adjusted Gross Income.
    K Indicates the return has been cleared by Statute Control. Valid on prior year returns only.
    M Indicates Form 2555-EZ is attached.
    R Authenticated by Electronic Filing PIN (eFP). MeF ONLY - DO NOT ENTER OR DELETE.
    S Taxpayer is exempt from paying self-employment tax.
    U Form 8949 attached with code ”Y” or “Z” in column (f)
    X Reserved
    1 Edited on dual-status Tax Returns
    6 1/2 SE Deduction bypass (1/2 SE Deduction is not valid for TY97 and prior). Also valid for TY08 and later
    8 E-file Form 1040 Additional Child Tax Credit with Puerto Rico Address
  5. RPC "8" may generate as a Field Error on Form 1040A returns that otherwise meet the RPC "8" criteria.

    1. Refer to all instructions under EC 339 to make the correct determination. See IRM 3.22.3.252.

    2. Delete RPC 8.

ERS Action Code - 3 Positions

  1. ALWAYS SSPND with Action Code 215 for first correspondence with taxpayers in FLC 20 or 21.

  2. The ERS Action Code indicates that specific information is missing, or the return is being suspended, or removed from processing. Error Resolution System (ERS) Action Codes will have sufficient detail to indicate if correspondence, in-house research, or other action(s) are required. For a complete listing of ERS Action Codes refer to the exhibit in IRM 3.12.2, Individual Master File Error Resolution General Instructions.

  3. Code & Edit Tax Examiners assign Action Codes to numbered returns that are unprocessable, require research, correspondence, etc. The code is entered on the lower center margin of the return.

  4. Correspondence Action Sheets (Form 3696-A, Form 6001, Form 13900, or Form 13975) used for initiating correspondence are attached by Code & Edit. For routing within the service center (In-House Research), codes and literals for each Action Code will generally be sufficient with no further explanation.

  5. The Action Code assigned by Code & Edit is transcribed and kept as part of the Form 1040/Form 1040-NR record. It will always display as a Priority 1 error.

  6. The presence of a valid Action Code except for Action Code 001, places the record in the suspense inventory, either Workable or Unworkable.

  7. If the Action Code assigned by Code & Edit is invalid or incomplete, the "000" is used as a clear code to delete invalid or erroneous Action Codes when there is no reason to suspend the record.

  8. Only one Action Code can be assigned at one time to a record.

  9. Use Command Code SSPND, RJECT or NWDLN to enter an Action Code on the record, correct an invalid code, resuspend, or delete a record from ERS.

    1. Entering a valid Action Code with SSPND Command Code clears the record from the screen and places it in either Workable or Unworkable Suspense.

    2. An ERS Tax Examiner entering a valid Action Code with the RJECT Command Code deletes the record from ERS. Generally, the Service Center Control File (SCCF) is automatically updated for the deleted records. Only Action Codes 620, 630, 640, 650, 660, and 670 are valid with Command Code RJECT.

    3. Entering an Action Code with the NWDLN Command Code deletes the record from ERS and establishes a new DLN for reinput.

Field 01ACD Audit Codes - 10 Positions

  1. This is edited by Code & Edit in the bottom right margin of Page 1.

    1. The valid Audit Codes for Form 1040-NR (Doc. Code 72 and 73) are 2, 3, B, C, H, J, K, L, N, P, Q, R, S, U, V, W, X, and Z.

    2. The valid Audit Codes for Form 1040-PR/Form 1040-SS (Doc. Code 26 and 27) are 2, 3, B, H, J, K, L, U, X, and Z.

  2. Invalid Conditions - are as follows:

    1. For Form 1040-NR/Form 1040-NR-EZ (Doc. Code 72/73) and the Audit Code is other than 2, 3, B, C, H, J, K, L, N, P, Q, S, U, V, W, X, or Z.

    2. For Form 1040-PR/Form 1040-SS (Doc. Code 26/27) and the Audit Code is other than 2, 3, B, H, K, L, U, X, or Z.

  3. Correction Procedures - Compare the field on the screen with the entry on the return. If edited or transcribed incorrectly, correct the screen display and the code entered in the lower right margin of page 1 of the return. If the code is illegible, use the following list to determine the correct Audit Code:

    Code Explanation
    2 Form 8862 attached with Child Tax Credit/ACTC/ODC portion completed.
    3 Form 8862 attached with American Opportunity Credit portion completed.
    H
    • Form 8891 is attached

    • Form 926 is attached

    • Form 3520, Form 3520-A is attached

    • Form 5471 or Form 5472 attached

    • Schedule B, line 8 box marked “yes”.

    J Special Use.
    K
    • Preparer identified by Compliance Division Criminal Investigation Staff

    • Refund Scheme Return/Refund

    • Disclosure Statement, Refund Scheme, Preparer Identified is attached

    • Form 1040-NR with Form 8854 attached

    L
    • Joint committee case

    • IRC 6501(d), request for prompt audit or assessment.

    N Form 1040-NR filer occupation is entertainer or professional athlete.
    U Form 8862 attached with EIC portion completed
    X Return file contains an ITIN for the primary and/or secondary taxpayer. This code is entered by Examiners in ITIN. It is not for use by examiners in ERS.
    Z Form 8919 Uncollected Social Security and Medicare Tax on Wages is filed with the return and is incomplete.

    Note:

    Audit Code "D" is NOT valid for Form 1040-NR or Form 1040-NR-EZ. Collections has agreed to discontinue editing Audit Code "D" on these returns until further notice. Delete Audit Code "D"

    if edited/entered on a Form 1040-NR or Form 1040-NR-EZ.

  4. If the correct audit code cannot be determined delete the audit code from the screen.

Section 02 - Form 3471 (Edit Sheet) and ERS Validation

  1. Section 02 contains edited information from Form 3471, Edit Sheet and fields used for ERS validation.

Error Record Format-Section 02

  1. Section 02 contains the following Fields:

    Form 1040-NR Form 1040-NR-EZ Form 1040-PR/Form 1040-SS Field Title
    02RI 02RI 02RI Revalidation Indicator
    02DTR   02DTR Dependent TIN Requirement
    02CD1 02CD1 02CD1 Unallowable Code-1
    02AM1 02AM1 02AM1 Unallowable Amount-1
    02CD2 02CD2 02CD2 Unallowable Code -2
    02AM2 02AM2 02AM2 Unallowable Amount-2
    02CD3 02CD3 02CD3 Unallowable Code -3
    02AM3 02AM3 02AM3 Unallowable Amount -3
    02AGI 02AGI   Unallowable Adjusted Gross Income
    02ITM 02ITM   Unallowable Itemized
    02NI 02NI   Unallowable Net Income
    02TXA 02TXA 02TXA Unallowable Tax Adjustment
    02RPD 02RPD 02RPD Correspondence Received Date
    0206 0206 0206 Late Filing Code
    02PDP 02PDP 02PDP Pre-Determined Delinquency Penalty
    0208 0208 0208 Form 4563 Indicator
    0211 0211 0211 ID Number Penalty
    02W2A 02W2A   ITIN Return First W-2 SSN (ERS Input Only)
    02W2B 02W2B   ITIN Return Second W-2 SSN (ERS Input Only)
    02ARC 02ARC 02ARC ACA Resolution Code (ERS Input Only)

Form 3471 - Unallowables on International Tax Returns

  1. Don’t enter unallowable codes (UA) or unallowable amounts on any international tax returns including Form 1040, Form 1040A, Form 1040EZ, Form 1040-NR, Form 1040-NR-EZ, Form 1040-SS, and Form 1040-PR. Unallowable instructions in IRM 3.12.3, Error Resolution, Individual Income Tax Returns, don’t apply to any international returns. LB&I Compliance has developed other methods to select unallowable cases for review.

  2. Delete entries if present in the following fields in Section 02: 02CD1, 02AM1, 02CD2, 02AM2, 02CD3, 02AM3, 02AGI, 02ITM, 02NI, and 02TXA.

