21.7.4 Income Taxes/Information Returns 21.7.4.1 Program Scope and Objectives 21.7.4.1.1 Background 21.7.4.1.2 Authority 21.7.4.1.3 Responsibilities 21.7.4.1.4 Program Management and Review 21.7.4.1.5 Program Controls 21.7.4.1.6 Terms/Definitions/Acronyms 21.7.4.1.7 Related Resources 21.7.4.2 Taxpayer Advocate Service (TAS) 21.7.4.3 BMF Income Tax / Information Returns and Related Research Material 21.7.4.3.1 Form 1041 Research Material 21.7.4.3.2 Form 1065 Research Material 21.7.4.3.3 Form 1066 Research Material 21.7.4.3.4 Form 1120 Series Research Material 21.7.4.3.5 Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns 21.7.4.3.6 Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns 21.7.4.4 Income and Information Returns Procedures 21.7.4.4.1 Form 1041, U.S. Income Tax Return for Estates and Trusts 21.7.4.4.1.1 Filing Requirements, Form 1041 21.7.4.4.1.1.1 Domestic Decedent and Bankruptcy Estates 21.7.4.4.1.1.2 Domestic Trusts 21.7.4.4.1.1.3 Types of Trusts 21.7.4.4.1.1.4 Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts 21.7.4.4.1.1.5 Form 1041-N, U.S. Income Tax Return for Alaska Native Settlement Trusts 21.7.4.4.1.1.6 Qualified Disability Trust 21.7.4.4.1.2 Schedules Associated with Form 1041 21.7.4.4.1.3 General Definitions 21.7.4.4.1.4 Entity Perfection of Form 1041 21.7.4.4.1.5 Permissible Tax Years, Form 1041 21.7.4.4.1.6 Extensions to File, Form 1041 21.7.4.4.1.7 Tax Computation, Form 1041 21.7.4.4.1.7.1 Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts 21.7.4.4.1.7.2 Short Period Returns, Form 1041 21.7.4.4.1.7.3 Annualized Tax, Form 1041 21.7.4.4.1.7.4 Form 1041 Exemptions 21.7.4.4.1.7.5 Allowable Credits (Form 1041) 21.7.4.4.1.7.5.1 Non-Refundable Credits (Form 1041) 21.7.4.4.1.7.5.2 Refundable Credits (Form 1041) 21.7.4.4.1.8 Estimated Tax Payments (Form 1041) 21.7.4.4.1.8.1 Short Taxable Years (Form 1041) 21.7.4.4.1.8.2 Electronic Payment Options for e-file Users; Payment by Electronic Funds Withdrawal (Direct Debit) and Payment by Credit or Debit Card (Pay by Phone or Internet) 21.7.4.4.1.8.3 Form 1041-V, Payment Voucher 21.7.4.4.1.9 Electronic Filing of Form 1041 Returns 21.7.4.4.1.10 Form 1041 Claims and Requests for Adjustments 21.7.4.4.1.11 Social Security Domestic Employment Reform Act (SSDERA) and Business Master File (BMF) Schedules H 21.7.4.4.1.11.1 Provisions of Social Security Domestic Employment Reform Act (SSDERA), General Information 21.7.4.4.1.11.1.1 Social Security Domestic Employment Reform Act (SSDERA) Interest-free Provisions 21.7.4.4.1.11.2 Business Master File (BMF) Schedule H Processing 21.7.4.4.1.11.2.1 Loose Schedules H (BMF) 21.7.4.4.1.11.2.2 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.1.11.2.3 Adjustments (Amended Returns, TRNS 193s, etc.) Involving Form 1041 With Schedule H 21.7.4.4.1.11.2.4 Net Decrease, Original Assessment on Form 1041 (MFT 05) and Form 940 (MFT 10) 21.7.4.4.1.11.2.5 Net Increase, Original Assessment on Form 1041 (MFT 05) and Form 940 (MFT 10) 21.7.4.4.1.12 Form 1041-T, Allocation of Estimated Tax Payments to Beneficiaries 21.7.4.4.1.12.1 Form 1041-T Filing Dates 21.7.4.4.1.12.2 Transferring Credits/Payments (Form 1041-T) 21.7.4.4.1.12.3 CP 208 Notice, Potential Credit Transfer Action Form 1041 21.7.4.4.1.12.4 Balance Due Notices on IMF Accounts 21.7.4.4.1.13 Victims of Terrorism Tax Relief Act of 2001 - Tax Forgiveness 21.7.4.4.1.14 Pooled Income Trusts Government National Mortgage Association (GNMA) 21.7.4.4.1.15 Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, Received in Conjunction with Form 1041 21.7.4.4.1.16 United States Department of Agriculture (USDA) Discrimination Settlement Payments 21.7.4.4.1.17 Wrongful Incarceration Exclusion 21.7.4.4.1.18 Form 1041 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.2 Form 1065, U.S. Return of Partnership Income 21.7.4.4.2.1 Form 1065-B, U.S. Return of Income for Electing Large Partnerships 21.7.4.4.2.2 Publicly Traded Partnerships 21.7.4.4.2.3 Form 1065 Return Due Dates 21.7.4.4.2.3.1 Form 1065 Short Period Final Returns with Tax Period Beginning After December 31, 2015 21.7.4.4.2.3.2 Form 1065 for Tax Period 201512 – Return Received Date Problem 21.7.4.4.2.4 Schedules K and K-1 (Form 1065) 21.7.4.4.2.4.1 Schedule K-2 and Schedule K-3 21.7.4.4.2.5 Extensions of Time to File Form 1065 21.7.4.4.2.5.1 Taxpayers Abroad 21.7.4.4.2.6 Publication 541, Partnerships 21.7.4.4.2.7 Partnership Penalties 21.7.4.4.2.7.1 Form 1065 Failure to File Penalty and CP 575 Notice 21.7.4.4.2.7.2 Form 5471 Penalties for Partnerships 21.7.4.4.2.8 Modernized e-file (MeF) - Electronic Filing of Partnership Returns and Mandatory e-Filing Requirements 21.7.4.4.2.8.1 Partnerships with More Than 100 Partners 21.7.4.4.2.8.1.1 Large Partnership Penalty for Failing to File Electronically 21.7.4.4.2.8.1.2 Waiver Requests by Large Partnerships Required to File Electronically 21.7.4.4.2.8.2 Small Partnership Penalty Abatement 21.7.4.4.2.8.3 Known e-file Issues and Solutions - Form 1065 21.7.4.4.2.9 Form 1065 and Form 1065X, Amended Return, Administrative Adjustment Request (AAR) and Bipartisan Budget Act (BBA) 21.7.4.4.2.9.1 Items to Compare on Transcript (TRNS) 193s (Form 1065) 21.7.4.4.2.9.2 Partnership Terminations for Partnership Tax Years Beginning on or Before December 31, 2017, Only 21.7.4.4.2.9.3 Amended Returns for Bipartisan Budget Act (BBA) Partnerships for Taxable Years Beginning in 2018 and 2019, Rev. Proc. 2020-23 21.7.4.4.2.10 Multiple Filed Form 1065 21.7.4.4.2.11 CP 282 Notice, Notification of Possible Additional Partnership Filing Requirements (Withholding Tax on Foreign Partners) 21.7.4.4.2.12 Form 1065 Filed under Rev. Proc. 2003-84 21.7.4.4.2.13 Schedule M-3 (Form 1065), Net Income (Loss) Reconciliation for Certain Partnerships 21.7.4.4.2.14 Payment by Credit or Debit Card (Pay by Phone or Internet) 21.7.4.4.2.15 Substantial Built-In Loss in the Case of Transfer of Partnership Interest 21.7.4.4.3 Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return 21.7.4.4.3.1 Form 1066 Due Dates, Payments, and Extensions to File 21.7.4.4.3.2 Amended Form 1066 and Form 1065X, Amended Return or Administrative Adjustment Request (AAR) 21.7.4.4.3.3 Schedule Q (Form 1066), Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation 21.7.4.4.3.4 Foreclosure Property Extension Requests 21.7.4.4.4 Form 1120 Series Returns, Corporation Income Tax 21.7.4.4.4.1 Types of Form 1120 21.7.4.4.4.2 Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016 21.7.4.4.4.2.1 Form 1120 Corporate Series Return Due Dates – Tax Years Beginning after December 31, 2015 21.7.4.4.4.2.1.1 Form 1120 Short Period Final Returns with Tax Period Beginning After December 31, 2015 21.7.4.4.4.2.1.2 Correcting the Form 1120 Return Due Date 21.7.4.4.4.3 Personal Service Corporations (PSC) 21.7.4.4.4.3.1 CP 224 Notice, Notice of Potential Qualification as a Personal Service Corporation 21.7.4.4.4.4 Consolidated Returns 21.7.4.4.4.5 Extensions to File Form 1120 Series Returns 21.7.4.4.4.5.1 Form 1120 Short Period Final Returns with Tax Period Beginning After December 31, 2015 Filing Extension Requests 21.7.4.4.4.5.2 Taxpayers Abroad 21.7.4.4.4.6 Change in Accounting Period (Corporations) 21.7.4.4.4.6.1 Taxpayer Requests Ruling on Accounting Period 21.7.4.4.4.7 Tax Computation (Corporations) 21.7.4.4.4.7.1 Exceptions to the Standard Tax Rate (Corporations) 21.7.4.4.4.7.1.1 Qualified Personal Service Corporations 21.7.4.4.4.7.1.2 Members of a Controlled Group 21.7.4.4.4.7.2 Form 4626, Alternative Minimum Tax - Corporations 21.7.4.4.4.7.3 CP 130 Notice, Potential Exemption from AMT 21.7.4.4.4.8 Schedules, Form 1120 Series 21.7.4.4.4.9 Credits, Form 1120 Series Returns 21.7.4.4.4.9.1 Investment Credit, General Business Credit — Missing or Incomplete Schedules 21.7.4.4.4.9.1.1 Investment Credit Erroneously Computed or Claimed 21.7.4.4.4.10 Payment of Tax (Corporations) 21.7.4.4.4.10.1 Estimated Tax Payments - Due Dates 21.7.4.4.4.10.2 Large Corporate Underpayments 21.7.4.4.4.11 Other Form 1120 Series Returns 21.7.4.4.4.11.1 Form 1120-S, U.S. Income Tax Return for an S Corporation 21.7.4.4.4.11.1.1 Relief for Late S Corporate Elections 21.7.4.4.4.11.1.2 Estimated Tax Payments (Subchapter S Corporations) 21.7.4.4.4.11.1.3 Required Tax Year (Subchapter S Corporations) and Exceptions 21.7.4.4.4.11.1.4 Refundable Credit (Form 1120-S) 21.7.4.4.4.11.1.5 Item Reference Number (IRN) 886, Form 1120-S 21.7.4.4.4.11.1.6 Form 8869, Qualified Subchapter S Subsidiary Election (Under Section 1361(b)(3) of the Internal Revenue Code) 21.7.4.4.4.11.1.7 Converting Form 1120 Back to Form 1120-S 21.7.4.4.4.11.1.8 Section 13543 Modification of Treatment of S Corporation Conversions to C Corporation 21.7.4.4.4.11.1.9 Failure to File S Corporation Return Penalty 21.7.4.4.4.11.2 Form 1120-H, U.S. Income Tax Return for Homeowners Associations 21.7.4.4.4.11.3 Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations 21.7.4.4.4.11.4 Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return 21.7.4.4.4.11.4.1 IRC Section 847 Payments and Requirements (Prior to January 1, 2018) 21.7.4.4.4.11.4.2 Repeal of Special Estimated Tax Payments 21.7.4.4.4.11.5 Form 1120-L, U.S. Life Insurance Company Income Tax Return 21.7.4.4.4.11.6 Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return 21.7.4.4.4.11.7 Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons 21.7.4.4.4.11.8 Form 1120-F, U.S. Income Tax Return of a Foreign Corporation 21.7.4.4.4.11.9 Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation 21.7.4.4.4.11.10 Form 1120-SF, U.S. Income Tax Return for Settlement Funds 21.7.4.4.4.11.11 Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts 21.7.4.4.4.11.11.1 Form 8927, Determination Under IRC 860(e)(4) by a Qualified Investment Entity 21.7.4.4.4.11.11.2 Deficiency Dividends for Regulated Investment Company (RIC) and Real Estate Investment Trust (REIT) Filing Form 8927 - Background 21.7.4.4.4.11.11.3 Deficiency Dividends Procedures and Deadlines (OAMC Complex Interest Team Only) 21.7.4.4.4.11.12 Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies 21.7.4.4.4.11.13 Form 1120-X, Amended U.S. Corporation Income Tax Return 21.7.4.4.4.11.13.1 Pre-Adjusted Form 1120-X Procedures 21.7.4.4.4.11.13.2 Line on Form 1120-X to Apply Overpayment as Credit Elect 21.7.4.4.4.11.14 Form 1120-C, U.S. Income Tax Return for Cooperative Associations 21.7.4.4.4.12 Adjusting Tax and Item Reference Number (IRN) 886 21.7.4.4.4.13 Insolvent Financial Institutions/Failed Savings and Loans, and Failed Banks 21.7.4.4.4.13.1 Resolution Trust Corporation (RTC)/Federal Deposit Insurance Corporation (FDIC) Returns 21.7.4.4.4.13.2 Adjustment Procedures (RTCs/FDICs) 21.7.4.4.4.13.3 Insolvent Financial Institutions/Failed Banks 21.7.4.4.4.14 Form 4466 Transcripts (Form 1120) 21.7.4.4.4.15 Modernized e-file (MeF) System Functionality Overview 21.7.4.4.4.15.1 Modernized e-file (MeF) - Electronic Filing of Corporate and Exempt Organization Returns 21.7.4.4.4.15.2 Corporate and Exempt Organization Penalty for Failure to File Electronically 21.7.4.4.4.15.3 Known e-file Issues and Solutions - Form 1120 21.7.4.4.4.16 Failure to File Form 1120, with a Form 5471 or a Form 5472 Penalty 21.7.4.4.4.17 Form 1120 and Reinstated Exempt Organization Determination 21.7.4.4.4.18 Forms 1120 Series and Form 1120-S - Potential Frivolous Refunds/Possible ID Theft or RICS Involvement 21.7.4.4.4.19 Form 966 - Corporate Dissolution or Liquidation 21.7.4.4.4.20 Micro-Captive Insurance Amended Returns 21.7.4.4.5 Estimated Tax Overpayment, Credit Elect - General 21.7.4.4.5.1 Credit Elect Computer Programming on Certain Income Tax/EO Returns 21.7.4.4.6 Form 8716, Election to Have a Tax Year Other Than a Required Tax Year 21.7.4.4.7 Form 8752, Required Payment or Refund Under Section 7519 21.7.4.4.7.1 Election Year, Base Year, Required Tax Year (Form 8752) 21.7.4.4.7.2 Penalties (Form 8752) 21.7.4.4.7.3 Posting of the Payment (Form 8752) 21.7.4.4.7.4 Form 8752 Credit Transfers 21.7.4.4.7.5 Form 8752 Tax Adjustments 21.7.4.4.7.5.1 Incorrect Percentage Used (Form 8752) 21.7.4.4.7.5.2 Form 8752 Posts to Incorrect Period, Correct Return Unavailable 21.7.4.4.7.5.3 Form 8752 Posts to Incorrect Period, Return Available 21.7.4.4.7.6 Form 8752 Overpayments 21.7.4.4.7.7 Form 8752 Refunds 21.7.4.4.7.7.1 Refunds Involving Termination of Section 444 Election 21.7.4.4.7.7.2 Refunds Involving Continuation of Section 444 Election 21.7.4.4.7.7.3 No Interest on Section 444 Refunds 21.7.4.4.7.8 Section 7519 Statute of Limitations, Period for Assessment 21.7.4.4.7.8.1 Section 7519 Statute of Limitations, Period for Claiming a Refund of a Payment. 21.7.4.4.8 Non-refundable Credits, Income Tax Returns 21.7.4.4.8.1 General Business Credit, Form 3800 21.7.4.4.8.1.1 Priority of Credits 21.7.4.4.8.1.2 Use of Other Credits Prior to Allowance of General Business Credit 21.7.4.4.8.1.3 Form 8844, Empowerment Zone Employment Credit 21.7.4.4.8.1.4 Carryback/Carryforward of Excess Credits 21.7.4.4.8.2 Expiration of Credits 21.7.4.4.8.3 Information on Specific Non-Refundable Credits 21.7.4.4.8.3.1 Form 3468, Investment Credit 21.7.4.4.8.3.1.1 Carryforward of Investment Credit 21.7.4.4.8.3.1.2 Form 3468, Credit for Investment in Clean Coal Facilities 21.7.4.4.8.3.1.3 Form 3468, Qualifying Advanced Energy Project Credit Under IRC 48C 21.7.4.4.8.3.1.4 Form 8942, Application for Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Therapeutic Discovery Project Program 21.7.4.4.8.3.1.5 Form 3468, Advanced Manufacturing Investment Credit Under IRC 48D 21.7.4.4.8.3.1.6 Form 3468, Energy Credit Under IRC 48 21.7.4.4.8.3.2 Form 5884, Work Opportunity Credit 21.7.4.4.8.3.2.1 Form 8884, Expanded Work Opportunity Credit, New York Liberty Zone 21.7.4.4.8.3.2.2 Form 5884, Work Opportunity Credit, Hurricane Katrina Employees 21.7.4.4.8.3.2.3 Employee Retention Credit for Employers Affected by Hurricane Katrina, Rita, and Wilma (Form 5884-A, Credit for Employers Affected by Hurricanes Katrina, Rita, and Wilma) 21.7.4.4.8.3.2.4 Form 5884-A, Hurricane Katrina Housing Credit 21.7.4.4.8.3.2.5 Form 5884, Work Opportunity Credit - Incentives to Hire Unemployed Veterans and Disconnected Youth 21.7.4.4.8.3.2.6 Form 5884, Work Opportunity Credit - Section 261, Returning Heroes and Wounded Warriors Work Opportunity Tax Credits, of the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011, Title II, subtitle D, of Pub. L. No. 112-056 21.7.4.4.8.3.2.7 Form 5884, Work Opportunity Credit 21.7.4.4.8.3.3 Employee Retention Credit for Employers Affected by Qualified Disasters - Form 5884-A, Credits for Affected Disaster Area Employers 21.7.4.4.8.3.3.1 Form 5884-A Eligibility Requirements 21.7.4.4.8.3.3.2 Form 5884-A, Claim Procedures 21.7.4.4.8.3.4 Form 6478, Biofuel Producer Credit 21.7.4.4.8.3.5 Form 6765, Credit for Increasing Research Activities 21.7.4.4.8.3.6 Form 8586, Low-Income Housing Credit and Form 8609, Low-Income Housing Credit Allocation and Certification 21.7.4.4.8.3.7 Form 8830, Enhanced Oil Recovery Credit 21.7.4.4.8.3.8 Form 8826, Disabled Access Credit 21.7.4.4.8.3.9 Form 8835, Renewable Electricity Production Credit 21.7.4.4.8.3.10 Form 8907, Nonconventional Source Fuel Credit 21.7.4.4.8.3.11 Credit for Prior Year Minimum Tax, Form 8801 (Estates and Trusts) and Form 8827 (Corporations) 21.7.4.4.8.3.12 Form 8845, Indian Employment Credit, and Accelerated Depreciation for Business Property on an Indian Reservation 21.7.4.4.8.3.13 Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips 21.7.4.4.8.3.14 Form 8847, Credit for Contributions to Selected Community Development Corporations 21.7.4.4.8.3.15 Form 8820, Orphan Drug Credit 21.7.4.4.8.3.16 Form 8861, Welfare-to-Work Credit 21.7.4.4.8.3.17 Trans-Alaska Pipeline Liability Fund Credit 21.7.4.4.8.3.18 Form 8912, Credit to Holders of Tax Credit Bonds 21.7.4.4.8.3.19 Form 8882, Credit for Employer-Provided Childcare Facilities and Services 21.7.4.4.8.3.20 Form 8881, Credit for Small Employer Pension Plan Startup Costs, Auto-Enrollment, and Military Spouse Participation 21.7.4.4.8.3.20.1 Form 8881, Credit for Small Employer Pension Plan Startup Costs 21.7.4.4.8.3.20.2 Form 8881, Small Employer Auto-Enrollment Credit 21.7.4.4.8.3.20.3 Form 8881, Military Spouse Participation Credit 21.7.4.4.8.3.21 Form 8874, New Markets Tax Credit 21.7.4.4.8.3.22 Form 8864, Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credit 21.7.4.4.8.3.23 Form 8896, Low Sulfur Diesel Fuel Production Credit 21.7.4.4.8.3.24 Form 8900, Qualified Railroad Track Maintenance Credit 21.7.4.4.8.3.25 Form 8906, Distilled Spirits Credit 21.7.4.4.8.3.26 Form 8904, Credit for Producing Oil and Gas from Marginal Wells 21.7.4.4.8.3.27 Form 8834, Qualified Electric Vehicle Credit, TY 2006 and Prior 21.7.4.4.8.3.27.1 Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit 21.7.4.4.8.3.28 Form 8910, Alternative Motor Vehicle Credit 21.7.4.4.8.3.28.1 Conversion Kits, Qualified Plug-in Electric Drive Motor Vehicle 21.7.4.4.8.3.29 Form 8911, Alternative Fuel Vehicle Refueling Property Credit 21.7.4.4.8.3.30 Form 7213, Nuclear Power Production Credit 21.7.4.4.8.3.31 Credit for Investment in Clean Coal Facilities 21.7.4.4.8.3.32 Credit for Business Installation of Qualified Fuel Cell, Qualified Microturbine and Combined Heat and Power Property 21.7.4.4.8.3.33 Form 8923, Mine Rescue Team Training Credit 21.7.4.4.8.3.34 Form 8908, Energy Efficient Home Credit 21.7.4.4.8.3.35 Form 8931, Agricultural Chemicals Security Credit 21.7.4.4.8.3.36 Form 8909, Energy Efficient Appliance Credit 21.7.4.4.8.3.36.1 Energy Efficient Appliance Credit - American Taxpayer Relief Act, P.L. 112-240 21.7.4.4.8.3.37 Form 8933, Carbon Oxide Sequestration Credit 21.7.4.4.8.3.38 Form 8936, Clean Vehicle Credits 21.7.4.4.8.3.38.1 Form 8936, Qualified Two or Three-Wheeled Plug-In Electric Vehicle 21.7.4.4.8.3.38.2 Form 8936, Qualified Plug in Electric Drive Motor Vehicle Credit (placed in service 2022 or prior) 21.7.4.4.8.3.38.3 Form 8936, New Clean Vehicle Credit (placed in service 2023 or subsequent) 21.7.4.4.8.3.38.4 Form 8936, Qualified Commercial Clean Vehicle Credit 21.7.4.4.8.3.39 Form 5884–B, New Hire Retention Credit 21.7.4.4.8.3.40 Black Liquor Credit Claims 21.7.4.4.8.3.41 Form 8941, Credit for Small Employer Health Insurance Premiums 21.7.4.4.8.3.42 Rehabilitation Credit Limited to Certified Historic Structures 21.7.4.4.8.3.43 Form 7207, Advanced Manufacturing Production Credit 21.7.4.4.8.3.44 Form 7210, Clean Hydrogen Production Credit 21.7.4.4.8.4 Form 8903, Domestic Production Activities Deduction 21.7.4.4.8.5 Amortization of Research and Experimental Expenditures 21.7.4.4.8.6 Form 8994, Employer Credit for Paid Family and Medical Leave 21.7.4.4.8.7 COVID-19-related Tax Credits for Paid Sick and Paid Family Leave 21.7.4.4.9 Refundable Credits, Income Tax Returns 21.7.4.4.9.1 Form 4136, Credit for Federal Tax Paid on Fuels 21.7.4.4.9.2 Credits for Taxes Paid on Undistributed Capital Gains of Regulated Investment Company (RIC) or Real Estate Investment Trusts (REIT) 21.7.4.4.9.2.1 Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, for Individual Retirement Account (IRA) Trusts 21.7.4.4.9.2.2 Loose Form 2439, Copies A and B 21.7.4.4.9.3 Prior Sequestration of Form 8827 Credit - General Information 21.7.4.4.9.3.1 Previously Sequestered Corporate Alternative Minimum Tax (AMT) Recovery 21.7.4.4.9.3.2 Repeal of Alternative Minimum Tax (AMT), and Repeal of Corporate AMT Sequestration 21.7.4.4.9.3.3 Processing Amended Returns with Form 8827, or Certain Cares Act Form 1139 Applications , with Form 8827 21.7.4.4.9.4 Coronavirus Aid, Relief and Economic Security Act of 2020 (CARES Act) (PL 116-136, Section 2305) 21.7.4.4.9.5 Inflation Reduction Act (IRA), Superseding and Amended Return Processing; Elective Payment Elections (EPE) or Transfers 21.7.4.4.9.5.1 Adjusting Accounts with Elective Payment Election Sequestration 21.7.4.4.10 Federal Income Tax Withheld (FITW)/Backup Withholding (BUWH) on Income Tax Returns 21.7.4.4.11 Form 8621, Return by a Shareholder of a Passive Foreign Investment Co. or Qualified Electing Fund 21.7.4.4.12 Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships 21.7.4.4.13 Form 8875, Taxable Real Estate Investment Trust (REIT) Subsidiary Election 21.7.4.4.14 Form 8873, Extraterritorial Income Exclusion 21.7.4.4.15 Form 3115, Application for Change in Accounting Method 21.7.4.4.15.1 Loose Form 3115 Procedures 21.7.4.4.15.1.1 Forms 3115 Filed Under Automatic Change Procedures 21.7.4.4.15.1.2 Forms 3115 filed Under Non-Automatic Change Procedures 21.7.4.4.15.1.3 Forms 3115 - All Others 21.7.4.4.15.1.4 Mark to Market Elections under IRC 475 21.7.4.4.16 Form 8329, Form 8330, Form 8703, Mortgage Credit Certificates (MCC), and Notice of Defeasance - Background and Purpose 21.7.4.4.16.1 Form 8329, Lender's Information Return for Mortgage Credit Certificates (MCCs) 21.7.4.4.16.2 Form 8330, Issuer's Quarterly Information Return for Mortgage Credit Certificates (MCCs) 21.7.4.4.16.3 Form 8703, Annual Certification of a Residential Rental Project 21.7.4.4.16.4 Mortgage Credit Certificate Election and State Certification 21.7.4.4.16.5 Notices of Defeasance 21.7.4.4.17 First-Year Bonus Depreciation and IRC 179 Expense 21.7.4.4.17.1 The Job Creation and Workers Assistance Act of 2002, P.L. 107-147 - Additional First-Year Depreciation - New York Liberty Zone IRC 168(k) 21.7.4.4.17.1.1 The Job Creation and Workers Assistance Act of 2002, P.L. 107-147 - Additional First-Year Depreciation - New York Liberty Zone IRC 1400L 21.7.4.4.17.1.2 Election Not to Deduct 21.7.4.4.17.2 The Jobs and Growth Tax Relief Reconciliation Act of 2003, P.L. 108-27 - Bonus First-Year Depreciation 21.7.4.4.17.3 Gulf Opportunity Zone Act of 2005, P.L. 109-135 21.7.4.4.17.3.1 Gulf Opportunity Zone Act of 2005, Additional First-Year Depreciation 21.7.4.4.17.3.2 Gulf Opportunity Zone Act of 2005 - Low-Income Housing Credit 21.7.4.4.17.3.3 Gulf Opportunity Zone Act of 2005 - New Markets Credit, Form 8874 21.7.4.4.17.3.4 Gulf Opportunity Zone Act of 2005 - Bonus First-Year Depreciation 21.7.4.4.17.3.5 Form 3468, Gulf Opportunity Zone Act of 2005 - Investment Credit 21.7.4.4.17.4 Tax Relief and Health Care Act of 2006, P.L. 109-432, Qualified Cellulosic Biomass Ethanol Plant Property - Additional First-Year Depreciation 21.7.4.4.17.4.1 Emergency Economic Stabilization Act of 2008, P.L. 110-343, Qualified Cellulosic Biofuel Plant Property - Additional First-Year Depreciation 21.7.4.4.17.4.2 Second-Generation Biofuel Plant Property - Additional First-Year Depreciation 21.7.4.4.17.5 Small Business and Work Opportunity Tax Act of 2007, P.L. 110-28 21.7.4.4.17.6 Economic Stimulus Act of 2008 P.L. 110-185, 50 percent Additional Special Depreciation Allowance 21.7.4.4.17.6.1 American Recovery and Reinvestment Act of 2009 P.L. 111-5, 50 percent Additional Special Depreciation Allowance 21.7.4.4.17.6.2 Small Business Jobs Act of 2010 P.L. 111-240, 50 percent Additional Special Depreciation Allowance 21.7.4.4.17.6.3 The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, 50 percent Additional Special Depreciation Allowance 21.7.4.4.17.6.3.1 The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, Temporary 100 percent Additional Special Depreciation Allowance 21.7.4.4.17.6.4 American Taxpayer Relief Act of 2012, P.L. 112-240, 50 percent Additional Special Depreciation 21.7.4.4.17.6.5 Tax Increase Prevention Act of 2014, P.L. 113-295, 50 percent Additional Special Depreciation 21.7.4.4.17.6.6 Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113, 50 percent Additional Special Depreciation 21.7.4.4.17.6.7 Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113, 50 percent Additional Special Depreciation Deduction for Qualified Property for 2016 Through 2019 21.7.4.4.17.6.8 Section 263A not Applicable to Certain Costs of Replanting Citrus Plants Due to Loss or Damages 21.7.4.4.17.6.9 Applicable Recovery Period for Real Property 21.7.4.4.17.6.10 Temporary 100-Percent Expensing 21.7.4.4.17.7 Economic Stimulus Act of 2008, P.L. 110-185, IRC 179 Expense 21.7.4.4.17.7.1 American Recovery and Reinvestment Act of 2009, P.L. 111-5, IRC 179 Expense 21.7.4.4.17.7.2 Hiring Incentives to Restore Employment Act, P.L. 111-147, IRC 179 Expense 21.7.4.4.17.7.3 Small Business Jobs Act of 2010, P.L. 111-240, IRC 179 Expense 21.7.4.4.17.7.4 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, IRC 179 Expensing 21.7.4.4.17.7.5 American Taxpayer Relief Act of 2012, P.L.112-240, IRC 179 Expensing 21.7.4.4.17.7.6 Tax Increase Prevention Act of 2014, P.L. 113-295, IRC 179 Expensing 21.7.4.4.17.7.7 Protecting Americans from Tax Hikes Act of 2015, P.L. 114-113, IRC 179 Expensing 21.7.4.4.17.7.8 Modifications of Rules for Expensing Depreciable Business Assets under Code 179 21.7.4.4.17.8 Food, Conservation, and Energy Act of 2008, P.L. 110-246 - Additional First-Year Depreciation for Kiowa County, Kansas and Surrounding Areas 21.7.4.4.17.8.1 Food, Conservation, and Tax Relief Act of 2008, P.L. 110-246 - Increased Section 179 Expense for Kiowa County, Kansas and Surrounding Areas 21.7.4.4.17.8.2 Food, Conservation, and Energy Act of 2008, (Form 5884-A) Credit for Employers Affected by May 4, 2007 Storms and Tornadoes in Kiowa County, Kansas and Surrounding Areas 21.7.4.4.17.8.3 Food, Conservation, and Energy Act of 2008, Hurricane Katrina Housing Credit, Form 5884-A for Taxpayers Affected by the May 4, 2007 Storms and Tornadoes in Kiowa County, Kansas and Surrounding Areas 21.7.4.4.17.9 Form 8932, Credit for Employer Differential Wage Payments 21.7.4.4.17.10 The Housing and Economic Recovery Act of 2008 P.L. 110-289, Election to Accelerate Research Credit and Alternative Minimum Tax Credit in Lieu of Bonus Depreciation 21.7.4.4.17.10.1 American Recovery and Reinvestment Act of 2009 P.L. 111-5, Election to Accelerate Research Credit and Alternative Minimum Tax Credit in Lieu of Bonus Depreciation 21.7.4.4.17.10.2 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, Election to Accelerate Alternative Minimum Tax Credit in Lieu of Bonus Depreciation 21.7.4.4.17.10.3 American Taxpayer Relief Act of 2012, P.L. 112-240, Extension of Election to Accelerate the Alternative Minimum Tax Credit in Lieu of Bonus Depreciation 21.7.4.4.17.10.4 Tax Increase Prevention Act of 2014, P.L. 113-295, Accelerate the Alternative Minimum Tax Credit in Lieu of Bonus Depreciation 21.7.4.4.17.10.5 Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113, Extension of Election to Accelerate the Alternative Minimum Tax Credit in Lieu of Bonus Depreciation 21.7.4.4.17.10.5.1 Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113, Extension of Election to Accelerate the Alternative Minimum Tax Credit in Lieu of Bonus Depreciation for 2016 through 2019 21.7.4.4.17.10.6 Repeal of Election to Accelerate the Alternative Minimum Tax Credit in Lieu of Bonus Depreciation 21.7.4.4.17.11 Energy Efficient Commercial Building Deduction 21.7.4.4.17.12 Election to Expense Advanced Mine Safety Equipment 21.7.4.4.17.13 Special Allowance for Certain Reuse and Recycling Property 21.7.4.4.17.14 Emergency Economic Stabilization Act of 2008, P.L. 110-343 - Special Allowance for Qualified Disaster Assistance Property, Additional First-Year Depreciation 21.7.4.4.18 Qualified Opportunity (QO) Fund Investments 21.7.4.4.18.1 Qualified Opportunity (QO) Fund Investor - Amended Return Processing 21.7.4.4.18.2 Qualified Opportunity (QO) Fund Penalties and Amended Returns 21.7.4.4.19 Form 8886, Reportable Transaction Disclosure Statement 21.7.4.4.19.1 Form 8883, Asset Allocation Statement Under Section 338 21.7.4.4.19.2 Basket Option Contracts 21.7.4.4.20 Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts 21.7.4.4.21 Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method 21.7.4.4.22 Telephone Excise Tax Refund (TETR) 21.7.4.4.23 Form 1099-K, Payment Card and Third-Party Network Transactions - Reporting Requirements 21.7.4.4.24 Demutualization Claims 21.7.4.4.25 Section 965 Transition Tax 21.7.4.4.26 Net Operating Loss (NOL) - Carryforward 21.7.4.4.27 Qualified Business Income Deduction (QBID) 21.7.4.4.27.1 Amended Returns Claiming Section 199A - Qualified Business income Deduction (QBID) 21.7.4.4.28 Capital Construction Fund (CCF) Part 21. Customer Account Services Chapter 7. Business Tax Returns and Non-Master File Accounts Section 4. Income Taxes/Information Returns 21.7.4 Income Taxes/Information Returns Manual Transmittal August 30, 2024 Purpose (1) This transmits revised IRM 21.7.4, Business Tax Returns and Non-Master File Accounts, Income Taxes/Information Returns. Material Changes (1) Various changes and updates are made throughout this IRM. The following table is a list of incorporated changes which were added, removed, or revised, as appropriate. IRM Material Change IRM 21.7.4.1(5) Added Abbreviation (PPB) for Policy and Procedures BMF IRM 21.7.4.1.3(2) Updated title of “Commissioner” to “Chief” of Taxpayer Services; deleted 8th bullet in reference to AM field directors responsibility for IRM policy IRM 21.7.4.1.6(2) Added Acronym “TS” to the table for Taxpayer Services, per Chief Counsel feedback. IRM 21.7.4.3.3(1) Deleted first bullet point because Pub 550 is listed in reference to IRM 21.7.4.3(3), per Chef Counsel feedback. IRM 21.7.4.4.1.1.1(2) Added 2023 gross income reporting requirements for Domestic Decedent and Bankruptcy Estates per Pub. 908 IRM 21.7.4.4.1.7(2) Added 2023 Form 1041 tax rate schedule per Form 1041 instructions IRM 21.7.4.4.1.7.4(1) Added 2023 Qualified Disability Trust Exemption amount per Form 1041 instructions IRM 21.7.4.4.1.9(2)(3) Update paragraph (2) to include a link to irs.gov E-services information for tax professionals; delete paragraph (3) (information now included in paragraph 2 irs.gov E-services link) IRM 21.7.4.4.1.11(5) Updated IRM number reference from 21.7.2.4.11.1 to 21.7.2.4.9.1, Forms Used in Reporting Employment Taxes for Household Employees, per IRM 21.7.2 author feedback. IRM 21.7.4.4.1.11.1(3) Add 2023-2024 wage threshold for SSDERA per Pub. 926 IRM 21.7.4.4.1.11.1.1 Updated paragraph (3) and (5) with new link to IRM 21.7.2.4.4.2, Interest-Free Adjustments (Employment Tax Returns), per IRM 21.7.2 author feedback. IRM 21.7.4.4.1.12.1(1) Added due date for 2024 Form 1041-T, per Chief Counsel Feedback IRM 21.7.4.4.1.13(3) Added paragraph 3 containing routing information for KITA/KIA Claims IRM 21.7.4.4.1.17 (5) Updated link in paragraph 5 from IRM 21.6.6.2.30, Tax Treatment of Compensation for Exonerated Prisoners to IRM 21.6.6.2.31, Tax Treatment of Compensation for Exonerated Prisoners per SERP Feedback #16578. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.2.3(6) Updated example of timely filing if 1065 return due date falls on a holiday per SERP Feedback #16514. IPU 24U0386 issued 03-11-2024. IRM 21.4.4.2.7(7) Modified failure to file penalty chart for returns due between January 1, 2023, and December 31, 2023 and for returns due after January 1, 2024 and subsequent, per Chief Counsel feedback. IRM 21.7.4.4.2.8 Per Notice 2024-18, updated guidance throughout section on hardship waiver, administrative exemption, and religious exemption for partnerships required to electronically file per Notice 2024-18. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.2.8 Changes throughout; updated paragraph (1) specifying the electronic filing requirements applicable to calendar year returns prior to 2024; removed paragraph (2); specified e-file requirements paragraph (3); specified Reg. 301.6011-3 authorizes the Commissioner to provide hardship waivers in paragraph (4); editorial changes to paragraph (6) including updated wording from “waiver” to administrative exemption; updated title of Publication 4163 in paragraph (7); updated paragraph (8) with irs.gov links on how to register for e-Services and new user registration information, per Chief Counsel feedback. IRM 21.7.4.4.2.8.1.1(3) Failure to File Partnership Return Using Electronic Media penalty rate for 2024 updated per IRM 20.1.2.5 IRM 21.7.4.4.2.8.1.1(5) Updated IDRS number from 0430469845 to 0445160144 based on SERP Feedback 12799. IPU 23U0982 issued 10-02-2023. IRM 21.7.4.4.2.8.1.2(5) Removed dated timeframes for filing electronic filing waivers and replaced with a statement that requests should be filed at least 45 days prior to the due date of the return, including extensions, per Chief Counsel feedback. IRM 21.7.4.4.2.9(7) Updated corresponding line number for Ordinary Business Income (loss) on Form 1065 per SERP Feedback #18177. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.2.9(7) Added Note for Variance in Credits, Schedule K, lines 15a - Line 15f, between the original filing and the amended return in relation to e-filed vs. paper filed returns based on SERP Feedback #16723. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.2.9(7) Clarification of Form 1065 Variance in Ordinary Business Income (loss) line numbers for 2022 and prior and 2023 and later tax years per SERP feedback #20285. IRM 21.7.4.4.2.9(9) Added additional guidance for routing amended Form 1065 and Form 1065-X to the BBA Unit per SERP Feedback #18813.IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.2.9(11) Updated corresponding line number for Ordinary Business Income (loss) on Form 1065. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.2.9.2 Changes throughout replacing IRC 705(b)(1)(B) with IRC 708(b)(1)(B) and including the word “former” in reference to IRC 708(b)(1)(B), per Chief Counsel feedback. IRM 21.7.4.4.2.11(6) Removed requirement to use a Form 2158 to process Form 8804 payment to NMF. IPU 23U1158 issued 12-08-2023. IRM 21.7.4.4.3.4(8) Updated contact information to: Subject Matter Experts RICs, REITs, and REMICs Internal Revenue Service LB&I, Financial Services 847-737-6666 Between 8:30 AM and 5:00 PM (CST) per SERP Feedback #13606. IPU 23U1107 issued 11-20-2023. IRM 21.7.4.4.4.6(2) Clarified guidance on Form 1128 to adopt, change, or retain a tax year, per Chief Counsel feedback. IRM 21.7.4.4.4.6.1(8) Clarified instructions for relief when Form 1128 is denied, per Chief Counsel feedback. IRM 21.7.4.4.4.7.2 Changes throughout updating guidance on new Corporate Alternative Minimum Tax (CAMT) reported on Form 4626 per amended IRC 55 due to the Inflation Reduction Act of 2022. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.4.11.1(3) Updated CAT-A guidance on variance in credits, Schedule K, lines 13a through 13g, between the original filing and the amended return per SERP Feedback #16725. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.4.11.1(11) Updated incorrect reference in paragraph 11 to refer to BMF Entity Unit information in paragraph 11. Reference now reads to refer to BMF Entity Unit information in paragraph 8 based on SERP Feedback 12822. IPU 23U0982 issued 10-02-2023. IRM 21.7.4.4.4.11.1(12) Added reference to paragraph (9) referencing timeframes to advise the taxpayer when sending Form 4442 referrals to the BMF Entity Unit per SERP Feedback 15262. IPU 23U1158 issued 12-08-2023 . IRM 21.7.4.4.4.11.1.1 Changes throughout specifying guidance in Rev. Proc 2013-30, and clarifying abbreviations for ESBT, QSST and Qsub, per Chief Counsel feedback. IRM 21.7.4.4.4.11.1.7(1) Updated link from IRM 3.13.222.62 to IRM 3.13.222.63 for Unpostable Code (UPC) 310 Reason Code 4 based on SERP Feedback #15850. