4.119.4  BMF Underreporter (BMF-AUR) Program (Cont. 1)

4.119.4.7 
Analysis of Income Types

4.119.4.7.2 
Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans - General

4.119.4.7.2.3  (09-02-2016)
Agricultural Payments and Market Gain on Commodity Credit Corp. (CCC) Loans - Miscellaneous

  1. If Agricultural Payments or Market Gain on CCC Loans are U/R, enter the following on the Letter 2030:

    1. Select AGRICULTURE PAYMENTS or MARKET GAIN ON CCC LOANS from the drop down menu in the "Your income and deductions" field.

      Exception:

      Form 1041 only - When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Agricultural Payments or Market Gain on CCC Loans IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.3  (09-02-2016)
Form 1041 Business Income or (Loss) (Bartering/Payment Card/Third Party Network Payments/Fishing Boat Proceeds/Medical Payments/Nonemployee Compensation - General

  1. If an estate operated a business, income and expenses are reported on Form 1040, Schedule C Profit or Loss From Business (or Schedule C-EZ, Net Profit From Business). Net profit or (loss) from Schedule C (or Schedule C-EZ) is carried forward to Form 1041, line 3.

  2. Income types generally considered Business Income display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type Income Description
    Bartering BARTERING Form 1099-B An exchange of one taxpayer’s property or services for another taxpayer’s property or services. The fair market value of property or services received through barter is taxable income.
    Gross Proceeds Paid to an Attorney ATTRNY FEE Form 1099-MISC Gross proceeds paid to an attorney in connection with legal services.
    Gross Amount of Payment Card / Third Party Network Transactions GAMC&TN

    Note:

    JAN PMT - DEC PMT and CARDNTPRES are for information only.

    Form 1099-K Consist of total transactions received from payment card transactions (i.e., Master Card, Visa, etc.); electronic payment facilitators or third party settlement organizations (i.e., PayPal, etc.).
    Fishing Boat Proceeds FISH INC Form 1099-MISC Proceeds from the sale of a catch.
    Medical and Healthcare Payments MED PAYMTS Form 1099-MISC Compensation for medically related services provided or goods sold.
    Nonemployee Compensation NONEMP COM Form 1099-MISC Compensation for services provided or goods sold.
  3. Payers (generally insurance companies) report gross proceeds paid to an attorney (ie: Attorney’s Fees) on Form 1099-MISC when they cannot determine the specific portion of the payment attributable to the taxpayer. The taxpayer is instructed to report only the taxable portion as income on their return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. During Case Analysis, do not consider this amount type when determining U/R UNLESS the taxpayer provides a specific breakdown of their Business Income and includes this amount type on their tax return.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. During response phase it may be necessary to account for this amount type when evaluating the taxpayer's response.

4.119.4.7.3.1  (09-02-2016)
Bartering Analyzation

  1. Compare Bartering amounts with entries on:

    1. Form 1040, Schedule C, lines 1 or 6 or C-EZ, line 1.

    2. Form 1040, Schedule F, lines 1a, 2, 7, 8, 9, 37, 42, 43, or 44. (Consider bartering reported here only if it can determine from the payer name or business activity that it is farm related income).

    3. Form 1041, line 3.

  2. Comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as Bartering:

    1. Form 1041, line 8.

    2. Form 1041, Schedule D.

      Note:

      Payers may erroneously report securities transactions as bartering since both income types are reported on Form 1099-B

      .

    3. Form 8949.

    4. Form 1040, Schedule E, lines 3 or 4.

    5. Form 4835, lines 1, 6 or 7.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.3.2  (09-02-2016)
Bartering - Miscellaneous

  1. If Bartering is U/R, enter the following on the Letter 2030:

    1. Select BARTERING from the drop down menu in the "Your income and deductions" field.

      Exception:

      GROSS RECEIPTS may be selected from the drop down menu when multiple business income related Amount Types (IRPTR Literals) are involved.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Bartering IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.3.3  (09-02-2016)
Payment Card/Third Party Network Payments - Analyzation

  1. Compare Payment Card/Third Party Network Payments amounts with entries on:

    1. Form 1040, Schedule C, Part I, line 1.

    2. Form 1040, Schedule C-EZ, Part II, line 1.

    3. Form 1040, Schedule F.

    4. Consider Payment Card/Third Party Network Payments reported if it is included in a larger total for the applicable taxpayer on Form 1040 Schedule C, C-EZ, or F, unless the IR is obviously not the same type of income.

    5. Form 1041, line 3.

  2. If a Form 1099-K and Form 1099-MISC are present with identical money amounts, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Gross Payment Card transactions are not adjusted for any authorized returns or other allowances.

    1. During Case Analysis consider the entire IR amount when determining underreported income UNLESS the taxpayer provides a specific breakdown of their Gross Receipts or Sales and includes this amount type on their tax return.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. When comparing Payment Card/Third Party network Payment IRs with entries on any line not specifically identified for Payment Card/Third Party Network Payments the amount must match within $1 or be CLEARLY IDENTIFIED by payer name, activity or as Payment Card/Third Party Network Payments income:

    1. Form 1041, Schedule D, Part I, lines 1a - 3, column (d) or Part II, lines 8a, 9 or 10, column (d).

    2. Form 1040, Schedule E, Part I.

    3. Form 8949, Part I, line 1 column (d) or Part II, line 1, column (d).

    4. Form 4797, Parts I, II, or III.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.3.4  (09-02-2016)
Payment Card/Third Party Network Payments - Miscellaneous

  1. If Payment Card/Third Party Network Payments is U/R, enter the following on the Letter 2030:

    1. Select GROSS PAYMENT CARD PAYMENTS from the drop down menu in the "Your income and deductions" field.

      Exception:

      GROSS RECEIPTS may be selected from the drop down menu when multiple business income related Amount Types (IRPTR Literals) are involved.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Payment Card/Third Party Network Payment IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 1 when Payment Card/Third Party Network Payments is U/R.