Field 0208 Form 4563 Indicator

  1. Description -This field is edited on line 8 of Edit Sheet Form 3471.

  2. Invalid Condition - Any entry other than "1" .

  3. Correction Procedures -

    1. If Form 4563 is attached to the return, Code & Edit will enter a "1" . This number must be entered in Field 0208.

    2. Delete an entry other than a "1" , if present in this Field.

    3. Field 0208 is only valid for FLC 21.

Section 03 - Simplified Tax Return

  1. For Section 03 refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, Section 03, for field descriptions, invalid conditions and correction procedures unless otherwise specified

Error Record Format-Section 03

  1. Section 03 contains the following Fields:

    Form 1040-NR Form 1040-NR-EZ Form 1040-PR/Form 1040-SS Field Title
    03WG 03WG   Wages
    03INT     Taxable Interest
    03TEI     Tax Exempt Interest
    03DIV     Ordinary Dividends
    03QD     Qualified Dividends
    03GIR     Gross Individual Retirement Account (IRA) Distributions
    03TIR     Taxable IRA Distributions
    03GPA     Gross Pensions and Annuities
    03TPA     Taxable Pensions and Annuities
    03CGL     Schedule D Profit/Loss
    03TOT 03TOT   Total Income
    03TAJ     Total Adjustments
    03AGI 03AGI   Adjusted Gross Income
    03QBI     Qualified Business Income Deduction
    03INC 03INC   Taxable Income
    03TTX 03TTX   Tentative Tax
    03AF     Additional Forms 8814 attached (ERS only)
    03AT     Additional Forms 8814 Tax (ERS only)
    03HCR   03HCR Form 8885 Health Coverage Recapture Amount (ERS Only)
    03COD     Child Tax and Other Dependent Credit Amount
    03NRC     Total Statutory Credits
    03TAX 03TAX 03TAX Total Tax
    03WH 03WH   Withholding-Form(s) W-2 or 1099
    03ACT   03ACT Additional Child Tax Credit
    03PAY 03PAY 03PAY Total Payments
    03BDR 03BDR 03BDR Balance Due/Refund
    03CEL 03CEL 03CEL Credit Election Amount
    03ETP 03ETP 03ETP Pre-Determined Estimated Tax Penalty
    03AI 03AI 03AI Third Party Authorization Indicator
    03TPN 03TPN 03TPN Third Party Designee Name
    03TPI 03TPI 03TPI Third Party Designee ID Number
    03EMW   03EMW E-File Mandate Waiver Indicator
    03PT 03PT 03PT Preparer TIN
    03PE 03PE 03PE Preparer EIN
    03PC 03PC 03PC Preparer Code
    03PTN 03PTN 03PTN Preparer Telephone Number

Fields 03WG - Wages

  1. This field is located on line 8, Form 1040-NR and line 3, Form 1040-NR-EZ. Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

  2. Household Employees may not have Form W-2 to support an entry on line 8, Form 1040-NR or line 3, Form 1040-NR-EZ. They are instructed to write "HSH" and the amount of earnings to the left of the wages line. Consider this a "Form W-2 type" statement.

Field 03INT Taxable Interest

  1. This field is located on line 9a, Form 1040-NR. Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

  2. United States bank interest, savings and loan or similar association interest and certain deposits with United States insurance companies is not taxable. Delete entry where reported.

    Note:

    Generally, dividends received from stocks and mutual funds, as well as interest received from bonds not in registered form, is considered taxable income.

Field 03TEI Tax Exempt Interest

  1. ≡ ≡ ≡ ≡ ≡ taxpayer's entry.

Field 03DIV Ordinary Dividends

  1. This field is located on line 10a, Form 1040-NR. Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03QD Qualified Dividends

  1. This field is located on line 10b, Form 1040-NR. Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03CGL Schedule D Profit/Loss

  1. This field is located on line 14, Form 1040-NR. Refer to EC 204 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Fields 03GIR and 03TIR Gross and Taxable IRA Distribution

  1. These fields are located on line 16a (Gross) and 16b (Taxable), Form 1040-NR on TY2019 and TY 2017 and prior returns. Refer to EC 218 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns. In TY 2018, IRA amounts are combined with pensions and annuities and reported on line 17a and 17b.

Fields 03GPA and 03TPA Gross and Taxable Pensions and Annuities

  1. These fields are located on line 17a (Gross) and 17b (Taxable), Form 1040-NR. Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03TOT Total Income

  1. This field is located on line 23, Form 1040-NR; line 7, Form 1040-NR-EZ; line 7b Form 1040. Refer to EC 218 in both IRM 3.22.3.171 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03TAJ Total Adjustments

  1. This field is located on line 34, Form 1040-NR. Refer to EC 229 in both IRM 3.22.3. and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03AGI Adjusted Gross Income (AGI)

  1. This field is located on line 35, Form 1040-NR and line 10, Form 1040-NR-EZ. Refer to EC 230 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03QBI Qualified Business Income Deduction

  1. This field is located on line 38, Form 1040-NR, TY 2018 and later. Refer to EC 248, 249 and EC 250 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03INC Taxable Income

  1. This field is located on line 41, Form 1040-NR and line 14, Form 1040-NR-EZ. Refer to EC 250, EC 252, and EC 265 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03TTX Tentative Tax

  1. This field is located on line 42, Form 1040-NR and line 15, Form 1040-NR-EZ. Refer to EC 265 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03AF Additional Form 8814 attached (ERS only)

  1. This field is ERS input only. Refer to EC 265 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03AT Additional Form 8814 Tax (ERS only)

  1. This field is ERS input only. Refer to EC 265 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03HCR Form 8885 Health Coverage Recapture Amount (ERS Only)

  1. This field is ERS input only.

Field 03COD Child Tax and Other Dependent Credit Amount

  1. This field is located on line 49, Form 1040-NR. Refer to EC 290 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03NRC Total Statutory Credits

  1. This field is located on line 52, Form 1040-NR. Refer to EC 310 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03TAX Total Tax

  1. This field is located on line 61, Form 1040-NR; line 17 Form 1040-NR-EZ; line 6 Form 1040-PR/1040-SS. Refer to EC 334 in both IRM 3.22.3.248 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 03WH Withholding

  1. This field is located on line 62A, Form 1040-NR; line 18A Form 1040-NR-EZ. Field 03WH is for withholding from Form(s) W-2 and Form(s) 1099.

  2. Form 1040-NR and Form 1040-NR-EZ also has other types of withholding claims. Refer to the instructions for Fields 0562B, C and D, Form 1040-NR and Field 0518B, Form 1040-NR-EZ Withholding.

Field 03ACT Additional Child Tax Credit

  1. This field is transcribed from line 64 of Form 1040-NR; line 9, Form 1040-PR/Form 1040-SS. See IRM 3.22.3.253.

Field 03PAY Total Payments

  1. This field is transcribed from line 71, Form 1040-NR; line 21, Form 1040-NR-EZ, and line 11, Form 1040-PR and Form 1040-SS. See EC 355 at IRM 3.22.3.262.4.1.

Field 03BDR Balance Due/Refund

  1. This field is a negative field (meaning a refund due to taxpayer) if transcribed from line 73a; Form 1040-NR; line 23a, Form 1040-NR-EZ; and line 13a, Form 1040-PR and Form 1040-SS. This field is positive (meaning amount due to IRS) if transcribed from line 75, Form 1040-NR; line 25, Form 1040-NR-EZ; and line 15, Form 1040-PR and Form 1040-SS.

Field 03CEL Credit Election Amount

  1. This field is transcribed from line 74, Form 1040-NR; line 24, Form 1040-NR-EZ; line 14, Form 1040-PR or Form 1040-SS

  2. Credit Election amount Field is used to indicate the amount of overpayment that the taxpayer wants to allocate toward the next year’s tax liability.

Field 03ETP Pre-Determined Estimated Tax Penalty

  1. This field is transcribed from line 76, Form 1040-NR; line 26, Form 1040-NR-EZ

  2. This field is transcribed from the coded amount next to line 14 of Form 1040-PR or Form 1040-SS.

Field 03AI Third Party Authorization Indicator

  1. This field is transcribed from the third party designee area of page 2, Form 1040-NR; page 1, Form 1040-NR-EZ, Form 1040-PR or Form 1040-SS

Field 03TPN Third Party Designee Name

  1. This field is transcribed from the Third Party Designee area on page 2, Form 1040-NR; page 1, Form 1040-NR-EZ, Form 1040-PR or Form 1040-SS. It is 20 characters in length.

Field 03TPI Third Party Designee ID Number

  1. This field is transcribed from the Third Party Designee area on page 2, Form 1040-NR; page 1, Form 1040-NR-EZ, Form 1040-PR or Form 1040-SS. The taxpayer is instructed to enter 5 digits, alpha or numeric that they choose as their ID Number.

Field 03EMW E-FIle Mandate Waiver Indicator

  1. This field is transcribed from the lower right of page 2, Form 1040-NR, and page 1 of Form 1040-PR, or Form 1040-SS.

Field 03PT Preparer TIN

  1. This field is transcribed from the preparer’s area of page 2, Form 1040-NR, and page 1 of Form 1040-NR-EZ, Form 1040-PR, or Form 1040-SS.

Field 03PE Preparer EIN

  1. This field is transcribed from the preparer’s area of page 2, Form 1040-NR, and page 1 of Form 1040-NR-EZ, Form 1040-PR, or Form 1040-SS.

Field 03PC Preparer Code

  1. This code will be edited to the right of the Preparer's EIN on page 2, Form 1040-NR; page 1, Form 1040-NR-EZ and Form 1040-PR or Form 1040-SS.

Field 03PTN Preparer Telephone Number

  1. This field is transcribed from under the Paid Preparer's information in the lower right-hand margin of page 2, Form 1040-NR; page 1, Form 1040-NR-EZ, Form 1040-PR or Form 1040-SS. It is a ten-digit field that can contain alpha, numeric and blank entries.