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.4.11.1.7(1) In the first sentence, add “Corporation” between “Small” and Business”, per Chief Counsel Feedback IRM 21.7.4.4.4.11.6 Updated paragraph (3) and (4) with qualifications and filing requirements for Form 4876-A, Election To Be Treated as an Interest Charge DISC, per Chief Counsel feedback. IRM 21.7.4.4.4.11.6(6) Updated IDRS number from 0241326771 to 0244374812 based on SERP Feedback 12836. IPU 23U0982 issued 10-02-2023. IRM 21.7.4.4.4.11.11.3(5) Updated No Consideration contact information from Financial Products Specialist Area to Subject Matter Expert RICs, REITs, and REMICs. Phone number updated from 847-737-6430 to 847-737-6666 and hours of operation updated to 8:30 a.m. to 5:00 p.m. CST per SERP Feedback #13607. IPU 23U1107 issued 11-20-2023. IRM 21.7.4.4.4.11.11.3(9) Phone number updated from 847-737-6430 to 847-737-6666 for the Financial Products Specialists in the LB&I Enterprise Activities Practice Area. IPU 23U1107 issued 11-20-2023. IRM 21.7.4.4.4.11.12 Changes throughout; corrected title of IRM 21.7.4.4.4.2.1 in paragraph (3); clarified terms for Regulated Investment Company (RIC) in paragraph (5), per Chief Counsel feedback. IRM 21.7.4.4.4.11.14(11) Updated mailing zip code for Form 1120-C, U.S. Income Tax Return for Cooperative Associations, per Form 1120-C instructions. IRM 21.7.4.4.4.13.3(2) Instruction added for FDIC correspondence received requesting tax abatement under IRC 7507 to be referred to LB&I Exam “HQ Reserve 5”. IRM 21.7.4.4.4.15(7) Updated paragraph with irs.gov links on how to register for e-Services and new user registration information. IRM 21.7.4.4.4.15.1 Per Notice 2024-18, updated guidance throughout section on hardship waiver, administrative exemption, and religious exemption for corporations required to electronically file . IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.4.15.1 Updated guidance throughout regarding electronic filing requirements for returns required to be filed during calendar years ending on or before December 31, 2023 including the aggregate number of returns comprising the requirement; updated Form 8879-C ,Form 8879-S, and Form 8879-I, replacing with new Form 8879-CORP in paragraph (8) and (9), clarification of administrative exemption for e-filing due to religious beliefs in paragraph (10), per Chief Counsel feedback. IRM 21.7.4.4.4.15.2(2) Updated to include T.D. 9972 and correct date from December 21, 2023 to December 31, 2023 and clarified the aggregate number of returns comprising the electronic filing requirement, per Chief Counsel feedback. IRM 21.7.4.4.4.20(3) Removed sentence to follow normal amended return procedures. Instruction to follow IRM 21.5.3 General Claims Procedures added in paragraph (4). IPU 23U0982 issued 10-02-2023. IRM 21.7.4.4.4.20(3) Updated IRM link referenced in paragraph 3 from IRM 21.3.1.6.65 Letter 6336, Micro-Captive Insurance, Soft Notice to IRM 21.3.1.6.58 Micro-Captive Insurance Amended Returns. IPU 23U1107 issued 11-20-2023. IRM 21.7.4.4.4.20(4) Added link to IRM 21.5.3 General Claims Procedures for instruction on adjusting Micro-Captive Insurance Amended Returns. Removed mailing address for other statements/correspondence related to micro-captive insurance. IPU 23U0982 issued 10-02-2023. IRM 21.7.4.4.7(6) Updated IDRS number for CII correspondence referral concerning Form 8752, or IRC 7519 in CAMC from 0248492337 to 0231092337 per SERP feedback #18101. IPU 24U0405 issued 03-14-2024. IRM 21.7.4.4.8.1(4) Added reference to IRM 21.7.4.4.8.1.4, Carryback/Carryforward of Excess Credits, per Chief Counsel Review. IRM 21.7.4.4.8.1.1 Changes throughout; credit order information updated; added the following credits: Advanced nuclear power facility production, Form 7213, New Clean Vehicle Credit, Form 8936, Zero-emission Nuclear Power Production, Form 7213, Sustainable Aviation Fuel, Form 8864, Clean Hydrogen Production, Form 7210, Qualified Commercial Clean Vehicle, Form 8936 Advanced Manufacturing Production, Form 7207, Military Spouse Retirement Plan Credit, Form 8881. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.1.1(2) Following new credits added: Clean Electricity Investment Credit, Form 3468, Investment Credit, Part V, Clean Electricity Production Credit, Form 7211, Clean Fuel Production Credit, Form 7218, per 2024 Form 3800, General Business Credit, Part III. IRM 21.7.4.4.8.1.2 (1) Deleted reference to Form 8860; added reference to Form 8912, Credit to Holders of Tax Credit Bonds, per Chief Counsel feedback IRM 21.7.4.4.8.1.4(1) Added clarifying information on carryforward/carryback of unused credits, per IRC 38(c), IRC 6417(b), and IRC 39(a) and Chief Counsel feedback IRM 21.7.4.4.8.3.1 Changes throughout; added the Clean Electricity Investment Credit to list of credits in paragraph (1); deleted outdated information on the qualifying therapeutic discovery project credit (6); added note to paragraph (7) referring to IRA credit calculations beginning in paragraph (14); Moved existing paragraph (8-14) below existing paragraph (20) to place IRA legislation in sequential order after prior tax law changes; added new paragraph (20) regarding CHIPS 2022 Advanced Manufacturing Investment Credit under IRC 48D; added information regarding “Applicable credits” as defined in IRC 6417(b) are carried back 3 years, per Chief Counsel feedback. IRM 21.7.4.4.8.3.1.2 Updated IRM Title to Form 3468, Credit for Investment in Clean Coal Facilities. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.1.3 Updated IRM Title to Form 3468, Qualifying Advanced Energy Project Credit Under Section 48C. Changes throughout IRM reflecting updated guidance resulting from P.L. 117-169, commonly known as the Inflation Reduction Act (IRA) of 2022. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.1.5 Subsection added Form 3468, Advanced Manufacturing Credit Under Section 48D. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.1.6 Subsection added Form 3468, Energy Credit under Section 48. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.2 Updates throughout; adding abbreviation name for Work Opportunity Tax Credit in paragraph (1) and editorial edits in paragraph (5) removing explanation of acronym WOTC, per Chief Counsel Feedback. IRM 21.7.4.4.8.3.2.6 Changes throughout; updated wording in paragraph (1) “for qualified veterans”; per Chief Counsel feedback; Updated paragraph (2) new link to IRM 21.7.2.5.15, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, and Form 5884-D, Employee Retention Credit for Certain Tax-Exempt Organizations Affected by Qualified Disasters, per IRM 21.7.2 author feedback. IRM 21.7.4.4.8.3.3(6) Updated new link to IRM 21.7.2.5.15, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, and Form 5884-D, Employee Retention Credit for Certain Tax-Exempt Organizations Affected by Qualified Disasters, per IRM 21.7.2 author feedback. IRM 21.7.4.4.8.3.4 Updated the word IRC 404 to “section” 404 in the paragraph (1), 2nd Note. Updated the word “possession” to “territory” in paragraph (7), per Chief Counsel feedback. IRM 21.7.4.4.8.3.5(7) Updated new link to IRM 21.7.2.5.21, Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, per IRM 21.7.2 author feedback. IRM 21.7.4.4.8.3.5(14) Updated IDRS number for reassignment of CII cases from 0445160144 to 0444281365. IPU 23U0982 issued 10-02-2023. IRM 21.7.4.4.8.3.5(14) Updated IDRS number for reassignment of CII cases from 0444281365 to 0445160144. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.8.3.5(14) Updated IDRS number for reassignment of Research Credit Claims in CII from 0444281365 to 0445160144 in second box of “If and Then” chart, per SERP Feedback #21537. IPU 24U0858 issued 07-22-2024. IRM 21.7.4.4.8.3.5(15) Extended timeframe of claim perfection procedures for Forms 1120x, 1040x, and amended Forms 1041 with Research Credit Claims to January 10, 2025. IPU 23U1107 issued 11-20-2023 IRM 21.7.4.4.8.3.5(15) Added note for research credit claims postmarked June 18, 2024 and subsequent, regarding change to qualifying criteria from 5 to 3 items per . IRM 21.7.4.4.8.3.6 Updates throughout; inserted in the third sentence of paragraph (1) “in which the building is placed in service” ;replaced the 2nd bullet of paragraph (2) with finance obligation described in IRC 42(h)(4)(A) ; added clarifying Notice 2021-17, and Notice 2022-5 information to paragraph (3): Replace the 2nd bullet of paragraph (3) with the applicable dollar limitation for 2022. Replace the 3rd bullet of paragraph (3) with updated calculation information; paragraph (6) added clarifying information on what form to use to claim the Low-Income Housing Credit. IRM 21.7.4.4.8.3.7(3) Added a reference to Notice 2023-57 providing the inflation adjustment factor for tax years beginning after 2023. IRM 21.7.4.4.8.3.8(2) Clarified treatment of unused credit with referral to IRM 21.7.4.4.8.1.4, Carryback/Carryforward of Excess Credits IRM 21.7.4.4.8.3.9 Updated title to IRM to Form 8835 Renewable Electricity Production Credit to reflect form change; changes throughout IRM reflecting updated guidance resulting from P.L. 117-169, commonly known as the Inflation Reduction Act (IRA) of 2022. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.9(7) Added the 2024 credit rates for renewable electricity production determined under IRC 45(a) for a facility placed in service after December 31, 2021, and before January 1, 2023 IRM 21.7.4.4.8.3.9(9) Added Announcement 2022-23, 2022-48 and I.R.B. 499 to the 2022 notice column for the inflation adjustment factor for the PTC and the refined coal production credit under IRC 45. IRM 21.7.4.4.8.3.9(16) Updated Form 8835 Renewable Electricity Production Credit carryback information from one year to three years per IRC 6417(b). IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.8.3.10(9) Added 2023 Reference Price information for form 8907 Non-Conventional Source Fuel Credit IRM 21.7.4.4.8.3.13(2) Clarified treatment of unused credit with referral to IRM 21.7.4.4.8.1.4, Carryback/Carryforward of Excess Credits IRM 21.7.4.4.8.3.14(5) Clarified treatment of unused credit with referral to IRM 21.7.4.4.8.1.4, Carryback/Carryforward of Excess Credits IRM 21.7.4.4.8.3.15(1) Removed outdated reference to Form 6765 per Chief Counsel Review. Clarified For taxable years beginning after December 31, 2017, the Orphan Drug Credit is limited to “an amount equal to” 25 percent. IRM 21.7.4.4.8.3.15(2) Paragraph deleted, per Chief Counsel feedback. IRM 21.7.4.4.8.3.15(4) Clarified treatment of unused credit with referral to IRM 21.7.4.4.8.1.4, Carryback/Carryforward of Excess Credits IRM 21.7.4.4.8.3.17(3) Clarified treatment of unused credit with referral to IRM 21.7.4.4.8.1.4, Carryback/Carryforward of Excess Credits IRM 21.7.4.4.8.3.20 Renamed heading to: Form 8881, Credit for Small Employer Pension Plan Startup Costs, Auto Enrollment, and Military Spouse Participation. This reference now provides a general overview of all credits reported on Form 8881; new subsections added for each credit. Previous information pertaining to Credit for Small Employer Pension Plan Startup Costs moved to 21.7.4.8.3.20.1, Form 8881 Credit for Small Employer Startup Costs. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.20.1 Subsection updated from Section 45T Auto-Enrollment Option for Retirement Savings Options Provided by Small Employers to Form 8881, Credit for Small Employer Pension Plan Startup Costs. Previous information pertaining to Section 45T Auto-Enrollment Option for Retirement Savings Options Provided by Small Employers moved to IRM 21.7.4.8.3.20.2, Form 8881, Small Employer Auto-Enrollment Credit. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.20.1 Added description of Employer Contributions Credit under IRC 45E(f), per Chief Counsel feedback. IRM 21.7.4.4.8.3.20.2 New subsection added: Form 8881, Small Employer Auto-Enrollment Credit replacing information previously found in IRM 21.7.4.4.8.3.20.1. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.20.3 New subsection added: Form 8881, Military Spouse Participation Credit. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.20.3 Updates to paragraphs (1) and (6) specifying contribution plans need to be defined contribution plans under IRC 414(i), per Chief Counsel feedback. IRM 21.7.4.4.8.3.22 Changes throughout clarifying necessary certificates for SAF Synthetic Blending Components; Notice updates from 2023-06 to 2024-06, added Notice 2024-37, clarification on what type of fuel mixtures can be used in sustainable aviation fuel per IRC 40B. IRM 21.7.4.4.8.3.25(5) Updated average tax-financing cost per case Form 8906, Distilled Spirits Credit for 2023 and 2024 per Form 8906 instructions IRM 21.7.4.4.8.3.27.1(13) Removed reference to IRM 21.7.4.4.8.3.38.1, Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two- or Three-Wheeled Plug-in Electric Vehicle). IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.29 Changes throughout section reflecting updated guidance for Form 8911, Alternative Fuel Vehicle Refueling Property Credit resulting from P.L 117-169, commonly known as the Inflation Reduction Act of 2022. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.30 Changes throughout IRM; adding clarifying information on Form 7213, Nuclear Power Production Credit. IRM title changed to match form. Updated general information and processing procedures for both IRC 45J Advanced Nuclear Power Facilities and IRC 45U Qualified Nuclear Power Facilities. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.30(7) Updated paragraph with information on transferring the production credit from advanced nuclear power facilities from qualified entities to eligible project partners, per Notice 2023-24. IRM 21.7.4.4.8.3.32(8) Added paragraph regarding changes to IRC 48 under The Inflation Reduction Act (IRA), P. L. 117-169 linked to IRM 21.7.4.4.8.3.1 Form 3468, Investment Credit, per Chief Counsel feedback. IRM 21.7.4.4.8.3.34(3) Clarified extended credit requirements per IRA for Form 8908, Energy Efficient Home Credit P.L. 117-169, commonly known as the Inflation Reduction Act of 2022. IRM 21.7.4.4.8.3.34(4) Updated definition of an eligible contractor for Form 8908, Energy Efficient Home Credit per Chief Counsel review IRM 21.7.4.4.8.3.37 Changes throughout IRM reflecting updated guidance for Form 8933, Carbon Oxide sequestration credit resulting from P.L. 117-169, commonly known as the Inflation Reduction Act of 2022. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.37(14) Added 2024 inflation reduction factors for Form 8933, Carbon Oxide Sequestration Credit per Notice 2024-39, IRB 2024-24 1611. IRM 21.7.4.4.8.3.37(18) Added information regarding IRC 6417 Elective Payment Elections for S Corporations and Partnerships for Form 8933, Carbon Oxide Sequestration Credit. IPU 24U0405 issued 03-14-2024. IRM 21.7.4.4.8.3.37(20) Added adjustment consideration for IRC 6417 Elective Payment Elections for S Corporations and Partnerships for Form 8933, Carbon Oxide Sequestration Credit. IPU 24U0405 issued 03-14-2024. IRM 21.7.4.4.8.3.38 Renamed heading to Clean Vehicle Credits - Form 8936. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.38 Changes throughout referring to credit as “Clean Vehicle Credit” and vehicles as “clean new vehicles”. Updates to word percent to % throughout. Clarification on flow through to Form 3800 for some entities, per Chief Counsel feedback. IRM 21.7.4.4.8.3.38(20) Changed paragraph to include guidance on following IRM sub-sections which provide guidance on responding to inquiries related to the various credits claimed on Form 8936. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.38.1 Renamed heading to Form 8936, Qualified Two- or Three-Wheeled Plug-In Electric Vehicle. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.38.2 Added Subsection; Form 8936, Qualified Plug in Electric Drive Motor Vehicle Credit (place in service 2022 or prior). IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.38.3 Added Subsection; Form 8936, New Clean Vehicle Credit (2023 or subsequent). IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.38.3(7) Exceptions to VIN lookup tool noted; CAT-A guidance added. IPU 24U0678 issued 05-23-2024.IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.8.3.38.3(8) New paragraph added for actions required for Clean Vehicle Credit claimed on Form 8936. IPU 24U0678 issued 05-23-2024. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.8.3.38.4 Added Subsection; Form 8936, Qualified Commercial Clean Vehicle Credit. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.38.4(7) Exceptions to VIN lookup tool noted; CAT-A guidance added. IPU 24U0678 issued 05-23-2024. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.8.3.38.4(8) New paragraph added for required actions for Commercial Clean Vehicle Credit claimed on Form 8936. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.8.3.41(7) Added 2024 dollar amount, $32,400, per Rev. Proc. 2023-34. IRM 21.7.4.4.8.3.42(4) Added form number for Form 3468 Investment Credit IRM 21.7.4.4.8.3.43 Subsection added Form 7207, Advanced Manufacturing Production Credit. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.8.3.44 Subsection added Form 7210, Clean Hydrogen Production Credit. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.9.3.3(2) Updated IDRS number from 0435140576 to 0435240576 based on SERP Feedback 13246. IPU 23U0982 issued 10-02-2023 IRM 21.7.4.4.9.3.3(2) Updated IDRS number from 0435140576 to 0434904470 based on SERP Feedback #17634. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.9.5 Renamed heading to Inflation Reduction Act (IRA), Superseding and Amended Return Processing Elective Payment Elections (EPE) or Transfers; changes throughout IRM; note added regarding TC 971 AC 831 -R Freeze, math error notices, updated guidance for superseding and amended returns claiming EPE for processing years beginning 202312 and subsequent, and CAT-A procedure information updated for adjusting amended and superseding returns claiming EPE. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.9.5 Changes throughout IRM identifying EPE IRN’s with updates to Amended/Superseding adjustment procedures; CAT-A criteria. IPU 24U0678 issued 05-23-2024. IRM 21.7.4.4.9.5 Changes throughout; paragraphs (1) - (6) updated with clarifying information on eligibility of taxpayers under IRC 6417 and IRC 6418, elective payment/transfer registration, and credit eligibility, per Chief Counsel feedback. IRM 21.7.4.4.9.5.1 Subsection added Adjusting Accounts with Elective Payment Election Sequestration. IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.9.5.1(10) Added CRN 463 Clean Electricity Production Credit under IRC 45Y to table, per Chief Counsel feedback. IRM 21.7.4.4.10(2) Updated new link to IRM 21.7.2.4.8.3, Backup Withholding (BUWH) Claims on Form 945, per IRM 21.7.2 author feedback IRM 21.7.4.4.11 Changes throughout; clarification on filing requirements and adjustment information for Form 8621, Return by a Shareholder of a Passive Foreign Investment Co. or Qualified Electing Fund; paragraphs added/deleted and renumbered, per Chief Counsel Feedback. IRM 21.7.4.4.11(4) Clarification on source documentation adjustments for Form 8621 attachment to tax returns. IRM 21.7.4.4.14 Changes throughout clarifying Form 8873, Extraterritorial Income Exclusion and repeal of FSC and ETI binding contract rules for taxable years beginning after May 17, 2006. IRM 21.7.4.4.15 Changes throughout updating references to Rev. Proc. 2023-24 to 2024-23, Rev. Proc. 2023-01 to 2024-1, per Chief Counsel feedback. IRM 21.7.4.4.15.1.1 Changes throughout adding information to paragraph 1, new bullet (d), Forms 3115 filed with a designated change number (DCN) 255, “Changes related to cost offsets resulting from concurrent cost-offset related inventory changes” updating references to Rev. Proc. 2023-24 to 2024-23, Rev. Proc. 2023-01 to 2024-1, and modifying paragraph (4) with by Rev. Proc. 2017-59, 2017-48 I.R.B. 543, per Chief Counsel Feedback IRM 21.7.4.4.15.1.2 Changes throughout updating references to Rev. Proc. 2023-24 to 2024-23, Rev. Proc. 2023-01 to 2024-1. Added paragraph (3) information on revoking an election per private letter ruling or consent of the Commissioner, per Chief Counsel Feedback IRM 21.7.4.4.15.1.1(4) Removed expiration date on taxpayer ability to use electronic signature on Form 3115 per revised IRM 10.10.1 published 10-17-2023. IPU 23U1107 issued 11-20-2023. IRM 21.7.4.4.17.7.8(2) Updated table with 2022, 2023, 2024 inflation adjustments for business assets under IRC 179, per Rev. Proc. 2021-45, 2022-38, and 2023-34. IRM 21.7.4.4.17.11(7) Added bullet reference to Announcement 2024-24 affirming Reference Standard 90.1-2022 for property placed in service after December 31, 2028, and the construction of which did not begin by December 31, 2022, per Chief Counsel review. IRM 21.7.4.4.19.2 Changes throughout; added information that Notice 2015-74 is obsolete in paragraphs (3) and (4). Removed reference to Notice 2015-74 in paragraphs (5) and (6), per Chief Counsel feedback. IRM 21.7.4.4.23(6) Note added for delay of the new $600 Form 1099-K, Payment Card and Third Party Network Transactions reporting threshold for third party settlement organizations for calendar year 2023. IPU 23U1148 issued 12-05-2023. IRM 21.7.4.4.26(7) Updated paragraph to include IRM 21.5.9.2.1, Identifying Carryback Applications and Claims, and IRM 21.5.9.2.2, Identifying Carryforward Claims links for carryback case identification and assignment procedures, per IRM 21.5.9 author feedback. IRM 21.7.4.4.28 New subsection added; Capital Construction Fund (CCF). IPU 24U0386 issued 03-11-2024. IRM 21.7.4.4.28(2) Updated word “fishermen” to taxpayers, per Chief Counsel Feedback. IRM 21.7.4.4.28(6) Clarified information in (6) pertains to “corporate” taxpayers, per Chief Counsel Feedback. (2) Various editorial changes have been made throughout this IRM. Cross-references were added, removed, or revised, as appropriate. Effect on Other Documents IRM 21.7.4 Income Taxes/Information Returns dated August 25, 2023, effective October 1, 2023 is superseded. The following IRM procedural update(s) have been incorporated into this IRM: IPU 23U0982 issued 10-02-2023, IPU 23U1107 issued 11-20-2023, IPU 23U1148 issued 12-05-2023, IPU 23U1158 issued 12-08-2023, IPU 24U0386 issued 03-11-2024, IPU 24U0405 issued 03-14-2024. IPU 24U0678 issued 05-23-2024, IPU 24U0858 issued 07-22-2024. Audience This IRM is intended for all Taxpayer Services (TS) Customer Account Service employees, including Customer Service Representatives (CSR) and Tax Examiners (TE) in Accounts Management who answer telephone inquiries and/or work taxpayer correspondence regarding issues involving Business Master File (BMF) Income Tax Returns and Information Returns. Effective Date (10-01-2024) Lucinda Comegys, Director, Accounts Management Taxpayer Services Division 21.7.4.1 (10-01-2024) Program Scope and Objectives This IRM section provides procedures and guidance for resolving Business Master File (BMF) income tax accounts. Purpose: This IRM provides general information concerning business income tax returns, and procedures for working telephone inquiries and correspondence relating to BMF income tax adjustments. Audience: Customer Account Services, Customer Service Representatives (CSR) and Tax Examiners (TE) in Accounts Management who answer telephone inquiries and/or work taxpayer correspondence. Policy Owner: The Director, Accounts Management; Taxpayer Services Division. Program Owner: Taxpayer Services, Customer Accounts Services, Accounts Management, Policy & Procedures BMF(PPB), Business Adjustments. Primary Stakeholders: Taxpayers, Taxpayer Services (TS), Small Business Self Employed (SBSE), Large Business and International (LB&I). Program Goals: The objectives for the program ensure taxpayers will receive timely and accurate responses to their inquiries and quickly and effectively resolve issues with their Business Master File (BMF) accounts by outlining the steps for employees to accomplish their tasks. 21.7.4.1.1 (10-01-2021) Background Employees in Accounts Management (AM) respond to taxpayer inquiries and phone calls as well as process claims, certain applications and other internal adjustment requests. The IRS is committed to a customer service program that encourages taxpayers to comply voluntarily with the tax laws and assist them in meeting their obligations. AM employees provide customers with assistance in a manner that warrants the highest degree of public confidence, Customer Service Representatives (CSRs) practice courtesy and proper communication techniques while ensuring that taxpayers receive complete technical and accurate procedural responses. IRM 21.7.4 includes current instructions for AM employees working business accounts to accurately address the most frequent situations encountered by CSRs. 21.7.4.1.2 (10-01-2022) Authority The procedures in this IRM attempt to translate a variety of legal and administrative authorities into practical guidance assistors can use. These authorities take many forms: Treasury regulations, Internal Revenue Codes (IRC), advice from counsel, Policy Statements (e.g., P-21-3), etc., are cited in this IRM as they apply to the topic being discussed. The authorities for this IRM include: The Internal Revenue Code (IRC) is the authority for the procedures in this Internal Revenue Manual. In addition to participating in the promulgation of Treasury (Tax) Regulations, the IRS publishes a regular series of other forms of official tax guidance, including revenue rulings, revenue procedures, notices, and announcements. See Tax Code, Regulations and Official Guidance , for a comprehensive list of official IRS guidance. The authoritative instrument for the distribution of all forms of official IRS tax guidance is the Internal Revenue Bulletin (IRB), a weekly collection of these and other items of general interest to the tax professional community. Notices (which may contain guidance that involves substantive interpretations of the Code or other revenue laws) or announcements (through which the IRS makes public pronouncements of immediate or short-term value) published in the Internal Revenue Bulletin. See IRM 1.2.1.13, Servicewide Policies and Authorities, Policy Statements for Customer Account Services Activities, which contains the Policy Statements that relate to customer Account Services activities. The following are used by this program: Policy Statement 21-1 (Formerly P-6-1) - Service Commitment to Taxpayer Service Program Policy Statement 21-2 (Formerly P-6-10) - The public impact of clarity, consistency, and impartiality in dealing with tax problems must be given high priority Policy Statement 21-3 (Formerly P-6-12) - Timeliness and Quality of Taxpayer Correspondence Policy Statement 21-4 (Formerly P-6-13) - One-stop service defined Policy Statement 21-5 (Formerly P-6-40) - Assistance furnished to taxpayers in the correction of accounts 21.7.4.1.3 (10-01-2024) Responsibilities Accounts Management Policy and Procedures, BMF (PPB) has responsibility in this IRM for issuing guidance to employees who help taxpayers in resolving account issues, work amended returns, prepare installment agreements and process penalty abatement requests among many other duties. These procedures include instructing employees on the actions for input into the Internal Data Retrieval System (IDRS). Guidance for Accounts Management employees include the following: AM Operation Support (AMOS) Reports, Equipment & Phones (REP) Resource Management & Training (RMT) Policy and Procedures BMF (PPB) Policy and Procedures IMF (PPI) Technology Assistance & Stakeholder Communication (TASC) Identity Protection Strategy and Oversight (IPSO) The Taxpayer Services Chief has overall responsibility for the policy related to this IRM which is published on a yearly basis The Chief of PPB is responsible for ensuring this IRM is timely submitted to publishing each year IRM 21.1.1, Accounts Management and Compliance Services Overview, provides guidance to employees assigned to the Accounts Management organization. 21.7.4.1.4 (10-01-2021) Program Management and Review IRM 1.4.16, Accounts Management Guide for Managers, provides guidance for program management and review of programs assigned to Accounts Management. Managers manage work programs and perform program and employee reviews to ensure Accounts Management work is completed according to procedural guidelines contained in this IRM. Program Reports: The program reports provided in this IRM help Accounts Management Customer Service Representatives (CSR) and Tax Examiners (TE). For reports concerning quality, inventory, aged listings, refer to IRM 1.4.16, Accounts Management Guide for Managers. View aged listings by accessing Control Data Analysis, Project PCD, on the Control-D/Web Access server, which has a login program control. Program Effectiveness: Program Effectiveness is determined by Accounts Management’s employees successfully using IRM guidance to perform necessary account actions and duties. Use the following reports to ensure program effectiveness: National Quality Review System (NQRS) Centralized Evaluative Review (CER) Managerial Reviews Annual Review: Review the processes included in this manual annually to ensure accuracy and promote consistent tax administration. 21.7.4.1.5 (10-01-2021) Program Controls Program Controls: See IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS) and Electronic Products and Services Support, for quality data and guidelines for measurement. The Embedded Quality Review Program is the system used by Accounts Management for reviewing employees’ work quality. The Quality Review process provides a method to monitor, measure, and improve the quality of work. Quality Review data is used to provide quality statistics for the Service’s Business Results part of the Balanced Measures, and/or to identify trends, problem areas, training needs, and opportunities for improvement. Centralized Quality Review System (CQRS) is operated by the Joint Operations Center (JOC) to provide independent quality review services for a number of product lines. Perform local and Operation reviews to focus attention on areas that require improvement. The Quality Assurance Manager’s staff performs local quality reviews, or Corrective and Preventative Action System Manager (CPAS). Local quality reviews are used for employee development and on-the-job instruction. The Accounts Management function may also request that local quality reviews be performed on processes not subject to the national quality review. Managerial reviews, prepared on EQRS, measure employee performance. Quality Review data is used by management to provide a basis for measuring and improving program effectiveness by identifying: Defect(s) resulting from site or systemic action(s) or inaction(s), Driver(s) of customer accuracy, Reason(s) for defect occurrence, Defect trends, Recommendation(s) for corrective action, and Training needs. 21.7.4.1.6 (10-01-2024) Terms/Definitions/Acronyms The ReferenceNet Legal and Tax Research Service page provides an Acronym Database to research acronyms found within this IRM. The following table includes a list of common acronyms used by Accounts Management employees. This list is not all inclusive. Acronym Definition AGI Adjusted Gross Income AM Accounts Management AMT Alternative Minimum Tax BMF Business Master File BMFOL Business Master File On-Line BS Blocking Series CFOL Corporate File On-Line CIC Coordinated Industry Cases CII Correspondence Imaging Inventory EIN Employer Identification Number FR Filing Requirement FTC Foreign Tax Credit FTD Federal Tax Deposit IDRS Integrated Data Retrieval System IDT Identity Theft IMF Individual Master File IMFOL Individual Master File On-Line JCC Joint Committee Case LC Large Corp LCI Large Corp Indicator LCC Large Corporate Compliance MeF Modernized e-File MFT Master File Tax MTC Minimum Tax Credit NMF Non-Master File RIVO Return Integrity Verification Operations SSN Social Security Number TC Transaction Code TS Taxpayer Services TXI Taxable Income 21.7.4.1.7 (10-01-2017) Related Resources Below are websites, job aids, or electronic tools needed to assist in completing the work in Accounts Management: The Correspondence Imaging Inventory (CII) for case inventory. The Employee User Portal (EUP) to view corporate, estate and trust, partnership, and individual electronic tax returns filed via MeF. IRM 21.2.2-2, Accounts Management Mandated IAT Tools. These IAT tools simplify taxpayer account processing by assisting the user with IDRS research and input. Servicewide Electronic Research Program (SERP) to view SERP Alerts, IPUs, Correspondex Letters and IRM supplements among others. The Electronic Publishing Website to research forms, instructions and publication, other Internal Revenue Manuals, revenue procedures and IRS announcements. 21.7.4.2 (10-01-2019) Taxpayer Advocate Service (TAS) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see Taxpayer Bill of Rights. Per the TBOR, taxpayers have the right to expect a fair and just tax system which provides taxpayers with the opportunity to have their facts and circumstances considered when it might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through normal channels. See IRM 13.1.1.1.1, Taxpayer Bill of Rights (TBOR), IRM 13.1.1.1.2, Taxpayer Bill of Rights 2 (TBOR 2), and Pub 1, Your Rights as a Taxpayer, for more information. Refer taxpayers to TAS if the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria), or Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), is attached, and steps cannot be taken to resolve the taxpayer's issue the same day (24 hours). "Same day" resolution occurs if an issue is resolved within 24 hours, or if the IRS takes steps within 24 hours to resolve the issue. (See also IRM 13.1.7.5, Same Day Resolution by Operations.) When making a TAS referral, use Form 911, and forward to TAS in accordance with your local procedures. 21.7.4.3 (10-01-2020) BMF Income Tax / Information Returns and Related Research Material Forms covered in this section: Form 1041, U.S. Income Tax Return for Estates and Trusts Form 1065, U.S. Return of Partnership Income Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return Form 1120 series, U.S. Corporation Income Tax Return Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts Form 8716, Election to Have a Tax Year Other Than a Required Tax Year Form 8752, Required Payment or Refund Under Section 7519 BMF Schedule H (Form 1040), Household Employment Taxes Utilize the specific form and corresponding instructions for that form, such as the Instructions for Form 1041, for additional information. For Form 1041, Form 1065, Form 1066, and Form 1120 series returns, taxpayers or Accounts Management employees can use the publications listed below to obtain additional information. Publication 535,Business Expenses Publication 538,Accounting Periods and Methods Publication 544,Sales and Other Dispositions of Assets Publication 550,Investment Income and Expenses Publication 583,Starting a Business and Keeping Records Publication 908,Bankruptcy Tax Guide Publication 925,Passive Activity and At-Risk Rules Publication 1066-C, A Virtual Small Business Tax Workshop DVD A small business or self-employed individual who needs answers to tax questions, educational materials or tools to help them run their business, see Small Business and Self-Employed Tax Center found on IRS.GOV. This site offers extensive resources and online tools to help small businesses and self-employed persons such as: Small business forms and publications Online applications for an Employer Identification Number Employment tax information – federal income tax, Social Security and Medicare taxes, Federal Unemployment Tax Act (FUTA) and self-employment tax Tax-related news that could affect your business Small business educational events IRS videos for small businesses A-Z Index for Business, a fast way to find information 21.7.4.3.1 (10-01-2018) Form 1041 Research Material Besides the publications listed in IRM 21.7.4.3(3), BMF Income Tax/ Information Returns and Related Research Material, Form 1041 filers can use the publications below for additional information. Also see IRM 21.7.4.4.1.9, Electronic Filing of Form 1041 Returns, for publications relating to the electronic filing of Form 1041. Publication 559, Survivors, Executors, and Administrators Publication 926, Household Employer's Tax Guide, for Form 1041 domestic (household) employers who must file Schedule H. To obtain IRS publications: Access the IRS Internet Web site at IRS.GOV Frequently Used Forms and Publications Call the Forms and Publication toll-free line at 800-829-3676 For information on ordering forms and publications see IRM 21.3.6.4.1, Ordering Forms and Publications 21.7.4.3.2 (10-01-2021) Form 1065 Research Material Besides the publications listed in IRM 21.7.4.3(3), BMF Income Tax / Information Returns and Related Research Material, Form 1065 filers can use the publications as sources for additional information: Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities Publication 541, Partnerships Publication 925, Passive Activity and At-Risk Rules Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns Publication 4164, Modernized e-file (MeF) Guide for Software Developers and Transmitters Obtain the publications listed above on the IRS Internet Web site at www.irs.gov or by calling the Forms and Publication toll-free line at 800-829-3676. See IRM 21.3.6.4.1, Ordering Forms and Publications, for information on ordering forms and publications. 21.7.4.3.3 (10-01-2024) Form 1066 Research Material Besides the publication listed in IRM 21.7.4.3(3), BMF Income Tax / Information Returns and Related Research Material, Form 1066 filers can use the publication below as a source for additional information: Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). This publication contains directories relating to real estate mortgage investment conduits (REMICs) and collateralized debt obligations (CDOs). The directory for each calendar quarter is based on information submitted to the IRS during that quarter and is only available on the Internet. 21.7.4.3.4 (01-01-2005) Form 1120 Series Research Material Besides the publications listed in IRM 21.7.4.3(3), BMF Income Tax / Information Returns and Related Research, Publication 542, Corporations, Form 1120 filers can use it as an additional source of information. Also, see the instructions for each specific type of Form 1120 series return for additional information. 