4.119.4.7.3.5  (09-02-2016)
Fishing Boat Proceeds - Analyzation

  1. When comparing Fishing Boat Proceeds amounts with the following entries, the amount must match within $1 or be CLEARLY identified by payer name, activity or as fish income:

    1. Form 1040, Schedule C, Part I.

    2. Form 1040, Schedule C-EZ Part II.

    3. Form 1040, Schedule E, Part I.

    4. Form 1040, Schedule E, Part II.

    5. Form 1041, line 3.

    6. Form 1041, line 8.

  2. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.3.6  (09-02-2016)
Fishing Boat Proceeds - Miscellaneous

  1. If Fishing Boat Proceeds are U/R, enter the following on the Letter 2030:

    1. Select FISH INC from the drop down menu in the "Your income and deductions" field.

      Exception:

      GROSS RECEIPTS may be selected from the drop down menu when multiple business income related Amount Types (IRPTR Literals) are involved.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Fishing Boat Proceeds IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.3.7  (09-02-2016)
Medical Payments - Analyzation

  1. Compare Medical Payments with entries on:

    1. Form 1040, Schedule C, Part I or Schedule C-EZ, Part II if it appears to be for a medical practice.

    2. Form 1040 Schedule E, Part II if it appears to be related to the medical profession.

    3. Form 1041, line 3.

    4. Form 1041, line 8, the amount must match within $1 or be CLEARLY IDENTIFIED as Medical Payments.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

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

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.3.8  (09-02-2016)
Medical Payments - Miscellaneous

  1. If Medical Payments are U/R, enter the following on the Letter 2030:

    1. Select MEDICAL PAYMENTS from the drop down menu in the "Your income and deductions" field.

      Exception:

      GROSS RECEIPTS may be selected from the drop down menu when multiple business income related Amount Types (IRPTR Literals) are involved.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Medical Payments IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.3.9  (09-02-2016)
Nonemployee Compensation - Analyzation

  1. Compare Nonemployee Compensation amounts with entries on:

    1. Form 1040, Schedule C, Part I.

    2. Form 1040, Schedule C-EZ, Part II.

    3. Form 1040, Schedule F, Part I or III.

    4. Form 4835, Part I.

    5. Consider Nonemployee Compensation reported if it is included in a larger total on Form 1040, Schedule C, C-EZ, F or Form 4835, unless the IR is obviously not the same type of income.

    6. Form 1041, line 3.

  2. When comparing Nonemployee Compensation IRs with entries on any line not specifically identified for Nonemployee Compensation, the amount must match within $1 or be CLEARLY IDENTIFIED:

    1. Form 1040, Schedule E, Part I.

    2. Form 4797, Sales of Business Property, Parts I, II, or III - Consider the Nonemployee Compensation reported if the sales price matches the IR within $1.

    3. Form 6252, Installment Sale Income, line 5 or line 21.

    4. Form 1041, Schedule D, Part I, lines 1a, 2 , or 3 column (d) or Part II, lines 8a, 9 or 10, column (d).

    5. Form 8949, Part I, line 1 column (d) or Part II, line 1, column (d).

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

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Nonemployee Compensation may represent crop insurance proceeds, which are reported on Form 1040, Schedule F, line 6a or 6b, or Form 4835, line 5a or 5b.

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

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

  6. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.3.10  (09-02-2016)
Nonemployee Compensation - Miscellaneous

  1. If Nonemployee Compensation are U/R, enter the following on the Letter 2030:

    1. Select NONEMPLOYEE COMPENSATION from the drop down menu in the "Your income and deductions" field.

      Exception:

      GROSS RECEIPTS may be selected from the drop down when multiple business income Amount Types (IRPTR Literals) are involved.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Nonemployee Compensation IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.4  (09-02-2016)
Cancellation of Debt - General

  1. Cancellation of Debt is considered income to the taxpayer if a debt owed to the Federal Government, financial institution, credit union or other creditor was discharged and is not otherwise excluded from gross income.

  2. Cancellation of Debt is reported on Form 1099-C.

  3. Cancellation of Debt is identified on IDRS CC:IRPTR as Amount Type (IRPTR Literal) AMT DBT CN.

    Note:

    PRPTY FMV and INT FORGVN are displayed for information purposes only.

4.119.4.7.4.1  (09-02-2016)
Cancellation of Debt - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

      Exception:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

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

  2. Cancellation of Debt comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED:

    Form 1041 Form 1120
    1. Form 1041, line 8.

    2. Form 1040 Schedule C, Part I, line 6 (or Schedule C-EZ, line 1).

    3. Form 1040, Schedule E, Part I, lines 3 and/or 4.

    4. Form 1040, Schedule F, Part I, lines 3a, 4a, 5b, 6a, and 8 or Part III, line 39a through 43.

    1. Form 1120, line 10.

    2. Form 4797: Compare the description of debt property from the IR(s) to Column (a) in Parts I, II, and III and allow credit for gross amounts reported. If the IR is not clearly identified, purse the income. If the PRPTY FMV amount is less than the AMT DBT CN, pursue the difference.

  3. If the taxpayer reduces the reported AMT DBT CN amount by the INT FORGVN amount, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If the taxpayer received AMT DBT CN from a Foreclosure or Repossession and the taxpayer is personally liable (recourse debt), the amount by which the canceled debt exceeds the PRPTY FMV of the property must generally be reported as ordinary income on Form 1041, line 8 or Form 1120, line 10.

    Note:

    The payer may indicate on the Form 1099-C that the taxpayer is personally liable for repayment of the debt. The 1099-C IR indicates Personally liable in the "Was Debtor Personal liable" field on IDRS CC:IRPTR.

  5. If the taxpayer has received AMT DBT CN from a Foreclosure or Repossession and the taxpayer is not personally liable (non-recourse debt), the gain or loss is computed by comparing the balance of the loan amount (1099-C) with the adjusted basis.

    1. Losses are non-deductible, unless the property was used in trade or business or held for investment. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Include a Special Paragraph to inform the taxpayer these losses are not deductible.