Section 04 - Additional Income and Adjustments to Income

  1. For Section 04 refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, Section 04, for field descriptions, invalid conditions and corrections unless otherwise specified.

Error Record Format - Section 04

  1. Section 04 contains the following Fields:

    Note:

    The "Location on the Form" applies to Form 1040-NR, Form 1040-NR-EZ, Form 1040-PR, and Form 1040-SS unless specified otherwise:

    Form 1040-NR Form 1040-NR-EZ Form 1040-PR/Form 1040-SS Field Title
    0411 0404   State Income Tax Refund
    0412 0405   Scholarship or Fellowship Grant
    0413     Combined Schedule C Profit/Loss
    0415     Other Gains/Losses
    0418     Schedule E Profit/Loss
    0419     Combined Schedule F Profit/Loss
    0420     Taxable Unemployment Compensation
    0421     Other Income
    0422 0406   Income Exempt by Treaty
    0424     Educator Expenses
    0425     Health Savings Account Deduction
    0426     Moving Expenses
    0427     Deduction for Self-Employment (SE)Tax
    0428     SE Retirement Plans Deductions
    0429     Self Employed Health Insurance
    0430     Penalty on Savings Withdrawal
    0431 0408   Scholarship or Fellowship Grant Excluded
    0432     IRA Deduction
    0433 0409   Student Loan Interest Deduction
    04DPA     Domestic Production Activities Deduction (ERS only)
    04MSA     Archer Medical Savings Account
    04ADJ     Other Adjustments
    04RTA   04RTA Form 982 Indicator

Fields 0411/0404 - State Income Tax Refund

  1. This field is located on line 11, Form 1040-NR; line 4 Form 1040-NR-EZ. Refer to EC 218 in both IRM 3.22.3. and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Fields 0412/0405 - Scholarship or Fellowship Grants

  1. Scholarship or Fellowship Grants are reported on line 12, Form 1040-NR, and line 5, Form 1040-NR-EZ.

  2. An entry on line 12, Form 1040-NR, or line 5, Form 1040-NR-EZ, may be supported by one of the following documents:

    1. Form W-2 (issued by a college or an educational institution)

    2. Form 1042-S, Income Code 16 issued by a college or educational institution (Income Code 15 in TY 2014 and prior)

    3. A statement from the educational institution (on their letterhead) which identifies the income paid to the nonresident alien taxpayer as a Scholarship or Fellowship Grant.

    Note:

    Support is not required for an entry on line 12, Form 1040-NR, or line 5, Form 1040-NR-EZ.

  3. If the Scholarship or Fellowship Grant income is included in Wages (Field 03WG of Form 1040-NR, and Form 1040-NR-EZ), adjust the wages and enter the Scholarship or Fellowship Grants in Field 0412 of Form 1040-NR, or Field 0405 or Form 1040-NR-EZ.

    Caution:

    If it can be determined that the taxpayer is claiming a tax treaty exemption of Scholarship or Fellowship Grant income see EC 218 instructions at IRM 3.22.3.171.2.2.1 (5) (Form 1040-NR) or IRM 3.22.3.171.2.2.2 (3) (Form 1040-NR-EZ).

Field 0413 Combined Schedule C Profit/Loss

  1. This field is located on line 13, Form 1040-NR. Refer to EC 202 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0415 Other Gains/Losses

  1. This field is located on line 15, Form 1040-NR. Refer to EC 218 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0418 Schedule E Income/Loss

  1. This field is located on line 18, Form 1040-NR. Refer to EC 206 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0419 Combined Schedule F Profit/Loss

  1. This field is located on line 19, Form 1040-NR. Refer to EC 208 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0420 Taxable Unemployment

  1. This field is located on line 20, Form 1040-NR. Refer to EC 218 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns. For TY2009 ONLY, the first $2400 in unemployment compensation is not taxable.

Field 0421 Other Income

  1. This field is located on Line 8, Schedule 1, Form 1040 and Line 21, Form 1040-NR. Refer to EC 218 in both IRM 3.22.3.171 and IRM 3.12.3 Error Resolution, Individual Income Tax Returns.

Field 0422/0406 - Total Income Exempt by Treaty

  1. This field is located on line 22, Form 1040-NR and line 6 Form 1040-NR-EZ and is used for information purposes only and not used in the computation of total income. Refer to EC 218 in IRM 3.22.3.171.2.2.1 (8) for Form 1040-NR and IRM 3.22.3.171.2.2.2 (4) for Form 1040-NR-EZ.

  2. The taxpayer's entry on line 22 (line 6) must correspond to the information provided about treaty-exempt income reported on page 5, item L, Form 1040-NR, or page 2, item J, Form 1040-NR-EZ, or elsewhere on the return.

  3. The taxpayer must identify:

    1. the name of the foreign country whose tax treaty with the United States provides his exempt status;

    2. the treaty article number which exempts his specific income; and

    3. the amount of the exempt income for the tax year.

    Note:

    In addition, if the taxpayer claims the benefits of the Government Service treaty article listed in Exhibit 3.22.3-2 verify that the taxpayer holds an A1 or A2 visa and refer to the Exhibit to determine if the claim is valid.

  4. All three (3) items listed above must be identified before validation of the treaty can be completed. Correspond for any missing information by selecting paragraph J on Form 13900. If no reply or an incomplete reply, disallow the treaty exemption.

  5. Treaty income exemption claims are validated using the tax treaty table at Exhibit 3.22.3-1, Table 2. Compensation for Personal Services, and the table of exempt countries for government service employees at Exhibit 3.22.3-2. Include the guidance in the footnotes on the tax treaty table when validating treaty exemption claims. The footnotes are based on the specific provisions in each of the tax treaties.

    Example:

    Per the tax treaty table, a resident of Australia may claim an exemption of $10,000 under Article 17 for public entertainment income for the tax year. The table has footnote “25” attached to the maximum amount on the table. Footnote 25 says that the exemption doesn’t apply if gross receipts of this type of income exceed the maximum amount. As a result, the exemption isn’t allowed when the total Article 17 income is over $10,000.

  6. If the taxpayer provides a treaty article number, but doesn’t cite the subparagraphs, accept the treaty article without the subparagraphs if the country and amount are valid for that article number on the treaty tables.

Field 0424 Educator Expense

  1. This field is located on line 24, Form 1040-NR. Refer to EC 220 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0425 Health Savings Account Deduction

  1. This field is located on line 25, Form 1040-NR. Refer to EC 226 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0426 Moving Expenses

  1. This field is located on line 26, Form 1040-NR. Refer to EC 229 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0427 Deduction for Self-Employment Tax Amount

  1. This field is located on line 27, Form 1040-NR. Refer to EC 211 in IRM 3.22.3.166.

  2. Nonresident aliens who are filing a dual-status tax return are required to pay SE tax on their United States Self-Employment income and are allowed to take a deduction for one-half of the SE tax paid on line 27.

Field 0428 SE Retirement Plans Deduction

  1. This field is located on line 28, Form 1040-NR. Refer to EC 229 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0429 Self Employed Health Insurance

  1. This field is located on line 29, Form 1040-NR. Refer to EC 229 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0430 Penalty on Saving Withdrawal

  1. This field is located on line 30, Form 1040-NR. Refer to EC 229 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Fields 0431/0408 - Scholarship or Fellowship Grants Exclusion

  1. This field is located on line 31, Form 1040-NR and line 8, Form 1040-NR-EZ. Refer to EC 229 in IRM 3.22.3.178.2.2 (Form 1040-NR) and EC 230 IRM 3.22.3.179.2.3 (Form 1040-NR-EZ).

Field 0432 IRA Deduction

  1. This field is located on line 32, Form 1040-NR. Refer to EC 222 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0433 Student Loan Interest Deduction

  1. This field is located on line 33, Form 1040-NR. Refer to EC 224 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 04DPA Domestic Production Activities Deduction (ERS Only)

  1. Domestic Production Activities Deduction is expired for TY19 and later returns.

  2. This field is located on line 34, Form 1040-NR, for TY17 and prior. This field is ERS input only. This deduction will be entered as a write-in by the taxpayer on the dotted portion of line 34 in TY18. For TY18 Form 1040-NR, enter the write-in amount in Field 04DPA. Refer to EC 228 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 04MSA Archer MSA

  1. This field is located on the dotted portion to the left of line 34, Form 1040-NR. See EC 229 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns

Field 04ADJ Other Adjustments (dotted portion)

  1. This field is located on the dotted portion of line 34, Form 1040-NR. Refer to EC 229 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 04RTA Form 982 Indicator

  1. This field is only valid on a Form 1040-NR or a Form 1040-PR/Form 1040-SS.

    Note:

    Field 04RTA is the only field that is in Section 04 on a Form 1040-PR/Form 1040-SS

    .