21.7.4.3.5 (10-01-2022) Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns Form 7004 is used to request an automatic extension of time to file certain business income tax, information, and other returns. The extension is granted if the taxpayer completes Form 7004 properly, and properly estimates the tax (if applicable), files the form by the due date of the return to which the Form 7004 applies, and pays any tax that is due. Per Treas. Reg. 1.6081-3(a)(3), corporations (or affiliated group of corporations filing a consolidated return) must remit the amount of the properly estimated unpaid tax liability on or before the date prescribed for payment. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 7004 does not extend the time for payment of tax. Therefore, to avoid interest charges and a late payment penalty, payment of any balance due on line 8 of Form 7004 is required by the due date of the return for which the extension is filed. Form 7004 can be filed on paper or can be filed electronically. See the Instructions for Form 7004 for the forms that cannot be filed electronically and for general information. Also, visit the IRS Web site at www.irs.gov, for more information on filing Form 7004 electronically. Form 7004 is processed to BMF as Transaction Code (TC) 620 with Document Code 04. Form 7004 received without remittance posts as $.00. In addition, when the TC 620 posts to the account, Integrated Data Retrieval System (IDRS) generates TC 460 on the module and reflects the extended due date. Computer Condition Code (CCC) "L" shows a rejected or denied extension of time to file. See IRM 3.11.212, Application for Extension of Time To File Tax Returns, for additional information. Also, follow the procedures in IRM 20.1.2.2.3, Extensions of Time to File and Pay, when the taxpayer requests penalty abatement and claims they filed a timely extension. Universal Location Code (ULC 98) is entered to allow a date more than 6 months in the future. See IRM 20.1.2.2.3.3, Taxpayers Abroad, for more information. 21.7.4.3.6 (10-01-2023) Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns The Bipartisan Budget Act of 2015 (BBA of 2015) (P.L. 114-74, Title XI, section 1101) repealed the rules for electing large partnerships for tax years beginning after 2017. Due to elimination of large partnership elections, the Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, deleted the line used to extend the filing for Form 1065-B, U.S. Return of Income from Electing Large Partnerships. For tax years beginning in 2018 and subsequent, Form 1065-B is no longer filed. Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, (the Act) changed the due date for filing the tax return of a partnership, and thus the date by which a partnership must file a corresponding Form 7004 has also changed. Additionally, section 1.6081-2T now allows for a six-month extension of time to file Form 1065. The new statutory due date is effective for tax years beginning after December 31, 2015, but 2016 returns filed by the prior due date were treated as timely under Notice 2017-71. The regulatory extension was effective for applications for extensions filed after July 20, 2017, but taxpayers could have elected to apply it to their returns filed for periods beginning after December 31, 2015. The due date for a partnership to file its income tax return, and therefore, the date by which a partnership may request an automatic extension for filing Form 1065 or Form 8804 using Form 7004 is now the 15th day of the third month following the close of the partnership’s tax year. The duration of the automatic extension of time to file Form 1065 and Form 8804 has increased to six months. Section 1.6081-6T increased the duration of the automatic extension of time to file Form 1041 for a trust or non-bankruptcy estate to 5½ months. Section 2006(a) of the Act changed the due date for filing most C corporation returns, and thus the date by which a C corporation may request an automatic extension using Form 7004 for the Form 1120 Series (except Form 1120-C filers that do not meet the requirements of section 6072(d) and Form 1120-IC-DISC filers), has changed. Note: Form 1120-S is not filed by a “C” corporation and therefore its due date has not changed. See also, IRM 21.7.4.4.4.11.14, Form 1120-C, U.S. Income Tax Return for Cooperative Associations for information on the return due date for Form 1120-C filers. In addition, section 2006(c) of the Act changed the duration of the automatic extension of time to file the return of a C corporation that ends its taxable year on June 30. For purposes of this rule, a taxable year ending any time in June is treated as ending on June 30. The provisions are effective for tax years beginning after December 31, 2015 and before January 1, 2026. Although section 2006(c) also provided that the duration of the automatic extension for C corporations filing on a calendar-year basis was five months, that provision has no effect because section 1.6081-3T provides a six-month extension for such filers. The due date of the return of most C corporations, and therefore, the date by which a C corporation (except if filing Form 1120-C or Form 1120-IC-DISC) may request an automatic extension of time to file its return using Form 7004, is the 15th day of the fourth month following the close of the C corporations tax year. The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the taxable year for tax years beginning after December 31, 2015 and before January 1, 2026. For purposes of this rule, a taxable year ending any time in June is treated as ending on June 30. If a C corporation files its return for a taxable year that ends on June 30 and ends before January 1, 2026, the duration of the automatic extension is seven months. A taxable year ending any time in June is treated as ending on June 30. A filer of a Form 1120-POL is not treated as a C corporation for purposes of this rule, and is always eligible for an automatic six-month extension of time to file. Immediately prior to cycle seven, master file programming provided a five-month extension of time to file for most C corporations, rather than the six months provided by section 1.6081-3. Master file programming was corrected in cycle seven to allow a six-month extension. Accurate BMF extensions posted cycle seven and subsequent. Information Technology (IT) corrected the return due dates and the extended due dates for extensions processed before cycle seven. These accounts show a TC 971 with Action Code 399 posting in Cycle 201709. Note: See the various subsections in this IRM for more information concerning the forms impacted by this legislation. Notice Review developed procedures to handle extension requests received in 2016. See the tables below and the information in the paragraphs above for tax years beginning after December 31, 2015 and before January 1, 2026, for eligible forms requiring an automatic 5 ½ month extension and for an automatic 6-month extension: Form 7004, Automatic Five and a Half Month Extension Extension is For Form MFT Form Code 1041 (except bankruptcy estates) 05 05 Form 7004, Automatic Six-Month Extension (Except most 1120 series with tax years ending in June) Extension is For Form MFT Form Code Extension is for Form MFT Form Code 706-GS(D) 78 01 1120-ND (IRC 4951 Taxes) 02 20 706-GS(T) 77 02 1120-PC 02 21 1041 (Bankruptcy Estate Only) 05 03 1120-POL 02 22 1041-N 05 06 1120-REIT 02 23 1041-QFT 05 07 1120-RIC 02 24 1042 12 08 1120-S 02 25 1065 06 09 1120-SF 02 26 1065-B (form obsoleted after 2017) 06 10 3520-A 42 27 1066 07 11 8612 89 NMF 28 1120 02 12 8613 14 NMF 29 1120-C (All Form 1120-C filers) 02 34 8725 27 NMF 30 1120-F 02 15 8804 08 31 1120-FSC 02 16 8831 89 NMF 32 1120-H 02 17 8876 27 NMF 33 1120-L 02 18 8924 08 35 1120-ND 02 19 8928 89 NMF 36 See the table below and the information in paragraph (4) above for tax years beginning after December 31, 2015, and before January 1, 2026, and that have a June 30 ending, for the forms that are eligible for an automatic 7-month extension. Form 7004, Automatic Seven-Month Extension (Tax year that end in June) Extension is For Form MFT Form Code Extension is for Form MFT Form Code 1120 02 12 1120-ND 02 19 1120-C (Non section 6072(d) filers) 02 34 1120-ND (IRC 4951 Taxes) 02 20 1120-F 02 15 1120-PC 02 21 1120-FSC 02 16 1120-REIT 02 23 1120-H 02 17 1120-RIC 02 24 1120-L 02 18 1120-SF 02 26 The IRS no longer sends notifications that the taxpayer’s extension is approved. IRS will only notify the taxpayer if the taxpayer’s request for an extension is disallowed. Computer Condition Code (CCC) "L" shows a rejected or denied extension of time to file. Per IRM 3.11.212.3.2, Notification to Taxpayer, when the extension request is denied, Code and Edit must initiate correspondence to inform the taxpayer that the extension is denied. There is no automatic notice generated to the taxpayer. Form 7004 is filed on paper or is filed electronically (see paragraphs directly above for those forms for which Form 7004 is valid). For details, see the Instructions for Form 7004 for the forms that cannot be filed electronically and for general information. Form 7004 is processed to BMF as Transaction Code (TC) 620 with Document Code 04. Form 7004 received without remittance posts as $.00. In addition, when the TC 620 posts to the account, Integrated Data Retrieval System (IDRS) generates TC 460 on the module and reflects the extended due date. See IRM 3.11.212, Application for Extension of Time To File Tax Returns, for additional information. Also, follow the procedures in IRM 20.1.2.2.3, Extensions of Time to File and Pay, when the taxpayer requests penalty abatement and claims they filed a timely extension. Universal Location Code (ULC 98) is entered to allow a date more than 6 months in the future. See IRM 20.1.2.2.3.3, Taxpayers Abroad, for more information. 21.7.4.4 (01-01-2005) Income and Information Returns Procedures Use the following information and procedures for the designated forms. 21.7.4.4.1 (09-24-2009) Form 1041, U.S. Income Tax Return for Estates and Trusts Form 1041 is filed to report the income of an estate or trust as reported by a fiduciary. The Master File Tax (MFT) code is 05 and the tax class is "2." It covers a calendar or fiscal year not exceeding 12 months. The return is due on or before the 15th of the fourth month following the close of the taxable year. Every Form 1041 is edited with a Fiduciary Code and may have a Trust Code. However, amended returns are not transcribed. See IRM 3.11.14.13.3, Fiduciary and Trust Code Editing, for more information on fiduciary and trust codes. Also, see IRM 3.11.14-4, Due Date Chart, for Form 1041 due dates. 21.7.4.4.1.1 (01-01-2005) Filing Requirements, Form 1041 The fiduciaries for certain domestic decedent and bankruptcy estates and certain domestic trusts are required to file Form 1041. 21.7.4.4.1.1.1 (10-01-2024) Domestic Decedent and Bankruptcy Estates A domestic decedent’s estate is a taxable entity separate from the decedent and comes into being with the death of the individual. It exists until the final distribution of its assets to the heirs and other beneficiaries. The income earned by the assets during this period is reported by the estate under the conditions described in Publication 559, Survivors, Executors, and Administrators. The personal representative of a domestic decedent’s estate which meets either of the criteria below, must file Form 1041: Gross income of $600 or more for the taxable year. Any beneficiary who is a non-resident alien. A bankruptcy estate is a separate and distinct taxable entity from the debtor, if the debtor is an individual in a Chapter 7 or Chapter 11. For more information, refer to Publication 908, Bankruptcy Tax Guide. If the bankruptcy estate is a separate taxable entity, the bankruptcy trustee or debtor-in-possession must file Form 1041 if the estate has: For tax years beginning in Gross income of at least 2015 $10,300 2016 $10,350 2017 $10,400 2018 $12,000 2019 $12,200 2020 $12,400 2021 $12,550 2022 $12,950 2023 $13,850 Under Treasury Regulation section 1.6081-6, effective 6/24/2011, the automatic filing extension period for bankruptcy estates of individuals filing bankruptcy petitions under Chapter 7 or Chapter 11 of the Bankruptcy Code is 6 months. 21.7.4.4.1.1.2 (01-01-2005) Domestic Trusts A trust is an arrangement in which one party (the trustee) takes title to property for the benefit of another party or parties (beneficiaries). Trustees manage and control the property under a duty to administer the trust according to the trust agreement or local law for the benefit of the beneficiaries. A trust is created during an individual's life (inter vivos), or at the time of their death under a will (testamentary). Domestic trusts which meet any of the criteria below must file Form 1041: Any taxable income for the taxable year. Gross income of $600 or more, regardless of the amount of taxable income. Any beneficiary who is a non-resident alien. 21.7.4.4.1.1.3 (10-01-2007) Types of Trusts A simple trust is created by a written document. This type of trust requires all income to be distributed currently, has no authority to make charitable contributions and (during the taxable year in question) does not distribute any amount allocated to the corpus of the trust. A complex trust is created by a written document. It is for the taxable year and does not qualify as a simple trust. It may or may not distribute current income, principal, or make charitable contributions depending upon its terms. A grantor trust is usually set up by a person, an organization, or, in certain cases, created by a will. The grantor retains sufficient control over the assets of the trust. The income from the trust is taxable to the grantor or other person treated as the owner of the trust. A separate statement attached to the Form 1041 includes reporting of the income, deductions, and credits (including Federal Income Taxes Withheld). Grantor trusts have many unique characteristics. Among them: Grantor trusts ordinarily file Form 1099, reporting all items of income paid by the trust and identifying the grantor or other payee. Treas. Reg. section 1.671-4(b), details methods by which the trustee may notify the grantor or other persons treated as the owner of the trust of all items of income, deductions, and credit for the taxable year. The trustee of certain grantor trusts may elect an alternative reporting method under Regulation 1.671-4. Generally, these trusts report by issuing a Form 1099 reporting the trust income and showing the grantor or other person treated as owner of the trust as payee. A trust may be a partial grantor trust if the power which would make the trust a grantor trust only applies to a portion of the trust assets. The grantor trust portion must report under the general grantor trust rules, and the non-grantor trust portion should report as a simple or complex trust depending on its provisions. A pooled income fund is a split interest trust that is established by a public charity. The donor or other beneficiary retains a life income interest and the charity receives the remaining interest. It is not exempt from tax under IRC 501(a). A Form 5227, Split Interest Trust Information Return, is filed by the fiduciary in addition to Form 1041. A Qualified Revocable Trust is any trust (or part of a trust) that, on the day the decedent died, is treated as owned by the decedent under IRC 676. The grantor of the trust pays taxes on the trust on their Form 1040 return. The trustee files Form 1041 for "informational purposes" only. The trustees of each qualified revocable trust and the executor of the related estate (if one exists), use Form 8855, Election to Treat a Qualified Revocable Trust as Part of an Estate, to make a IRC 645 election. This election allows a qualified revocable trust to be treated and taxed (for income tax purposes) as part of its related estate (Form 706) during the election period and cannot be revoked once the election is made. See the General Instructions for Form 8855 for more information. Qualified Funeral Trust - See IRM 21.7.4.4.1.1.4, Form 1041 - QFT, U.S. Income Tax Return for Qualified Funeral Trusts. Alaskan Settlement Trust - See IRM 21.7.4.4.1.1.5, Form 1041-N, U.S. Income Tax Return for Alaska Native Settlement Trusts. Treat Electing Small Business Trusts (ESBTs) as two separate trusts for purposes of determining income tax. The portion of an ESBT that consists of stock in one or more S corporations (the S portion) is treated as one trust. The portion that consists of all other assets in the trust is treated as a separate trust. The grantor or another person may be treated as the owner of all, or a portion of either or both trusts, in which case the grantor portion is subject under subpart E (grantor portion). Qualified Disability Trust See IRM 21.7.4.4.1.1.6, Qualified Disability Trust. See IRM 3.11.14.1.6, Definitions, for more general definitions relating to trusts and estates. 21.7.4.4.1.1.4 (10-01-2019) Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts The Taxpayer Relief Act of 1997 (TPRA) resulted in the establishment of Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts. These trusts created by a contract with a trade or business provide funeral or burial services. The sole purpose of the trust is to hold, invest, and reinvest funds in the trust and to use those funds to make payments for funeral or burial services for the beneficiaries of the trust. Do not allow exemptions. The trustee of a trust that has elected to be taxed as a qualified funeral trust (QFT) files Form 1041-QFT to report the income, deductions, gains, losses, and tax liability of the QFT. The trustee can use the form to report information for a single QFT or for multiple QFTs having the same trustee. Composite Returns report multiple trusts. Prior to August 28, 2008, each individual trust reported on Form 1041-QFT is limited in the amount that the beneficiaries could contribute for their funeral expenses. If a QFT has multiple beneficiaries, the contribution limit applies separately to each beneficiary. The contribution limit is determined by the year the purchaser entered into the contract for funeral or burial goods and services and does not change over the life of the trust. The threshold for aggregate contributions (for each individual trust) is adjusted each year based on cost of living adjustments. However, the Hubbard Act of 2008, P.L. 110-317, repealed the dollar limitation contribution for tax year 2009 and subsequent. See the General Instructions for Form 1041-QFT for TY 2008 and prior years for the specific dollar limitations. A trustee may file a single, composite Form 1041-QFT for some or all QFTs of which they are the trustee, including QFTs that had a short tax year. The trustee must attach a statement to a composite Form 1041-QFT that includes the following information for each QFT (or separate interest treated as a separate QFT). See the General Instruction for Form 1041-QFT for more specific information on the requirements below: The name of the owner or the beneficiary, The type and gross amount of each type of income earned by the QFT for the tax year, The type and amount of each deduction and credit allocable to the QFT, The tax and payments made for each QFT, and The termination date for each QFT that is terminated during the year. Kansas City Submission Processing Campus processes Domestic Forms 1041-QFT and Ogden Submission Processing Campus processes all International Forms 1041-QFT. The MFT is 05, Document Code 39, and the Filing Requirement Code (FRC) is 9. Determine Form 1041-QFT Estimated Tax (ES) payments individually for each trust reported on a composite (more than one trust involved) Form 1041-QFT. The ES payments are not based on the total taxable income for all trusts reported on the form. Therefore, some taxpayers may have incorrect ES penalties assessed since the computer bases the computation on the total taxable income. If a phone call or correspondence is received from a taxpayer stating an incorrect ES penalty is assessed: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If the taxpayer states they are liable for a penalty, but not for the amount assessed, reduce the penalty to the amount calculated by the taxpayer if they provide the calculation on paper. Do not reduce the penalty if the taxpayer does not provide the calculation. If the calculation in (b) directly above is not provided, ask the taxpayer to fax/mail it to you. Upon receipt, verify the computation and adjust the penalty to the taxpayer's figures. Use reason code 045 in the fourth position and apologize to the taxpayer by phone or via Letter 544C. When an amended Form 1041-QFT is received, adjust the account per the guidance in IRM 21.7.4.4.1.10, Form 1041 Claims and Requests for Adjustments. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.1.1.5 (10-01-2019) Form 1041-N, U.S. Income Tax Return for Alaska Native Settlement Trusts Under present law, the Alaska Native Claims Settlement Act (“ANCSA”) established Native Corporations to hold property for Alaska Natives. Generally, only Alaska Natives can be common shareholders of those corporations, unless a Native Corporation specifically allows other shareholders under specified procedures. ANCSA permits a Native Corporation to transfer money or other property to an Alaska Native Settlement Trust ("Settlement Trust" ) for the benefit of beneficiaries who constitute all or a class of the shareholders of the Native Corporation, to promote the health, education and welfare of beneficiaries and to preserve the heritage and culture of Alaska Natives. Native Corporations and Settlement Trusts, as well as their shareholders and beneficiaries, are subject to tax under the same rules and in the same manner as other taxpayer corporations, trusts, shareholders, or beneficiaries. Section 13821 of Tax Cuts and Jobs Act of 2017 (TCJA), added three new provisions to the IRC that affect tax treatment of Native Corporations and Settlement trusts: IRC 139G allows a Native Corporation to assign the value of certain payments that it would otherwise receive to a Settlement Trust without including those payments in gross income if the assignment is in writing and the Corporation has not received the payments before the assignment. IRC 247 allows a Native Corporation to elect annually to deduct contributions made to a Settlement Trust, and a Settlement Trust to elect annually to defer any recognition of income related to the property contributed by the Corporation until the Trust disposes of the property in a sale or exchange. IRC 6039H(e) requires any Native Corporation, that has made an election under IRC 247 to furnish a statement to the Settlement Trust. Exception: See 26 U.S. Code § 646 - Tax treatment of electing Alaska Native Settlement Trusts and 43 U.S. Code Chapter 33 - Alaska Native Claims Settlement for more information. IRC 139G and IRC 6039H(e) apply to taxable years beginning after December 31, 2016. Note: The provision relating to the deduction of contributions is effective for taxable years for which the Native Corporation’s refund statute of limitations period has not expired. If the refund statute of limitations period expires before December 22, 2018, the Settlement Trust has until December 21, 2018 to make a claim for credit or refund. Ogden Submission Processing Campus processes all Forms 1041-N. The volume is minimal. Forms 1041-N are processed as a Form 1041-QFT (Document Code "39," MFT "05," Tax Class "2" ). The only unique identifying field that differentiates the two returns is audit code "8" on the 1041-N account. See the Instructions for Form 1041-N, for more information. 21.7.4.4.1.1.6 (10-01-2019) Qualified Disability Trust A Qualified Disability Trust is any trust: Described in 42 U.S.C. 1396p(c)(2)(B)(iv) and established solely for the benefit of an individual under 65 years of age who is disabled, and The Commissioner of Social Security determines all of the beneficiaries to be disabled for some part of the tax year within the meaning of 42 U.S.C. 1382(c)(a)(3). The Victims of Terrorism Tax Relief Act of 2001 provides that certain disability trusts may claim a personal exemption in an amount that is based upon the personal exemption provided for individuals under IRC 151(d), rather than the $100 or $300 personal exemption provided under current law. See IRM 21.7.4.4.1.7.4, Form 1041 Exemptions, for the exemption amount and phaseout thresholds for Qualified Disability Trusts. Note: For taxable years beginning after December 31, 2017 and ending before January 1, 2026, the exemption amount under section 151(d) is zero. See IRC 151(d)(5). 21.7.4.4.1.2 (10-01-2018) Schedules Associated with Form 1041 The schedules associated with Form 1041: Schedule A, Charitable Deductions Schedule B, Income Distribution Deduction Schedule D, Capital Gains and Losses (This schedule must be attached if the alternative tax computation is used.) Schedule G, Tax Computation Schedule H, Form 1040, Household Employment Taxes (1995 and subsequent) Schedule I, Alternative Minimum Tax-Estates and Trusts. Schedule J, Accumulation Distribution for Certain Complex Trust Schedule K-1, Beneficiary’s Share of Income, Deductions, Credits, etc. (Trusts and estates are required to file Schedules K-1 for each beneficiary named on Form 1041.) 21.7.4.4.1.3 (10-01-2020) General Definitions The following list contains and defines common terms used with Form 1041 (See IRM 3.11.14.1.6, Terms/Definitions, for more definitions.) Administrator - The person in charge of administering an estate who is named by the courts when there is no will, or if no executor is named in the will, or if the named executor cannot or will not serve. Beneficiary - A person designated as the recipient of funds or other property under a trust or an estate. Conservatorship - An arrangement to hold property, usually for an incompetent person, which may or may not be a trust for federal purposes. Estate - A legal entity created as a result of a person's death. The estate consists of the real and/or personal property of the deceased person. Fiduciary - Trustee of a trust or executor, executrix, administrator, administratrix, personal representative, or person in possession of property of a decedent's estate. Guardianship/Custodianship - An arrangement to hold property for a minor, which may or may not be a trust for federal purposes. Maker/grantor/etc. - The person/organization that either creates a trust, or directly, or indirectly makes a gratuitous transfer to the trust. Trust - A legal entity created under state law and taxed under federal law. The trust is an arrangement created by will or an inter vivos declaration by which trustees hold title to property to protect or conserve it for beneficiaries. 21.7.4.4.1.4 (01-01-2005) Entity Perfection of Form 1041 A single individual or group may set up several trusts. These trusts may have almost identical names or structures. Example: ABC Trust number 1 and ABC Trust number 2 represent separate trusts. Mix-ups between these entities frequently occur since a single individual or firm usually administers both trusts. To resolve these cases: Determine the correct entities from information available. If the correct entity is not determined or identified, forward a photocopy of the front page (entity portion) including available research, and a photocopy of any other document in the case file that may help determine the correct entity, to Entity Control. Maintain an open control base until the case is returned and proper adjustment is completed. 21.7.4.4.1.5 (10-01-2011) Permissible Tax Years, Form 1041 Most trusts are required to file a calendar year return. The only Form 1041 filers permitted to retain or adopt a fiscal year include: Decedent’s estates Bankruptcy estates Charitable trusts under IRC 4947(a)(1) Trusts under IRC 501(a) Trusts treated as wholly owned by a grantor under rules of IRC 671 - 679 (which use the tax year of their owner) To change the accounting period of an estate, a Form 1128, Application to Adopt, Change or Retain a Tax Year, must be filed and approved. The bankruptcy estate of an individual in a Chapter 7 or Chapter 11 case may change its accounting period one time without approval. 21.7.4.4.1.6 (10-05-2022) Extensions to File, Form 1041 Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, and Other Returns is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1041 will be granted if the taxpayer completes Form 7004 properly, makes a proper estimate of the tax (if applicable), files the form by the due date of the return to which the Form 7004 applies, and pays any tax that is due. Generally, Form 7004 is filed on or before the due date of the Form 1041. Form 7004 does not extend the time for payment of tax. Therefore, to avoid interest charges and a late payment penalty, payment of any balance due on line 8 of Form 7004 is required by the due date of the return for which the extension is filed. If more time is needed to file the estate or trust return, Form 7004 extends the time to file 5 1/2 months. Therefore, for trusts and estates (other than bankruptcy estates) filing Form 1041 that requested a valid extension on or before April 15th, the return is due on or before September 30th. Notice 2020-23, Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, extended the due date for filing 2019 tax returns and payments, as well as the first two 2020 estimated tax payments to Wednesday, July 15, 2020. Businesses that need additional time to file must file Form 7004. The extended return due date will not exceed October 15, 2020. If the due date of a Form 1041 series return falls on a Saturday, Sunday, or legal holiday, the Form 1041 filer can file on the next day that is not a Saturday, Sunday, or legal holiday. See IRM 20.1.2.2.1, When Timely Mailing Equals Timely Filing or Paying (Received Date vs. Filing/Payment Date). See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns - Tax Years Beginning After December 31, 2015, for more general information. 21.7.4.4.1.7 (10-01-2024) Tax Computation, Form 1041 The method of calculating the liability using Form 1041 varies depending on the type of taxpayer involved. Decedent’s estates and trusts compute their income tax liability using the rates in the table below. The taxpayer enters the computed tax liability on line 1a of Schedule G. Follow the Schedule G submitted by the taxpayer as there can be other credits or taxes applicable. The total from line 7, Schedule G is the amount entered on the "Total tax" line on Form 1041. 2023 Tax Rate Schedule If the taxable income on Page 1, Line 22 is over: But not over: The tax is: Of the amount over: $0 $2,9000 10 percent $0 $2,900 $ 10,550 $ 290 + 24 percent $ 2,900 $10,550 $ 14,450 $2,126 + 35 percent $ 10,550 Over $14,450 $3,491 + 37 percent $ 14,450 2022 Tax Rate Schedule If the taxable income on Page 1, Line 23 is over: But not over: The tax is: Of the amount over: $0 $2,750 10 percent $0 $2,750 $ 9,850 $ 275 + 24 percent $ 2,750 $9,850 $ 13,450 $1,979 + 35 percent $ 9,850 Over $13,450 $3,239 + 37 percent $ 13,450 2021 Tax Rate Schedule If the taxable income on Page 1, Line 23 is over: But not over: The tax is: Of the amount over: $0 $2,650 10 percent $0 $2,650 $ 9,550 $ 265 + 24 percent $ 2,650 $9,550 $ 13,050 $1,921 + 35 percent $ 9,550 Over $13,050 $3,146 + 37 percent $ 13,050 2020 Tax Rate Schedule If the taxable income on Page 1, Line 23 is over: But not over: The tax is: Of the amount over: $0 $2,600 10 percent $0 $2,600 $ 9,450 $ 260 + 24 percent $ 2,600 $9,450 $ 12,950 $1,904 + 35 percent $ 9,450 Over $12,950 $3,129 + 37 percent $ 12,950 2019 Tax Rate Schedule If the taxable income on Page 1, Line 23 is over: But not over: The tax is: Of the amount over: $0 $2,600 10 percent $0 $2,600 $ 9,300 $ 260 + 24 percent $ 2,600 $9,300 $ 12,750 $1,868 + 35 percent $ 9,300 Over $12,750 $3,075.50 + 37 percent $ 12,750 Note: Previous Tax Rate Schedules are found in prior year IRMs. If the decedent’s estate or trust used Schedule D and the alternative tax computation, follow the computation using the applicable form line-by-line instructions. If the bankruptcy estate must file a return, the trustee (or debtor-in-possession) completes the identification area at the top of the Form 1041 and lines 22 - 29 and signs and dates it. The trustee uses the Form 1041 as a transmittal for Form 1040, U.S. Individual Income Tax Return. The trustee completes Form 1040 and figures the tax using the tax rate schedule for a married person filing separately. In the top margin of Form 1040, the trustee writes "Attachment to Form 1041. DO NOT DETACH." The trustee attaches Form 1040 to Form 1041. The bankruptcy estate computes its liability in the same manner as an individual, claims the same exemption as an individual, and, if it does not itemize, uses the same standard deduction as an individual. See IRM 3.12.14-27 , Bankruptcy Estate Tax Rate Schedule, for applicable tax rate computations. 21.7.4.4.1.7.1 (10-01-2021) Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts Section 1402(a)(1), of the Health Care and Education Reconciliation Act of 2010, P.L. 111–152, added a Net Investment Income Tax (NIIT) under section 1411 of the Internal Revenue Code for tax years beginning on or after January 1, 2013 and subsequent. Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, is used to figure the amount of taxpayer’s Net Investment Income Tax (NIIT). The NIIT applies at a rate of 3.8 percent to certain Net Investment Income (NII) of individuals, estates and trusts. Although section 1411 falls within Chapter 2A of the Code, entitled "Unearned Income Medicare Contribution," the tax is not a payroll tax. Generally, the NIIT cannot be offset by most tax credits (such as foreign tax credit or general business credit). The 3.8 percent net investment income tax is levied on non-business income from interest, dividends, certain non-qualified annuities, royalties, rents, and capital gains. See Instructions for Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, for more information. Information concerning individual taxpayers and the NIIT is found in IRM 21.6.4.4.19, Net Investment Income Tax. In the case of an estate or trust, section 1411(a)(2) imposes a tax (in addition to any other tax imposed by subtitle A) for each taxable year equal to 3.8 percent of the lesser of the taxpayer’s: Undistributed NII for such taxable year, or excess (if any) of-(i) the adjusted gross income (as defined in Code section 67(e)) for such taxable year, over (ii) the dollar amount at which the highest tax bracket in Code section 1(e) begins for such taxable year. The tax does not apply to the following estate and trusts listed below: Trusts exempt from income taxes imposed by Subtitle A of the Internal Revenue Code (e.g., charitable trusts and qualified retirement plan trusts exempt from tax under IRC 501), and Charitable Remainder Trusts exempt from tax under IRC 664 (however, the annuity or unitrust distributions from such a trust to persons subject to tax under IRC 1411 are subject to special rules). An unexpired trust with interests devoted to one or more of the purposes described in IRC 170(c)(2)(B). Trusts classified as “grantor trusts” under IRC 671 through IRC 679. Trusts not classified as “trusts” for federal income tax purposes (e.g., Real Estate Investment Trusts and Common Trust Funds). Alaskan Native Settlement Trusts (Form 1041-N) or Perpetual Care (Cemetery) Trusts. A trust or decedent’s estate in which all the unexpired interests devoted to one or more of the purposes described in IRC 170(c)(2)(B). Foreign estates or foreign trusts (but the U.S. beneficiary subject to the tax on the NII distributed by these entities). The 3.8 percent net investment income tax is reported on Form 8960. Form 8960 is attached to either Form 1041 or Form 1041-QFT. For Form 1041, the NIIT is included in the amount on line 23, and for Form 1041-QFT, the NIIT is included in the amount on line 17. For Form 8960 the amount of income which is subject to the NIIT is captured on line 20 and the NIIT is captured on line 21. Beginning in January 2014 Net Investment Income is transcribed and posts to command codes TXMOD and BMFOLR under the field "NI Income" and the Net Investment Income Tax posts as "NI Income Tax." To adjust an account, input: Item Reference Number 861 to update the Net Investment Income Item Reference Number 862 to update the Net Investment Income Tax TC 29X to decrease/increase the tax More information is found on irs.gov under Net Investment Income Taxes, Questions and Answers on the Net Investment Income Tax. 21.7.4.4.1.7.2 (10-01-2019) Short Period Returns, Form 1041 Trusts and estates required to file a short period return under the conditions below: It is a final return. It is an initial estate return (except fiscal year ending on date of death). It is an initial trust return using the calendar year ending "12" . It is the first return the trust or estate files after changing its accounting periods. 