    2. Losses in excess of gains from sales of property used in trade or business are deductible as ordinary losses.

  6. If the taxpayers indicate that the income is not taxable because they are insolvent, (e.g., Form 982, Box 1b, is checked or on an attached statement), they MUST provide a statement showing the amount of their insolvency. If taxpayers do not provide a breakdown of their assets and liabilities, DO NOT consider them to be insolvent. The taxpayers are considered insolvent if the net liability amount(s) shown on the attached statement is GREATER than the total fair market value of assets immediately prior to the debt cancellation.

    1. If the AMT DBT CN amount(s) is less than or equal to the insolvency amount, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. If the AMT DBT CN amount(s) is more than the insolvency amount, the amount of the taxpayers insolvency must be considered. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Example:

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

  7. When more than one information return containing Cancellation of Debt amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Cancellation of Debt together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

4.119.4.7.4.2  (09-02-2016)
Cancellation of Debt - Miscellaneous

  1. If Cancellation of Debt is U/R, enter the following on the Letter 2030:

    1. Select CANCELLATION OF DEBT from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Cancellation of Debt IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 24 when Cancellation of Debt is U/R.

4.119.4.7.5  (09-02-2016)
Commodity Credit Corporation (CCC) Loans Forfeited - General

  1. Commodity Credit Corporation (CCC) Loans Forfeited are reported on Form 1099-A, Acquisition or Abandonment of Secured Property, and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) DEBT OUT.

    Note:

    PRPTY FMV is displayed for information purposes only.

4.119.4.7.5.1  (09-02-2016)
Form 1041 Commodity Credit Corporation (CCC) Loans Forfeited - Analyzation

  1. When the outstanding debt relates to a forfeited Commodity Credit Corporation loan, the payer is instructed to indicate "CCC" in the property description on Form 1099-A, box 6.

  2. The debt (principal only) owed at the time that the Commodity Credit Corporation (CCC) loan is forfeited is considered income.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡

  4. Compare Debts Out (i.e., CCC Loan Forfeited) with entries on:

    1. Form 1040, Schedule F, line 5b (use line 5c if line 5b is zero or blank) or line 40b (use line 40c if line 40b is zero or blank).

    2. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    3. Form 4835, line 4b (use line 4c if line 4b is zero or blank).

    4. Give credit for amounts reported on Form 1041, line 6.

    5. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    6. Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    7. Form 1040, Schedule E, Part V, line 42:

    If the amount reported on Schedule E, Part V, line 42 is Then
    Equal to or greater than the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
    Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

    Exception:

    Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  5. Consider CCC loans Forfeited reported if income from a farming business is reported on Schedule E, Part II.

  6. When more than one information return containing CCC Loan Forfeited amounts are present and the taxpayer does not provide a breakdown:

    1. Group all CCC Loan Forfeited together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  7. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.5.2  (09-02-2016)
Form 1120 Commodity Credit Corporation (CCC) Loans Forfeited - Analyzation

  1. When the outstanding debt relates to a forfeited Commodity Credit Corporation loan, the payer is instructed to indicate "CCC" in the property description on Form 1099-A, box 6.

  2. The debt (principal only) owed at the time that the Commodity Credit Corporation (CCC) loan is forfeited is considered income.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡

  4. Compare Debts Out (ie: CCC Loan Forfeited) with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, line 5b (use line 5c if line 5b is zero or blank) or line 40b (use line 40c if line 40b is zero or blank).

    3. Form 4835, line 4b (use line 4c if line 4b is zero or blank).

    4. Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    5. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.10, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General, for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  5. When more than one information return containing CCC Loan Forfeited amounts are present and the taxpayer does not provide a breakdown:

    1. Group all CCC Loan Forfeited together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  6. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.5.3  (09-02-2016)
Commodity Credit Corporation (CCC) Loans Forfeited - Miscellaneous

  1. If CCC Loans forfeited are U/R, enter the following on the Letter 2030:

    1. Select COMMODITY CREDIT CORPORATION LOANS FORFEITED from the drop down menu in the "Your income and deductions" field.

      Exception:

      Form 1041 only - When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Commodity Credit Corporation (CCC) Loans Forfeited IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.6  (09-02-2016)
Cooperative Distributions - General

  1. Cooperative Distributions are paid by cooperatives to their members.

  2. Cooperative Distributions display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Patronage Dividends PATRONAGE 1099-PATR
    Per-unit Retained Allocations RTAIN ALLC 1099-PATR
    Redemption of Nonqualified Notices and Retain Allocations REDEMPTION 1099-PATR
    Non Patronage Distributions NONPAT DIS 1099-PATR

    Note:

    INVEST CRD, WRK OP CRD, PT AMT ADJ, PROD DEDCT and OTH CDT&DD are for information purposes only.

4.119.4.7.6.1  (09-02-2016)
Form 1041 Cooperative Distributions - Analyzation

  1. Group Patronage Dividends, Per-unit Retain Allocations, Redemption Amount and Non Patronage Distributions IRs to determine the overall amount AND compare with the following entries:

    1. Form 1040, Schedule F, line 3a (use 3b if line 3a is zero or blank) or 38a (use line 38b if line 38a is zero or blank).

      Caution:

      Per Unit Retain Allocations may be reported on Form 1040, Schedule F line 2. Only give credit if the amount reported on line 2 matches within $1 or is clearly identified as Per Unit Retain Allocations.

    2. Form 4835, Farm Rental Income and Expenses, line 2a (line 2b if line 2a is zero or blank).

    3. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    4. Form 1041, line 6.

    5. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

      Note:

      Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    6. Form 1040, Schedule E, Part V, line 42:

      If the amount reported on Schedule E, Part V, line 42 is Then
      Equal to or greater than the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
      Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  2. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.6.2  (09-02-2016)
Form 1120 Cooperative Distributions - Analyzation

  1. Group Patronage Dividends, Per-unit Retain Allocations, Redemption Amount and Non Patronage Distributions IRs to determine the overall amount AND compare with the following entries:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, Profit or Loss From Farming, line 3a (use 3b if line 3a is zero or blank) or 38a (use line 38b if line 38a is zero or blank).