  2. An entry is required in Field 04RTA when Form 982 is present. Enter a "1" in Field 04RTA.

Section 05 - Additional Taxes, Additional Credits and Payments

  1. For Section 05 refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, Section 05, for field description, invalid conditions and correction procedures unless otherwise specified.

Error Record Format-Section 05

  1. The following fields will be displayed for Form 1040-NR, Form 1040-NR-EZ, Form 1040-PR, and Form 1040-SS.

    Form 1040-NR Form 1040-NR-EZ Form 1040-PR/Form 1040-SS Field Title
    0543     Alternative Minimum Tax
    0544     Advance Premium Tax Credit Repayment
    0546     Foreign Tax Credit
    0547     Credit for Child and Dependent Care Expenses
    0548     Retirement Savings Contribution
    0550     Residential Energy Credit from Form 5695
    0551     Form 3800,8801 and Other Credits
    0551A     General Business Credits
    0551B     Credit for Prior Year Minimum Tax
    05ADC     Adoption Credit (ERS only)
    05MIC     Mortgage Interest Credits (ERS only)
    05QED     Form 8396 Qualified Plug-in Electric Drove Credit (ERS only)
    05AMC     Form 8910 Alternative Motor Vehicle Credit (ERS only)
    05OSC     Other Statutory Credits (ERS only)
    0554     Tax on Income Not Effectively Connected
    0555   0503 Combined Self-Employment Tax
    0556 0516   Unreported Social Security and Medicare Tax on Form 4137 and Form 8919
    0557     Tax on Early Distributions
    0558     Gross Transportation Tax
    0559A   0504 Combined Household Employment Taxes
    0559B     First Time Home Buyer Repayment from Form 5405
    05SRP     Shared Responsibility Penalty Amount (ERS only)
    05LIR     Form 8611 Recapture (ERS only)
    05RTX     Recapture Tax (ERS only)
    05USS     Uncollected SST Tax on Tips
    05IDT     Form 6252 Amount-IRC 453 (ERS only)
    05IDC     Form 6252 Code-IRC 453
    0560     Form 8959-Form 8960 and Other Taxes
    05NTI     Section 965 Tax Installment (ERS Only)
    05TL     Section 965 Tax Liability (ERS Only)
    0562B     Withholding-Form(s) 8805
    0562C     Withholding-Form(s) 8288-A
    0562D 0518B   Withholding-Form(s) 1042-S
    0563 0519 0507 Estimated Tax Payments
    0565     Reconciled Premium Tax Credit Amount
    0566 05EXT 05EXT Form 4868 Payment
    0567   0508 Excess Social Security/tier 1 RRTA withheld
    0568     Fuel Tax Credit
    0569     Form 2439 and Other Credit Amount
    0569A     Form 2439 Regulated Investment Tax Credit
    05HCC   05HCC Form 8885 Health Coverage Tax Credit
    05OTH   05OTH Other Payment or Credit Amount (ERS only)
    05TYP   05TYP Other Payment or Credit Type (ERS only)
    0570 0520   Form 1040C

Field 0543 Alternative Minimum Tax

  1. This field is located on line 43, Form 1040-NR. Refer to EC 267 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0544 Advance Premium Tax Credit Repayment

  1. This field is located on line 44, Form 1040-NR. Refer to EC 270 through EC 276 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0546 Foreign Tax Credit

  1. This field is located on line 46, Form 1040-NR. Refer to EC 277 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

  2. Foreign Tax Credit cannot be claimed for income that was excluded because of a tax treaty.

Field 0547 Credit for Child and Dependent Care Expenses

  1. This field is located on line 47, Form 1040-NR. Refer to EC 278 and EC 279 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0548 Retirement Savings Contribution Credit

  1. This field is located on line 48, Form 1040-NR. Refer to EC 286 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0550 Residential Energy Credit from Form 5695

  1. This field is located on line 50, Form 1040-NR. Refer to EC 291 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0551 Form 3800, Form 8801, and Other Credits

  1. This field is located on line 51, Form 1040-NR. Refer to EC 302 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0551A General Business Credits

  1. The taxpayer will check Box a at line 51, Form 1040-NR. Refer to EC 302 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0551B Credit for Prior Year Minimum Tax

  1. The taxpayer will check Box b at line 51, Form 1040-NR. Refer to EC 302, EC 308 and EC 310 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05ADC Adoption Credit (ERS only) Form 8839

  1. This field is ERS input only. The taxpayer will check Box c, line 51, Form 1040-NR and write in Form 8839, Refer to EC 294 and EC 299 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05MIC Mortgage Interest Credit (ERS only) Form 8396

  1. This field is ERS input only. The taxpayer will check Box c, line 51, Form 1040-NR and write in Form 8396. Refer to EC 292 and EC 310 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05QED Qualified Plug-in Electric Drive Credit (ERS only) Form 8936

  1. This field is ERS input only. The taxpayer will check Box c, line 51, Form 1040-NR and write in Form 8936. Refer to EC 299 and EC 310 in IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05AMC Alternative Motor Vehicle Credit (ERS only) Form 8910

  1. This field is ERS input only. The taxpayer will check Box c, line 51, Form 1040-NR and write in Form 8910. Refer to EC 299 and EC 310 in IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05OSC Other Statutory Credits (ERS only)

  1. This field is located on line 51, Form 1040-NR. The taxpayer will check Box c at line 51 Form 1040-NR. Refer to EC 300, EC 302 and EC 310 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0554 Tax On Not Effectively Connected Income (NEC)

  1. Income not effectively connected with a United States trade or business (NEC) is reported on page 4, Schedule NEC, of Form 1040-NR and is taxed at a rate of 30 percent unless the taxpayer's country of residence has a different tax rate due to tax treaty provisions. Exhibit 3.22.3-3, Treaty Table 1. Tax Rates on Income Other than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax Treaties, displays the tax treaty rates applicable to NEC income.

  2. Refer to IRM 3.22.3.234.3, Correction Procedures - EC311, for instructions on validating treaty tax rates used on Schedule NEC.

Field 0555/0503 Combined Self-Employment Tax

  1. This field (0555) is located on line 55, Form 1040-NR. Refer to EC 209 in IRM 3.22.3.164.

  2. This field (0503) is located on line 3, Form 1040-PR or Form 1040-SS. Refer to EC 209 in IRM 3.22.3.164.

  3. Dual-status - A taxpayer may pay self-employment tax only on the income earned during the period of U.S. residency reported on the Form 1040 statement of a dual-status Form 1040-NR. Follow taxpayer intent.

Form 1040 SE Tax Field 05204 - Combined Self-Employment Tax

  1. If a taxpayer is from the USVl, AS, GU, CNMI, or PR and files Form 1040 with a Schedule C, C-EZ, E (Part II present), F, or SE to report self-employment taxes in lieu of Form 1040-PR or Form 1040-SS, SSPND 610 to renumber as Form 1040-SS.

    Caution:

    If the taxpayer is claiming wages and/or withholding, do not convert.

  2. Totalization Agreements or Bilateral Social Security Agreements were enacted in order to eliminate dual coverage and dual contributions to the social security system for the same work. This ensures that social security taxes (including SE tax) are paid only to one country. If the taxpayer resides in any of the following countries GTSEC 01 and enter RPC "S" in Field 01RPC.

    • Australia

    • Austria

    • Belgium

    • Brazil

    • Canada

    • Chile

    • Czech Republic

    • Denmark

    • Finland

    • France

    • Germany

    • Greece

    • Hungary

    • Iceland

    • Ireland

    • Italy

    • Japan

    • Luxembourg

    • Netherlands

    • Norway

    • Poland

    • Portugal

    • Slovak Republic

    • Slovenia

    • South Korea

    • Spain

    • Sweden

    • Switzerland

    • United Kingdom (England, Northern Ireland, Scotland, and Wales)

    • Uruguay

Field 0556/0516 Unreported Social Security and Medicare Tax for Form 4137 and Form 8919

  1. This field is located on line 56, Form 1040-NR; line 16 Form 1040-NR-EZ. Refer to EC 316 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0557 Tax on Early Distributions

  1. This field is located on line 57, Form 1040-NR. Refer to EC 318 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0558 Gross Transportation Tax

  1. This field is located on line 58, Form 1040-NR. Refer to EC 334 in IRM 3.22.3.248.

Field 0559A/0504 Combined Household Employment Taxes

  1. This field is transcribed from line 59A, Form 1040-NR or line 4 of Form 1040-PR and Form 1040-SS. Refer to EC 322, EC 324 and EC 326 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0559B First Time Home Buyer Repayment from Form 5405

  1. This field is transcribed from line 59B, Form 1040-NR. Refer to EC 328 and EC 329 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05SRP Shared Responsibility Penalty Amount (ERS only)

  1. This field is ERS input only on dual-status Form 1040-NR. Refer to EC 333 and EC 334.

    Note:

    Beginning in tax year 2019, the amount of the SRP has been reduced to zero for all taxpayers. Taxpayers will no longer report any information about minimum essential coverage or about liability for the SRP on their returns.