21.7.4.4.1.7.3 (05-08-2019) Annualized Tax, Form 1041 To annualize tax and exemptions on short period returns, use the instructions in Publication 538, Accounting Periods and Methods. Do not annualize tax on short period initial or final returns. See the second table in IRM 20.1.3-1, Installment Due Dates for Individuals, Estates and Trusts Subject to IRC 6654, for the due date of estimated tax payments on short period returns. 21.7.4.4.1.7.4 (10-01-2024) Form 1041 Exemptions Allowable exemptions include: $600 for a decedent estate. $300 for a trust, which under its instrument, is required to distribute all of its income for the taxable year (This deduction is allowed regardless of whether the trust is simple or complex). $100 for a trust which is not required to distribute all of its income for the taxable year (Complex trusts are entitled to this exemption). Same exemption as an individual under IRC 151 for a bankruptcy estate. Note: Grantor trusts are not entitled to an exemption, except for a partial grantor trust, which is entitled to the applicable exemption for its non-grantor trust portion. A Qualified Disability Trust is entitled to the same personal exemption amount as an unmarried individual and is effective for tax years ending after September 10, 2001. However, for a tax year beginning after December 31, 2017, the amount is $4,150. For taxable years beginning after December 31, 2018, and before January 1, 2026, the $4,150 amount is adjusted for inflation. See IRC 642(b)(2)(C)(iii). In addition, for taxable years 2017 through 2025, the phaseout does not apply. A Qualified Disability Trust is also subject to the same phaseout as the personal exemption if the trust's modified Adjusted Gross Income exceeds certain limits. Taxpayers must complete the Exemption Worksheet for Qualified Disability Trusts to figure the amount of the trust's exemption when their modified AGI exceeds the limits shown in the chart below. Tax Year Exemption Amount Phaseout Threshold 2012 $3,800 Eliminated in 2012 2013 $3,900 $250,000 2014 $3,950 $254,200 2015 $4,000 $258,200 2016 $4,050 $259,400 2017 $4,050 $261,500 2018 $4,150 No phaseout 2019 $4,200 No phaseout 2020 $4,300 No phaseout 2021 $4,300 No phaseout 2022 $4,400 No phaseout 2023 $4,700 No phaseout Note: This provision does not apply to any portion of a disability trust that is treated as a grantor trust. Exemptions are allowed on final returns. 21.7.4.4.1.7.5 (01-01-2005) Allowable Credits (Form 1041) Certain non-refundable and refundable credits are allowed on Form 1041. The following subsections address the processing of these credits 21.7.4.4.1.7.5.1 (05-08-2019) Non-Refundable Credits (Form 1041) The General Business Credits reported on Form 3800 are treated as used on a first-in, first-out basis by offsetting the earliest-earned credits first. Therefore, the order in which the credits are used in any tax year is: Carryforwards to that year, the earliest ones first, as of the close of the tax year in which the credit is used: The general business credit earned in that year, and The carryback to that year. See IRM 21.7.4.4.8, Non-refundable Credits, Income Tax Returns, for more information on non-refundable credits and IRM 21.7.4.4.8.1.1, Priority of Credits, for the components of the general business credits reported on Form 3800. 21.7.4.4.1.7.5.2 (07-09-2009) Refundable Credits (Form 1041) The allowable refundable credits include: Credit for Federal Tax Paid on Fuels - Form 4136 Notice to Shareholder of Undistributed Long-Term Capital Gains - Form 2439 All prepayment credits See IRM 21.7.4.4.9, Refundable Credits, Income Tax Returns, for more information on refundable credits. 21.7.4.4.1.8 (05-08-2019) Estimated Tax Payments (Form 1041) Per IRC 6654(I), new and existing trusts and estates must make quarterly estimated tax payments in the same manner as individuals, except an estate and certain grantor trusts exempt from making such payments during their first two taxable years. Generally, the estate or trust must make an estimated payment if it expects to owe at least $1,000 in tax during the taxable year and it expects the withholding and credits to be less than the smaller of: 90 percent of the tax shown on the tax return, or 100 percent of the tax shown of the prior year tax return (110 percent if the amount of the estate’s or trust’s AGI on that return is more the $150,000, and less than 2/3 of the gross income of the prior year is from farming or fishing). Note: If a return is not filed for the prior year or that return didn't cover a full 12 months, the second bullet does not apply. The exceptions from making estimated tax payments for some entities include: An estate of a domestic decedent or a domestic trust that had no tax liability for the preceding taxable year. A decedent's estate for any tax year ending before the date that is two years after the decedent's death. A trust that is treated as owned by the decedent if the trust will receive the residue of the decedent's estate under the will (or if no will is admitted to probate, the trust primarily responsible for paying debts, taxes, and expenses of administration) for any tax year ending before the date that is two years after the decedent's death. See the Disaster Assistance Information on SERP regarding the postponement of certain estimated tax payments due to various disasters and prior revisions of this IRM for more information on these postponements. The following due dates for estimated tax payments for calendar year filers include: April 15 June 15 September 15 January 15 (of the following year) Charitable trusts (Form 1041 with Fiduciary Code 9) and private foundations are subject to corporate estimated tax provisions under IRC 6655. Form 1041-ES, Estimated Income Tax for Estates and Trusts, payment vouchers are mailed along with quarterly estimated payments to: Internal Revenue Service P.O. Box 932400 Louisville, KY 40293-2400 21.7.4.4.1.8.1 (04-02-2020) Short Taxable Years (Form 1041) For a short taxable year in which a trust or estate subject to IRC 6654 terminates, installments of estimated tax must be paid for any installment due before the last day of the short taxable year. A final installment must be paid by the 15th day of the first month following the month in which the short taxable year ends. Per Notice 87-32, when a trust or estate makes payments with respect to a short taxable year, the percent of the required annual payment which is paid varies depending on the number of required installments. See IRM 20.1.3-1, Installment Due Dates for Individuals, Estates and Trusts Subject to IRC 6654, to determine the payment dates and the applicable percentage for short period returns. Schedule H, Household Employment Taxes, is subject to estimated tax payments. 21.7.4.4.1.8.2 (10-14-2009) Electronic Payment Options for e-file Users; Payment by Electronic Funds Withdrawal (Direct Debit) and Payment by Credit or Debit Card (Pay by Phone or Internet) Form 1041 and Form 1065 filers may pay their taxes via electronic funds withdrawal (Direct Debit), or by phone or internet using a credit or debit card. Taxpayers can make payments using an American Express Card, Discover Card, MasterCard or VISA Card. The IRS does not determine which credit cards the service providers accept. Taxpayers have the option to use either an IRS e-pay service provider or an integrated IRS e-file and e-pay service provider. The service providers offer these options to taxpayers who file on paper or electronically. The payment options are available 24 hours a day, 7 days a week. The service providers charge convenience fees for the services. See IRM 21.2.1.48, Electronic Payment Options for Individuals and e-file Users, for specific information on the Electronic Funds Withdrawal option, and for Credit or Debit Card Payments (Pay by Phone or Internet), for more specific information. 21.7.4.4.1.8.3 (10-01-2011) Form 1041-V, Payment Voucher Form 1041 filers have Form 1041-V, Payment Voucher, to remit payment. Form 1041-V allows the IRS to process payments more accurately and efficiently. Strongly encourage taxpayers to use Form 1041-V; however, there is no penalty if it is not used. 21.7.4.4.1.9 (10-01-2024) Electronic Filing of Form 1041 Returns MeF will accept the current year and two prior tax years. Taxpayers cannot use MeF to file returns for tax years earlier than the two prior years. When an electronically transmitted business return is rejected there is a 10-day Transmission Perfection Period to perfect that return for electronic re-transmission. The perfection period is 10 calendar days for any business return that is rejected. Note: For re-transmitted rejected returns, if the last day to file falls on a Saturday, Sunday or holiday, this is the due date of the return and not the next business day. Qualified fiduciaries or transmitters can file Form 1041 and related schedules electronically. For more information about becoming an e-file provider, visit the IRS.gov website Become an Authorized e-File Provider. To file Form 1041 electronically each software developer, transmitter, and large taxpayer wanting to participate in the MeF program MUST successfully pass the Assurance Testing System (ATS). The assurance testing system is a process that tests the tax preparation software and/or the electronic transmissions to ensure the participant's software and/or the electronic transmissions have the correct file specifications to file returns electronically. Testing for Form 1041 is generally available in ATS by the start of November each year. See Pub 5078, Modernized e-file (MeF) Test Package, and IRM 3.42.4.13, Assurance Testing System (ATS) Process, for more information on the testing process. MeF allows for Year-Round Filing – MeF allows for year round submission of returns. For more information about the MeF system status and possible delays, refer to the Modernized e-file (MeF) status page. Direct questions or problems related to the following issues to the e-help desk at 866-255-0654. For current year questions regarding MeF system problems, new transmitter development problems and new development of forms related to the MeF programs, send to the MeF mailbox at MeFmailbox@irs.gov: IRS e-file application ATS or communication testing Transmission issues Rejects Status of processing Strong authentication for A2A Technical questions on schemas or business rules Filers may also write to the IRS at the following address: Ogden Submission Processing Center Mail Stop 6052 1160 West 1200 South Ogden, UT 84201 The following publications designed to provide the general requirements and procedures for Form 1041 e-file Program, U.S. Income Tax Return for Estates and Trusts include: Pub 3112, IRS e-File Application and Participation Pub 4163, Modernized e-File (MeF) Information for Authorized e-File Providers for Business Returns, Tax Returns Processed in 2019 Pub 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters Pub 5078, Modernized e-File (MeF) Test Package, Business Submissions, Assurance Testing System (ATS) Taxpayers must supply their name control when filing electronically. See IRM 21.7.13.5.6, EIN Assignment: Estate, for information on the name control assigned to estates and IRM 21.7.13.5.8, EIN Assignment: Trust, for information on the name control assigned to trusts. Also, see Document 7071-A, BMF Name Control Job Aid, for additional information. Identification of electronic returns include a unique Document Locator Number (DLN) and the words "Electronic Return - Do Not Process" at the bottom of the return. The following file location code/tax class/document code for returns previously processed in Philadelphia include: 52/2/36 - Form 1041 98/2/36 - Form 1041 (Foreign Address) 66/2/36 - Form 1041 (PR) The following file location code/tax class/ document code for returns processed in Ogden include: 88/2/36 Ogden Submission Processing Center (MeF System) 93/2/36 Ogden Submission Processing Center (Legacy System) 92/2/36 Ogden Overflow Number Note: See IRM 3.42.4.9.2, Identifying e-file BMF Identification Codes, for more information on these codes. The IRS changed the Multiple Tax Return Listing process used to sign electronically filed Form 1041, U.S. Income Tax Return for Estates and Trusts. Beginning January 1, 2014, the IRS e-file Signature Authorization document, Form 8879-F, can only associate with a single 1041 return. Beginning TY 2014, taxpayers who filed their original Form 1041 electronically via MeF may file a TY 2014 amended return through MeF. Other taxpayers must complete an amended return on paper and file it at the campus where they would normally file a paper return. Use Corporate File On-Line (CFOL) command codes (CC) to research the account. Request the original return only when necessary. If it is necessary to secure the signature, use CC ESTAB and notate "Provide Form 8453" in the remarks section. Use Command Code TRPRT. See IRM 21.2.2.4.4.6, TRDB CC TRPRT (Tax Return Print) Input, for information on CC TRPRT. Section 17 of the Worker, Homeownership, and Business Assistance Act of 2009, P.L. 111-92, amends IRC 6011(e), effective for returns filed after December 31, 2010, by adding at the end new paragraph (3): "SPECIAL RULE FOR TAX RETURN PREPARERS." In general, under new paragraph (3)(A), the Secretary requires the use of magnetic media (electronic) filing for any individual income tax return (includes estates and trusts) prepared by a tax return preparer if; such return is filed by such tax return preparer, and such tax return preparer is a specified tax return preparer for the calendar year during which such return is filed. For purpose of IRC 6011(e)(3), the term specified tax return preparer means, with respect to any calendar year, any tax return preparer unless such preparer reasonably expects to file 10 or fewer individual income tax returns during such calendar year, IRC 6011(e)(3)(B). For purposes of IRC 6011(e)(3), the term individual income tax return means any return of the tax imposed by subtitle A of the Code on individuals, estates, or trusts, IRC 6011(e)(3)(C). 21.7.4.4.1.10 (10-01-2019) Form 1041 Claims and Requests for Adjustments Accounts Management processes various Form 1041 adjustment requests. Consider all prior adjustments to the account before making the requested adjustment. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 1041 claims and/or amended returns involving Ponzi Scheme issues (including language discussing removal of phantom or fraudulent income), may meet examination criteria. Route to Examination as CAT-A ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: See Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General, for more Cat-A information on paragraphs 2 or 3 above. Action required on tax adjustments: Input TC 290/291 for the applicable amount using blocking series 00 with the original return and 17 without the original return. Input Item Reference Number (IRN) 886 for the applicable amount if taxable income is also being adjusted. See IRM 21.7.4.4.4.12, Adjusting Tax and Item Reference Number (IRN) 886, for more information on IRN 886. Action required on credit adjustments: Input TC 290 $.00 using blocking series 00 with the original return and 17 without the original return. Input the correct Credit Reference Number (CRN) for the amount of the credit adjustment. The following Form 1041 CRNs include: Credit for federal tax paid on fuel (Form 4136). See IRM 21.7.4.4.9.1, Form 4136 Credit for Federal Tax Paid on Fuel, for more information. Substantiated payment credits - CRN 766 increases the credit; CRN 767 decreases the credit. Fuel from a Nonconventional Source Credit - CRN 883. Credit for Alcohol Used as Fuel (Form 6478) - CRN 884. Withholding tax - CRN 806 increases the credit; CRN 807 decreases the credit. Net Investment Income Taxes - See IRM 21.7.4.4.1.7.1, Form 8960, Net Investment Income Taxes - Individuals, Estates, and Trusts, for more information. 21.7.4.4.1.11 (10-01-2024) Social Security Domestic Employment Reform Act (SSDERA) and Business Master File (BMF) Schedules H As a result of the Social Security Domestic Employment Reform Act (SSDERA), taxpayers must file Schedule H (Form 1040), Household Employment Taxes, to report household wages and employment taxes paid to domestic household workers such as a gardener, nanny, cook or butler. SSDERA mandates Schedule H to be filed on a calendar year basis. Therefore, FY filers must attach a Schedule H for a calendar year. Example: ABC Trust has a FY of 06. When the trust filed Form 1041 for the period ending 202106, Schedule H should cover the period January 1, 2020 - December 31, 2020. For 202206, the Schedule H should contain information covering the period January 1, 2021 - December 31, 2021. Individuals that hire a domestic employee (as defined in Pub 926), such as a gardener or a nanny, must file Schedule H. See IRM 21.6.4.4.8, Schedule H, Household Employment Taxes, for more information on individuals reporting employment taxes. The information contained in the following subsections of this section pertain to Schedules H processed on MFT 05. Besides trusts (a trust can be a domestic employer) with domestic employees, certain tax-exempt entities not required to file income tax returns may have domestic employees. These groups can file loose Schedules H rather than filing an income tax return and attaching Schedule H or including these domestic employees on their Form 941. Processing information is found later in IRM 21.7.4.4.1.11.2.1, Loose Schedule H (BMF). Example: A tax-exempt group home which hires domestic employees to clean the group home (where the employer is the group home and not an individual resident of the home) can file a loose Schedule H. Example: A church (tax-exempt) which pays a housekeeper to clean the minister's home can file a loose Schedule H. For information on related subjects, see the subsections shown below: For information on filing requirements and procedures for other entities such as partnerships, corporations, and state and local government health and welfare agencies, see IRM 21.7.2.4.9.1, Forms Used in Reporting Employment Taxes for Household Employees. For information on individuals with domestic employees, see IRM 21.6.4.4.8, Schedule H, Household Employment Taxes. For information on Federal Unemployment Tax Act (FUTA) taxes reported on the incorrect form or multiple forms, see IRM 21.7.3.4.14, Schedule H FUTA Erroneously Reported. For information when both Form 940 and Form 941 have been filed erroneously (instead of Schedule H), see IRM 21.6.4.4.8.12, BMF Form 941, Employer's Quarterly Federal Tax Return, Filed Instead of IMF Schedule H, Household Employment Taxes. It is strongly recommended that only a small group of employees work cases involving BMF Schedules H. 21.7.4.4.1.11.1 (10-01-2024) Provisions of Social Security Domestic Employment Reform Act (SSDERA), General Information Even though Social Security Domestic Employment Reform Act (SSDERA) is considered employment taxes, SSDERA mandates the collection of domestic service employment taxes be coordinated with the collection of income taxes. Domestic employees under the age of 18 are excluded from coverage if domestic service is not the principal occupation of the employee, see IRC 3121(b)(21). Student is considered an occupation. This provision is effective regardless of the amount of wages paid to the employee under 18. Wages less than the applicable dollar threshold are not subject to social security or Medicare taxes. This threshold is updated yearly. See the chart below for the applicable thresholds. Year Wages Paid Threshold Tax Period(s) 2012 - 2013 $1,800 201212 - 201411 2014 - 2015 $1,900 201412 - 201611 2016 - 2017 $2,000 201612 - 201811 2018 - 2019 $2,100 201812 - 202011 2019 - 2020 $2,200 201912 - 202111 2020 - 2021 $2,300 202012 - 202211 2021 - 2022 $2,400 202212 - 202311 2022 - 2023 $2,600 202312 - 202411 2023-2024 $2,700 202412 - 202511 Taxpayers are subject to FUTA tax if they paid total cash wages of $1,000 or more to household employees in any calendar quarter of the tax year or the prior tax year. The first $7,000 of cash wages paid to each household employee is "FUTA wages." The law contains no provision for employees in (2) or (3) above to opt to make payments in order to obtain social security or Medicare coverage. A trust or an individual that is required to pay household employment taxes using Schedule H must include household employment taxes in figuring their estimated tax payments, if either of the situations below apply: If it has federal income tax withheld from any income. If it is required to make estimated tax payments (to avoid a penalty) even if it did not include household employment taxes when figuring its estimated tax. 21.7.4.4.1.11.1.1 (10-01-2024) Social Security Domestic Employment Reform Act (SSDERA) Interest-free Provisions Employers who discover (ascertain) they have reported and paid less FICA tax or income tax withholding tax (FITW) than is due on an original Form 1041 tax return, may qualify for an interest-free tax adjustment under IRC 6205 and Regulation 26 CFR 31.6205-1 provisions. Schedule H adjustments carry the same interest-free provisions as employment tax returns. See the provisions detailed in IRM 21.7.2.4.4.2, Interest Free Adjustments (Employment Tax Returns). To qualify for an interest-free tax adjustment, the employer must file the proper forms reporting the correction by the due date of the tax return for the tax period in which the error is ascertained. A Form 1041 taxpayer has until the due date of the Form 1041 to which the Schedule H relates, to file an amended return. Example: If the taxpayer’s fiscal year month (FYM) is 12, and the error is found and reported on October 13th, the ascertained date is April 15 of the following year. Therefore, the last day to file an adjusted return is April 15. If the taxpayer’s FYM is 04, and the error is found and reported on October 13th, the ascertained date is August 15 of the following year. Therefore, the last day to file an adjusted return carrying this date is August 15. Employment tax regulations effective January 1, 2009, require payment of employment tax increases (including Schedule H) for income tax withheld, and social security and Medicare taxes made on or before the date the amended return/Schedule H is filed. (FUTA taxes are not affected.) As with Form 940 unemployment tax, the FUTA portion (Part II) of Schedule H does not carry an interest-free provision. As a result, when adjusting Schedule H taxes, it is sometimes necessary to use both TC 298 (for interest-free income tax and FICA adjustments, Part I, Schedule H) and TC 290 (FUTA portion, Part II, Schedule H). If the return is filed timely and payment is made in the time subscribed; when inputting a TC 298, the interest computation date is the IRS received date of the corrected return ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM 21.7.2.4.4.2, Interest Free Adjustments (Employment Tax Returns), for more information. 21.7.4.4.1.11.2 (10-01-2013) Business Master File (BMF) Schedule H Processing All BMF Schedules H are processed on MFT 05 as an attachment to Form 1041. All transactions codes (TCs) and reference codes applicable to Form 940 (MFT 10) are valid on MFT 05, except for TC 186. In addition, use IRNs showing as valid on Form 94X on Schedule H adjustments. However, see paragraph (2) below. Use these transaction codes and reference codes when adjusting Schedules H on MFT 05. Note: See the October 1, 2007 and prior editions of this IRM for information on BMF Schedule H processed prior to 1998. Do Not use TC 766 when adjusting Advanced Earned Income Tax Credit (AEITC) on Schedule H. This would cause confusion with the 766 applicable to substantiated payment credits on Form 1041. When adjusting AEITC, simply include the increase/decrease as part of the TC 29X. No reference code is needed. On August 10, 2010, Public Law 111-226, Education Jobs and Medicaid Assistance Act of 2010, was enacted. Section 219 of the Act repealed the AEITC for tax years beginning after December 31, 2010. Therefore, AEITC is not valid for tax periods ending after 201111. Section 9015, Additional Hospital Insurance Tax on High-Income Taxpayers, of the Patient Protection and Affordable Care Act, added section 3101(b)(2) and section 3102(f) to the Internal Revenue Code. Section 3101(b)(2) increases the employee portion of Medicare (Hospital Insurance) tax for tax years beginning after December 31, 2012, by an additional .09 percent of wages, as defined in section 3121(a). The additional Medicare tax is not imposed until wages exceed the statutory threshold amounts below: $250,000 for a married couple filing a joint return, $125,000 for married couples filing separate returns, and $200,000 for single individuals. Note: The threshold amounts are not indexed for inflation. The Patient Protection and Affordable Care Act also increased the Medicare tax on self-employment income for any tax year beginning after December 31, 2012, by an additional 0.9 percent of self-employment income which is in excess of certain threshold amounts listed above. See various subsections of IRM 21.7.2, Employment and Railroad Tax Returns, for additional information. When inputting an adjustment, the reference codes used do not have to equal the amount of the TC 29X. This check was not put in place because regular Form 1041 tax may also need adjusting. In this instance, it is not possible to match the reference code amounts to the TC 29X. Note: This does not eliminate the procedures to input the proper reference codes with the Schedule H portion of the adjustment. 21.7.4.4.1.11.2.1 (01-01-2005) Loose Schedules H (BMF) Receipt and Control (R&C) may receive loose Schedules H with "trust" or "estate" in the name line, or from taxpayers not required to file an income tax return (for example, group homes). R&C: Posts any payment to MFT 05 Forwards the loose Schedule H to Code and Edit (C&E) for preparation of a dummy Form 1041 Follow the same procedures for making adjustments to BMF Schedule H returns in IRM 21.7.4.4.1.11.2.3, Adjustments (Amended Returns, TRNS 193s, etc.) Involving Form 1041 With Schedule H, below. 21.7.4.4.1.11.2.2 (01-01-2006) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.1.11.2.3 (10-24-2012) Adjustments (Amended Returns, TRNS 193s, etc.) Involving Form 1041 With Schedule H The procedures for adjusting Schedules H depend on several factors, such as: Whether the adjustment is an increase or decrease The period on which the previous assessment was input The MFT(s) on which the previous assessment was input Use procedures in IRM 21.7.4.4.1.11.2.4 and IRM 21.7.4.4.1.11.2.5 below to make the adjustments involving Form 1041 with Schedule H. When a state receives a loan (advance) from the Federal Unemployment Account in order to pay unemployment benefits, and does not repay the loan on time, the credit allowable against the tax is reduced. Refer to these states as credit reduction states. Employers that pay their state unemployment tax timely and in full receive a 5.4 percent credit against their Federal tax. However, the credit is reduced when a state has taken loans from the federal government to meet its state unemployment benefits liabilities and has not repaid these loans within the allowable time frame. The U.S. Department of Labor declares the credit reduction states. See IRM 21.7.3.4.10, Credit Reduction States, for more information on credit reduction states and for a listing of the states declared as credit reduction states. Do not make adjustments to BMF Schedule H accounts due to telephone calls from taxpayers, other than abating duplicate assessments. If the taxpayer reported the incorrect amount of tax, advise them to file an amended return. However, if the taxpayer reported employment taxes on Form 94X and/or FUTA tax on Form 940, and reported the same amounts on Form 1041, remove the tax from the incorrect form (Form 940 and/or Form 94X) and ensure payment is on the correct account. Delete the Form 94X and/or Form 940 filing requirements if necessary. 21.7.4.4.1.11.2.4 (06-04-2018) Net Decrease, Original Assessment on Form 1041 (MFT 05) and Form 940 (MFT 10) Use the chart below when the adjustment is a net decrease and the original assessment of the Schedule H amount is made on MFT 05 or MFT 10. If And Then The adjustment is a net decrease to Form 1041 The original assessment of the Schedule H amount was made on Form 1041 Input TC 291 using appropriate reference codes. If taxpayer is also adjusting "normal" Form 1041 liability, input TC 291 for the net amount with blocking series 00 or 17. The adjustment is a net decrease to Form 940 The original assessment is on Form 940, Schedule H Adjustment only On MFT 10 Module(s): Input TC 291 in blocking series 40 with appropriate reference codes use ADD24/ADC24 to transfer the credit to MFT 05 using TC 570 on the credit side. On the MFT 05 module: Input TC 290 $.00 with posting delay code of 1 and blocking series 00 or 17 The adjustment is a net decrease to both Form 1041 and 940 The original assessment is on the Form 940 On MFT 10 Module(s): Input TC 291 in blocking series 40 with appropriate reference codes use ADD24/ADC24 to transfer the credit to MFT 05 using TC 570 on the credit side. On the MFT 05 module: Input TC 291 for the Form 1041 portion only with blocking series 00 or 17. Use HC 3 and Posting delay code of 1 The Schedule H is an increase and Form 1041 portion is a decrease The original assessment is on the Form 940 On MFT 10 Module(s), no adjustment is necessary On the MFT 05 module: Input TC 291 for the net adjustment amount with blocking series 00 or 17 Use the appropriate reference codes for the Schedule H amount and the Form 1041 portion The Schedule H is a decrease and Form 1041 is an increase The original assessment is on the Form 940 On MFT 10 Module(s): Input TC 291 in blocking series 40 with appropriate reference codes use ADD24/ADC24 to transfer the credit to MFT 05 using TC 570 on the credit side. On the MFT 05 module: Input TC 290 for the Form 1041 portion only with blocking series 00 or 17. 21.7.4.4.1.11.2.5 (06-07-2018) Net Increase, Original Assessment on Form 1041 (MFT 05) and Form 940 (MFT 10) Use the chart below when the adjustment is a net increase and the original assessment of the Schedule H amount is made on MFT 05 or MFT 10. If And Then Both Form 1041 and Schedule H require increases The original assessment is on either the 1041 or Schedule H If both the Form 1041 and schedule H reflect an increase, input the adjustment on MFT 05. On the MFT 05 module: Input TC 290 for the Schedule H Part II and Form 1041 portion with blocking series 00 or 17 The Form 940 is a decrease and the Form 1041 portion is an increase The original assessment is on the Form 940 On the MFT 10 module(s): Input TC 291 in blocking series 40 with the appropriate reference codes. Use ADD24/ADC24 to transfer the credit to MFT 05 using TC 570 on the credit side. On the MFT 05 module: Input TC 290 for the entire net increase (including the decrease(s) on MFTS 04 and 10) with blocking series 00 or 17. Use HC 3 and posting delay code of 1 The Form 940 is an increase and the Form 1041 is a decrease The original assessment is on the Form 940 On the MFT 10 module(s), no adjustment is necessary On the MFT 05 module Input 29X with all appropriate reference codes with blocking series 00 or 17. Use the alpha list below: The Schedule H, Part I increase is equal to or greater than the entire net increase Input TC 298 The Schedule H, Part I increase is less than the entire net increase Input TC 298 for the Schedule H, Part I amount. Input TC 290 for the increase. See the Example below. Example: Form 1041 portion, $175 decrease Schedule H, Part II, $200 increase Schedule H, Part I $50 increase Total: $75 increase - Input TC 298 for $50 and TC 290 for $25 The increase is on the Form 1041 The original assessment is on Form 1041 Input TC 290/298 for the increase using the table and examples below. (The table assumes there is a valid ascertained date) with blocking series 00 or 17. Use the appropriate reference codes for both the Form 1041 portion and the Schedule H portion. If the net FUTA portion (Part II) of the Schedule H and the Form 1041 portion is zero or an increase Input TC 298 for total net adjustment of the entire Schedule H and Form 1041. See Example 1 below. If the net of Part II, Sch H and the Form 1041 portion is an increase greater than the decrease on Part I, Sch H. Input TC 290 for the total net adjustment of the entire Sch H and Form 1041. See Example 2 below. If the net of Part II, Sch H and the Form 1041 portion is an increase and Part I Sch H is also an increase. Input TC 290 for the net of Part II Schedule H and the Form 1041 portion Input TC 298 for the Part I, Sch H portion. See Example 3 below. Example: 1 Form 1041 Portion, $100 decrease Schedule H, Part II, $60 increase Schedule H, Part I, $50 increase Total: $10 increase-Input TC 298 for $10 Example: 2 Form 1041 Portion, $150 increase Schedule H, Part II, $50 decrease Schedule H, Part I, $70 decrease Total: $30 increase-Input TC 290 for $30 Example: 3 Form 1041 Portion, $100 increase Schedule H, Part II, $40 decrease Schedule H, Part I, $30 increase Total: $90 increase-Input TC 290 for $60 and TC 298 for $30 21.7.4.4.1.12 (10-01-2021) Form 1041-T, Allocation of Estimated Tax Payments to Beneficiaries Form 1041-T is used by a trust or, for it’s final tax year, a decedent’s estate may elect under Section 643(g) to have any part of its estimated tax payments (but not income tax withheld) treated as made by a beneficiary or beneficiaries. If a trust files a valid Form 1041-T by the 65th day after the close of the tax year, the beneficiary who is allocated a payment is treated as receiving a distribution on the last day of the taxable year of the estate or trust. The distribution is included in the distributable net income (DNI) from the trust or estate for that tax year. If a beneficiary and the estate or trust has different tax years, the DNI from a fiscal year or a short year ending with or within the beneficiary’s tax year is included in income for that tax year. Treas. Reg. section 1.662(c)–1. The beneficiary is considered to make a payment of estimated tax on January 15 following the last day of the taxable year. Form 1041-T is a stand-alone form (even if filed with a Form 1041) that is filed by the due date for the Form 1041-T. See IRM 21.7.4.4.1.12.1(1), for applicable Form 1041-T due dates. There are no provisions of law for transferring the credit for Federal Income Tax Withheld (FITW) on a Form 1041 Trusts and Estates account to an individual taxpayer's (beneficiaries) Form 1040 account. Section 643(g) allows the allocation of estimated tax payments on Form 1041-T and IRC 643(d) allows for the allocation of back-up withholding but not for transferring FITW. See the Instructions for Form 1041, line 24e and IRM 21.6.3.4.2.2, Withholding (W/H) Tax Credit, for more information. Note: The owner of a grantor trust treats the income, deductions, credits (including Federal Income Tax Withheld) etc., as belonging directly to the grantor and are reported on the individual’s personal income tax withheld. This also applies to any portion of a trust that is treated as a grantor trust. Correspondex Letter 2305C, Estimated Tax Credits to Beneficiary - Form 1041-T was revised to respond to inquiries received on Form 1041-T. However, you may use another "C" letter if necessary. 21.7.4.4.1.12.1 (10-01-2024) Form 1041-T Filing Dates For a valid election, a trust or decedent’s estate must file Form 1041-T by the 65th day after the close of the tax year as shown at the top of the form. For a calendar year trust or estate, that date is March 6, or March 5 if it is a leap year. However, if the due date falls on a Saturday or Sunday, or is a legal holiday, then the due date is the next business day. See the due dates in the table below. Calendar Year Due Date 2019 March 5, 2020 2020 March 8, 2021 (March 6 was a Saturday) 2021 March 7, 2022 (March 6 was a Sunday) 2022 March 6, 2023 2023 March 5, 2024 (2024 is a leap year) 2024 March 6, 2025 If the return is the final return of an estate or trust, the election is filed by the 65th day after the close of the trust’s or estate’s tax year. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.1.12.2 (10-01-2022) Transferring Credits/Payments (Form 1041-T) Since the estimated tax payments are claimed as ES credits by the beneficiaries (BMF and IMF), the credits must be transferred on an expedited basis. The Form 1041-T may be filed without the Form 1041 and so a TC 150 does not have to post before transferring these credits. In addition, a TC 150 does not have to post to the beneficiaries account before transferring to the individuals IMF account. Once the election is made and the credits transferred to the beneficiaries, it cannot be revoked. Treas. Reg. section 301.9100–8(a)(4)(i). Form 1041-T is considered correspondence and must meet "Policy Statement P-21-3" time frames. Follow the instructions below when making credit transfers. Use CFOL command codes to research the accounts of all the beneficiaries listed on Form 1041-T. Use CC INOLE with definer "T" or "S" and determine if the beneficiary is the primary taxpayer. Only transfer credit to the primary taxpayer’s SSN. Transfer credit to the income tax return for individuals and businesses. If an account is not present on master-file, input TC 000 to establish the account. See IRM 3.13.5.117, Establishing a New Account (TC 000), for guidance on establishing an account. Verify the total amount of estimated taxes shown as being allocated to the beneficiaries on lines 1 and 4 (these two amounts must be equal) on Form 1041-T, is posted to the Form 1041 account. If the amount is not posted, research IDRS for any missing payments. If unable to locate, adjust the allocation for each beneficiary by the percentage shown on Form 1041–T. When additional information is needed to complete the credit transfers, make two attempts by phone to obtain the needed information. Advise the trust or estate of any action taken which changes the information originally submitted. Handle Trusts that file a calendar year return and a Form 1041-T in the following manner. Input CC ADD/ADC24 (when transferring between master file (e.g., BMF and IMF) or when transferring with a TC 820) to transfer the estimated tax payments for the calendar year (including any credit elect applied from the tax prior year and) with the last installment of estimated tax being due on January 15 of the following year. For example, a trust filing a Form 1041-T for the tax period 201612 and allocating to individual taxpayers: Transfer the credits received by January 15 using the January 15 date of the year following the tax period ending date of the trust (including TC 716 credit elects) by debiting the MFT 05/201612 account with a TC 820 for the amount being transferred to an individual beneficiaries’ account with a date of 01/15/2017. Credit each individual beneficiaries’ MFT 30/201612 account with a TC 700 for the amount being transferred and a date of 01/15/2017 and a designated payment code of "00" on the credit side of the credit transfer. Insert a "1" in the Bypass Indicator Field on the credit side to bypass the unpostable check or input TC 570 as appropriate. Transfer ES payments posted after 01/15/2017 using the payment date with TC 820 and TC 660. While posting of the TC 150 is not needed, the transferred credit cannot exceed the sum of the posted TC 66X and 71X credits. See UPC 325, RC 2. Input TC 672 to reverse payments posted with a TC 670. Send the necessary closing letter to the trust of the credits transferred. Trusts must file on a calendar basis except for trusts exempt under IRC 501(a) or trusts described in IRC 4947. See IRC 644 for more information. If a trust files a short period final return, allocate the estimated tax payments made on Form 1041 among the beneficiaries as if the taxpayer filed a full 12-month Form 1041 return. For example, a trust filing a Form 1041-T for the tax period 201608: In this case the payments and any credit elect is likely on the 05/201612 module. Input CC ADD/ADC24 when transferring between master files (e.g., BMF and IMF or when transferring with a TC 820): Transfer the credits that are received by January 15 using the January 15 date of the year following the tax period ending date of the trust (including TC 716 credit elects) by debiting the MFT 05/201612 account with a TC 820 for the amount being transfer to an individual beneficiaries’ account with a date of 01/15/2017. Credit each individual beneficiaries’ MFT 30/201612 account with a TC 700 for the amount being transferred and the same 01/15/2017 date. Send the proper closing letter to the trust of the credits transferred. An estate may file on a fiscal year basis. No matter what month the estate’s final tax year ends in, credit payments to the beneficiary account using January 15 of the year following the end of that tax year. Therefore, any estate with a tax period ending in 2018 (201801 - 201812) is credited to the MFT 30/201812 account with a 01/15/2019 date. See the examples in the following 2 paragraphs. Example A: An estate with a tax year ending on January 31, 2018, files a Form 1041-T on April 5, 2018. Transfer the estimated tax credits to an individual beneficiary’s Form 1040 for 201812 effective January 15, 2019 which is the January 15th following the January 31 year end. Note that for the fiscal year estate, the ES payments are due on the 15th day of May 2018, July 2018 and October 2018 and February 2019. See IRC 6654(k)(1). Input CC ADD/ADC24 and: Transfer the credits through the 4th installment by debiting the MFT 05/201801 account with TC 820 for the amount being transfer to an individual beneficiaries’ accounts with a 01/15/2019 date. Credit each individual beneficiaries’ MFT 30/201812 account with TC 700 for the amount being transferred using the same 01/15/2019 date. Input an override indicator of “2” on both sides of the credit transfer. Send the proper closing letter to the trust of the credits transferred. Example B: An estate with a tax year ending on October 31, 2018, files Form 1041-T on January 4, 2019. For an estate with a fiscal year ending in October, the ES payments are due on the 15th day of February 2018, April 15, 2018, July 15, 2018, and November 15, 2018. Input CC ADD/ADC24 and: Transfer the credits through the 4th installment by debiting the MFT 05/201810 account with TC 820 for the amount being transfer to an individual beneficiaries’ account with a 01/15/2019 date. Credit each individual beneficiaries’ MFT 30/201812 account with TC 700 for the amount being transferred using the same 01/15/2019 date. Input a designated payment code of "00" on the credit side of the credit transfer. Input an override indicator of “2” on both sides of the credit transfer. Send the proper closing letter to the trust of the credits transferred. If the return is received late ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Suspend the case and send Letter 2305C explaining the reason for the rejection and request information for the disposition of the credit on the trust’s account. The overpayment is applied to the trust or estate’s account and may be refunded or applied as a credit elect to the trust’s account for the next year. If no reply is received, refund the money and send Letter 2305C. To refund the credit and release the -P freeze, input an ADD24 credit transfer with a TC 820 debit and TC 700 credit to the same tax period using the due date of the return. This releases the freeze and allows the credit to refund. EXCEPTION: If the Form 1041 has not posted after the normal processing timeframe, send Letter 2305C explaining the reason for the rejection request and advise the taxpayer to file Form 1041 requesting a refund or credit elect. Close the case. The CII image is the source document on Form 1041-T cases and remains on CII for further recall if needed. If the TC 150 has posted to master file, the CII case is part of the electronic file. If TC 150 has not posted to master file and you are working a paper Form 1041-T case (non-CII), input TC 930 to have Form 1041-T attached to Form 1041 after action is completed. 21.7.4.4.1.12.3 (10-01-2022) CP 208 Notice, Potential Credit Transfer Action Form 1041 When Form 1041 posts with credit shown on the election line and the credit is not transferred, a -P freeze generates. The freeze is released when the module balance becomes zero or debit status. If the freeze is not released within 6 cycles after the return has posted, a CP 208 Notice, Potential Credit Transfer Action Form 1041 generates. Action required: If Then Form 1041-T is located (filed on or before the 65th day after the close of the taxable year) Follow procedures in IRM 21.7.4.4.1.12.2. Credit cannot be transferred due to Form 1041-T not being timely filed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 1. Correspond with or phone the trustee to explain the credit balance and why the credit cannot be applied to the beneficiaries’ accounts. 2. Request information for disposition of the credit. 3. Suspend the case for 40 days awaiting the taxpayer’s response. 4. Upon receipt of the taxpayer’s response, take the necessary action to resolve the -P freeze. Follow the procedures in IRM 21.7.4.4.1.12.2(12). Exception: If the Form 1041 has not posted after the normal processing timeframe, send a Letter 2305C explaining the reason for the rejection request and advise the taxpayer to file Form 1041 requesting a refund or credit elect. Close the case. 21.7.4.4.1.12.4 (01-01-2005) Balance Due Notices on IMF Accounts In situations where Form 1041-T is not processed because of late filing, the beneficiary may receive a balance due notice from the IMF account. The Accounts Management employees (IMF and BMF) may need to coordinate resolution of the case when there is an indication the credits were to come from the trust’s account. Action required: Determine the status of Form 1041-T by researching the trust’s account. (Form 1040, Schedule E, can provide the trust’s Employer Identification Number (EIN). If Form 1041-T is located and credit is available for transfer, follow procedures in IRM 21.7.4.4.1.12.2. If there is no record of Form 1041-T being filed, or if Form 1041-T was filed and later rejected, send a letter to the beneficiary explaining the balance due is correct and they should contact the trust to resolve the balance due on the IMF account. 21.7.4.4.1.13 (10-01-2024) Victims of Terrorism Tax Relief Act of 2001 - Tax Forgiveness The Victims of Terrorism Tax Relief Act of 2001 (the Act) was enacted on January 23, 2002. The Act amends IRC 692, by adding IRC 692(d) which provides that the IRS will forgive the federal income tax liability of those killed in the following attacks for certain tax years: The April 19, 1995, attack on the Alfred P. Murrah Federal Building (Oklahoma City attack). The September 11, 2001, attacks on the World Trade Center, the Pentagon, and United Airlines Flight 93 in Somerset County, Pennsylvania (September 11, attacks). Terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002, (anthrax attacks). The Military Family Tax Relief Act of 2003, amended IRC 692(d) to include families of astronauts whose death occurs in the line of duty after December 31, 2002. This includes the Space Shuttle Columbia heroes. IRC 692(d) also allows that the minimum amount of relief for victims of the specified attacks is $10,000. The $10,000 minimum forgiveness applies to the original or amended Form 1040, U. S. Individual Income Tax Return, and Form 1041, U. S. Income Tax Return for Estates and Trusts. See the October 1, 2002, through October 1, 2007, revisions of this IRM for more information on the Victims of Terrorism Tax Relief Act of 2001 - Tax Forgiveness. Refer all claims and inquiries referring to Victims of Terrorist Attacks and the 9/11 Attack to the KITA/KIA team in Kansas City. These claims are expeditiously processed in the Kansas City KITA team. If received at any other campus, reassign the claim to the KITA team using IDRS 0933578782, and category code "KITA". 21.7.4.4.1.14 (01-01-2005) Pooled Income Trusts Government National Mortgage Association (GNMA) Government National Mortgage Association (GNMA) Trusts are assigned a pool number which becomes the name of the trust with the first four digits of the pool number being the name control on the account. The fiduciary name is the owner of the GNMA Trust. When an EIN is assigned to a GNMA Trust pool number, it must remain with the pool number even when purchased by another fiduciary. ENMOD shows the pool number assigned to the GNMA Trust at the beginning of the first name line. Therefore, when a GNMA Trust account is sold, the EIN and pool number remain the same and only the fiduciary name changes. GNMA Trust Pool Returns are Non-Taxable Grantor Trust returns which should contain no taxable income. When a GNMA Trust is sold and bought during the year, each fiduciary files a short period return, which results in a Duplicate Filing Condition (DUPF). Determine which fiduciary is selling and which one is purchasing to perfect the fiduciaries name and address on ENMOD to the purchasing fiduciary. It is not necessary to process the short period return to the current period. Adjust the account accordingly. The seller should show in box F and G; the pool number, that it is a final return, and the date of sale. The buyer should show in box F and G; the pool number, that it is an initial return, and the date of purchase. If you cannot determine which fiduciary is selling and which one is buying from the available information, try to contact the taxpayer. If unable to secure the information, DO NOT change the care of/sort name line and the address currently on ENMOD. If you receive a DUPF in which the pool number does not match the EIN: Search CC NAMEE for the correct EIN. If unable to secure the correct EIN, contact the Fiduciary for the correct number. If unable to obtain the correct EIN from the Fiduciary, send to Entity to assign a new number. Wait for the new EIN to post. Reprocess the return to the new EIN after the new number posts. Entity will send a notice to the taxpayer with the new EIN information. See IRM 21.7.9, Duplicate Filing Conditions, for more information on processing DUPFs. 21.7.4.4.1.15 (11-20-2023) Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, Received in Conjunction with Form 1041 If an estate or trust is the recipient of a portion of an early distribution, or if the trust or estate does not receive at least the minimum required distribution (excess accumulations) from their Individual Retirement Arrangement (IRA), they may be required to file Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts. Estates and trusts not otherwise required to file Form 1041, may file Form 5329 by itself. If the trust or estate does not receive at least the minimum required distribution, a 50 percent excise tax (penalty) is assessed on the excess accumulations. Part IX, Additional Tax on Excess Accumulation in Qualified Retirement Plans (Including IRAs), is completed when the taxpayer did not receive the minimum required distribution from their qualified retirement plan. The amount posts to master file as part of the TC 150. If you receive a loose Form 5329 from a trust or estate reporting an addition to tax, and if: A TC 150 is not on the module, prepare a "dummy" Form 1041 for processing. Complete the entity section and write-in the amount of the addition to tax, on page 2, Schedule G, line 9. Write "Form 5329" to the left of the entry. Carry this amount from line 9 to line 24, total tax, on page 1 of Form 1041. A TC 150 is on the module and the TC 150 amount is different than that reported on Form 5329 assess the additional tax with a TC 290 for the amount shown on Form 5329, allow CP 210/CP 220 to generate to the taxpayer. A TC 150 is on the module and the amount reported on Form 5329 is the same amount as the TC 150, and is a Correspondence Imaging Inventory (CII) case, input 290 $.00 and leave history item, "F5329N/C." If not a CII case, associate the form with the TC 150 following local procedures. The excise tax in Part IX can be waived if the taxpayer establishes the excess accumulation is due to a reasonable error and that steps were taken to correct the situation. If you receive a request for abatement on an account with TC 150 and you determine abatement of the 50 percent excise tax (penalty), abate with TC 291 and allow CP 210/220 Notice to generate to taxpayer. If you receive a loose Form 5329 with no TC 150 and a request for abatement of the 50 percent tax in Part IX, you must prepare a dummy return as directed in paragraph (3) above. If you determine abatement of the 50 percent tax is necessary, enter $.00 on page 2, Schedule G, line 9. Write "Form 5329" to the left of the entry. Carry this amount from line 9 to line 24, total tax, on page 1 of Form 1041. Send the taxpayer Letter 1803C, IRA/Keogh Inquiry, and advise them that we have waived the 50 percent additional tax. If you receive a loose Form 5329 with a TC 150 on the account and a request for abatement of the 50 percent tax in Part IX, and you determine not to assess the 50 percent tax, close with a TC 290 for $.00 and send the taxpayer Letter 1803C, IRA/Keogh Inquiry, and advise them that we have waived the 50 percent additional tax. If you decide to assess the additional tax, input with a TC 290 for the amount shown on Form 5329 and allow CP 210/220 to generate to the taxpayer. Only the additional tax reported in Part IX on Excess Accumulations is waived. If a taxpayer requests abatement of the 6 percent, 10 percent or 15 percent addition to tax in Parts I through Parts VIII, check the Instructions for Form 5329 for exceptions to when the additional tax does not apply. If no exception applies, send Letter 916C, Claim Incomplete for Processing; No Consideration, and advise the taxpayer that there are no provisions to waive the additional tax. 21.7.4.4.1.16 (10-01-2023) United States Department of Agriculture (USDA) Discrimination Settlement Payments The United States Department of Agriculture (USDA) paid cash settlements and granted loan cancellations to various groups of farmers pursuant to settlements approved throughout the years. The settlements resulted from discrimination suits brought against the USDA by the farmers. Taxpayers may use terms other than "USDA" when communicating about these claims. Some frequently used terms include: Pigford Pigford II Black Farmers Lawsuit/Settlement Cases Keepseagle/Native Americans Hispanic and Women Farmers and Ranchers The settlement amounts fell into three categories: $50,000 cash payment Forgiveness of the principal and interest on certain debts (amounts varied by claimant) A payment toward tax equal to 25 percent of the total of the $50,000 payment and the forgiveness of the debt principal (but not the interest) Most taxpayers received these payments over a period of two years, the cash payment and the debt forgiveness occurred in one year, and the tax payment is remitted to IRS in the following year. The cash payment and the tax payment (the 25 percent amount) are taxable income. The forgiveness of debt is generally taxable income excludable under certain circumstances. The payment of tax (25 percent payment): Is claimed as an estimated tax payment for the tax year the settlement/debt forgiveness is received. Is made directly to IRS by the USDA on behalf of the taxpayer and since the taxpayers did not make this payment, they may forget to claim the credit on their return. Is identified by the unique Document Locator Number (DLN) of 52217 or 43217 (013/014) 9XX. Will show a J – Freeze on the module if the farmer does not claim the estimated tax payment. See IRM 21.5.6.4.19, J- Freeze. Is reported as taxable income for the year the payment is applied to the taxpayer's account. Keepseagle and Pigford II settlements and Hispanic and Women Farmers and Ranchers settlements are divided into two categories: Track A - claimants received an award of up to $50,000 plus an additional 25 percent in federal income tax withholding (for a total of up to $62,500). Track B - claimants received up to $250,000 with no income tax withheld. Track A and Track B - claimants may have also received debt forgiveness. Both Track A and Track B claimants were issued a Form 1099-MISC, Miscellaneous Income, along with an instructional notice prepared by a third-party (not the IRS) advising the farmer how to correctly report the settlement. Farmers who had debt forgiveness received a Form 1099–C, Cancellation of Debt. If the recipient of this settlement is deceased, the executor of the estate must file a Form 1041. The recipient will receive a Form 1099 filed under the Employer Identification Number (EIN) of a trust or estate, or the Social Security Number (SSN) of the decedent. If the estate or trust received a Form 1099 showing federal income tax withheld, it will check the box and include the amount withheld on income retained by the estate or trust in the total for line 24e. Route U.S. Discrimination cases involving Form 1041 taxpayers or deceased taxpayers to the Kansas City campus. Complete Form 4442, Inquiry Referral, and e-fax to Kansas City AM, P & A, Bryan Becker, at 816-499-5161. Include a day and evening phone number for the taxpayer. See IRM 21.6.4.4.9.3, U.S. Discrimination Settlement Payments, for more information. 21.7.4.4.1.17 (03-11-2024) Wrongful Incarceration Exclusion Under Section 139F a wrongfully incarcerated individual excludes from gross income any civil damages, restitution, or other monetary award (including compensatory or statutory damages and restitution imposed in a criminal matter) relating to their incarceration for the covered offense for which they are convicted. A covered offense is any criminal offense under federal or state law, including any criminal offense arising from the same course of conduct as that criminal offense. This exclusion applies whether or not the wrongfully incarcerated individual suffered a personal physical injury or physical sickness. A wrongfully convicted individual is an individual who is convicted of a covered offense, served part or all of a sentence of imprisonment relating to the covered offense and meets any one of the following requirements: The individual is pardoned, granted clemency, or granted amnesty for that covered offense because the individual is innocent of that covered offense; or The judgment of conviction for the individual for that covered offense is reversed or vacated and the indictment, information, or other accusatory instrument for that covered offense is dismissed; or The judgment of conviction for the individual for that covered offense is reversed or vacated and the individual is found not guilty at a new trial after the judgment of conviction for that covered offense is reversed or vacated. Section 139F applies to taxable years beginning before, on, or after section 139F was enacted into law. A wrongfully incarcerated individual who included an award in income may file a claim for refund the later of the following: Within 3 years from the date the individual filed the income tax return that previously reported the award or 2 years from the date the individual paid the tax on the award. The fiduciary of an estate, such as an executor or administrator, may claim a refund on behalf of a decedent who included in income in a prior tax year an award qualifying for the Wrongful Incarceration Exclusion. If the estate received a posthumous award and included it in income for a prior tax year on Form 1041, the fiduciary must file an amended Form 1041 for the estate to exclude the award from income and a claim a refund. See Pub 559, Survivors, Executors, and Administrators, for more information. Kansas City Submission Processing expeditiously processes the claims. Assign ALL exonerated prisoner claims to IDRS 0933578782 with category code XRET. Update the case note with exonerated prisoner claim. See IRM 21.6.6.2.31, Tax Treatment of Compensation for Exonerated Prisoners, for more information. If an award does not qualify for the exclusion from income under Section 139F and IRM 21.7.4.4.1.17(1), it may qualify for exclusion from income under Section 104(a)(2). The exclusion from income under Section 104(a)(2) applies to compensatory damages for personal physical injuries or physical sickness (including damages for economic losses flowing from the personal physical injuries or physical sickness) that an individual receives from a state for wrongful incarceration or conviction. Exclude these compensatory damages from income whether they are received in a lump sum, periodic payments, or a factoring transaction. 21.7.4.4.1.18 (10-01-2023) Form 1041 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Forms 1041 that meet certain criteria ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ A systemic TC 570 is placed on the tax module to set the –R freeze to hold any refund until a review of the module is completed. Identify these accounts by a TC 570 with all fives in the blocking series and serial number of the Document Locator Number (DLN), i.e., XXXXX-XXX-55555-X. If an inquiry is received from a Form 1041 filer inquiring about the expected refund, research the account for a TC 570 posted to the account as described in the paragraph above. If the tax module contains a TC 570 with all fives, prepare a Form 4442 and notate "unreversed TC 570" , and leave a history item on IDRS of "TC570ALL5S" and "ROUTETOFRP" , and route to: Internal Revenue Service Attn: FRP M/S 4450 1973 N. Rulon White Blvd. Ogden, UT 84404 Advise the taxpayer that their inquiry is being forwarded to another department for resolution and apologize for the delay in resolving the issue. Effective January 1, 2017, Computer Condition Code "E" (CCC) is edited on Form 1041, Form 1041-N, and/or Form 1041-QFT, (any year) if it is determined that the return is a potential identity theft filing. See IRM 3.11.14.8.4, CCC E - Potential ID Theft Filing, for additional information. If a tax examiner in Submission Processing (SP) Code and Edit (C&E) finds a case with attachments or correspondence indicating the taxpayer is a victim of ID Theft, the case is referred to one of the SP BMF ID Theft liaisons. If the SP BMF Theft Liaison says the return is ID Theft, the tax examiner will edit CCC "E" . See IRM 25.23.11.6.3, BMF Returns Selected for RICS Review, for additional information. When CCC "E" is edited on a return a TC 971 AC 711 will post to IDRS master file. This TC 971 code will cause the return to post as a TC 973 instead of a TC 150. In addition, a Letter 6042C is sent to the taxpayer requesting them to validate the filing of the return. Note: As of June 2018, 6042C Letter replaced Letter 5263C. Caution: Only RICS can reissue this letter. If the taxpayer contacts the IRS by telephone and the criteria above is met, follow the guidance in IRM 25.23.11.6.3, BMF Returns Selected for RICS Review. If correspondence is received responding to the 6042C Letter, route to: RICS Unit, OSC Mail Stop 9002 Ogden, UT 84401 For more information on potential BMF identify theft, see IRM 25.23.11.4, Business Master File (BMF) ID Theft Research. 21.7.4.4.2 (10-01-2023) Form 1065, U.S. Return of Partnership Income A partnership is a relationship between two or more persons who join to carry on a trade or business. The term partnership includes a limited partnership, syndicate, group, pool, joint venture, or other unincorporated organization, through or by which any business, financial operation, or venture is carried on that is not a corporation, trust, estate, or sole proprietorship. (See Publication 541, Partnerships, for additional information.) Each partner contributes money, property, labor, and/or skill and all expect to share in the profits and losses of the business. The partnership must file a Form 1065 to report its taxable income or loss. Each partner's distributive share of the income or loss is reported by the partnership to the partner on a Schedule K-1. Each partner must make estimated tax payments if necessary. Every partnership that engages in a trade or business, or has gross income, must file an information return on Form 1065 showing its income, deductions and other required information. A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenditures treated as deductions or credits for federal income tax purposes. See IRM 21.7.4.4.2.8.1, for information on partnerships with more than 100 partners. See IRM 21.7.4.4.2.3, Form 1065 Return Due Dates - Tax Periods Beginning on or Before December 31, 2015, and IRM 21.7.4.4.2.3.1, Form 1065 Return Due Dates Tax Periods Beginning After December 31, 2015, for information on the return due date for Form 1065 returns. In addition, see IRM Exhibit 3.11.15-3, Due date Chart, for Form 1065 due dates. Form 1065 isn't considered a return unless it is signed by a partner or LLC member manager. The fact that a partner’s name is signed on the return, it is prima facie evidence that such partner is authorized to sign the return on behalf of the partnership. When a return is made for a partnership by a receiver, trustee, or assignee, the fiduciary must sign the return, instead of the partner or LLC member manager. See "Who Must Sign" in the Instructions for Form 1065 when the partnership is in bankruptcy and the return is made by a receiver or trustee. The MFT is 06 and the tax class is 3. Use blocking series 00 when making adjustments when the original return is secured and blocking series 17 without the original return. The name control of a partnership is the first four letters of the legal name of the partnership. See IRM 21.7.13.5.3.6, CC ESIGN Input: Partnerships, and Document 7071-A, BMF Name Control Job Aid, for more information on name control. A married couple jointly owning and operating an unincorporated business and share in the profits and losses, are considered partners in a partnership and must file Form 1065. For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a "qualified joint venture" , whose only members are a husband and a wife filing a joint return, can elect not to be treated as a partnership for Federal tax purposes. In addition, per the Instructions for Form 1065, if the taxpayer and their spouse materially participate as the only members of a jointly owned and operated business, and they file a joint return for the tax year, they can elect to be treated as a qualified joint venture instead of a partnership. A qualified joint venture is a joint venture that conducts a trade or business where: The only members of the joint venture are a husband and wife who file a joint return. Both spouses materially participate in the trade or business. Both spouses elect not to be treated as a partnership. A qualified joint venture, for purposes of this provision, includes only businesses owned and operated by spouses as co-owners, and not in the name of a state law entity (including a general or limited partnership or limited liability company). The spouses must share the items of income, gain, loss, deduction, and credit in accordance with each spouse's interest in the business. Beginning with 200712, these taxpayers make the election on a jointly filed Form 1040 by dividing all items of income, gain, loss, deduction, and credit between them in accordance with each spouse’s respective interest in the joint venture. For more information, see the Married Couples in Business information on the IRS website. For cases involving potential identity theft and RICS involvement, refer to IRM 25.23.11.6.3, BMF Returns Selected for RICS Review, for additional guidance. For more information on potential BMF identity theft, see IRM 25.23.11.4, Business Master File (BMF) ID Theft Research. 21.7.4.4.2.1 (10-01-2022) Form 1065-B, U.S. Return of Income for Electing Large Partnerships For tax years beginning on or after January 1, 2018, Form 1065-B is no longer filed according to the Bipartisan Budget Act (BBA) of 2015. The BBA replaced the auditing and tax collection procedures for partnerships under the Tax Equity and Fiscal responsibility Act of 1982 (TEFRA) and the electing large partnership rules with the centralized partnership audit regime. 21.7.4.4.2.2 (10-01-2022) Publicly Traded Partnerships The Revenue Reconciliation Act of 1987 (1987 Act) enacted provisions relating to publicly traded partnerships (PTPs). A PTP is defined as any partnership whose partnership interests are (1) traded on an established securities market, or (2) readily tradable on a secondary market (or the substantial equivalent thereof). In general, a PTP is treated as a corporation, unless 90 percent or more of the gross income of such partnership for such taxable year consist of certain qualifying income. The Taxpayer Relief Act of 1997 amended provisions of the 1987 Act and imposed for each taxable year on the income of each electing 1987 partnership a tax equal to 3.5 percent of such partnership’s gross income for the taxable year from the active conduct of trades and businesses by the partnership. An “electing 1987 partnership” means any publicly traded partnership if: Such partnership is an existing partnership (as defined in section 10211(c)(2) of the Revenue Reconciliation Act of 1987). Section 7704(a) has not applied (and without regard to subsection 7704(c)(1) would not have applied) to such partnership for all prior taxable years beginning after December 31, 1987, and before January 1, 1998. Such partnership elects the application of 7704(g)(3), for its first taxable year beginning after December 31, 1997. A tax of 3.5 percent of such partnership’s gross income receipts is imposed for the taxable year from the active conduct of trades and businesses of the partnership. Therefore, the TC 150 may be for a significant amount. There are less than 10 electing partnerships in the country. These partnerships file returns in Ogden Submission Processing Center (OSPC). The doc code for these returns is 67. Programming is available to assess tax on original input in 2002. If a tax adjustment is required, use the following procedures: Input TC 290 or 291 to adjust to correct amount It is not necessary to input with a credit reference number Exception: TCs 766/767 are the only other valid transaction codes. The credit reference number which posts on the transcript as TC 766 or 767 identifies the type of credit, e.g., fuel tax credit, or IRC 965 tax credits. Note: If the TC 766 or TC 767 has a CRN 263, it relates to the IRC 965 Deferred Tax Amount. Generally, the TC 766 CRN 263 is generated to offset the TC 150 tax liability for the 965 deferred tax amount. Since partnerships are pass-through entities, most of them do not have a tax liability or TC 150. However, an Electing Large Partnership may have a TC 150 to report their income, gains, losses, deductions, etc., and related tax adjustments. See IRM 21.5.13, IRC 965 Transition Tax for more information. Make credit transfers if necessary. However, credit elect is not available on these forms. 21.7.4.4.2.3 (03-11-2024) Form 1065 Return Due Dates Partnerships are generally required to have a tax year that conforms to the majority of its partners. Most partnerships file Form 1065 on a calendar year end basis. Two exceptions to this rule include: Exception: 1 The partnership can establish a business purpose for having a different tax year ending date. This is identified by TC 054 on cc ENMOD. Exception: 2 The partnership elects under IRC 444 to have a tax year other than a required tax year by filing Form 8716, Election to Have a Tax Year Other Than a Required Tax Year. This is identified by TC 055 on cc ENMOD. Partnerships who make the Section 444 election must make the payments required by section 7519 and file Form 8752, Required Payment or Refund Under Section 7519. See IRM 21.7.4.4.7 for more information on filing Form 8752. For taxable years beginning before January 1, 2016, Form 1065 is due on or before the 15th day of the fourth month following the close of the tax year. If Year End is: Then Due Date is: December April 15th January May 15th February June 15th March July 15th April August 15th May September 15th June October 15th July November 15th August December 15th September January 15th October February 15th November March 15th For taxable years beginning before January 1, 2016, the partnership can file Form 7004, Application for Automatic Extension of time to File Certain Business Income Tax, Information, and Other Returns to request an automatic 5-month extension of time to file. Taxpayers are required to file Form 7004 by the original return due date. For more information on extensions see IRM 21.7.4.4.2.5 IRM 21.7.4.4.2.6, Extensions of Time to File Form 1065. Example: If the Form 7004 is filed by April 15th for a calendar year end partnership, the return is due on or before September 15th. For taxable years beginning after December 31, 2015, Section 2006(a)(1) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41 (the Act) changed the Form 1065 return due date. The Form 1065 is filed on or before the 15th day of the third month following the close of the tax year. This is the date the partnership tax year ended, as shown on the top of Form 1065. If Year End is: Then Due Date is: December March 15th January April 15th February May 15th March June 15th April July 15th May August 15th June September 15th July October 15th August November 15th September December 15th October January 15th November February 15th For taxable years beginning after December 31, 2015, the Act changed the due date and the duration for filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. Form 7004 is filed on or before the 15th day of the third month following the close of the tax year. The Act has changed the duration to a 6-month extension of time to file. Example: If the Form 7004 is filed by March 15th for a calendar year end partnership, the return is due on or before September 15th. If the due date of a Form 1065 return falls on a Saturday, Sunday, or legal holiday, the partnership can file on the next day that is not a Saturday, Sunday, or legal holiday. For example, the Emancipation Day holiday in the District of Columbia was celebrated on Friday, April 15, 2022, allowing mid-April filers to be timely if they filed by Monday April 18, 2022. The Emancipation Day holiday in the District of Columbia was celebrated on Monday, April 17, 2023, allowing mid-April filers to be timely if they filed by Tuesday, April 18, 2023. 