      Caution:

      Per Unit Retain Allocations may be reported on Form 1040, Schedule F line 2. Only give credit if the amount reported on line 2 matches within $1 or is clearly identified as Per Unit Retain Allocations.

    3. Form 4835, line 2a (line 2b if line 2a is zero or blank).

      Reminder:

      Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    4. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.10, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General, for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  2. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.6.3  (09-02-2016)
Cooperative Distributions - Miscellaneous

  1. If Cooperative Distributions is U/R, enter the following on the Letter 2030:

    1. Select COOPERATIVE DISTRIBUTION from the drop down menu in the "Your income and deductions" field.

      Exception:

      Form 1041 only - When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Cooperative Distribution IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.7  (09-02-2016)
Crop Insurance - General

  1. Crop Insurance proceeds are payments received by farmers or agricultural businesses as a result of destruction or damage to crops.

  2. Crop Insurance is reported on Form 1099-MISC and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) CROP INS.

4.119.4.7.7.1  (09-02-2016)
Form 1041 Crop Insurance - Analyzation

  1. Compare Crop Insurance with entries on:

    1. Form 1040, Schedule F, line 6a (use line 6b if line 6a is zero or blank) or line 41.

    2. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    3. Form 4835, line 5a (use line 5b if line 5a is zero or blank).

    4. Give credit for amounts reported on Form 1041, line 6.

    5. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

      Note:

      Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    6. Form 1040, Schedule E, Part V, line 42:

      If the amount reported on Schedule E, Part V, line 42 is Then
      Equal to or greater than the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
      Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  2. Apparent Crop Insurance discrepancies may be due to the taxpayer electing to defer reporting the proceeds to the next year. Consider any Crop Insurance discrepancies resolved when ALL of the following conditions are met:

    1. Uses a cash accounting method (see Form 1040, Schedule F), AND

    2. Attaches a statement electing to defer Crop Insurance proceeds to the subsequent year (under IRC Section 451(d) and Regulation Section 1.451-6).

      Note:

      If the taxpayer filed Form 1040, Schedule F, box 6c should be checked. If Form 4835 is filed, box 5c should be checked.

  3. When more than one information return containing Crop Insurance amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Crop Insurance together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.7.2  (09-02-2016)
Form 1120 Crop Insurance - Analyzation

  1. Compare Crop Insurance with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, line 6a (use line 6b if line 6a is zero or blank) or line 41.

    3. Form 4835, line 5a (use line 5b if line 5a is zero or blank).

      Note:

      Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    4. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.10, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General, for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  2. Apparent Crop Insurance discrepancies may be due to the taxpayer electing to defer reporting the proceeds to the next year. Consider any Crop Insurance discrepancies resolved when ALL of the following conditions are met:

    1. Uses a cash accounting method (see Form 1120, Schedule K), AND

    2. Attaches a statement electing to defer Crop Insurance proceeds to the subsequent year (under IRC Section 451(d) and Regulation Section 1.451-6).

      Note:

      If the taxpayer filed Form 1040, Schedule F, box 6c should be checked. If Form 4835 is filed, box 5c should be checked.

  3. When more than one information return containing Crop Insurance amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Crop Insurance together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.7.3  (09-02-2016)
Crop Insurance - Miscellaneous

  1. If Crop Insurance is U/R, enter the following on the Letter 2030:

    1. Select CROP INSURANCE from the drop down menu in the "Your income and deductions" field.

      Exception:

      Form 1041 only - When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Crop Insurance IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 20 whenever Crop Insurance is U/R.

4.119.4.7.8  (09-02-2016)
Dividends and Capital Gain Distributions

  1. Dividends are distributions of property made by a corporation to its shareholders out of its current or accumulated earnings and profits. Dividends paid directly to a shareholder are reported on Form 1099-DIV, Dividends and Distributions. Dividends received indirectly through a pass-through entity are reported on Schedules K-1 from Form 1065, U.S. Return of Partnership Income, Form 1041, U.S. Income Tax Return for Estates & Trusts, and Form 1120-S, U.S. Income Tax Return for an S Corporation.

  2. Capital gain distributions are normally paid by regulated investment companies, mutual funds, and real estate investment trusts from their net long term capital gains.

4.119.4.7.8.1  (09-02-2016)
Dividends - General

  1. Dividends display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Ordinary Dividend ORD DIV 1099-DIV
    Ordinary Dividends DIVIDENDS K-1 1120S
    Ordinary Dividends DIVIDENDS K-1 1041
    Ordinary Dividends DIVIDENDS K-1 1065

    Note:

    QLF DVDNDS, 28% RT GN, UN 1250 GN, CASH LIQ, NOCASH LIQ, SC 1202 GN, NONDV DIST, INVEST EXP, FRGN TX PD, EXMTINTDIV, and SPRVACTBID, are for information purposes only.

4.119.4.7.8.2  (09-02-2016)
Form 1041 Dividends - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    • Keogh (HR-10) or Tax Sheltered Annuities (403(b)) accounts

    • Simplified Employee Pensions (SEP) or Individual Retirement Accounts (IRA)

    • A pension plan or profit sharing plan (PSP) (including a 401(k) plan)

    • An Escrow Account (Attorneys)

    • Municipal Bonds

  2. Compare Ordinary dividends and/or Dividend amounts with entries on:

    1. Form 1041, line 2a.

    2. Form 1040, Schedule E, Parts II, III, and/or IV. The amounts must match within $1 or be clearly identified as Dividend Income.

  3. Do not screen the QLF DVDNDS element of the IR(s). The taxpayer determines the portion of QLF DVDNDS (from Form 1099-DIV, Box 1b) that is entered on Form 1041, line 2b. For all 1099-DIV IRs where the ORD DIV element is fully or partially U/R and a QLF DVDNDS element is present, take the following action:

    1. When issuing a Letter 2030, always enter the qualified dividends reported on Form 1041, line 2b(2) in the Capital Gains Tax Rate Calculation worksheet.

      Note:

      Qualified Dividends are used in determining the proper Capital Gains tax rate.