Field 05LIR Form 8611 Recapture Tax (ERS only)

  1. This field is ERS input only. On Form 1040-NR this tax from Form 8611 is notated as ”LIHRC” on line 60. Refer to EC 333 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05RTX Recapture Tax (ERS only)

  1. This field is ERS input only. Refer to EC 333 for instructions.

Field 05USS Uncollected Tax on Reported Tips

  1. Refer to EC 334 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05IDT Form 6252 IRC 453 Amount (ERS only)

  1. This field is an ERS input only field. When a Form 6252-IRC 453 code is present, transcribe the Form 6252-IRC 453 amount from line 60, box b notated on Form 1040-NR.

  2. Refer to EC 333 and EC 334 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 05IDC Form 6252 IRC 453 Code

  1. This field is one position in length and it will be transcribed from line 60, box b on Form 1040-NR

  2. The valid codes are as follows:

    1. A - Taxpayer notes 453(A) on line 60b

    2. L - Taxpayer notes 453(L) on line 60b

    3. Blank is default

  3. Refer to EC 333 and EC 334 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Field 0560 Form 8959 Form 8960 and Other Taxes

  1. This field is transcribed from line 60, Form 1040-NR. Taxpayers will identify these taxes by entering a code from the instructions. Refer to EC 334.

Field 05NTI Section 965 Tax Installment (ERS Only)

  1. This field is an ERS only field for TY 2018 and later on Form 1040-NR. Refer to instructions in EC 188 for dual-status returns at IRM 3.22.3.154.

Field 05TL Section 965 Tax Liability (ERS Only)

  1. This field is an ERS only field for TY 2018 and later on Form 1040-NR. Refer to instructions in EC 188 for dual-status returns at IRM 3.22.3.154.

Fields 0562B, C and D, Form 1040-NR, and Field 0518B, Form 1040-NR-EZ- Withholding

  1. These fields are transcribed from line 62b, line 62c, and line 62d of Form 1040-NR; and line 18b of Form 1040-NR-EZ.

    Caution:

    DO NOT ALLOW FOREIGN WITHHOLDING

  2. Fields 0562B, C and D on Form 1040-NR are for Federal income tax withheld as follows:

    1. Field 0562B is for Form(s) 8805 withholding.

    2. Field 0562C is for Form(s) 8288-A withholding.

    3. Field 0562D is for Form(s) 1042-S withholding.

  3. Field 0518B on Form 1040-NR-EZ is for Form(s) 1040-S withholding.

Fields 0563/0519/0507 Estimated Tax Payments

  1. This field is transcribed from line 63 Form 1040-NR; line 19 Form 1040-NR-EZ; line 7, Form 1040-PR/Form 1040-SS.

Field 0565 - Reconciled Premium Tax Credit Amount

  1. This field is transcribed from line 65 Form 1040-NR.

Field 0566/05EXT Amount Paid with Request for Extension

  1. This field is transcribed from line 66, Form 1040-NR.

  2. For Form 1040-NR-EZ, Form 1040-PR and Form 1040-SS, this is an ERS input only field and is edited on the bottom right margin for Form 1040-NR-EZ, Form 1040-PR and Form 1040-SS.

Field 0567/0508 Excess Social Security Tax Withheld (SST)/Railroad Retirement Tax Withheld (RRTA)

  1. This field is transcribed from line 67, Form 1040-NR; line 8, Form 1040-PR and Form-SS. See IRM 3.22.3.262.4.9 and IRM 3.22.3.262.5.2

Field 0568 Fuel Tax Credit from Form 4136

  1. This field is transcribed from line 68, Form 1040-NR. See EC 347 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Fields 0569, 0569A, 05HCC, 05OTH, 05TYP - Form 2439, Form 8885 and Other Payments or Credit Types

  1. These fields are transcribed from line 69 and line 69A, Form 1040-NR. Field 05HCC, Field 05OTH, and Field 05TYP are ERS entry fields. See instructions for using these fields in EC 348 and EC 349 for Form 1040-NR and in EC 355 for Form 1040-PR and Form 1040-SS.

  2. Fields 0569, 0569A, 05HCC, 05OTH, and 05TYP represent the following:

    1. Field 0569 - Total credits transcribed from line 69, Form 1040-NR.

    2. Field 0569A - Credit from Form 2439 transcribed from line 69A, Form 1040-NR

    3. Field 05HCC - Credit from Form 8885. This is an ERS input field used on Form 1040-NR, Form 1040-PR and Form 1040-SS.

    4. Field 05OTH - Other Payment or Credit Amount. This is an ERS input field for credits on line 69d.

    5. Field 05TYP - Other Payment or Credit Type. This is an ERS input field for type of credit from current year line 69d or prior year expired credit.

    Note:

    Other Payment or Credit Type "S" is for credits from Form 1042-S on Form 1040. See instructions in EC 355 IRM 3.22.3.262.3.4

Field 0570/0520 Credits paid with Form 1040-C

  1. This field is transcribed from line 70, Form 1040-NR, and line 20, Form 1040-NR-EZ.

Section 06 - Direct Deposit Information (EC 138 and 139)

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for screen displays, invalid conditions and correction procedures. This section is valid for all forms.

Section 07 - Data-Itemized Deductions

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for Section 07 invalid conditions.

Error Record Format-Section 07

  1. The following fields are displayed for Section 07 on Form 1040-NR and Form 1040-NR-EZ:

    Form 1040-NR Form 1040-NR-EZ Field Title
    0701A 07TID State and Local Income Tax
    0702   Cash Contributions
    0703   Other Contributions
    0704   Carryover Contributions
    0705   Total Contributions
    0706   Total Casualty/Theft Loss
    07UEE   Unreimbursed Employee Expenses (TY17 and prior ERS input only)
    07GMD   Gross Miscellaneous Deductions (TY17 and prior ERS input only)
    07NMD   Net Miscellaneous Deduction (TY17 and prior ERS input only)
    0707   Other Miscellaneous Deductions
    07OTG   Other Than Gambling
    0708   Total Itemized Deductions
    0708V 07IDV Total Itemized Deduction Verified

General Correction Procedures - Itemized Deductions

  1. When processing a dual-status return and Itemized Deductions are claimed on Schedule A Form 1040 that do not have a corresponding line on Page 3, Schedule A of Form 1040-NR, enter the amount(s) in Field 07OTG.

Form 1040-NR - General Instructions for Itemized Deductions
  1. On Form 1040-NR, the taxpayer can itemize deductions against income reported on lines 8 through 23 only.

  2. On MeF Form 1040-NR, Schedule A is displayed as page 3 of the Form 1040-NR and isn’t listed as a separate schedule in the MeF Return Request and Display. Scroll through the pages of the Form 1040-NR to find Schedule A.

Form 1040 - General Instructions for Itemized Deductions with IRC 933
  1. Taxpayers who exclude income from Puerto Rican sources under IRC 933 may only claim the portion of itemized deduction that is related to the income that is taxable on Form 1040.

Dual-status - General Instructions for Itemized Deductions
  1. Dual-status taxpayers are not entitled to the standard deduction.

  2. Deductions claimed on Schedule A, Form 1040 and statement attached to the Form 1040-NR controlling return will be combined with Form 1040-NR, Schedule A deductions. Those fields not applicable to Form 1040-NR should be combined and entered in Field 07OTG.

  3. If Form 1040 is the controlling return, Code & Edit edits CCC “Y” on the return to force the return to ERS for review. ERS enters “1” in Field 07IEI to assure that the standard deduction isn’t used. See the instructions in EC 260 at IRM 3.22.3.195.3.

Field 0701A - State and Local Income Taxes Deduction Form 1040-NR

  1. Field 0701A is transcribed from line 1a, Form 1040-NR, Schedule A.

Field 07TID - Itemized Deductions Form 1040-NR-EZ

  1. Field 07TID is transcribed from line 11, Itemized deductions, Form 1040-NR-EZ. State and local income taxes are the only itemized deductions allowed on Form 1040-NR-EZ, and the underprint for Field 07TID is equal to Total Itemized Deductions Computer. Refer to EC 250 at IRM 3.22.3.191.2.3.1 for TY 2018 and later, or EC 252 IRM 3.22.3.192.2.3.1, Itemized Deductions/Standard Deduction Form 1040-NR-EZ, for TY 2017 and prior.

Field 0702 - Cash Contributions

  1. Field 0702 is transcribed from line 2, Form 1040-NR, Schedule A.

Fields 0703/0704 - Other Contributions/Carry-Over Contributions

  1. Field 0703 is transcribed from line 03, Form 1040-NR, Schedule A for (Other than Cash) contributions.

  2. Field 0704 is transcribed from line 04, Form 1040-NR, Schedule A for (Carry-Over from Prior Year) contributions.

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

Field 0705 - Total Contributions

  1. Field 0705 is transcribed from line 5, Form 1040-NR, Schedule A.

Field 0706 - Total Casualty/Theft Loss

  1. Field 0706 is transcribed from line 6, Form 1040-NR, Schedule A.

  2. Losses are allowable only for property located in the United States. A supporting Form 4684, Casualties and Thefts, is required.