21.7.4.4.2.3.1 (10-01-2021) Form 1065 Short Period Final Returns with Tax Period Beginning After December 31, 2015 The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41, changed the due date for filing Form 1065 partnership returns and is effective for taxable years beginning after December 31, 2015. See IRM 21.7.4.4.2.3, Form 1065 Partnership Return Due Dates, for more information. The return due date for Form 1065 partnership returns with a taxable year beginning after December 31, 2015 has changed from the 15th day of the fourth month (April 15th for calendar year filers) to the 15th day of the third month (March 15th for calendar year filers) following the close of the tax year. Form 1065 partnerships filing short period or short period technical terminations under IRC 708(b)(1)(B) (see IRM 21.7.4.4.2.9, Form 1065 and Form 1065X, Amended Return, Administrative Adjustment Request (AAR) and Bipartisan Budget Act (BBA)), or final returns with tax years beginning after December 31, 2015, may not be processed correctly during 2016. Short period partnership returns are assigned computer condition code (CCC) “Y.” Partnership returns marked final are coded with CCC “F.” Partnership returns coded CCC Y or F are manually reviewed to ensure correct processing. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.2.3.2 (06-04-2018) Form 1065 for Tax Period 201512 – Return Received Date Problem A problem was identified during the processing of some Form 1065, U.S. Return of Partnership Income Tax Returns, which resulted in late return received dates being recorded for some timely filed partnership returns. Returns postmarked April 18, 2016 may have an assessed TC 166 Failure to File Penalty (FTF). The 2015 calendar year (201512) Form 1065 filing date was due on April 15, 2016. However, Friday, April 15, 2016 was a legal holiday in the District of Columbia (Emancipation Day) and April 16, 2016 was a Saturday and April 17, 2016 was Sunday. IRC 7503 provides the filing (the postmark date) on April 18, 2016 is considered timely if April 15, 2016 is a Saturday, Sunday, or legal holiday in the United States or District of Columbia, and April 18, 2016 is the next day that isn’t a Saturday, Sunday, or legal holiday in the United States or District of Columbia. If an inquiry is received from a taxpayer or their representative stating that the 201512 Form 1065 tax return ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ accept the taxpayer’s statement and abate any late filing penalty assessed by inputting Penalty Reason Code 045 and Hold Code 0. This will result in a CP 210 Notice being issued when the FTF penalty is abated. If a partnership return for tax period 201512 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, and the taxpayer states that the return was mailed on or before 4/18/2016, then request the return from files to review the postmark date. If the postmark is on or before 4/18/2016, but privately metered (not US Post Office or designated private delivery service), and: If the return was received within 14 days following the postmark date; abate the penalty with penalty reason code 045. If the return was received more than 14 days following the postmark date, inform the taxpayer that the postmark date is not accepted as proof of timely mailing because the return was not delivered within the normal delivery period following the postmark date. If the postmark is on or before 4/18/2016, AND it is a US Post Office post mark or designated private delivery service receipt, then abate the penalty with reason code 045 regardless of return received date. If the postmark is after 4/18/2016, do not abate the penalty. Explain that the return was filed late because it was mailed after the return due date. 21.7.4.4.2.4 (10-01-2022) Schedules K and K-1 (Form 1065) Schedule K (Form 1065), Partners’ Distributive Share Items, and Schedule K-2 (Form 1065), Partners’ Distributive Share Items—International, contain the total amount for each applicable item. Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., and Schedule K-3 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.—International, contain the partner’s distributive share of the total amount of each applicable item. Schedules K-1 and K-3 are attached to Form 1065. The partnership provides the partner its applicable Schedules K-1 and K-3. For loose Schedules K-1 and K-3 received, determine if they were sent due to possible assertion of a missing information penalty. See IRM 20.1.2.4.3, Penalty Relief, and IRM 21.7.4.4.2.7. Follow the table directly below. If Then A Missing Information Penalty (TC 246 or TC 240 with no reference number) was assessed Adjust the penalty per IRM 20.1.2.4.3, Penalty Relief. No penalty was assessed Associate the Schedule(s) K-1 and K-3 with the return using Form 9856, Form 10023, or any other locally approved form/procedure. Input a TC 290 for $.00 if associating the document with an electronic return. See IRM 21.5.1.4.4, Processing of Loose Forms or Schedules, for CII images. Do not use blocking series 18 whenever inputting TC 290 $.00 to associate a loose form or schedule with the TC 150. TC 150 is not posted Input TC 930 to have document returned to you when the return posts to assure a Missing Information Penalty was not assessed in error. See IRM 21.5.1.5.7, CII Push Codes, if this is a CII case. 21.7.4.4.2.4.1 (11-07-2022) Schedule K-2 and Schedule K-3 Schedule K-2, Partners' Distributive Share Items-International, and Schedule K-3, Partner's Share of Income, Deductions, Credits, etc.-International, are new for the 2021 tax year. These schedules replace, supplement and clarify the former line 16, Partners’ Distributive Share Items, Foreign Transactions, of Schedule K, Form 1065, and line 16, Foreign Transactions, of Schedule K-1 (Form 1065). They also replace, supplement and clarify reporting of certain amounts formerly reported on Form 1065, Schedule K, Line 20c, Other items and amounts, and Schedule K-1, Part III, line 20, Other information. The new schedules assist partnerships in providing partners with the information necessary for the partners to complete their returns with respect to the international tax provisions of the Internal Revenue Code. For example, the new Schedule K-3 provides information necessary for corporate and individual partners to figure their foreign tax credit on Form 1118, Foreign Tax Credit - Corporations, and Form 1116, Foreign Tax Credit (Individual, Estate or Trust). Schedule K-2 is an extension of Schedule K of Form 1065 and is used to report items of international tax relevance from the operation of a partnership. Schedule K-3 is an extension of Schedule K-1 (Form 1065) and is generally used to report to partners their share of items reported on Schedule K-2. Partners generally use the information reported on Schedule K-3 to complete their tax or information returns. Any partnership required to file Form 1065 that has items relevant to the determination of the U.S. tax or certain withholding tax or reporting obligations of its partner under the international provisions of the Internal Revenue Code must complete the relevant parts of Schedules K-2 and K-3. The partnership need not complete this schedule if the partnership does not have items of international tax relevance. Notice 2021-39 announces transition relief for taxable years that begin in 2021 with respect to Schedules K-2 and K-3 required for Forms 1065. Section 2 provides background on the new schedules and the penalties that may apply for failure to file or show information on a partnership return, failure to file correct information returns, and failure to furnish complete payee statements. Section 3 provides transition relief from the penalties described in Section 2 if the filer establishes to the satisfaction of the Commissioner that it made a good faith effort to comply with the filing requirements. See the Schedules K-2 and K-3 Frequently Asked Questions (Forms 1065, 1120S, and 8865) for more information regarding clarification and additional exceptions for tax year 2021. See Partnership Instructions for Schedules K-2 and K-3 (Form 1065) for additional information needed to complete Schedules K-2 and K-3. 21.7.4.4.2.5 (10-01-2019) Extensions of Time to File Form 1065 Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1065 is granted if the taxpayer completes Form 7004 properly and files the form by the due date of the Form 1065. Beginning January 1, 2009, the extension of time to file partnership returns granted an automatic five-month extension and is only effective until tax years ending on, or before December 31, 2015. Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the due date for filing the tax return of a partnership, and the date by which a partnership must file Form 7004 for partnership returns have changed. Additionally, section 2006(b) allowed for a six-month extension of time to file Form 1065. The provisions are effective for tax years beginning after December 31, 2015: The due date of a partnership return, in which Form 7004 is filed, for a partnership return is the 15th day of the third month following the close of the partnership’s tax year. The duration of the automatic extension of time to file Form 1065 has increased to six months. Due to the late date that the legislation was passed, interim guidance was developed to handle extension requests received in 2016. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ For more general information see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning on or Before December 31, 2015, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning After December 31, 2015. 21.7.4.4.2.5.1 (10-01-2016) Taxpayers Abroad Partnerships are entitled to an automatic 2 - 3-month extension to file and pay under certain conditions outlined in IRM 20.1.2.2.3.3, Taxpayers Abroad. When a partnership return is identified during processing as qualifying for the extension, Code and Edit will enter Computer Condition Code (CCC) "R" on the return if the return is filed by the extended return due date, and it will also enter CCC "D" on the return if the tax shown on the return is paid by the extended return due date. CCC "R" is not entered on returns that were filed after the extended return due date, nor is CCC "D" entered on returns where the tax shown on the return is not paid by the extended return due date. This presents a problem since BMF does not recognize the automatic extension without manual intervention. A partnership may respond to a penalty notice by indicating that it qualifies for the extension under 26 CFR 1.6081-5 or 26 CFR 1.6081-5T. Before taking any action verify that it does qualify (see IRM 20.1.2.2.3.3, Taxpayers Abroad). If the partnership qualifies, input TC 460 to allow an extension to the 15th day of the sixth month following the end of the tax period. This will cause the Failure to File penalty to recompute. Since there is no way to input an extension of time to pay, the Failure to Pay penalty for paying late needs a manual adjustment if the Form 1065 reported tax and the partnership did not pay the tax on the return due date. If the automatic extension is a three-month extension, multiply the unpaid tax on the original return due date by 1.5 percent (0.015). If the automatic extension is a two-month extension, multiply the unpaid tax on the original return due date by 1.0 percent (0.010). Input TC 271 for the computed amount as a negative number. Use reason code 062 (so as not to restrict the FTP penalty) and penalty reason code 030. Use hold code 0 to allow issuance of an adjustment notice. 21.7.4.4.2.6 (01-01-2005) Publication 541, Partnerships Use Publication 541, Partnerships, to determine the various forms and schedules required as attachments to Form 1065. 21.7.4.4.2.7 (10-01-2024) Partnership Penalties Partnerships may be assessed a penalty under IRC 6698(a)(1) for failure to timely file a return, including extensions (TC 160/TC 166) or a failure to provide information penalty (TC 240/246) under IRC 6698(a)(2), when Form 1065 is lacking the required information such as Schedules K-1, or a balance sheet. See IRM 20.1.2.4, Failure to File Partnership Return - IRC 6698, for more information. However, if the taxpayer supplies the information in a specified time period or states they are not required to file the form for which the penalty is charged, they may qualify for penalty abatement. See IRM 20.1.2.4.3, Penalty Relief, for more information. See IRM 3.12.15.4.41, Field 01MSC, Missing Schedule Code, for additional information on missing schedule codes: Missing Schedule Code Code Number Schedules K-1 33 Schedule L (Balance Sheet) 34 Schedules K-1 and Schedule L 36 Schedule K 45 Schedule K and Schedules K-1 46 Schedule K and Schedule L 47 Schedule K, Schedules K-1 and Schedule L 49 The penalty is computed by multiplying the rate by the number of months or portions of a month late by the number of persons who were partners in the partnership for that year. Beginning in 2022, the Form 1065 late and missing information penalties are assessed using the TC 240/246 PRN 722/723. After December 31, 2021, TC 16X will no longer be used to assess IRC 6698/6699 penalties. The penalties are assessed as follows: TC 24X and PRN 722 = Late Filing Penalty TC 24X and PRN 723 = Missing/Incomplete Information Penalty These will include IRN 851, 852 and 853 as outlined in the table below: IRN 851 Meaning IRN 852 Meaning IRN 853 Meaning PRN 722 Number of partners for MFT 06 Number of residual interest holders for MFT 07 Number of months N/A PRN 723 Number of partners for MFT 06 Number of months Missing Schedule Note: See IRM 20.1.2.4.3, Penalty Relief, for more information to process penalty relief requests for the above penalties. Small partnerships, i.e., a partnership that has 10 or fewer partners, may qualify for a statutory exception. See IRM 20.1.2.4.3.1, Revenue Procedure 84-35, for details. Also, see IRM 20.1.1.3, Criteria for Relief from Penalties, for more information on penalty relief, including reasonable cause. For information on penalties involving the requirement for large partnerships to file electronically, see IRM 21.7.4.4.2.8.1.1. Section 8, Modification of Penalty for Failure to File Partnership Returns; Limitation on Disclosure, of the Mortgage Forgiveness Debt Relief Act of 2007, P.L. 110-142, increased the failure to file penalty and failure to file a complete return penalty on Form 1065 Partnership returns from $50 a month per partner to $85 per month per partner. The provision also increased the time period for calculating the penalty from five months to 12 months. The changes are effective for returns that are due on or after January 15, 2008 and before January 1, 2009. See the 10/01/2015 and prior revision of this IRM for the penalty rate for tax periods 200808 and prior. Per Chief Counsel, the Failure to File Penalty increases to $200 per partner, per month, for a maximum of 12 months, for returns due after December 31, 2017. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ Follow the chart below: Tax Periods Base Penalty Amount For a Maximum of For returns due after December 31, 2009, and on or before December 31, 2017 - Tax periods ending 201001 through 201709 $195 12 Months For returns due between January 1, 2018, and December 31, 2019 (without regard to extensions) - Tax periods ending 201710 through 201909 $200 12 Months For returns due between January 1, 2020, and December 31, 2020 (without regard to extensions) - Tax periods 201910 through 202009 $205 12 Months For returns due between January 1, 2021 and December 31, 2022 (without regard to extensions) - Tax periods 202010 through 202209 $210 12 Months For returns due between January 1, 2023 and December 31, 2023 (without regard to extensions) - Tax periods 202210 through 202309 $220 12 Months For returns due after January 1, 2024 and subsequent (without regard to extensions) – Tax periods ending 202310 through 202409 $235 12 Months Example: The following examples show how the penalty is calculated: Example 1 - A fiscal year return that begins November 1, 2016 and ends October 31, 2017 is due January 15, 2018. Because the return is due in 2018, the penalty increases to $200 per partner, per month, for a maximum of 12 months. Example 2 - A fiscal year return that begins October 1, 2016 and ends September 30, 2017 is due December 15, 2017. Because the return is due in 2017, the penalty remains at $195 per partner, per month, for a maximum of 12 months. Note: Penalty rates as adjusted for inflation are published at least annually via Internal Revenue Bulletin and in return instructions before they take effect. For more information regarding the penalty computation, see IRM 20.1.2.4.2, Penalty Computation, and the instructions for Form 1065. 21.7.4.4.2.7.1 (04-28-2017) Form 1065 Failure to File Penalty and CP 575 Notice When taxpayers apply for an Employer Identification number they receive a CP 575 Notice. Taxpayers with Form 1065 filing requirements receive a CP 575B Notice or a CP 575D Notice which instructs them of the return due date (RDD) for that form. New partnerships who failed to file on time may request penalty abatement while stating that they filed late because of an incorrect return due date on the CP 575B/D. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the RDD for partnerships and is effective for tax years beginning after December 31, 2015. Per the Act, the RDD for partnerships changed from the 15th day of the fourth month to the 15th day of the third month. However, CP 575B/D notices that were printed before programming was updated (July 2016) to print the new due date would have stated that the return was due by the 15th day of the fourth month when in fact the RDD changed to the 15th day of the third month. If you receive contact from a taxpayer stating that they received a CP 575B or CP 575D Notice with the incorrect information, request a copy of the notice from the taxpayer. If the taxpayer can send/fax us a copy of the notice, abate the FTF penalty with PRC 044 for written advice, and if they can’t produce a copy, then abate the FTF penalty with PRC 018 for first-time abatement. Apologize for the inconvenience. Note: A CP 575B/D for a tax period beginning before 1/1/2016 is not taken into consideration. The Form 1065 instructions for 2015 returns clearly stated that the return due date would change to the 15th day of the 3rd month for tax periods beginning after 12/31/2015. 21.7.4.4.2.7.2 (10-01-2022) Form 5471 Penalties for Partnerships Beginning January 2009, master file systemically assesses IRC 6038 penalties on Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, attached to a late filed Form 1065. The penalty is $10,000 per Form 5471 attached to the late filed Form 1065. The systemically assessed Form 5471 penalty appears on MFT 13 as a TC 240 with Penalty Reference Number (PRN) 623 for 2009 and as PRN 599 for 2010 and subsequent years. See IRM 20.1.9.3, IRC 6038 - Information Reporting With Respect to Foreign Corporations and Partnerships, for more information. See IRM 20.1.9.5, IRC 6038A(d) - Information Reporting for Certain Foreign-Owned Corporations, for more information. Both penalties carry doc code 54, and 00 as the first two digits of the blocking series. Manually assessed penalties by Exam will post as TC 240 with PRN 623 for failure to file Form 5471. The doc code is 54 (or 51, if it’s a quick or prompt assessment). BMFOLA will show that the input employee is in one of the Exam CCP teams in Cincinnati, Memphis, or Ogden. Accounts Management (AM) does not consider penalty abatement requests for the penalties assessed by Exam. Exam will consider all penalty abatement requests for Exam (manually) assessed Form 5471 Failure to File (FTF) penalties. A CP 215 Notice, Civil Penalty - 500 and 600 Series, generates as a result of the TC 240 penalty assessment on the MFT 13 module. The CP 215 notice instructs the taxpayer to send penalty abatement requests to Accounts Management’s International Unit in the Ogden campus. Ogden and Cincinnati International work the requests using instructions in IRM 21.8.2.20.2, Form 5471 Penalties Systemically Assessed from Late-Filed Form 1120 Series or Form 1065. 21.7.4.4.2.8 (10-01-2024) Modernized e-file (MeF) - Electronic Filing of Partnership Returns and Mandatory e-Filing Requirements For returns required to be filed during calendar years ending on or before December 31, 2023, all calendar year Form 1065 filers with 100 partners or less can file on paper or can voluntarily file their returns electronically. Certain partnerships with more than 100 partners must file electronically. See IRM 21.7.4.4.2.8.1, Partnerships with More Than 100 Partners, for information on partnerships with more than 100 partners. Revised Treas. Reg. 301.6011-3, which is applicable to partnership returns that are required to be filed during calendar years beginning after December 31, 2023, requires a partnership to electronically file its return if: It is required to file at least 10 returns of any type during the calendar year ending with or within the taxable year of the partnership, or The partnership has more than 100 partners during the partnership’s taxable year. The revised Treasury Regulation. 301.6011-3 authorizes the Commissioner to provide hardship waivers for partnerships that would experience hardship in complying with the e-filing requirements and administrative exemptions from the e-filing requirements to promote effective and efficient tax administration. Notice 2024-18, Section III provides guidance on these hardship waivers and administrative exemptions. In the case of undue hardship, the IRS may waive the electronic filing rules if the partnership demonstrates that a hardship would result if it were required to file its return electronically. A partnership interested in requesting a waiver of the mandatory electronic filing requirement must file a written request in advance in accordance with the procedures in the Form 1065 instructions. The revised regulations also grant an administrative exemption from the requirement to electronically file returns to partnerships whose use of the technology required to file electronically conflicts with their religious beliefs. Advance approval of an electronic filing administrative exemption is not required to file paper forms 1065 due to a religious exemption. Taxpayers must print in bold letters “Religious Exemption” at the top of page one of the return they file in paper form. See Topic no. 803, Electronic filing waivers and exemptions and filing extensions, for additional information. Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns , is designed to provide Authorized IRS e-file Providers and Large Taxpayers specific requirements and procedures for electronic filing through the Modernized e-file System. IRS e-file providers and applicants must submit their IRS e-file applications online. To register for e-Services, users navigate to the e-Services page Become an Authorized e-file Provider New users must also register by creating a profile with an IRS Credential Service Provider. The IRS uses ID.me, a technology provider, to provide identity verification and sign-in services, which allow access to e-Services. More information is available on IRS.gov at Register for IRS Online Self Help Tools. Participating transmitters and software developers MUST successfully pass the Acceptance Assurance Testing System (ATS) in order to file Form 1065 electronically. Only those entities developing software or transmitting returns directly to the IRS go through the testing process. The ATS process tests hypothetical scenarios to ensure the participants computer program has the correct file specifications to file returns electronically, that required fields will post to master file correctly and that providers understand the mechanics of IRS e-file. All Transmitters must perform a Communications Test and be accepted. No further communications testing is required when adding additional forms to MeF and they are not required to test each year. See Publication 3112, IRS e-file Application and Participation, Publication 5078, Modernized e-file Test Package, Business Submissions, Assurance Testing System (ATS), and Rev. Proc 2007-40 for more information on the testing process. Testing for Form 1065 is generally available in ATS by the start of November each year. The MeF system will accept partnership returns for all years beginning with TY 2019. MeF also accepts amended returns for these tax years if the original return is filed via MeF. See IRM 21.7.9.4.1.2.2, MeF Filed Amended Returns, for more information. Taxpayers must complete an amended return on paper if they filed their original return on paper. Ogden processes electronically filed partnership returns. The tax class is 2. The file location code (FLC) for e-filed returns is either 93, 92, or 88. Forms 1065 (except publicly traded partnerships) use doc code 65 if processed prior to 2007, and use doc code 69 if processed in 2007 and subsequent. Use doc code 67 for publicly traded partnerships. (See IRM 3.42.4.9.2, Identifying e-file BMF Identification Codes, for more information.) Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns, for a complete listing of the forms and schedules accepted electronically. If a form cannot be filed electronically with the partnership return, taxpayers can attach it as a PDF document. All returns filed through the MeF system must have signatures. If the return does not have a valid signature, the e-help Desk unit requests a signature. The MeF system requires taxpayers and Providers to use one of the two signature options: The Practitioner PIN (Personal Identification Number) method. The scanned Form 8453 method. The Practitioner PIN (Personal Identification Number) method (Form 8879) can only be used if the taxpayer uses an ERO. A paper copy of the signed Form 8879 is retained by the ERO and provided to the partnership but is not mailed to the IRS. Form 8879-PE is for Form 1065. With the scanned Form 8453 method, Form 8453-PE, U.S. Partnership Declaration and Signature for Electronic Filing, is scanned and submitted with the e-filed return as a Portable Document Format (PDF) file. Form 8453-PE is not mailed to the IRS. Use CFOL command codes to research the account. Request the original return only when necessary. Returns filed through the MeF system are stored immediately after the returns are processed on the Modernized Tax Return Database (MTRDB). The Employee User Portal (EUP) allows access to these returns through the Return Request and Display (RRD) subsystem. For more information on how to gain access to EUP, see IRM 3.42.4.5.1, Employee User Portal (EUP). DO NOT attach information (e.g., loose forms, schedules, and correspondence) to an electronically filed return. To identify an electronic DLN, see Document 6209, Section 4, Document Locator Number, Part 3 Campus and Filing Location Codes, or IRM 3.42.4.9.2.1, Researching e-file BMF Identification Codes. Use the following procedures when adjusting a return using a non-refile DLN: File the information using TC 290 $.00 with the applicable blocking series for the type of return/situation. DO NOT use an "attachment" or "association form." Note: These procedures are not needed for documents scanned into Correspondence Imaging Inventory (CII). CII serves as the retention area for these documents. 21.7.4.4.2.8.1 (10-01-2011) Partnerships with More Than 100 Partners The Taxpayer Relief Act of 1997 authorized the issuance of regulations mandating the filing of partnership returns with more than 100 partners (large partnerships) on magnetic media. The regulations also provide that the Commissioner may mandate one form of magnetic media on which the returns must be filed. As a result, the Commissioner determined these returns must be filed electronically. Final regulations were published in Internal Revenue Bulletin 1999-48 and are effective for tax years ending on or after December 31, 2000. Large partnerships filing Common Trust Fund returns are excluded from the mandate to file electronically. If a taxpayer contacts the e-help Desk (see IRM 3.42.7.2.1, Hours of Operation) and states they are a common trust fund partnership with over 100 partners, grant an automatic waiver from the requirement to e-file. See IRM 21.7.4.4.2.8.1.2, for more information on waivers. 21.7.4.4.2.8.1.1 (10-01-2024) Large Partnership Penalty for Failing to File Electronically Regulations under IRC 6011(e) provide for an assessment of a penalty if large partnerships fail to file their return electronically for tax years ending December 31, 2000 and subsequent. See IRM 20.1.2.5, Failure to File Partnership Return Using Electronic Media, for additional information. Taxpayers may request a waiver from the requirement to file electronically if the taxpayer can establish hardship. See IRM 21.7.4.4.2.8.1.2, Waiver Requests by Large Partnerships Required to File Electronically, and Treas. Reg. 301.6011-3 for more information. The penalty rate has changed over the years. The penalty is: For returns due on or before December 31, 2010 the penalty is $50 per partner over 100. For example, if a partnership has 120 partners and does not file electronically, a penalty of $1,000 ($50 X 20 partners) is assessed. It is assessed as TC 246 with reference number 688. For returns due on or after January 1, 2011, the penalty was increased to $100 per partner over 100. Therefore, in the above example, the penalty is $2,000 ($100 X 20 partners). Per section 208(f), Division B, Title II, of the Tax Increase Prevention Act of 2014, P.L. 113-295, amends the Internal Revenue Code to require an annual inflation adjustment to the penalty amount for failure to file partnership return using electronic media and is effective for returns due after 12/31/2014. Per section 806, of the Trade Preferences Extension Act of 2015, P.L. 114-27, the penalty is increased to $250 per partner over 100 with a maximum penalty of $3,000,000 for returns requiring filing after December 31, 2015. Adjusted for inflation, the $250 amount is inflation adjusted to $260 per partner with a maximum penalty of $3,178,500 for returns due in 2017 (see Rev. Proc. 2016-11). Adjusted for inflation, the penalty remains at $260 per partner, but the maximum penalty is increased to $3,218,500 for returns due in 2018 (see Rev. Proc. 2016-55). For returns due in 2016 and subsequent years, the table below reflects the inflation adjusted penalty per partner over 100, the lower maximum penalty, and the higher maximum penalty amount. See IRM 20.1.2.5, Failure to File Partnership Return Using Electronic Media, for more information. For returns due in The penalty per partner in excess of 100 is With a lower maximum penalty of With an upper maximum penalty of 2016 $260 $1,059,500 $3,178,500 2017 $260 $1,064,000 $3,193,000 2018 $260 $1,072,500 $3,218,500 2019 $270 $1,091,500 $3,275,500 2020 $270 $1,113,000 $3,339,000 2021 $280 $1,142,000 $3,426,000 2022 $280 $1,142,000 $3,426,000 2023 $290 $1,777,500 $3,523,500 2024 $310 $1,261.000 $3,783,000 If after the penalty is assessed, a taxpayer believes they can establish that the partnership qualified for a waiver of the e-file requirement, they must write to Accounts Management at the Ogden campus at the address in paragraph (5) directly below. Penalty abatement requests CANNOT be worked by phone or correspondence at other sites. Exception: If the module contains an un-reversed TC 971 AC 320 (penalty assessed in error), abate the penalty using PRN 688, with the penalty as a negative amount, using PRC 045. Erroneous penalty assessments may be abated in any functional area whenever identified. If a taxpayer calls or corresponds regarding where to file the request, instruct him to file the request at the address below. If an abatement request is received at another site and it is a CII case, reassign to 0445160144. OAMC employees should not reassign to this number but work these cases per the procedures in paragraphs 7 - 10 below. If not in CII, forward all other requests to OAMC: Internal Revenue Service 1973 N. Rulon White Blvd. Mail Stop 6552 Ogden, UT 84404 Taxpayers should not file returns on paper and wait for a penalty assessment before requesting abatement. They should request a waiver (if they meet the criteria) as detailed in IRM 21.7.4.4.2.8.1.2, Waiver Requests by Large Partnerships Required to File Electronically. Ogden Accounts Management campus works requests for abatement of FTF Electronically Penalty only, and/or inquiries requesting both FTF Penalty and FTF Electronically Penalty. Accounts Management in Cincinnati and Ogden both work requests for FTF Penalty abatement only. Taxpayers must establish reasonable cause due to hardship based on economic reasons or reasons out of their control such as equipment breakdown, destruction of magnetic media filing equipment, etc. If reasonable cause due to hardship is established, a TC 241 is generated when a TC 290 $.00 with Reference Number 688 with a minus sign is input on IDRS. If hardship is established: Input TC 290 $.00 in blocking series 17 with Reference Number 688 with a minus sign. Use RC 062 in the first position and the correct RC in the fourth position, usually RC 022. Inform the partnership (by letter) the request for penalty abatement was accepted. Also, inform the partnership the request is allowed for this tax period only, and if they believe they meet the hardship criteria in future years, they must request a waiver each year. Also, inform them they must try to meet the electronic filing requirement in future years. The fact that their reason is accepted this year, does not necessarily mean it is accepted in future years. If hardship is not established: Input TC 290 $.00 in blocking series 98. Input RC 062 in the first position. Do not input Reference Number 688. Send Letter 854C,Penalty Waiver or Abatement Disallowed/ Appeals Procedure Explained. If a taxpayer's request for penalty abatement is denied (unlike waiver requests), the taxpayer has the option to follow normal penalty appeals procedures. If a request for penalty abatement is received when the partnership files a paper Form 1065, Code and Edit faxes a copy to OSPC at 877-477-0575. These requests must be worked by OSPC within three working days of receipt. OSPC follows the instructions below. If Then The partnership establishes hardship 1. Input TC 971 Action Code 320. 2. Follow the procedures in IRM 21.7.4.4.2.8.1.1(8), Step 3 of the first then box which reads "Inform the partnership (by letter) the request" The partnership does not establish hardship 1. Input TC 971 Action Code 321. 2. Send Letter 854C, Penalty Waiver or Abatement Disallowed/ Appeals Procedure Explained If a large partnership files a Form 1065 electronically, but it is systemically rejected and the partnership files the return on paper, the partnership should attach a copy of the rejection notification to the paper Form 1065. If the postmark is within 10 days of notification from the IRS that the electronic return was rejected, Code and Edit enters Computer Condition Code (CCC) "R" to suppress the FTF penalty. (See IRM 3.11.15.15, Computer Condition Codes, for additional information on Code and Edits usage of CCCs.) They also fax a copy of page 1, Form 1065 and a copy of the ELF rejection notification (indicating "rejection notification from ELF" ) to OSPC at 877-477-0575. OSPC must: Work these cases within three working days of receipt. Input TC 971 Action Code 320. If a large partnership is erroneously assessed a penalty for failure to file electronically (TC 246 with Reference Number 688) due to IRS error, the penalty must be abated. Examples of this include, but are not limited to, returns where the number of partners were transcribed incorrectly (partnership has less than 100 partners but the number transcribed was more than 100) or the penalty was assessed for a tax period prior to period ending December 31, 2000. OSPC must: Input TC 290 $.00 in blocking series 17 with Reference Number 688 (for the amount of the penalty abatement) with a minus sign. Use PRC 045 in the fourth position. Inform the partnership by letter that the penalty was abated. Include an apology for the erroneous assessment. See IRM 20.1.2.5.1, Penalty Relief, for more information on the criteria for abating the penalty for failure to file a partnership return on electronic media due to reasonable cause. 