    2. Include the QLF DVDNDS element(s) on the IRs.

    3. Include PARAGRAPH 6.

  4. When more than one information return containing Ordinary Dividends and/or Dividends are present and the taxpayer does not provide a breakdown:

    1. Group all Ordinary Dividend and/or Dividend IRs together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  5. Dividends and Interest income may be interchanged. Check any interest income areas when comparing IR amounts. Offset dividend income against interest income ONLY if an unidentified amount matches the U/R dividend amount within $1.

  6. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.8.3  (09-02-2016)
Form 1120 Dividends - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    • Keogh (HR-10) or Tax Sheltered Annuities (403(b)) accounts

    • Simplified Employee Pensions (SEP) or Individual Retirement Accounts (IRA)

    • A trust or a plan where the corporation is listed as a Trustee

    • A pension plan or profit sharing plan (PSP) (including a 401(k) plan)

    • An Escrow Account (Attorneys)

    • Municipal Bonds

  2. Compare Ordinary dividends and/or Dividend amounts with entries on:

    1. Form 1120, line 4.

    2. Form 1120, line 10. The amount must match within $1 or be clearly identified as dividend income.

  3. When more than one information return containing Ordinary Dividends and/or Dividends are present and the taxpayer does not provide a breakdown:

    1. Group all Ordinary Dividend and/or Dividend IRs together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. Dividends and Interest income may be interchanged. Check any interest income areas when comparing IR amounts. Offset dividend income against interest income ONLY if an unidentified amount matches the U/R dividend amount within $1.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instructions.

4.119.4.7.8.4  (09-02-2016)
Dividends - Miscellaneous

  1. If Dividends are U/R, enter the following on the Letter 2030:

    1. Select DIVIDENDS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Dividend IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include the following:

    Form 1041 Form 1120
    PARAGRAPH 6 when sending QLF DVDNDS elements with the notice. PARAGRAPH 4 when dividends are U/R.

4.119.4.7.8.5  (09-02-2016)
Capital Gains Distributions - General

  1. Capital Gain Distributions display on IDRS CC:IRPTR with Amount Type (IRPTR Literal) CAPTL GAIN and Document Type Form 1099-DIV.

  2. Capital Gain Distribution are considered separately from Ordinary Dividends.

4.119.4.7.8.6  (09-02-2016)
Capital Gain Distributions - Analyzation

  1. Compare Amount Type CAPTL GAIN amounts with entries on:

    Form 1041 Form 1120
    • Schedule D, line 13

    • Line 4, if Form 1041, Schedule D is not attached

    • Schedule D, line 14

    • Line 8, if Form 1120, Schedule D is not attached

    Exception:

    Do not give credit for amounts on Form 1041, line 4 or Form 1120, line 8 if the amounts listed are clearly identified as a different income type.

  2. If the taxpayer provides a breakdown of Capital Gains Distributions (for example on an attachment/statement), ensure that the amount was properly carried forward to the following lines before considering them reported:

    1. Form 1041, Schedule D line 13 or Form 1041, line 4.

    2. Form 1120, Schedule D, line 14 or Form 1120, line 8.

  3. Verify that Capital Gain Distributions reported on Schedule D, are appropriately carried forward to page one of the tax return. If not, then consider the amount U/R and include PARAGRAPH 12.

  4. When more than one information return containing Capital Gain Distributions are present and the taxpayer does not provide a breakdown:

    1. Group all Capital Gain Distributions IRs together.

    2. Compare the group total to the amount reported on:

      Form 1041 Form 1120
      • Schedule D, line 13

      • Line 4, if Form 1041, Schedule D is not attached

      • Schedule D, line 14

      • Line 8, if Form 1120, Schedule D is not attached

      Exception:

      Do not give credit for amounts on Form 1041, line 4 or Form 1120, line 8 if the amounts listed are clearly identified as a different income type.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  5. Form 1041 only - If there is CAPTL GAIN U/R and the taxpayer reports a capital loss of $3,000 or more include PARAGRAPH 8.

  6. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instructions.

4.119.4.7.8.7  (09-02-2016)
Capital Gain Distributions - Miscellaneous

  1. If Capital Gain Distributions are U/R, enter the following on the Letter 2030:

    1. Select CAPITAL GAIN DISTRIBUTIONS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Capital Gain Distribution IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include the following:

    Form 1041 Form 1120
    • PARAGRAPH 8 when applicable

    • PARAGRAPH 12 when applicable

    • PARAGRAPH 12 when applicable

4.119.4.7.9  (09-02-2016)
Gambling Winnings - General

  1. Gambling winnings are identified on IDRS CC:IRPTR as Document Type "W-2G" and Amount Type (IRPTR Literal) GR WINNING.

    Note:

    IDEN WAGER is displayed for information purpose only.

4.119.4.7.9.1  (09-02-2016)
Gambling Winnings - Analyzation

  1. Compare Gambling winnings with entries on:

    Form 1041 Form 1120
    1. Form 1041, Line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    2. Form 1040, Schedule C, line 1 or C-EZ line 1 ONLY when the Business Activity relates to Gambling Industries - including Casinos and Racetracks activities. Consider any other Business income related IRs when determining the total amount to compare to Form 1040, Schedule C, line 1 or C-EZ line 1.

    1. Form 1120, Line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1120, line 1a (Gross Receipts) ONLY when the Business Activity on Form 1120, Schedule K lines 2a - c relates to Gambling Industries - including Casino and Racetrack activities. See IRM 4.119.4.7.10, Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) – General, for additional information on information returns that are related to Gross Receipts or Sales. Consider any other Gross Receipts related IRs when determining the total amount to compare to Form 1120, line 1a.

  2. When more than one information return containing Gambling Winnings amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Gambling Winnings together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instructions.