Field 07UEE - Unreimbursed Employee Expenses (ERS only)

  1. This field is ERS input only field. Field 07UEE is the taxpayer amount for unreimbursed employee expenses reported on line 7 of Schedule A on TY 2017 and prior Form 1040-NR. This amount is “X”’d by Code & Edit on PY paper-filed Form 1040-NR. GTSEC 07 and enter the taxpayer amount on line 7 in Field 07UEE.

    Note:

    Unreimbursed employee expenses is not an allowable deduction on Schedule A in TY 2018 and later.

Field 07GMD - Gross Miscellaneous Deductions (ERS only)

  1. This field is ERS input only field. Field 07GMD is the taxpayer amount for gross miscellaneous deductions reported on line 10 of Schedule A on TY 2017 and prior Form 1040-NR. This amount is “X”’d by Code & Edit on PY paper-filed Form 1040-NR. GTSEC 07 and enter the taxpayer amount on line 10 in Field 07GMD.

    Note:

    These deductions are not allowed on Schedule A in TY 2018 and later.

Field 07NMD - Net Miscellaneous Deductions (ERS only)

  1. This field is ERS input only field. Field 07NMD is the taxpayer amount for net miscellaneous deductions reported on line 13 of Schedule A on TY 2017 and prior Form 1040-NR. This amount is “X”’d by Code & Edit on PY paper-filed Form 1040-NR. GTSEC 07 and enter the taxpayer amount on line 13 in Field 07NMD.

    Note:

    These deductions are not allowed on Schedule A in TY 2018 and later.

Field 0707 - Other Itemized Deductions

  1. Field 0707 is transcribed from line 07, Schedule A, Form 1040-NR. This field is comparable to Field 0716 on Form 1040 Schedule A. Refer to EC 246.

Field 070TG - Other Than Gambling

  1. This field is for ERS input only. Field 070TG is used when an entry is present on the Other Itemized Deductions line that may be limited due to AGI. See EC 246.

  2. Enter amount(s) in Field 07OTG when processing a dual-status return and Itemized Deductions are claimed on Schedule A Form 1040 that do not have a corresponding line on Page 3 Form 1040-NR.

Field 0708 - Total Itemized Deductions Form 1040-NR

  1. Field 0708 is located on line 8 of Schedule A on page 3 of Form 1040-NR. Refer to EC 246 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Section 08 - Schedule B

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 08 screen displays, invalid conditions and correction procedures for Form 1040. The section is not valid for Form 1040-NR.

Sections 09, 10 and 11 - Schedule C/Schedule C-EZ and Part IV Form 1040-SS/Form 1040-PR

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Sections 09,10 and 11 screen displays, invalid conditions and correction procedures for Form 1040, and Form 1040-NR.

  2. The fields for Sections 09/10/11 on Form 1040-SS and Form 1040-PR are displayed in the next section. Sections 09/10/11 are transcribed but math errors are not generated. Field errors may generate if invalid characters are transcribed.

Error Record Format - Sections 09, 10 and 11

  1. Section 09 is displayed in the table below. Sections 10 and 11 have the same fields.

    Form 1040-PR and 1040-SS Field name Field Location
    0901L Gross Receipts Line 1, Part IV
    0916 Office Expenses Line 16, Part IV
    0923 Utilities Expense Line 23, Part IV
    0924 Schedule C Wages Line 24, Part IV

Section 12 - Schedule D

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 12 screen displays, invalid conditions and correction procedures for Schedule D, Capital Gains and Losses. The section is valid for Form 1040 and Form 1040-NR.

Section 13 - Schedule E

  1. Refer to IRM 3.12.2 Individual Master File Error Resolution General Instructions for Section 13 screen displays, invalid conditions and correction procedures for Schedule E, Supplemental Income and Loss. The section is valid for Form 1040 and Form 1040-NR.

Sections 14 and 15 - Schedule F

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for Sections 14 and 15 screen displays, invalid conditions and correction procedures for Schedule F, Profit or Loss From Farming. The sections are valid for Form 1040 and Form 1040-NR.

Section 16 - Schedule R

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 16 screen displays, invalid conditions and correction procedures for Schedule R, Credit for the Elderly or the Disabled. The section is valid for Form 1040 and Form 1040A.

Section 17/18 - Schedule SE

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for Section 17 and Section 18 screen displays, invalid conditions and correction procedures for Schedule SE, Self-Employment Tax.

  2. Section 17 is Schedule SE for the primary taxpayer, and Section 18 is Schedule SE for the secondary taxpayer.

    Note:

    For the remainder of this text Schedule SE will be referred to as Section 17; however, all correction procedures will apply equally to Sections 17 and 18.

Error Record Format - Section 17/18

  1. Section 17 contains the following Fields:

    Note:

    Section 18 is valid for Form 1040-PR and Form 1040-SS and is not valid for Form 1040-NR.

    Form 1040-NR Form 1040-PR/Form 1040-SS Field Title
    17SSN 17SSN SE SSN
    1701A 1701A Net Farm Profit Loss
    1701B 1701B Social Security Retirement or Disability and Conservation Reserve Program Payments Exclusion
    1702 1702 Net Non Farm Profit Loss
    17TE 17TE Tentative Earnings
    17QC 17QC SE Quarters Covered
    1704B 1704B Optional Method Income
    17CHW 17CHW Tentative Church Earnings
    17TSW 17TSW Total Social Security Wages Covered
    17SIV 17SIV Self Employed Social Security Income Computer Section 17 Amount Verified
    17MCD 17MCD SE Method Code
    17SEV 17SEV SE Tax Verified

Field 17SSN - Social Security Number (SSN)

  1. This field is transcribed from the header of Schedule SE Form 1040-PR and Form 1040-SS. Field 17SSN must be for the primary taxpayer.

  2. This field will appear invalid if it contains less than nine digits or any non-numeric character(s).

  3. If Section 17 is significant, Field 17SSN can’t be all blanks.

Field 1701A - Net Farm Profit/Loss

  1. This field is transcribed from line 1a and is the amount of farm income from Schedule F and/or farm partnership income or from Part III, Form 1040-PR and Form 1040-SS. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . If blank, enter amount from Schedule F or from Part III, Form 1040-PR and Form 1040-SS.

Field 1701B - Conservation Reserve Program Payments Exclusion

  1. Description - This field is transcribed from line 1b and is the amount of Conservation Reserve Program payments claimed on line 4b, Schedule F.

Field 1702 - Net Non Farm Profit/Loss

  1. This field is transcribed from line 2 and is the amount of Schedule C/Schedule C-EZ income and/or other Non-Farm self-employment income or from Part IV, Form 1040-PR and Form 1040-SS. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . If blank, enter amount from Schedule C/Schedule C-EZ or from Part IV, Form 1040-PR and Form 1040-SS.

Field 17TE - Tentative Earnings

  1. This field is transcribed from line 3 and represents the taxpayer's total of line 1a, line 1b and line 2.

  2. If the taxpayer has entered "Exempt Notary" and an amount to the left of line 3 and has subtracted the notated amount from the total of line 1 and line 2 of Schedule SE, Code & Edit will "exclude" the "Exempt Notary" amount from the line 2 amount.

Field 17QC - Self-Employment Quarters Covered

  1. This code will be used on Short Year returns only.

  2. This code is edited by Code & Edit to the right margin of:

    1. Line 4c (Long) of Schedule SE.

    2. Line 4 (Short), Schedule SE.

    3. Page 4, Part V to the right margin of line 4c, Form 1040-PR and Form 1040-SS.

  3. This field will appear invalid if transcribed as other than "1" , "2" , or "3" . Code "0" is also valid, but is computer-generated and cannot be transcribed.

  4. Compare the field on the screen to the entry on the return. Correct any editing or transcription error(s).

    1. If invalid, determine the number of quarters covered by the tax period and code as follows: Code "1" - One quarter, Code "2" - Two quarters and Code "3" - Three quarters.

      Note:

      A fraction of a quarter counts as a full quarter. The quarters begin in January, April, July and October.

      If the tax period covers more than three quarters, or if the correct code cannot be determined, blank the field to generate Code "0."

Field 1704B - Optional Method Income Amount

  1. This field is an ERS only field. It’s used when the taxpayer is using one or both optional methods.

Field 17CHW - Tentative Church Wages

  1. This field is transcribed from line 5a.

Field 17TSW - Total Social Security Wages Covered

  1. This field is transcribed from line 8d and is the total of Lines 8a, 8b and 8c.

Field 17SIV Self Employed Social Security Income Computer Amount Verified

  1. This field is for ERS input only and is used only for TY 2013 and prior returns.

Field 17MCD - SE Method Code

  1. This code is edited by Code & Edit in the bottom center margin of Schedule SE and to the left of line 9, Form 1040-PR/Form 1040-SS.