21.7.4.4.2.8.1.2 (10-01-2024) Waiver Requests by Large Partnerships Required to File Electronically Regulations provide for waiver of the requirement to file electronically if the taxpayer can establish hardship. A major factor in the decision is whether the taxpayer will incur undue economic hardship. See Treas. Reg. 301.6011-3(b). Per Announcement 2002-3, requests must be in writing with the notation on the envelope and at the top of the actual request "Form 1065 e-file Waiver Request - IRC 6011(e)(2)" , and must sign the request and include a statement; "Under penalties of perjury, I declare that the information contained in this waiver request is true, correct, and complete to the best of my knowledge and belief." It must contain a detailed explanation as to why the partnership is unable to file electronically, including: What steps they took to comply. Why the steps were unsuccessful. The hardship that would result, including any incremental costs to the partnership of complying with the electronic filing requirements. Incremental costs are those costs that are above and beyond the costs to file on paper. The incremental costs must be supported by a detailed computation. The detailed computation must include a schedule detailing the cost to file on paper and the costs to file electronically. An explanation of the steps they will take to comply next year. In addition to a detailed explanation, the waiver request must also contain: T Name of partnership. EIN of partnership. Mailing address of partnership. Tax year for which waiver is being requested. Taxpayers should see Announcement 2002-3 which was issued to provide information on the waiver request procedures. It is found on page 305 of Internal Revenue Bulletin 2002-2. Also, see IRM 3.42.4.17.4, Form 1065 MeF Penalties and Waiver Information, for the matrix that is followed to determine when to approve or deny a waiver request for the Form 1065 MeF return. Taxpayers must file all waiver requests with OSPC at the address below. Waiver requests should be filed at least 45 days prior to the due date of the return, including extensions. Waiver requests cannot be attached to extensions of time to file requests (Form 7004) or to the partnership's paper tax return. Requests from the partnership's tax advisor/preparer must be accompanied by a valid power of attorney if one is not already on file. Sent via United States Postal Service Sent via Private Delivery Service (e.g., UPS, FedEx, etc.) Internal Revenue Service Ogden Submission Processing Center e-file Team, Mail Stop 1057 Attn.: Form 1065 e-file Waiver Request Ogden, UT 84201 Internal Revenue Service 1973 Rulon White Blvd. e-file Team, Mail Stop 1056 Attn.: Form 1065 e-file Waiver Request Ogden, UT 84404 A waiver can only be requested for a specific tax period. Acceptance of the waiver does not waive the requirement for future tax periods. (See IRM 21.7.4.4.2.8.1.1.) Partnerships should receive written notice of the determination of their request within 30 days from the date the request was received. Unlike penalty abatement requests, denial of waiver requests cannot be appealed. After considering a waiver request, a TC 971 Action Code 320 is input, if the request is accepted. This prevents the assessment of the penalty for failure to file electronically. If a request is denied, a TC 971 Action Code 321 is input. (If both TC 971 Action Code 320 and 321 appear on the module, the latest TC 971 Action Code 320/321 takes precedence.) Letter 4118C, Request for a Waiver From Filing Partnership Return Electronically, informing the taxpayer of the decision, must be sent. 21.7.4.4.2.8.2 (05-08-2019) Small Partnership Penalty Abatement IRC 6031(a), requires a partnership to file a federal tax return (Form 1065). IRC 6698 imposes a penalty against a partnership that does not file a timely tax return or a complete tax return as required by IRC 6031(a) Rev. Proc. 84-35, provides for a procedural exception to the penalty for small partnerships. Revenue Procedure 84-35 allows for the reasonable cause abatement of the penalty for filing a late or incomplete return for certain "Small Partnerships." See IRM 20.1.2.4.3.1, Revenue Procedure 84-35, for the definition of a small partnership as defined by Revenue Procedure 84-35, and for the criteria that must be met for an abatement. 21.7.4.4.2.8.3 (10-01-2021) Known e-file Issues and Solutions - Form 1065 Periodically, problems arise that prevent taxpayers from being able to file electronically through the Modernized e-file (MeF) System. When this occurs, e-File Services (eFS), Large Business and International (LB&I), or Submission Processing will issue a workaround to taxpayers by posting information on the IRS Web site. Go to Tax Information For Businesses, click on e-file and look for the header, Corporations. Click on the link and then click on the link to e-file for Large Business and International (LB&I). See Known Issues and Solutions, for links to the Known e-file Issues and Solutions webpages. When taxpayers contact the e-help unit with processing problems, taxpayers are directed to this site. In addition, Accounts Management will issue SERP Alerts or IPUs if the situation warrants. For example, an Alert was issued due to a problem with name control mismatches on Form 1065 and Form 1120 accounts. If you receive a call from a taxpayer stating that they are having problems e-filing, research the webpage. If unable to find any information, refer the caller to the e-help desk unit, toll-free at 866-255-0654. See IRM 3.42.7.2.1, Hours of Operation for the hours of operation. 21.7.4.4.2.9 (10-01-2024) Form 1065 and Form 1065X, Amended Return, Administrative Adjustment Request (AAR) and Bipartisan Budget Act (BBA) Form 1065X, Amended Return or Administrative Adjustment Request (AAR), is available for both Form 1065 and Form 1066 filers to amend their federal tax return. Form 1065X is available for use by partnerships and REMICs that file paper returns. Taxpayers may use Form 1065X to amend prior years where the statute is open. Form 1065X will not be available in the e-file system for at least a year and possibly much longer. Partnerships required to file electronically will use the old Form 1065 in the electronic filing system, mark the amended box, and attach an electronic Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR). The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) allows for the filing of an Administrative Adjustment Request (AAR) by a flow-through entity (partnership or LLC). Form 8082, Notice of Inconsistent Treatment or Amended Return (Administrative Adjustment Request (AAR)), was designed to alert IRS to this condition. To correct errors on partnership-related items, partnerships under the Bipartisan Budget Act (BBA) must file an Administrative Adjustment Request (AAR) instead of an amended return. This applies to partnerships for taxable years beginning after December 31, 2017 and partnerships that elect into the BBA regime for taxable years beginning after November 2, 2015 and before January 1, 2018. Partnerships cannot file an AAR to only change a partnership representative (PR) designation. The Bipartisan Budget Act of 2015 (BBA) centralized partnership audit regime generally provides for determination of adjustments, and assessment and collection of tax attributable to such adjustments at the partnership level unless the partnership made certain elections. After January 1, 2018, if the partnership is filing an AAR to elect into BBA for a partnership taxable year beginning after November 2, 2015 and before January 1, 2018, see the instructions to the Form 8082 for more information. Note: A partnership with a short period tax year that begins and ends in 2018 may file a BBA AAR as long as the partnership did not elect out of the centralized partnership audit regime. Form 8082 is used by partners, S corporation shareholders, beneficiaries of estates or trusts, owners of a foreign trust, or residual interest holder in real estate mortgage investment conduit (REMIC) to notify the IRS of inconsistencies between the tax treatment of an item on their returns vs. the way the pass-through entity treated and reported the item on its return. Since Form 8082 is not consistently being attached as required, the amended/corrected/superseding Form 1065 returns that meet any of the criteria below must be routed to Examination as CAT-A criteria: Follow procedures in IRM 21.5.3-2, Examination Criteria (CAT-A) - General, for returns claiming Research and Development Credits. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Partnerships that file amended returns on Form 1065X, must be routed to Exam as CAT-A criteria if any of the following conditions below are met: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Action required on the amended/corrected/superseding returns that meet the criteria in paragraphs ( 7), (8) or (9)) directly above: Ensure any imputed underpayment received with a BBA AAR has been applied accordingly. Retain an open control in background (B) status on all cases referred to Examination and update the activity code to "CAT-A" . If a CII case, the case is systemically re-controlled to Exam in suspend status until returned from Exam or systemically purged from the Exam queue. See IRM 21.5.3.4.7, Processing Claims and Amended Returns With Examination Involvement, for more information. When the case is returned, follow Exam’s instructions and notify the taxpayer accordingly. See IRM 21.5.3.4.7.2, Examination, "Disallows" , "Accepts" , or "Selects" , for more information. If the case is selected or Exam does not return the case, close your base using Activity Code "AAREXAM" . Input a TC 971 Action Code 013 to show that the amended return is forwarded to the Examination Branch. Recharge the amended and original return (if received with TRNS 193) to Examination, unless the document is a CII return. Exam forwards the returns to Files if not needed for their case. Do not release the -A freeze, Examination releases the freeze. Form 1065 claims and/or amended returns involving Ponzi Scheme issues (including language discussing removal of phantom or fraudulent income), may meet Examination criteria. Route to Examination as CAT-A ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) - General, for more information. For Forms 1065/1065X, stating “Microcaptive”, see IRM 21.7.4.4.4.20, Micro-Captive Insurance Amended Returns, for processing instructions. Follow procedures in IRM 21.7.9.4.1, Resolving TRNS 193 and Amended/Corrected/Supplemental Returns, along with the instructions above, if a TRNS 193 is generated and the returns are secured and routed to Accounts Management for processing. For specific items to compare on Form 1065. See IRM 21.7.4.4.2.9.1, Items to Compare on TRNS 193s (Form 1065). See IRM 21.7.9.4.1.6, Duplicate Filing Conditions Involving Returns Prepared Under IRC Section 6020(b), when the TC 150 is a 6020(b) and the TC 976 is the taxpayers original return or when the TC 150 is the taxpayers return and the TC 976 is the 6020(b). 21.7.4.4.2.9.1 (03-15-2022) Items to Compare on Transcript (TRNS) 193s (Form 1065) Compare the items listed below on each return to determine if the TC 976 return is a true duplicate, amended, supplemental, or belongs to another tax period or entity. TIN Tax period Names and number of partners Income and deduction figures Balance sheet Schedules K-1 Signature and signature dates If the amended return is not received with the TRNS 193, follow the procedures in IRM 21.7.9.4.1.2, TRNS 193 Received Without Duplicate Return. Action required: If Then TC 976 return is a true duplicate, amended, or supplemental 1. Input TC 290 $.00 blocking series 00 (with original) or 17 (without original). 2. Adjust penalties as appropriate. See IRM 20.1.1, Introduction and Penalty Relief. Partners’ names are the same, but the percentage of ownership on Schedules K-1 has changed by 50 percent or more It is no longer necessary to route the case to Entity for determination if another partnership exists. TC 976 return belongs on another TIN or tax period 1. Input TC 290 $.00 using blocking series 00 or 17. 2. Correct the information on the TC 976 return. 3. Prepare, attach, and route Form 13596, Reprocessing Returns, for reprocessing to the correct tax period or TIN. See IRM 21.7.9.4.1.1, TRNS 193s Involving Reprocessing Returns, for more information. 4. Input TC 971 as appropriate, per instructions in IRM 21.5.1, General Adjustments. (Do not reprocess a TC 976 return to an account which contains a TC 150. Input a TC 290 $.00 to the account and attach the TC 976 return to the adjustment document.) One of the returns is a 6020(b) and the taxpayer filed an original return 1. Check the received date on the taxpayer’s return. (If prior to the 6020(b) return, the FTF penalty may need adjusting. See IRM 20.1.2.3.10, Substitute for Return - IRC 6651(g), for more information. 2. Verify the taxpayer’s return is complete and the number of partners involved. (If the information differs, penalties may need adjusting.) 3. Input TC 290 $.00 in blocking series 00 or 17 and adjust penalties as appropriate. 21.7.4.4.2.9.2 (10-01-2024) Partnership Terminations for Partnership Tax Years Beginning on or Before December 31, 2017, Only Following the, Tax Cuts and Jobs Act of 2017(TCJA), Section 13504 Repeal of Technical Termination of Partnerships, a partnership is considered terminated only if no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in the partnership. Special Rules: Merger or consolidation of two or more partnerships is considered the continuation of any merging or consolidating partnership whose members own an interest of more than 50 percent in the capital and profits Division of a partnership into two or more partnerships which the resulting partnership (other than any resulting partnership where the members had a 50 percent or less interest in the capital and profits of the prior partnership) is considered a continuation of the prior partnership. This amendment applies to partnership taxable years beginning after December 31, 2017. For partnership tax years beginning on or before December 31, 2017 only, a partnership is considered terminated under former section 708(b)(1)(B) if within a 12-month period there is a sale or exchange of 50 percent or more of the total interest in partnership capital and profits. The tax return for a partnership that terminates under IRC 708(b) is due on the 15th day of the third month following the month that a partnership terminates. For example, the due date for Form 1065 of a partnership that terminates under former IRC 708(b)(1)(B) on August 8, 2017, is November 15, 2017. If a new partnership continues in operation with the same EIN, then two short year returns would need to be filed for the year. One return for the period ending August 8th, and one return for the period beginning August 9th. The return for the first short period (201708) is due November 15, 2017, while the return for the second short period (201712) is due on the normal return due date of March 15, 2018. If multiple returns are filed under the same EIN citing former IRC 708(b)(1)(B) or the technical termination box is checked on the Form 1065 tax return (through 2017 revisions), and one of the returns is a short period return, reprocess the short period return to the proper tax period and release the -A freeze. When reprocessing a short period return that is filed late, research CC BMFOLT to determine if the taxpayer qualifies for First-Time Abatement (FTA). If the taxpayer does qualify for FTA, edit computer condition code (CCC) “R” to suppress the FTF penalty. If the taxpayer does not qualify for FTA, do not edit CCC “R” and allow the systemic assessment of the penalty. 21.7.4.4.2.9.3 (10-01-2021) Amended Returns for Bipartisan Budget Act (BBA) Partnerships for Taxable Years Beginning in 2018 and 2019, Rev. Proc. 2020-23 The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P.L. 116-136, 134 Stat. 281 (March 27, 2020), provides retroactive tax relief that affects partnerships, including relief for the taxable years ending in 2018, 2019, and in some cases 2020. Without the option to file amended returns, as granted in the revenue procedure, Bipartisan Budget Act (BBA) partnerships might not be able to take advantage of CARES Act benefits. Rev. Proc. 2020-23 allows eligible partnerships to file amended partnership returns for taxable years beginning in 2018 and 2019 using a Form 1065, U.S. Return of Partnership Income (Form 1065), with the “Amended Return” box checked, and issue an amended Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc. (Schedule K-1), to each of its partners. Eligible partners must file amended returns pursuant to the Revenue Procedure before September 30, 2020. An amended return filed under this Revenue Procedure has no impact on the IRC 6235(a)(1) statute of limitations for making partnership adjustments (unlike an Administrative Adjustment Request (AAR), which extends the IRC 6235(a)(1) date to 3 years from the date that the AAR is filed). Rev. Proc. 2021-29 allows some partnerships that filed a partnership return and all required Schedules K-1 for tax years beginning in 2018, 2019, or 2020 to file amended returns with corresponding Schedules K-1 before October 15, 2021. Notwithstanding the filing relief pursuant to the Revenue Procedure, a BBA partnership that files an amended return pursuant to the Revenue Procedure is still subject to the centralized partnership audit procedures enacted by the BBA. Therefore, BBA original returns as well as amended returns filed under Revenue Procedure 2020-23 are subject to the centralized audit procedures under BBA. Amended returns may take into account tax changes brought about by the CARES Act as well as any other tax attributes to which the partnership is entitled by law. This guidance applies to partnership amended returns filed (paper or electronic) no earlier than April 8, 2020 and before September 30, 2020 for tax periods beginning in 2018 and 2019, including both calendar and fiscal years. Revenue Procedure 2020-23 instructs the partnership to file Form 1065, U.S. Return of Partnership Income, with "FILED PURSUANT TO REV PROC 2020-23" , clearly shown at the top of the Form 1065, with the “Amended Return” box checked, and amended Schedules K-1 (Partner’s Share of Income, Deductions, Credits, etc.) attached for each of its partners. If the partnership files an amended return that does not adhere to these specific instructions (i.e., uses a Form 1065X or Form 8082, or does not check the correct box on a Form 1065), the IRS will accept the amended return as long as: 1. “FILED PURSUANT TO REV PROC 2020-23” is clearly shown, and 2. Amended Schedules K-1 are attached. Examples: If partnership files using Form 1065X (instead of Form 1065 with “Amended Return” box checked), as long as amended Schedules K-1 are attached and “FILED PURSUANT TO REV PROC 2020-23” is clearly shown at the top of the Form 1065X. If partnership files using Form 8082 with Form 1065 (with the “Amended Return” box checked), as long as amended Schedules K-1 are attached and “FILED PURSUANT TO REV PROC 2020-23” is clearly shown at the top of the Form 1065. If partnership files a duplicate Form 1065 (without checking the “Amended Return” box), with amended Schedules K-1 attached and “FILED PURSUANT TO REV PROC 2020-23” is clearly shown at the top of the Form 1065. Process amended returns without regard to open examination activity (if any of the following apply): If a TC 420 is on the module, Post TC 290 for zero (.00). • If AIMS status is greater than (>) 08, forward the amended return or copy to the controlling Examination group/function according to existing procedures. Input TC 971 action code 013. • If AIMS status is equal to, or less than (<) 08, send to files. If no TC 420, Post TC 290 for zero (.00) Note: Forward any amended partnership return filed with “FILED PURSUANT TO REV PROC 2020-23” at the top, attached to Form 8985, Pass -Through Statement - Transmittal/Partnership Adjustment Tracking Report, and Form 8986, Partner’s Share of Adjustment(s) to Partnership-Related Item(s), (instead of Amended Schedules K-1) to the Ogden BBA Unit, Mail Stop 4705. Note: Administrative Adjustment Requests (AARs) filed without any statement at the top should be processed in the usual manner. 21.7.4.4.2.10 (01-01-2005) Multiple Filed Form 1065 Banks acting as managers for underwriting syndicates to issue bonds are permitted to use the same EIN when filing partnership returns on behalf of each syndicate. TRNS 193s are suppressed on these cases. The first return posts as a TC 150 and subsequent returns as TC 976s. A "Consolidated Transcript" is generated when overflow conditions are reached. Action required: Input TC 290 $.00 to have the transcript of the TC 976 posting and the original return re-filed under the adjustment DLN. Use blocking series 00 (with original) or 17 (without original). 21.7.4.4.2.11 (12-08-2023) CP 282 Notice, Notification of Possible Additional Partnership Filing Requirements (Withholding Tax on Foreign Partners) A CP 282 Notice, Notification of Possible Additional Partnership Filing Requirements, is issued to Form 1065 filers who marked the "YES" checkbox next to question 14 on tax year 2018 forms and subsequent (question 16 on prior year forms), Foreign Partners, on Schedule B, Form 1065. This shows that the partnership had foreign partners (for purposes of IRC 1446) during the tax year. Both the Cincinnati and Ogden campuses work these responses. Generally, when a foreign person engages in a trade or business in the United States, which can occur if a nonresident alien individual, or foreign corporation is a partner in a partnership so engaged, income, gain, or loss arising from the activities of that trade or business, is considered as effectively connected to such trade or business (known as Effectively Connected Income (ECI)). It is the partnership's (CPA, attorney, accountant) responsibility to determine if the partnership has ECI allocable to a foreign partner. More information on ECI see IRM 21.8.1.12.10, Effectively Connected Income (ECI), and also see Effectively Connected Income (ECI). A partnership that has partnership items which are effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States, must report to the IRS under IRC 1446 effectively connected gross income allocable to foreign partners (without regards to distributions) on Form 8804 , Annual Return for Partnership Withholding Tax (Section 1446). In addition, they must pay a withholding tax on the effectively connected taxable income (ECTI) that is allocable to one or more partners, and file Form 8804, Form 8805, Foreign Partner’s Information Statement of section 1446 Withholding Tax and Form 8813, Partnership Withholding Tax Payment Voucher. For information on reporting and paying the Section 1446 withholding tax as well as the general reporting obligations, see Form 8804 and the Instructions for Form 8804, Annual Return For Partnership Withholding Tax, Form 8805, and Form 8813. See also Publication 515 , Withholding of Tax on Nonresident Aliens and Foreign Entities. Special rules apply to publicly traded partnerships. Unlike all other partnerships which withhold in the year the ECTI is allocated to a foreign partner, publicly traded partnerships withhold in the year there is a distribution to a foreign partner. Also, instead of filing Form 8804, Form 8805, or Form 8813, publicly traded partnerships must file Form 1042 and Form 1042-S. If the taxpayer contacts IRS and states: If And Then Not liable Taxpayer incorrectly checked the yes box or if an input error was made by IRS Acknowledge receipt of the issue. Apologize, if our error. Advise TP you will notate their file. Use TP correspondence or if telephone inquiry, prepare Form 4442/Form 4442 DI/AMS, as source document and in the remarks field, state TP not liable. Associate the above document to Files by inputting TC 290 $.00 in blocking series 17 or follow local procedures. Not liable Taxpayer correctly checked the yes box and had effectively connected gross income allocable to foreign partners (without regards to distributions) but had no ECTI allocable to any foreign partners Tell Taxpayer they still must file Form 8804, but not Form 8805 or Form 8813. Liable Needs forms Send necessary forms to TP or give toll-free forms number. Instruct TP to file at OIRSC Ogden, UT, 84201 Liable Original return(s) attached Route to Ogden Liable TP states that they have already filed and sends clearly marked copy of return(s) Destroy as classified waste, respond only if TP asks question. Note: Classified waste is documentation containing taxpayer entity or account information that is not part of the case and is not needed for audit trail purposes. Refer to IRM 21.5.1, General Adjustments, for guidance on handling classified waste to prevent inadvertent/unlawful destruction of records. Note: If the taxpayer states they had no taxable income, it is not a valid response. Advise the taxpayer they either marked the checkbox next to question 14 on tax year 2018 forms and subsequent (question 16 on prior year forms), Foreign Partners, on Schedule B, Form 1065, indicating that the partnership had foreign partners (for purposes of IRC 1446). Ask the taxpayer if this is correct and if they are liable or not liable, follow the chart above based on their response. 21.7.4.4.2.12 (10-01-2019) Form 1065 Filed under Rev. Proc. 2003-84 Rev. Proc. 2003-84, 2003-48 I.R.B. 1159, allows certain partnerships that invest in tax-exempt obligations to make an election that enables the partners to take into account monthly inclusions required under IRC 702 and IRC 707(c) of the IRC and provides rules for partnership income tax reporting. Thus, a partnership that has a monthly closing election in effect for the entire taxable year and meets the other requirements in section 8 of this revenue procedure, is not required to file a Form 1065 or issue Schedules K-1 (Form 1065). An eligible partnership makes a monthly closing election by providing in the entity’s governing documents that the partnership is making a monthly closing election that is effective as provided under section 5.02 of this revenue procedure and all partners consent to the election. The monthly closing election is effective on the later of: The start-up date of the partnership (as defined by section 4.05(1) of this revenue procedure), or The first day of the month in which the provisions described in section 5.01 of this revenue procedure is first included in the entities governing documents. A partnership must file an abbreviated return (considered abbreviated because only certain information is required and completed on the form) for the first taxable year during which the monthly closing election is in effect. The abbreviated return is filed by the date the partnership’s income tax return is ordinarily due and must be signed by a person with the authority to sign the partnership’s Form 1065 return. Taxpayers must type or write the words "Filed in Accordance with Rev. Proc. 2003-84" across the top of the form. See Rev. Proc. 2003-84 for the specific information that is included on the abbreviated return. Action required: If a taxpayer states they previously filed a Form 1065 under Rev. Proc. 2003-84, conduct account research to look for a copy of the abbreviated return for the first taxable year for which the election is in effect. Check the filing requirements to see if they are still active. If so, delete them by inputting TC 591 closing code 025 via command code FRM49. If a taxpayer is penalized for failing to file Form 1065 for a tax period AFTER they have filed the required abbreviated return, abate the penalty using penalty reason code 045, Service Error. Either contact the taxpayer by phone or send Letter 3012C, Partnership Return Filing Requirements: Form 1065, and advise the taxpayer that, based on the information provided they are not required to file future partnership returns. Apologize for any inconvenience. 21.7.4.4.2.13 (10-01-2018) Schedule M-3 (Form 1065), Net Income (Loss) Reconciliation for Certain Partnerships Beginning with tax year 2006 returns, any entity that files Form 1065 or Form 1065-B must complete and file Schedule M-3 in lieu of Schedule M-1, Reconciliation of Income (Loss) per Books With Income (Loss) per Return, if any of the following applies (See the Instructions for Form 1065 for more information): The amount of total assets at the end of the tax year reported on Form 1065, Schedule L, line 14, column (d), is equal to $10 million or more. The amount of adjusted total assets for the year is equal to $10 million or more. The amount of total receipts (as defined in the instructions for "Codes for Principal Business Activity and Principal Product or Services" in the Instructions for Form 1065), for the taxable year is equal to $35 million. An entity that is a reportable entity partner with respect to the partnership owns or is considered to own, directly or indirectly, interest of 50 percent or more in the partnership's capital, profit, or loss, on any day during the tax year of the partnership. 21.7.4.4.2.14 (10-14-2009) Payment by Credit or Debit Card (Pay by Phone or Internet) Form 1041 and Form 1065 filers may pay their taxes by phone or internet using a credit or debit card. Service providers accept payments made using an American Express Card, Discover Card, MasterCard, or VISA Card. The IRS does not determine which credit cards the service providers accept. Taxpayers have the option to either use an IRS e-pay service provider or an integrated IRS e-file and e-pay service provider. The service providers offer these options to taxpayers who file on paper or electronically. The payment options are available 24 hours a day, 7 days a week. The service providers charge convenience fees for the services. See IRM 21.2.1.48.5, Credit or Debit Card Payments (Pay by Phone or Internet), for more specific information. Also see IRM 21.2.1.48.4, Payment by Credit or Debit Card (Integrated e-file and e-pay), for other payment options. 21.7.4.4.2.15 (10-01-2021) Substantial Built-In Loss in the Case of Transfer of Partnership Interest The Tax Cuts and Jobs Act of 2017 (TCJA), Section 13502 Modify Definition of Substantial Built-In Loss in the Case of Transfer of Partnership Interest, amended the definition of a substantial built-in loss with respect to a transfer of a partnership interest. Under section 743(d), a partnership has a substantial built-in loss if: The partnership’s adjusted basis in the partnership property exceeds the fair market value (FMV) of the property by more than $250,000, or The transferee partner is allocated a loss of more than $250,000 if the partnership assets were sold for cash equal to their FMV immediately after the transfer occurred. This applies to transfers of partnership interests after December 31, 2017. See IRC 743(d). If the partnership is required to adjust the basis of partnership assets under IRC 743(b) or IRC 734(b) because of a substantial built-in-loss (as defined under IRC 743(d)) or substantial basis reduction (as defined under IRC 734(b)) they must mark yes in question 10(c) of the Form 1065. 21.7.4.4.3 (01-01-2005) Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return Form 1066 is used to report income, deductions, gains and losses from the operation of a REMIC. In addition, the form is used to report and pay the taxes on net income from prohibited transactions, foreclosure property, and contributions after the start-up day. Form 1066 is filed at the Ogden Submission Processing Center (including International forms). The MFT is 07, Tax Class 3, and Document Code 60. 21.7.4.4.3.1 (05-08-2020) Form 1066 Due Dates, Payments, and Extensions to File Form 1066 is a calendar year return. For taxable years beginning before January 1, 2016, the federal income tax return of a REMIC is due on or before the 15th day of the fourth month following the close of the taxable year as shown on the top of the return. If the REMIC ceases to exist before the end of the calendar year, a short period return is due on the 15th day of the fourth month following the date the entity ceased to exist. Section 2006(a)(1) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Act), P. L. 114-41, changed the income tax return due date for REMICs and is effective for taxable years beginning after December 31, 2015. Taxpayers must file the federal income tax returns of REMICs under section 6031 made on the basis of the calendar year on or before the 15th day of March following the close of the calendar year. Taxpayers filing such returns made on the basis of a fiscal year must file on or before the 15th day of the third month following the close of the fiscal year. Therefore, TY 201612 calendar year Form 1066 REMIC returns are due March 15, 2017. A REMIC must pay the tax in full by the due date of the return. No estimated tax payments are required. REMICs must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and income tax). Electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). When tax is reported on a late filed Form 1066, the return is subject to the Failure to Pay Penalty under IRC 6651(a)(2), and the Failure to File Penalty under IRC 6651(a)(1). If no tax is reported on the return, the REMIC is subject to the Failure to File penalty under IRC 6698. See IRM 20.1.2.4.3.4, REMIC Special Considerations, for information on working penalty abatement requests. Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1066 is granted if the taxpayer completes Form 7004 properly and files the form by the due date of the Form 1066 to which it applies. For tax year 2008 and prior, Form 7004 granted an automatic 6-month extension period for most BMF business returns. However, beginning January 1, 2009, to reduce the burden on recipients of Schedules K-1, the extension of time to file REMIC returns was shortened from six months to five months. Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the due date for filing the tax return of a REMIC, and thus the date by which a REMIC must file Form 7004 has changed. Additionally, section 2006(b) changed the duration of the extension of time to file Form 1066. The provisions are effective for tax years beginning after December 31, 2015: The due date of a REMIC return, by which Form 7004 is filed, is the 15th day of the third month following the close of the REMICs tax year. The duration of the automatic extension of time to file Form 1066 has increased to six months. See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning on or Before December 31, 2015, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning After December 31, 2015, for more general information. 21.7.4.4.3.2 (10-01-2021) Amended Form 1066 and Form 1065X, Amended Return or Administrative Adjustment Request (AAR) Taxpayers can file amended Form 1066. They are "G" coded and routed to Ogden Accounts Management. Form 1065X is available for use by REMICs that file paper returns. The 1065X is not available in the e-file system for at least a year and possibly much longer. Taxpayers may use Form 1065X to amend prior year Form 1066 returns where the statute is open. Route all amended returns and correspondence by a real estate mortgage investment conduit (REMIC, Form 1066) to Ogden Accounts Management Campus, Mail Stop 6740. For CII cases, do not select “Reroute.” Update the CII case page to Form 1066, MFT 07, and reassign to IDRS number 0441605253. If the amended return or correspondence involves "foreclosure property," see IRM 21.7.4.4.3.4, Foreclosure Property Extension Requests. Action required: Use blocking series 15 when adjusting Amended Form 1066 are not Cat-A criteria 21.7.4.4.3.3 (01-01-2005) Schedule Q (Form 1066), Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation A copy of Schedule Q is sent to each residual interest holder by the last day of the month following the end of the calendar quarter. Schedule Q notifies the taxpayer of their share of the REMICs quarterly taxable income (or net loss), the excess inclusion with respect to their interest, and their share of the REMICs IRC 212 expenses for the quarter. The original Schedules Q (Copy A) for all quarters are attached and filed with Form 1066. 