4.119.4.7.9.2  (09-02-2016)
Gambling Winnings - Miscellaneous

  1. If Gambling winnings is U/R, enter the following on the Letter 2030:

    1. Select GAMBLING INCOME from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Gambling winning IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.10  (09-02-2016)
Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General

  1. Income types generally considered Gross Receipts display on IDRS CC:IRPTR with the following Amount types and Document Types:

    Income Type Amount Type (IRPTR Literal) Document Type Income Description
    Bartering BARTERING Form 1099-B An exchange of one taxpayer’s property or services for another taxpayer’s property or services. The fair market value of property or services received through barter is taxable income.
    Gross Amount of Payment Card / Third Party Network Transactions GAMC&TN

    Note:

    JAN PMT - DEC PMT and CARDNTPRES are for information only.

    Form 1099-K Consist of total transactions received from payment card transactions (i.e., Master Card, Visa, etc.); electronic payment facilitators or third party settlement organizations (i.e., PayPal, etc.)
    Gross Proceeds Paid to an Attorney ATTRNY FEE Form 1099-MISC Gross proceeds paid to an attorney in connection with legal services.
    Fishing Boat Proceeds FISH INC Form 1099-MISC Proceeds from the sale of a catch.
    Medical and Healthcare Payments MED PAYMTS Form 1099-MISC Compensation for medically related services provided or goods sold.
    Nonemployee Compensation NONEMP COM Form 1099-MISC Compensation for services provided or goods sold.

4.119.4.7.10.1  (09-02-2016)
Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - Analyzation

  1. Gross Receipts or Sales refer to all other income received except those that are reported on Form 1120 lines 4 through 10.

  2. When determining underreported income, compare affected Amount Types to Form 1120, line 1a (Gross Receipts or Sales) and/or Form 1120, line 10 (Other Income).

    Note:

    Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless it is a dollar match to the information return amount.

  3. If a Form 1099-K and Form 1099-MISC are present with identical money amounts, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Gross Payment Card transactions are not adjusted for any authorized returns or other allowances.

    1. During Case Analysis consider the entire IR amount when determining underreported income UNLESS the taxpayer provides a specific breakdown of their Gross Receipts or Sales and includes this amount type on their tax return.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Payers (generally insurance companies) report gross proceeds paid to an attorney (i.e., Attorney’s Fees) on Form 1099-MISC when they cannot determine the specific portion of the payment attributable to the taxpayer. The taxpayer is instructed to report only the taxable portion as income on their return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. During Case Analysis, do not consider this amount type when determining U/R UNLESS the taxpayer provides a specific breakdown of their Gross Receipts or Sales and includes this amount type on their tax return.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. During response phase you may need to account for this amount type when evaluating the taxpayer’s response.

  6. When there are more than one type of Gross Receipts (e.g., Nonemployee Compensation and Medical payments) present on the same case and the taxpayer does not provide a breakdown. Group to determine the overall income amount to compare against amounts reported on the tax return.

    1. If the group total is larger, consider the difference underreported.

    2. If the group total is smaller, consider the issue resolved.

  7. If the taxpayer reports the same amount of Form 1099-MISC income as shown on the IR, but under a different payer name, consider the IR reported.

  8. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient, for further instructions.

4.119.4.7.10.2  (09-02-2016)
Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - Miscellaneous

  1. If Gross receipts are U/R, enter the following on the Letter 2030:

    1. Select GROSS RECEIPTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the amount from Form 1120, line 1a in the "Shown on return" field.

    3. Enter the total of all U/R Gross Receipt IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 1 when Gross Payment Card transactions are U/R.

  3. Select the appropriate income type from the drop down for any U/R Amount Types that are not part of the "Gross Receipts" group.

    Example:

    If there is U/R from Amount Type BARTERING that was partially reported on Form 1120, line 10 statements, then "Bartering" should be displayed in the "Your income and deductions" section of the notice. Enter the amount of bartering reported on the tax return in the "Shown on return" field on the notice.

4.119.4.7.11  (09-02-2016)
Interest - General

  1. Interest income displays on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Interest INTEREST 1099-INT
    Interest on U.S. Savings Bonds and Treasury Obligations SAV BOND 1099-INT
    Early Withdrawal Penalty INT FORFET 1099-INT
    Original Issue Discount on U.S. Treasury Obligation OID TRS OB 1099-OID
    Original Issue Discount for Current Year OR ISS DSC 1099-OID
    Other Periodic Interest INTEREST 1099-OID
    Early Withdrawal Penalty INT FORFET 1099-OID
    Interest INTEREST K-1 1120S
    Interest INTEREST K-1 1041
    Interest INTEREST K-1 1065

    Note:

    INVEST EXP, FRGN TX PD, TX EXM INT, SP PR INT, MARKETDISC, BOND PREM, BDPMTAXEXM are for information purposes only.

  2. Original issue discount (OID), which is treated as interest income, is the difference between the issue price and stated redemption price of a debt instrument (e.g., bond).

4.119.4.7.11.1  (09-02-2016)
Interest - Analyzation

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

    • Municipal Bonds

    • Keogh (HR-10) or Tax Sheltered Annuities (403(b)) accounts

    • Simplified Employee Pensions (SEP) or Individual Retirement Accounts (IRA)

    • A Pension Plan or Profit Sharing Plan (including a 401(k) plan)

    • A Capital Construction Fund (CCF) account

    Exception:

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

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Compare Interest, Savings Bond and OID amounts with entries on:

    Form 1041 Form 1120
    • Form 1041, Line 1

    • Form 1120, Line 5

    • Form 1120, Line 10. The amount must match with in $1 or be clearly identified

  4. The taxpayer may reduce INTEREST amounts by the Early Withdrawal Penalty shown on the information return as Amount Type "INT FORFET" and report the difference on Form 1041, 1 or Form 1120, line 5.

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

  5. When more than one information return containing Interest, Savings Bond and/or OID are present and the taxpayer does not provide a breakdown:

    1. Group all Interest, Savings Bond and OID IRs together.

    2. Compare the group total amount to the total reported interest.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  6. Form 1041 only - Interest comparison for the following entries must match within $1 or be CLEARLY IDENTIFIED as interest:

    • Form 1040 Schedule C, line 6

    • Form 1040 Schedule E, Parts ll, lll,or IV

    • Form 1040 Schedule F, Lines 8 or 43

  7. Form 1041, line 1 or Form 1120, line 5 may be reduced by any of the following. The amount should reflect the taxable amount of interest minus these adjustments:

    • Accrued Interest - Interest on securities transferred between interest payment dates

    • Tax-Exempt Interest - (e.g., Municipal Bonds, etc.)