  2. This field will appear invalid if transcribed as other than "1" or "2" . Code "0" is also valid, but is computer-generated and cannot be transcribed.

  3. Compare the field on the screen with the entry on the return. Correct any editing or transcription error(s). If invalid check Lines 2 or 4 in Part VII and 4b in Part V of Form 1040-PR and Form 1040-SS and code as follows:

    If And Then
    a) Line 4 has an amount,
    1. Line 4 is larger than line 2,

    2. Line 4b equals line 2 and line 4,

    3. Line 2 is blank or zero,

    Enter 1 in Field 17MCD.
    b) Line 2 or line 4 has an entry, All conditions in (a) for Code 1 are not met, Enter 2 in Field 17MCD.
    c) You can’t determine the code,   Blank Field 17MCD to generate Code 0 (zero).

Field 17SEV - Self-Employment Tax Verified

  1. This field is for ERS input only. It is used when the computer’s computation is not reliable for self-employment tax.

Section 19 - Form 1116

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 19 screen displays, invalid conditions and correction procedures for Form 1116, Foreign Tax Credit. The section is valid for Form 1040 and Form 1040-NR.

  2. If Form 2555 is attached and valid make sure that the amount on line 1a, Form 1116 is not the same as the income being excluded on Form 2555 line 18 or 26. See IRM 3.22.3.212.2

Section 20 - Schedule J

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 20 screen displays, invalid conditions and correction procedures for Schedule J, Income Averaging for Farmers and Fishermen. The section is valid for Form 1040, and Form 1040-NR.

Section 21 - Form 2441

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 21 screen displays, invalid conditions and correction procedures for Form 2441, Child and Dependent Care Expenses. This section is valid for Form 1040, Form 1040A and Form 1040-NR.

Section 22 - Form 3800

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 22 screen displays, invalid conditions and correction procedures for Form 3800, General Business Credit. This section is valid for Form 1040 and Form 1040-NR.

Section 23 - Form 4136

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 23 screen display, invalid conditions and correction procedures for Form 4136, Credit for Federal Tax Paid on Fuels. Section 23 is valid for Form 1040 and Form 1040-NR.

Sections 24 and 25 - Form 4137

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Sections 24 and 25 screen displays, invalid conditions and correction procedures for Form 4137, Social Security and Medicare Tax on Unreported Tip Income. Section 24 is valid for Form 1040, Form 1040-NR, and Form 1040-NR-EZ. Section 25 is valid for Form 1040.

Section 26 - Form 4684

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 26 screen displays, invalid conditions and correction procedures for Form 4684, Casualties and Thefts. This section is valid for Form 1040 and Form 1040-NR.

Section 27 - Form 4797

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 27 screen displays, invalid conditions and correction procedures for Form 4797, Sale of Business Property. This section is valid for Form 1040 and Form 1040-NR.

Section 28 - Form 4972

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 28 screen displays, invalid conditions and correction procedures for Form 4972, Tax on Lump-Sum Distributions. This section is valid for Form 1040 and Form 1040-NR.

Sections 29 and 30 - Form 5329

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Sections 29 and 30 screen displays, invalid conditions and correction procedures for Form 5329, Additional Taxes on Qualified Plans. Section 29 is valid for Form 1040 and Form 1040-NR. Section 30 is valid for Form 1040.

Section 31 - Form 6198

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 31 screen displays, invalid conditions and correction procedures for Form 6198, At-Risk Limitations. This section is valid for Form 1040 and Form 1040-NR.

    Note:

    Form 6198 is a valid form with Form 1040-NR, however it is not input on paper or MeF Form 1040-NR. Search Form 1040-NR for an attached Form 6198 if EC 070, EC 072, EC 073, EC 202, EC 206, or EC 208 generate. If found GTSEC 31 to enter amounts in the available fields.

Section 32 - Form 6251

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 32 screen displays, invalid conditions and correction procedures for Form 6251, Alternative Minimum Tax. This section is valid for Form 1040 and Form 1040-NR.

Section 33 - Form 8615

  1. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions for Section 33 screen displays, invalid conditions and correction procedures for Form 8615, Tax for Certain Children Who Have Unearned Income. This section is valid for Form 1040 and Form 1040-NR.

Section 34 and Section 35 - Form 2555 and Form 2555-EZ

  1. Sections 34 and 35 are Form 2555, Foreign Earned Income, and Form 2555-EZ, Foreign Earned Income Exclusion, for the primary (Section 34) and secondary (Section 35) taxpayer. Additional correction procedures are found in IRM 3.22.3.96 (EC 024), IRM 3.22.3.145 (EC 148), IRM 3.22.3.146 (EC 150), IRM 3.22.3.147 (EC 152), IRM 3.22.3.148 (EC 154), IRM 3.22.3.169 (EC 216), IRM 3.22.3.171 (EC 218), IRM 3.22.3.178.2.1 (EC 229), IRM 3.22.3.179 (EC 230), and IRM 3.22.3.248 (EC 334).

General Requirements for Form 2555 and Form 2555-EZ (Section 34 and 35)

  1. A U.S. citizen or resident alien who has earned income from a foreign country or countries may have income that is deductible or excludable from U.S. income tax on Form 1040 if he or she has a tax home in a foreign country or countries and is:

    1. A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period (regardless of physical presence) which includes an entire taxable year and part or all of the tax year of the return or

    2. A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with an applicable nondiscrimination clause and who is a bona fide resident of a foreign country for an uninterrupted period that includes an entire taxable year and part or all of the tax year of the return or

    3. A U.S. citizen or resident alien who has been physically present in a foreign country or countries for at least 330 days during any period of 12 consecutive months. Part of the 12-month period must fall in the tax period of the return.

    Some taxpayers may exclude income that they received for services performed in the year prior to the year of the tax return. This income is included on line 45 of Form 2555 with a notation of “Exclusion of Prior Year Income”, or similar. If the taxpayer is only excluding prior year income then the bona fide residency and physical presence test dates on the Form 2555 may not include a part of the tax year of the return.

  2. If a taxpayer left certain countries within certain dates without meeting the time requirement on Form 2555 or Form 2555-EZ, the requirement can be waived, see IRM 3.22.3.171.2.3.1.

  3. One Form 2555 or Form 2555-EZ must be provided for each taxpayer claiming the exclusion.

    1. If pages 1, 2 or 3 (page 1 or 2 for Form 2555-EZ) are missing, SSPND with Action Code 215 to correspond for missing pages using Form 13900 for Letter 4087C, and selecting paragraph R for Form 2555 and paragraph S for Form 2555-EZ.

    2. If the primary and secondary taxpayers have combined foreign earned income on one Form 2555 or Form 2555-EZ then SSPND 215 and correspond using Form 13900 and selecting paragraph P. If the taxpayers are a missionary team and both are included on one Form 2555 or Form 2555-EZ then don’t correspond. Divide the income equally between the two and adjust the available fields. GTSEC 34 (primary) or GTSEC 35 (secondary) and enter the spouse’s information and portion in available fields.

    3. If multiple Form 2555 or Form 2555-EZ are attached for one taxpayer then GTSEC 34 or 35 and enter the combined information in all available fields. If the combined foreign earned income from Forms 2555-EZ is over $103,900 (TY 2018) SSPND 215 and correspond using Form 13900 and selecting paragraph U.

Field and Money Amounts

  1. All fields are positive.

  2. The money amounts are entered in DOLLARS ONLY.

  3. The first Form 2555/Form 2555-EZ is Section 34 for the primary taxpayer and the second Form 2555/Form 2555-EZ is Section 35 for the secondary taxpayer.

    Note:

    For the remainder of this text Form 2555/Form 2555-EZ will be referred to as Section 34; however, all correction procedures will apply equally to Sections 34 and 35.

Error Record Format - Section 34/35

  1. Section 34 and Section 35 consists of the following fields:

    Form 2555 Form 2555-EZ Field Title
    34POD 34POD Post of Duty Code
    34BD1 34BD1 Beginning Date Bona Fide Residence
    34ED1 34ED1 Ending Date Bona Fide Residence
    34DIN 34DIN Declaration
    3414R 3414R Number of Days in United States - Bona Fide Residence
    34BD2 34BD2 Beginning Date Physical Presence
    34ED2 34ED2 Ending Date Physical Presence
    3418R 3418R Number of Days in United States - Physical Presence
    3419 3419 Wages
    3422G   Total Allowances
    3425   Meals and Lodging
    3433   Housing Expenses
    3436   Housing Exclusion
    3442 3442 Foreign Earned Income Exclusion
    3445 3445 Total Foreign Income/Housing Exclusion
    3450   Housing Deduction

    Note:

    On Form 2555-EZ line 18 must be transcribed as Field 3445.

Correction Procedures

  1. The following describes correction procedures for Section 34 and Section 35.

Field 34POD Post of Duty Code

  1. Code & Edit will edit this code to the top center margin and it will be present on all Form 2555/Form 2555-EZ. See IRM 3.22.3.97.3 EC 025.