    • Amortizable Bond Premium - Premium offsets interest on taxable bonds acquired after December 31, 1987

    • Frozen Deposits - An account from which the taxpayer is unable to withdraw funds because the financial institution or others in the area are bankrupt, insolvent, or in receivership

  8. Interest and Dividends income may be interchanged. Check any dividend income area when comparing IR amounts. Offset Interest/OID income against dividend income ONLY if an unidentified amount matches the U/R Interest/OID amount within a $1.

  9. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instructions.

4.119.4.7.11.2  (09-02-2016)
Interest - Miscellaneous

  1. If Interest is U/R, enter the following on the Letter 2030:

    1. Select INTEREST from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Interest IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.12  (09-02-2016)
Other Income - General

  1. Other income is identified with Document Type "1099-MISC" and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) MISC OTH I.

4.119.4.7.12.1  (09-02-2016)
Other Income - Analyzation

  1. Compare Amount Type MISC OTH I with entries on:

    1. Form 1041, line 8 or Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on these lines. DO NOT give credit for any unidentified amounts, unless there is a $1 match.

    2. Form 1040, Schedule F, lines 8 or 43. The amount must match within $1 or be clearly identified.

    3. Form 4835, line 6. The amount must match within $1 or be clearly identified.

    4. Form 1040, Schedule C, line 6.

  2. When more than one information return containing Other Income amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Other Income together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. The Other Income amount on a Form 1099-MISC IR represents the full value of Other Income. If the taxpayer reports a lesser amount, consider the difference U/R, unless documentation is attached to the return.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.12.2  (09-02-2016)
Other Income - Miscellaneous

  1. If Other Income is U/R, enter the following on the Letter 2030:

    1. Select OTHER INCOME from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Other Income IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.13  (09-02-2016)
Partnership/Trust/S-Corporation (Conduit Income) - General

  1. Conduit income is the taxpayer's distributive share from a Form 1065, U.S. Return of Partnership Income, Form 1120-S, U.S. Income Tax Return for an S Corporation or Form 1041, U.S. Income Tax Return for Estates and Trusts.

  2. Conduit income displays on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Ordinary Dividends DIVIDENDS
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Interest Income INTEREST
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Net Rental Real Estate Income REAL EST
    • K-1 1120S

    • K-1 1065

    Net Rental Real Estate Income NET RENTAL
    • K-1 1041

    Other Net Rental Income OTHER RENT
    • K-1 1120S

    • K-1 1065

    Other Rental Income OTH RENTAL
    • K-1 1041

    Net Short Term Capital Gain SHT TRM CG
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Net Long Term Capital Gain LNG TRM CG
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Other Portfolio and Non-Business Income OTH PRTFLO
    • K-1 1041

    Royalties ROYALTIES
    • K-1 1120S

    • K-1 1065

    Ordinary Business Income OR INC K-1
    • K-1 1120S

    • K-1 1065

    Ordinary Business Income BUSI INC
    • K-1 1041

    Guaranteed Payments GUAR PAYMT
    • K-1 1065

    Section 179 Deduction SECT179 EX
    • K-1 1120S

    • K-1 1065

    Note:

    The literals CREDITS CR&CR RCAP, OTHER INFO, and SECT179 EX are shown for information only. Do not pursue the 179EX amount.

4.119.4.7.13.1  (09-02-2016)
Form 1041 Partnership/Trust/S-Corporation (Conduit Income) - Analyzation

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

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. When screening conduit IRs, keep the positive and negative amounts separate, but be aware that the taxpayer may have netted the negative IRs against positive IRs and/or the totals on the tax return. Review all forms, schedules and attached explanations to identify gross income amounts.

    Caution:

    Ensure that any amounts reported on attachments/forms are properly included as income on page one of the return.

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

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

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

  6. REAL EST, OTHER RENT, GUAR PAYMT and OR INC K-1 is reported on Form 1040, Schedule E, Part II, Columns (g) and/or (j). If the amount is not found on Form 1040, Schedule E, Part II, Columns (g) and/or (j), check column (a) for the payer name and/or column (d) for the payer EIN.

    1. If the taxpayer reports passive income on column (g) or passive loss on column (f) AND attaches Form 8582, Passive Activity Loss Limitations, accept the gain or loss as reported, regardless of the amount, including zero.

    2. If the taxpayer does not report the payer name/EIN on the Form 1040, Schedule E (or Schedule E is not completed/present) AND attaches Form 8582, Passive Activity Loss Limitation, that includes the payer name and/or EIN of the discrepant IR, consider the discrepancy resolved.

    3. If the taxpayer attaches a completed Form 6198, At Risk Limitation, that matches the payer name and/or EIN consider the discrepancy resolved regardless of whether there is corresponding income/loss reported on Form 1040, Schedule E.

  7. OTH RENTAL, NET RENTAL, BUSI INC and OTH PRTFLO is reported on Form 1040, Schedule E, Part III, column (d) and/or (f), If the amount is not found on Form 1040, Schedule E, Part III, column (d) and/or (f), check column (a) for the payer name and/or column (b) for the payer EIN.

    1. If the taxpayer reports passive income on column (d) or passive loss on column (c) AND attaches Form 8582, Passive Activity Loss Limitation, accept the gain or loss as reported, regardless of the amount, including zero.

    2. If the taxpayer does not report the payer name/EIN on the Form 1040, Schedule E (or Schedule E is not completed/present) AND attaches Form 8582, Passive Activity Loss Limitation, that includes the payer name and/or EIN of the discrepant IR, consider the discrepancy resolved.

    3. If the taxpayer attaches a completed Form 6198, At Risk Limitation, that matches the payer name and/or EIN consider the discrepancy resolved regardless of whether there is corresponding income/loss reported on Form 1040, Schedule E.

  8. Compare Amount Types: REAL EST, NET RENTAL, OTHER RENT, OTH RENTAL, OR INC K-1, BUSI INC, OTH PRTFLO, and GUAR PAYMT with entries on:

    1. Form 1040, Schedule E, Part II and III.

    2. The taxpayer may combine Schedule K-1 amounts with SECTION 179 DEDUCTION and report the net on Form 1041, Schedule E, Part II or III. If the taxpayer did not claim the SECTION 179 DEDUCTION do not pursue.

    3. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    4. These Amount Types may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules, forms and attachments before pursuing discrepant K-1 amounts.

  9. ROYALTIES are reported on Form 1040 Schedule E, Part I, line 4.

  10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  11. If multiple conduit IRs are present from the same payer for the same taxpayer take the following action:

    1. Review IDRS CC:IRPTRL for each IR to determine the On File Date.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    4. If the On File Date is the same for multiple IRs and none of the IRs are reported, pursue all IRs.

  12. IDRS research is required to determine if fully U/R Schedule K-1 (Form 1041) IRs Trusts are the result of a fiscal year filling requirement. Using the payer EIN, research IDRS CC:BMFOLI to determine the following:

    1. Presence of MFT 05 with a Return Posted indicator of "Y" , denoting that a Schedule K-1 (Form 1041) was filed.

    2. If the MFT 05 indicates that it is for our BMF-AUR tax year pursue the U/R amount. If for another tax year, consider the issue resolved.

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

  13. Conduit income may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules and attachments before pursuing discrepant K-1 amounts:

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

    2. Consider each component of a K-1 IR separately. For example, if the taxpayer only reports the INTEREST/DIVIDENDS portion of the IR but fails to report the remaining K-1 income types included on the IR (e.g. OR INC K-1, GUAR PAYMT, etc.), pursue the remaining income types based on the applicable IRM procedures.

  14. DIVIDENDS - See IRM 4.119.4.7.8.2, Form 1041 Dividends - Analyzation, for further instructions.

  15. INTEREST - See IRM 4.119.4.7.11.1, Interest - Analyzation, for further instructions.

  16. RENTS and ROYALTIES - See IRM 4.119.4.7.17.1, Form 1041 Rents and Royalties – Analyzation, for further instructions.

  17. Compare Schedule K-1 Amount Type SHT TRM CG with entries on :

    1. Form 1041, Schedule D, line 5.

    2. If the taxpayer did not file a Schedule D, determine if the Short Term Capital Gains are reported on Form 1041, line 4.

    3. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

  18. Compare Schedule K-1 Amount Type LNG TRM CG with entries on:

    1. Form 1041, Schedule D, line 12.

    2. If the taxpayer did not file a Schedule D, determine if the Capital Gains are reported on Form 1041, line 4.

    3. Form 1041, line 8 Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

  19. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.13.2  (09-02-2016)
Form 1120 Partnership/Trust/S-Corporation (Conduit Income) - Analyzation

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

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

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. When screening conduit IRs, keep the positive and negative amounts separate, but be aware that the taxpayer may have netted the negative IRs against positive IRs and/or the totals on the tax return. Review all forms, schedules and attached explanations to identify gross income amounts.

    Caution:

    Ensure that any amounts reported on attachments/forms are properly included as income on page one of the return.

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

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

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

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

  5. Compare Amount Types: REAL EST, NET RENTAL, OTHER RENT, OTH RENTAL, OR INC K-1, BUSI INC, OTH PRTFLO, and GUAR PAYMT with entries on Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    1. These Amount Types may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules, forms and attachments before pursuing discrepant K-1 amounts.

    2. The taxpayer may combine Schedule K-1 amounts with SECTION 179 DEDUCTION and report the net on Form 1120, line 10. If the taxpayer did not claim the SECTION 179 DEDUCTION do not pursue.

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

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. If multiple conduit IRs are present from the same payer for the same taxpayer take the following action:

    1. Review IDRS CC:IRPTRL for each IR to determine the On File Date.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    4. If the On File Date is the same for multiple IRs and none of the IRs are reported, pursue all IRs.

  8. IDRS research is required to determine if fully U/R Schedule K-1 (1041) IRs Trusts are the result of a fiscal year filing requirement. Using the payer EIN, research IDRS CC:BMFOLI to determine the following:

    1. Presence of MFT 05 with a Return Posted indicator of "Y" , denoting that a Schedule K-1 (1041) was filed.

    2. If the MFT 05 indicates that it is for our BMF-AUR tax year pursue the U/R amount. If for another tax year, consider the issue resolved.

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

  9. Conduit income may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules and attachments before pursuing discrepant K-1 amounts.

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

    2. Consider each component of a K-1 IR separately. For example, if the taxpayer only reports the INTEREST/DIVIDENDS portion of the IR but fails to report the remaining K-1 income types included on the IR (e.g. OR INC K-1, GUAR PAYMT, etc.), pursue the remaining income types based on the applicable IRM procedures.

  10. DIVIDENDS - See IRM 4.119.4.7.8.3, Form 1120 Dividends - Analyzation, for further instructions.

  11. INTEREST - See IRM 4.119.4.7.11.1, Interest - Analyzation, for further instructions.

  12. ROYALTIES - See IRM 4.119.4.7.18.1, Form 1120 Royalties – Analyzation, for further instructions.

  13. Compare Schedule K-1 Amount Type SHT TRM CG with entries on:

    1. Form 8949, Part I, line 1. Taxpayers are instructed to write "from Schedule K-1" and to enter the amount in column (h).

    2. If the taxpayer did not file a Schedule D, determine if the Short Term Capital Gains are reported on Form 1120, line 8.

    3. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

  14. Compare Schedule K-1 Amount Type LNG TRM CG with entries on:

    1. Form 8949, Part II, line 1. Taxpayers are instructed to write "from Schedule K-1" and to enter the amount in column (h).

    2. If the taxpayer did not file a Schedule D, determine if the Capital Gains are reported on Form 1120, line 8.

    3. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

  15. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.


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