Field 34BD1 Beginning Date Bona Fide Residence

  1. This field is transcribed in YYYYMM format from:

    1. Line 10, Part II (Form 2555)

    2. Line 1b, Part I (Form 2555-EZ)

  2. See EC 148, EC 150 and EC 152 correction procedures.

  3. Returns being filed electronically with Form 2555/Form 2555-EZ may have missing or invalid dates in the four fields associated with that information, 34BD1, 34ED1, 34BD2, and 34ED2. Due to a programming problem the associated error codes, 148, 150 and 152 are not generating. As such, all Form 1040 returns that have a Form 2555/Form 2555-EZ attached must have Section 34/35 examined to determine if date information is entered. If there are no dates or if there are invalid dates review the tax return. If valid dates are found enter in appropriate fields. If valid dates are not available, DLSEC 34/35 and assign the appropriate TPNC when EC 218 generates.

Field 34ED1 Ending Date Bona Fide Residence

  1. This field is transcribed in YYYYMM format from:

    1. Line 10, Part II (Form 2555)

    2. Line 1b, Part I (Form 2555-EZ)

  2. The ending date must be at least 365 days later than the beginning date and part of these days must fall within the tax year of the return. See EC 148, EC 150 and EC 152 for correction procedures.

    Caution:

    If the taxpayer enters an ending date beyond the received date of the return, enter the received date as the ending date.

  3. Returns being filed electronically with Form 2555/Form 2555-EZ may have missing or invalid dates in the 4 fields associated with that information, 34BD1, 34ED1, 34BD2, and 34ED2. Due to a programming problem, the associated error codes, 148, 150 and 152 are not generating. As such, all Form 1040 returns that have a Form 2555/Form 2555-EZ attached must have Section 34/35 examined to determine if date information is entered. If there are no dates or if there are invalid dates research EUP. If valid dates are found enter in appropriate fields. If valid dates are not available DLSEC 34/35 and assign the appropriate TPNC when EC 218 generates.

Field 34DIN Declaration Indicator

  1. This field is transcribed from the right margin of line 13b, Part II.

  2. Field 34DIN can be blank or "4" .

  3. Code & Edit will edit "4" if any of the following boxes are checked:

    1. Line 13(a) - "YES" box checked

    2. Line 13(b) - "NO" box checked

    3. Line 15(c) - "YES" box checked

    4. Line 15(d) - "YES" box checked

    5. If the above boxes are not checked delete the entry.

    Caution:

    An entry in Field 34DIN is often a transcription error, where Integrated Submission and Remittance Processing System (ISRP) should have picked up Field 3414R. GTSEC 34 and enter in Field 3414R if necessary.

Field 3414R Number of Days in United States on Business (Bona Fide Residence)

  1. Total number of days is edited by C&E and transcribed from:

    1. the margin to the right of line 14 (Form 2555)

    2. the margin to the right of line 12 (Form 2555-EZ)

  2. Valid numbers are 001 through 366. If invalid, verify the taxpayer's entry and overlay the screen display with the correct number (Field 3414/3514 must have 3 positions).

Field 34BD2 Beginning Date Physical Presence

  1. This field is transcribed in YYYYMM format from:

    1. Line 16, Part III (Form 2555)

    2. Line 2b, Part I (Form 2555-EZ)

  2. When qualifying the taxpayer for physical presence test, the taxpayer must be physically present between 330 - 364 days. The qualifying period does not have to be a calendar year, it may cover parts of two years, however, part of the qualifying period must be in the current year of the return. Refer to EC 148, EC 150 and EC 152 for correction procedures.

Field 34ED2 Ending Date Physical Presence

  1. This field is transcribed in YYYYMM format from:

    1. Line 16, Part III (Form 2555)

    2. Line 2b, Part I (Form 2555-EZ)

  2. The ending date must be at least 330 days later than the beginning date and part of these days must fall within the tax year of the return. EC 148, EC 150 and EC 152 for correction procedures.

    Note:

    Part of the 12-month period must fall in the tax period of the return.

Field 3418R Number of Days in United States on Business (Physical Presence)

  1. The number of days is edited by C&E and transcribed from the margin to the right of line 18.

  2. Valid numbers are 001 through 366.

  3. If invalid, verify the taxpayer's entry and overlay the screen display with the correct number.

Field 3419 Form 2555/Form 2555-EZ Wages

  1. This amount is transcribed from:

    1. Line 19 (Form 2555)

    2. Line 17 (Form 2555-EZ)

Field 3422G Total Allowance

  1. This amount is transcribed from line 22G. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Field 3425 Meals and Lodging

  1. This amount is transcribed from line 25. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Field 3433 Housing Expenses (EC 154)

  1. This amount is transcribed from line 33. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  2. If blank, enter the smaller of line 28 or 36, Form 2555.

Field 3436 Housing Exclusion

  1. This amount is transcribed from line 36, Form 2555

  2. Qualified individuals may separately elect to claim the housing exclusion or the housing deduction, in addition to the foreign earned income exclusion. The housing exclusion applies only to amounts considered paid for with employer-provided amounts. The housing deduction applies only to amounts paid for with self-employment earnings.

  3. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) made the following changes to Section 911 which are effective for tax periods beginning on or after January 1, 2006.

    • The calculation of the base housing amount (line 32 of Form 2555) is now related to the maximum foreign earned income exclusion. The amount is 16 percent of the exclusion amount (computed on a daily basis) multiplied by the number of days in the qualifying period that fall within the tax period.

    • The amount of qualified housing expenses is limited to 30 percent of the maximum foreign earned income exclusion (computed on a daily basis) for the calendar year in which the taxable year of the individual begins multiplied by the number of days within the applicable period. For TY 2019, the daily amount is $87.04; the annual amount is $31,770. However, the law provides for adjustments to the percentage based on geographic differences in foreign housing costs relative to housing costs in the United States. Notice 2019-24 lists the geographic areas and applicable percentages shown in the table below.

    Country Location Limitation on Housing Expenses (full year) Limitation on Housing Expenses (daily)
    Angola Luanda 84,000 230.14
    Argentina Buenos Aires 56,500 154.79
    Australia Perth 32,300 88.49
    Australia Sydney 61,000 167.12
    Austria Vienna 35,400 96.99
    Bahamas, The Nassau 49,700 136.16
    Bahrain Bahrain 48,300 132.33
    Barbados Barbados 37,700 103.29
    Barbados Bridgetown 37,700 103.29
    Belgium Brussels 41,900 114.79
    Belgium Gosselies 37,300 102.19
    Belgium Mons 37,300 102.19
    Belgium SHAPE/Chievres 37,300 102.19
    Bermuda Bermuda 90,000 246.58
    Brazil Rio de Janeiro 35,100 96.16
    Brazil Sao Paulo 56,600 155.07
    Canada Calgary 38,500 105.48
    Canada Montreal 52,500 143.84
    Canada Ottawa 43,600 119.45
    Canada Quebec 34,900 95.62
    Canada Toronto 50,200 137.53
    Canada Vancouver 43,700 119.73
    Canada Victoria 39,500 108.22
    Cayman Islands Grand Cayman 48,000 131.51
    Chile Santiago 39,100 107.12
    China Beijing 71,200 195.07
    China Hong Kong 114,300 313.15
    China Shanghai 57,001 156.17
    Colombia Bogota 58,700 160.82
    Colombia All cities other than Bogota 49,400 135.34
    Costa Rica San Jose 32,000 87.67
    Democratic Republic of the Congo Kinshasa 42,000 115.07
    Denmark Copenhagen 43,704 119.74
    Dominican Republic Santo Domingo 45,500 124.66
    Ecuador Quito 38,200 104.66
    El Salvador San Salvador 32,000 87.67
    Estonia Tallinn 46,600 127.67
    France Garches 71,800 196.71
    France Lyon 39,700 108.77
    France Marseille 38,700 106.03
    France Montpellier 32,000 87.67
    France Paris 71,800 196.71
    France Sevres 71,800 196.71
    France Suresnes 71,800 196.71
    France Versailles 71,800 196.71
    France All cities other than Garches, Le Havre, Lyon, Marseille, Montpellier, Paris, Sevres, Suresnes, and Versailles 31,900 87.40
    Germany Babenhausen 35,200 96.44
    Germany Baumholder 35,000 95.89
    Germany Berlin 43,000 117.81
    Germany Birkenfeld 35,000 95.89
    Germany Boeblingen 42,300 115.89
    Germany Bonn 42,000 115.07
    Germany Cologne 56,200 153.97
    Germany Darmstadt 35,200 96.44
    Germany Frankfurt am Main 36,800 100.82
    Germany Garmisch-Partenkirchen 33,100 90.68
    Germany Gelnhausen 44,400 121.64
    Germany Giessen 36,000 98.63
    Germany Grafenwoehr 35,600 97.53
    Germany