21.7.4.4.3.4 (11-20-2023) Foreclosure Property Extension Requests Route all amended returns and correspondence by a real estate mortgage investment conduit (REMIC, Form 1066) to Ogden Accounts Management Campus, Mail Stop 6715. Also, route all requests for extension of "foreclosure property" grace period pursuant to IRC 856(e) to Ogden Accounts Management, Mail Stop 6740. If CII case re-control to 0441605253. If the correspondence includes a Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, the form must be signed by the taxpayer (Typically by the trustee of the account.). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ An extension request is timely if it is filed more than 60 days before the grace period would expire. The grace period expires as of the close of the third taxable year following the taxable year in which the REMIC acquired the foreclosure property (the second taxable year for qualified health care properties). Accordingly, if the grace period would expire on December 31 of a particular year, the extension request must be dated and filed by October 31 of that year for consideration of timely filing. See IRM 3.11.212.5, Determination of Timely Filing – General Instructions, for more information. If the request is timely filed, Ogden Accounts Management will send the taxpayer a Letter 96C, Acknowledgment Letter for General Use/Inquiry. In addition, Ogden will input a CII history statement that an extension request was received and that a Letter 96C was issued. Capture the screen of the Letter 96C for a record of the paragraphs used. In the 96C letter, use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the first two of the following bullets and follow the instructions in the third bullet: If your extension request for foreclosure property described in IRC 856(e) or IRC 860G(a)(8) is timely filed (i.e., more than 60 days before the grace period expires), then the grace period shall be automatically extended: (1) in the case of qualified health care property, for 4 years less the term of any prior grace period extension, and (2) in other cases, for three years. However, if your extension request is timely filed and the IRS subsequently reviews your request and determines that it shall not be granted, then the automatic extension of the grace period set out in the preceding paragraph shall end after the 30th day after you are notified by certified mail that the request was not granted. (See Treas. Reg. Section 1.856-6(g)(5).) Attach a copy of the extension request that contains the taxpayers name, their EIN, date of request, and property description (the address) of each property that the taxpayer is requesting a foreclosure extension for. If the request is not timely filed, Ogden Accounts Management will send the taxpayer a Letter 3064C, IDRS Special Letter. In addition, Ogden will input a CII history statement that an extension request was received and that a Letter 3064C was issued. Capture the screen of the Letter 3064C, for a record of the paragraphs used. In the Letter 3064C, use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the first two of the following bullets and follow the instructions in the third bullet: An extension request for foreclosure property described in IRC 856(e) or IRC 860G(a)(8) must be filed more than 60 days before the grace period would otherwise expire. Your request is untimely since it was filed after this deadline. The property is also ineligible for the automatic extension provided for a timely filed request. See Treas. Reg. Sections 1.856-6(g) (3), (5). While your extension request was untimely filed, you may make a separate request for the IRS to treat it as timely filed, pursuant to Treas. Reg. Section 1.856-6(g) (6), by establishing that (1) there was reasonable cause for failure to file the extension request within the prescribed time and (2) you filed the separate request within a reasonable time under the circumstances. Attach a copy of the extension request that contains the taxpayer’s name, its EIN, date of request, and property description (the address) of each property that the taxpayer is requesting a foreclosure extension for. If a subsequent inquiry is received "AFTER" a Letter 96C or Letter 3064C is sent (check ENMOD), advise the taxpayer that they may call the non-toll-free numbers below if they have any questions and may speak to one of the: Subject Matter Experts RICs, REITs, and REMICs Internal Revenue Service LB&I, Financial Services 847-737-6666 Between 8:30 AM and 5:00 PM (CST) 21.7.4.4.4 (10-01-2019) Form 1120 Series Returns, Corporation Income Tax Corporations use Form 1120 series returns to report income, gains, losses, deductions, and credits of U.S. corporations. Corporations must file an income tax return regardless of the amount of their income. For federal income tax purposes, the term "corporation" includes associations, joint stock companies, and partnerships that are treated as corporations under section 7704 or elect the classification as corporations. An officer of the corporation must sign the Form 1120. The MFT is 02 and the tax class is 3. See Document 6209 for codes and filing requirement codes. Use blocking series 00 when making adjustments when the original return is secured and blocking series 15 without the original return. Form 1120, Form 1120-F, and Form 1120-S can be filed electronically along with various forms and schedules. See IRM 21.7.4.4.4.15 , Modernized e-file (MeF) - System Functionality Overview, for more information. 21.7.4.4.4.1 (03-18-2020) Types of Form 1120 Corporations can file several types of Form 1120 depending on its business. Listed below are the types in the sequence they appear in this section: Form 1120, U.S. Corporation Income Tax Return Form 1120-S, U.S. Income Tax Return for an S Corporation Form 1120-H, U.S. Income Tax Return for Homeowners Associations Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return Form 1120-L, U.S. Life Insurance Company Income Tax Return Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return (processed as NMF) Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons Form 1120-F, U.S. Income Tax Return of a Foreign Corporation Form 1120-FSC, U.S. Income Tax Return for Foreign Sales Corporation Form 1120-SF, U.S. Income Tax Return for Settlement Funds Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies Form 1120-X, Amended U.S. Corporation Income Tax Return Form 1120-C, U.S. Income Tax Return for Cooperative Association 21.7.4.4.4.2 (05-09-2016) Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016 A newly organized corporation, except a Subchapter S or personal service corporation, can elect any accounting period (Fiscal Year Month (FYM)). Generally, an S corporation must file on the calendar year unless it meets certain criteria as outlined in the Instructions for Form 1120-S or makes a section 444 election (See IRM 21.7.4.4.7, Form 8752, Required Payment or Refund Under Section 7519, for information on the tax year of section 444 filers). For taxable years beginning before January 1, 2016, most Form 1120 corporation returns (except Form 1120-C filers who meet the requirements of section 6072(d) and Form 1120-IC-DISC) are due on or before the 15th day of the third month after the end of the tax year. A corporation filing a short period return must file by the 15th day of the 3rd month following the end of the short tax year. A dissolving corporation is required to file a final return for the short period that begins on the first day of its normal accounting period and ends on the date of dissolution. The return is due on or before the 15th day of the 3rd month following the close of the short tax year. In addition, for taxable years beginning before January 1, 2016, the corporation could request an automatic 6-month extension of time to file on Form 7004. For example, Form 1120 returns for tax year 201512 are due on or before March 15, 2016 and if an extension of time to file is requested timely the return is due on or before September 15, 2016. If the due date of a Form 1120 series return falls on a Saturday, Sunday, or legal holiday, the corporation can file on the next day that is not a Saturday, Sunday, or legal holiday. See IRM Exhibit 3.11.16-2, Due Date Charts, for Form 1120 series due dates. 21.7.4.4.4.2.1 (03-01-2020) Form 1120 Corporate Series Return Due Dates – Tax Years Beginning after December 31, 2015 Section 2006(a)(1) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the return due date for C corporations and is effective for taxable years beginning after December 31, 2015. The federal income tax return for the Form 1120 family of returns (except Form 1120-C, Form 1120-S and Form 1120-IC-DISC) is due on or before the 15th day of the fourth month following the close of the C corporation’s tax year, with one exception as follows: The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning after December 31, 2015 and before January 1, 2026. See IRM 3.11.16-2, Due Date Chart, for Form 1120 series due dates. Section 2006(c) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, also changed the duration of the extension of time to file income tax returns for most C corporations. For taxable years that end on December 31 and begin before January 1, 2026, the statutory automatic extension of time to file is five months. However, Regulation 1.6081-3 provides that Form 1120 filers, including calendar year filers, are allowed a six-month automatic extension. If the corporation files for a fiscal year that ends on June 30 and ends before January 1, 2026, the duration of the automatic extension is seven months. It is possible to receive short period final returns for periods that began after December 31, 2015 and ended prior to January 1, 2017. Due to the late date that the legislation was passed, IDRS programming was not completed until January 2017. Therefore, interim guidance was developed to handle Form 1120 returns received in 2016. See IRM 21.7.4.4.4.2.1, Form 1120 Short Period Final Returns with Tax Period Beginning After December 31, 2015, for more information. The return due date for Form 1120-S has not changed. Form 1120-S is due on or before the 15th day of the third month after the end of the tax year. For calendar year filers, Form 1120-S is due on or before the 15th day of March. The return due date for Form 1120-C remains the same for taxpayers who meet the requirements of section 6072(d), and the return due date for Form 1120-IC-DISC also remains the same (See IRM 21.7.4.4.4.11.6 , Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return and IRM 21.7.4.4.4.11.14, Form 1120-C, U.S. Income Tax Return for Cooperative Associations, for more information on the due date of each return). If the due date of a Form 1120 series return falls on a Saturday, Sunday, or legal holiday, the corporation can file on the next day that is not a Saturday, Sunday, or legal holiday. 21.7.4.4.4.2.1.1 (02-10-2020) Form 1120 Short Period Final Returns with Tax Period Beginning After December 31, 2015 The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41, changed the due date for filing certain Form 1120 corporate returns for taxable years beginning after December 31, 2015. See IRM 21.7.4.4.4.2.1, Form 1120 Corporate Series Return Due Dates – Tax Years Beginning after December 31, 2015, for more information. For taxable years beginning after December 31, 2015, the return due date for the Form 1120 family of returns (except Form 1120-C, Form 1120-S, and Form 1120-IC-DISC) changed from the 15th day of the third month (March 15th for calendar year filers) to the 15th day of the fourth month (April 15th for calendar year filers) following the close of the tax year with one exception: The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning after December 31, 2015 and before January 1, 2026. Work requests to update programming were not implemented until January 2017. Therefore, IRS computer systems did not consider returns with the new due date that were processed before 2017 late by one month, as incorrect penalties and interest would have been assessed if the IRS did not take action to prevent the assessment. C corporations filing short period final returns with tax years beginning after December 31, 2015, that were previously due by the 15th day of the third month are now due by the 15th day of the fourth month, except for those C corporations with a taxable year ending on June 30 and beginning prior to January 1, 2026, which continue to be due the 15th day of the third month. These short period returns may not have been processed correctly during 2016. Corporate returns marked final are assigned computer condition code (CCC) “F” and/or short period returns assigned CCC “Y” that end on or before November 30, 2016, and charged penalties and interest, will have the notice fall out to Notice Review (NR) to determine if it is correct or needs adjusting. IRM 3.14.2.11, 1120 Workaround – Short Period Return with Tax Period Beginning Date of 201601 and Subsequent (Processing Year 2016 Only), was updated to include guidance for Submission Processing for a workaround in Notice Review (NR) who will review affected notices via NRPS selection criteria and will abate or recalculate penalties and/or interest when necessary on corporate returns. Note: IRM subsection 3.14.2.11 was removed from the IRM located on SERP. If you need to view subsection 3.14.2.11, see the January 1, 2017 revision on the Electronic Publishing Website. If the tax period beginning date is after December 31, 2015, and the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: If the tax period ends on June 30, 2016, then the penalty is correct and no action is necessary. If the tax period beginning date is after December 31, 2015, and the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If an inquiry is received from a taxpayer stating they believe the return was not late, determine whether it meets the criteria in paragraph (7) above. Follow the procedures in the paragraph if they meet the criteria. Input penalty reason code 043 when adjusting. Also, input hold code 0 and allow the adjustment notice to generate. 21.7.4.4.4.2.1.2 (10-01-2020) Correcting the Form 1120 Return Due Date For taxable years beginning before January 1, 2016, most Form 1120 series corporation returns (except Form 1120-C filers who meet the requirements of section 6072(d) and Form 1120-IC-DISC) are due on or before the 15th day of the third month after the end of the tax year. A corporation filing a short period return must file by the 15th day of the 3rd month following the end of the short tax year. A dissolving corporation is required to file a final return for the short period that begins on the first day of its normal accounting period and ends on the date of dissolution. The return is due on or before the 15th day of the 3rd month following the close of the short tax year. For taxable years beginning after December 31, 2015, the Return Due Date (RDD) for the Form 1120 family of returns (except Form 1120-C, Form 1120-S, and Form 1120-IC-DISC) has changed from the 15th day of the third month (March 15th for calendar year filers) to the 15th day of the fourth month (April 15th for calendar year filers) following the close of the tax year with one exception: The income tax return of a C corporation that ends its tax year on June 30th which remain due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning after December 31, 2015 and before January 1, 2026. Note: If the parent corporation of a newly acquired corporation elects to file a consolidated return, the newly acquired corporation must file a return for the short period that ends on the date of the acquisition. The due date for that short period return is the earlier of the normal return due date for the acquired corporation if it had not filed a short period return, or the due date of the parent corporation including extensions. Because the computer cannot know the correct return due date for this type of short period return, the due date shown on IDRS may be incorrect. See IRM 21.7.4.4.4.4, Consolidated Returns, paragraph 5, for rules regarding the due date of that short period return. If it is determined that IDRS has the incorrect RDD for a Form 1120 case, employees can update it and the computer will systemically adjust the penalty(s) and/or interest (if charged) to the correct amount. The return due date field is found on TXMOD and on page 1 of Command Code (CC) BMFOLT. The field represents the RDD without regard to any extensions. For modules without a TC 766, the process is very simple: the only action needed is to use CC REQ77 /CC FRM77 to input TC 971 with Action Code (AC) 358. Enter the correct return due date as the transaction date of the TC 971. Follow the instructions below for modules with an unreversed TC 766. Use Hold Code (HC 4) when reversing the transactions below. If the TC 766 does not contain a Credit Reference Number (CRN), review the return on CC TRDBV and on CC BMFOLA and: Determine whether the credit is from Form 4136, Credit for Federal Taxes Paid on Fuel. If CRN(s) are found, reverse the TC 766 and input the correct CRN for a negative amount. This will generate TC 767 with CRN 450 and will not unpost. Determine if the credit is from other than Form 4136. If so, reverse the TC 766 with TC 767 for negative amount. For example, the Form 2439, Credit for Tax Paid on Undistributed Capital Gains of RICs or REITs does not have a CRN. Note: CC BMFOLA may also reflect CRN 450 with an amount. The amount of CRN 450 is the sum of the other CRN(s) amounts listed under CC BMFOLA. Input the individual CRNs that make up the sum of the CRN 450. If the TC 766 contains a CRN 450 with: The same DLN as the return, review the return (Form 4136 on CC TRDBV) to identify the credit reference number(s) and amount(s) that made up the CRN 450. Input the applicable CRN(s) and amount(s) as negative amounts to reverse the TC 766 with CRN 450. For example: CRN 359 for 10 percent Gasohol and CRN 369 for Aviation Fuel. Doc code 54 or doc code 47, review CC BMFOLA to identify the CRN(s) and amount(s) that made up the CRN 450 amount. Input the applicable CRN(s) and amount(s) as negative amounts to reverse the TC 766 with CRN 450. For example: CRN 360 for Non-taxable Use of Undyed Diesel Fuel and CRN 362 for Gasoline. If the TC 766 contains a CRN other than 450, input that CRN with a negative amount to reverse the TC 766. For example: CRN 793, Form 8827, Credit For Prior Year Minimum Tax – Corporations. After the reversal transactions are input for all posted TC 766 transactions in the module, use CC REQ77 / FRM77 to input TC 971 with AC 358. Enter the correct return due date as the transaction date of the TC 971. Input Posting Delay Code (PDC) 1 to ensure that all of the TC 767 transactions have posted before TC 971 attempts to post. If any unreversed TC 767 transactions remain on the module, the TC 971 will go unpostable with UPC 354 Reason Code 9. After the TC 971 AC 358 is input, re-input all of the TC 766 transactions that were reversed using the same CRN as that with which they were reversed. (If the TC 766 was reversed with no CRN, re-input without a CRN.) Input PDC 2 with the adjustment and with HC 3. See IRM 21.7.4.4.5, Estimated tax Overpayment, Credit Elect - General, if a credit elect is involved. 21.7.4.4.4.3 (10-01-2022) Personal Service Corporations (PSC) A personal service corporation, as defined in Regulations Section 1.441-3(c), must use the calendar year, unless it meets one of the criteria below: The corporation can establish to the satisfaction of the Commissioner that there is a substantial business purpose for having a different tax year. (TC 054 identifies approved business purposes.) The corporation elects under Section 444 to have a tax year other than its required tax year. (These corporations must file Form 8716, Election to Have a Tax Year Other Than a Required Tax Year. An approved election is identified by TC 055.) Corporations with fiscal tax periods beginning before January 1, 2018, and ending after December 31, 2017, figure and apportion their tax by blending the 35 percent rate in effect before January 1, 2018 with the 21 percent rate in effect after December 31, 2017 (e.g., blended rate). See IRM 3.12.251.32, Form 1120, Tax Rates, for more information on figuring blended rates. 21.7.4.4.4.3.1 (10-01-2022) CP 224 Notice, Notice of Potential Qualification as a Personal Service Corporation The CP 224, Notice of Potential Qualification as a Personal Service Corporation, was obsoleted effective 02/01/2021. The CP 224 was issued to businesses which, based on the business activity described on the Form 1120 they filed, qualified as a personal service corporation. The notice was an informational notice to alert them to a potential issue that may affect their tax return. It further stated that a corporation is a qualified personal service corporation if it met both of the tests described in IRM 21.7.4.4.4.3(2) (a) and (b) above. Taxpayers were instructed to consider the information in the notice and review their income tax return. If they had a practitioner or other third-party prepare their return, they would contact them for assistance. The notice also stated that no further action is necessary if their return is correct as filed, or to File Form 1120-X, Amended U.S. Corporation Income Tax Return, if necessary. 21.7.4.4.4.4 (01-28-2008) Consolidated Returns An affiliated group of corporations can elect to file a consolidated income tax return. The consolidated return is filed on the basis of the common parent’s corporate annual accounting period. The consolidated return must include all the income of the parent corporation plus the income of each subsidiary for the portion of such taxable year during which it was a member of the group. Form 851, Affiliations Schedule, is filed to identify the common parent corporation and each member of the affiliated group, and for making the determination that each subsidiary corporation qualifies as a member of the affiliated group. See the General Instructions for Form 851, for the requirements to qualify as an affiliated group. An affiliated group is one or more chains of includible corporations connected through stock ownership with a common parent corporation. See IRC 1504(a) and (b) for more information. Form 851 is filed with the consolidated tax return for the group. See IRM 21.3.3.5.2, Loose Forms/Schedules, for procedures for working loose Form 851. Income not included in the consolidated return by a corporation, because it is not in the group for its complete taxable year, is reported on a separate return. See the table below. If Then The group has filed a consolidated return by the due date for filing a subsidiary’s separate return (including extensions of time) The separate return must be filed no later than the due date of such consolidated return (including extensions of time). See the Example below this table. The group has not filed a consolidated return by the due date for filing a subsidiary’s separate return (including extensions of time) Such subsidiary must file a separate return no later than the due date of such subsidiary return (including extensions of time). See Reg 1.1502-76(c)(2). Example: The scenario below describes the situation when a group has filed a consolidated return by the due date for filing of a subsidiary’s separate return (including extensions of time). Corporation A has a FY 03. Corporation Z has a FY 12. Corporation Z acquires all of the stock of Corporation A at the close of September 30, 2016. Corporation Z files a consolidated return for the group for calendar year 2016 on April 15, 2017. Since Corporation Z filed a consolidated return by the due date for Corporation A (July 15, 2017), the return of Corporation A for the short taxable year beginning April 1, 2016 and ending September 30, 2016 must be filed no later than April 15, 2017 (the due date for Corporation Zs return). No penalty or interest is due for the period January 15, 2017 (normal due date for a return with period ending September 30, 2016) through April 15, 2017. Note: Code and Edit has procedures for identifying and coding this type of return. However, sometimes these returns are not coded properly, especially if e-filed. In order to correct the account, a manual adjustment to interest and/or penalties is possible. 21.7.4.4.4.5 (10-01-2020) Extensions to File Form 1120 Series Returns Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1120 is granted if the taxpayer completes Form 7004 properly, makes a proper estimate of the tax (if applicable), files the form by the due date of the return to which the Form 7004 applies, and pays any tax that is due. Form 7004 is filed on or before the due date of the Form 1120. Form 7004 does not extend the time for payment of tax. Therefore, to avoid interest charges and a late payment penalty, payment of any balance due on line 8 of Form 7004 is required by the due date of the return for which the request for extension is filed. For tax years beginning before January 1, 2016, a taxpayer could obtain a six-month extension period for most Form 1120 series returns by filing Form 7004. Section 2006(c) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the due date for filing the tax return of most C corporations, and thus the date by which a C corporation must file Form 7004 for the Form 1120 family of corporate returns (except Form 1120-C, Form 1120-S, and Form 1120-IC-DISC) has changed. Section 2006(c) changed the duration of the automatic extension of time to file. The effective provisions for tax years beginning after December 31, 2015 show the following: The due date of a C corporation return (except Form 1120-C, Form 1120-S and Form 1120-IC-DISC), by which Form 7004 is filed, will be the 15th day of the fourth month following the close of the C corporation’s tax year, with one exception. The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning before January 1, 2026. The due date for an S corporation return is due by the 15th day of the third month after the year end. For tax years that end on June 30 and begin before January 1, 2026, the duration of the automatic extension is seven months. For all other tax years beginning after December 31, 2015, the duration of the automatic extension is six months. Note: The return due dates for Form 1120-C filers who meet the requirements of section 6072(d) and Form 1120-IC-DISC filers have not changed. Form 1120-S is a return of an S corporation. Therefore, there is no change to the extension process for filers of these returns. Due to the late date that the legislation was passed, IDRS programming was not completed until January 2017. Therefore, interim guidance was developed to handle extension requests received in 2016. Timely filed calendar year Form 7004 is no longer date stamped and the envelope is no longer retained. However, the first document within a block of these forms will contain a received date. If the form is delinquent but the postmark on the envelope is timely, Code and Edit circles the received date. Consider timely any calendar year (200312 and subsequent) Form 7004 that is not date stamped. Follow IRM 20.1.2.2.3, Extension of Time to File and Pay, for penalty abatement procedures. The taxpayer shows on line 6, Form 7004, the tentative amount of tax for the taxable year. The amount is identified by TC 620 and is for reference purposes only. Even though a corporation has an extension of time to file, a failure to pay penalty may be assessed if the amount paid on or before the un-extended due date of the return, is not at least 90 percent of the total tax shown on the relevant Form 1120. See IRM 20.1.2.2.3, Extension of Time to File and Pay, for more information. The filing of Form 7004 does not affect the amount of interest assessed. Interest is assessed on any unpaid liability from the original due date of the return until the balance is paid in full. When correspondence is received requesting an explanation of the interest and/or penalties: Phone or send Letter 219C, Corporate Penalty and Interest Explained (Form 7004). If the taxpayer states Form 7004 was timely filed, research to locate the form. Follow IRM 20.1.2.2.3, Extension of Time to File and Pay, for penalty abatement procedures. If Form 7004 posted to an incorrect period or TIN, make any necessary credit transfers and re-input Form 7004 using REQ77 to input TC460/462. See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, for additional information. 21.7.4.4.4.5.1 (10-01-2020) Form 1120 Short Period Final Returns with Tax Period Beginning After December 31, 2015 Filing Extension Requests The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41, changed the due date for filing certain Form 1120 corporate returns for taxable years beginning after December 31, 2015. See IRM 21.7.4.4.4.2.1, Form 1120 Corporate Series Return Due Dates – Tax Years Beginning after December 31, 2015, for more information. For short tax periods beginning after December 31, 2015, the federal income tax return for the Form 1120 family of returns (except Form 1120-C, Form 1120-S and Form 1120-IC-DISC) and therefore, the date by which a corporation may request an automatic extension of time to file the return using Form 7004, is the 15th day of the fourth month following the close of the corporation’s tax year with one exception as follows: The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning after December 31, 2015 and before January 1, 2026. The duration of the extension of time to file is based on the month that the corporation’s tax year ends. For tax years beginning after December 31, 2015, and before January 1, 2026, see paragraph 3 in IRM 21.7.4.4.4.5, Extensions to File Form 1120 Series Returns, for the duration of the automatic extension period. If it is determined that the Form 7004 is for a tax period beginning after December 31, 2015, and the corporate return is other than Form 1120-C, Form 1120-S or Form 1120-IC-DISC, and the extension of time to file is filed: By the 15th day of the fourth month, a six-month extension is granted. October 15th for a calendar year filer. After the 15th day of the fourth month the extension request is denied. If an inquiry is received for a tax period beginning after December 31, 2015, stating that the taxpayer filed an extension request for a corporation for the Form 1120 family of returns (other than Form 1120-C or Form 1120-IC-DISC or for tax years ending on June 30) by the 15th day of the fourth month, and if research: Verifies the claim, input TC 460 and allow an extension of the duration shown in paragraph (3) above, calculated from the due date of the applicable Form 1120. Shows that the request for extension was filed after the 15th day of the fourth month, 15th day of the third month for Form 1120-S, advise the taxpayer that the request for extension was filed late and do not abate the penalty. Note: When necessary, the tax period beginning date is determined by looking at the tax period end date of the previous tax period, if a return was previously filed for that period. If the tax period began before January 1, 2016, then the extension is late if it is filed after the 15th day of the 3rd month following the close of the tax period. 21.7.4.4.4.5.2 (10-01-2016) Taxpayers Abroad Corporations are entitled to an automatic 2 - 3 month extension to file and pay under certain conditions outlined in IRM 20.1.2.2.3.3, Taxpayers Abroad. When a corporate return is identified during processing as qualifying for the extension, Code and Edit will enter Computer Condition Code (CCC) "R" on the return if the return is filed by the extended return due date, and it will also enter CCC "D" on the return if the tax shown on the return was paid by the extended return due date. CCC "R" is not entered on returns that were filed after the extended return due date, nor is CCC "D" entered on returns where the tax shown on the return was not paid by the extended return due date. This presents a problem since BMF does not recognize the automatic extension without manual intervention. A corporation may respond to a penalty notice indicating that it qualifies for the extension under 26 CFR 1.6081-5. Before taking any action verify that it does qualify see IRM 20.1.2.2.3.3, Taxpayers Abroad. If the corporation qualifies, input TC 460 to allow an extension to the 15th day of the sixth month following the end of the tax period. This will cause the Failure to File penalty to recompute. Since there is no way to input an extension of time to pay, the Failure to Pay penalty for paying late will need a manual adjustment if the Form 1120 reported tax and the corporation did not pay the tax by the original return due date. If the automatic extension is a three-month extension, multiply the unpaid tax on the original return due date by 1.5 percent (0.015). If the automatic extension is a two-month extension, multiply the unpaid tax on the original return due date by 1.0 percent (0.010). Input TC 271 for the computed amount as a negative number. Use reason code 062 (so as not to restrict the FTP penalty) and penalty reason code 030. Use hold code 0 to allow issuance of an adjustment notice. 21.7.4.4.4.6 (10-01-2024) Change in Accounting Period (Corporations) Under certain conditions, corporations (other than Subchapter S or personal service corporations and as defined in Revenue Procedure 2006-45 as clarified and changed by Revenue Procedure 2007-64) may obtain automatic approval to adopt, change, or retain its annual accounting period under IRC 442. See Rev. Proc. 2006-45, 2006-45 I.R.B. 851, In addition, see Rev. Proc. 2007-64, 2007-42 I.R.B. 818, which changes a scope provision and one of the terms and conditions under with IRS grants approval under Rev. Proc. 2006-45. If a taxpayer does not qualify to make the change under the automatic procedures of Rev. Proc. 2006-45, the taxpayer must make the change under Rev. Proc. 2002-39, I.R.B. 2002-22, (as clarified and modified by Notice 2002-72 and modified by Rev. Procs. 2003-34, 2003-79, and 2018-17). Generally, to request a ruling to adopt, change or retain a tax year, the taxpayer must file its Form 1128 by the due date (not including extensions) of the federal income tax return for the first effective year. To request automatic approval to change a tax year under Rev. Proc. 2006-45 , the taxpayer must file by the due date of the return (including extensions) for the short period required to effect the change. Under Pub. L. No. 114-41, section 2006(a), 129 Stat, 443, the due date for filing C corporation returns under IRC 6072 (a), the due date for filing C corporation returns was changed from March 15 to April 15 for calendar year taxpayers and from the 15th day of the third month following the close of the taxable year to the 15th day of the fourth month following the close of the taxable year for fiscal year taxpayers. For a C corporation with a taxable year ending on June 30, the change in due date begins in 2026. This change applies for taxable years beginning after December 31, 2015, except for a corporation with a year ending on June 30, in which case the new rule applies for tax years beginning after December 31, 2025. Pub. L. No. 114-41, section 2006(a). Entities other than corporations may also obtain automatic approval to adopt, change, or retain its annual accounting period under IRC 442. See Rev. Proc. 2006-46, 2006-45 I.R.B. 859. See Publication 538, Accounting Periods and Methods, for more information on accounting periods and the Instruction to Form 1128. A change in accounting period is identified by TC 053 or 054 on cc ENMOD. 21.7.4.4.4.6.1 (10-01-2024) Taxpayer Requests Ruling on Accounting Period Form 1128, Application To Adopt, Change, or Retain a Tax Year, is used by taxpayers in determining their tax accounting periods. Ordinarily a taxpayer adopts a tax year simply by filing the taxpayer’s first tax return on that year, without also filing Form 1128. However, if the taxpayer either needs permission to adopt its first year, or a taxpayer is changing its tax year, the taxpayer must file both the relevant tax return (normally a short-period return) and a Form 1128. Example: To illustrate, assume a newly formed corporation of individuals, all of whom use the calendar year, purchased a ski club that operates between September and March. Under IRC 706(b)(1)(B), the corporation could adopt the calendar year simply by filing its first tax return using that year. However, to adopt a tax year that is not the calendar year (for example, a tax year ending in March), the corporation must submit a ruling request to the National Office in Washington D.C., along with a user fee, a Form 1128, and its proposed first-year tax return, and ask the National Office to approve its request to adopt a tax year ending in March, under the seasonal business test. See Rev. Proc. 2002-39, 2002-1 C.B. 1046, section 5.03(b)(2)(b) (c). Certain changes to a tax period made under "automatic procedures" , are found in various revenue procedures. If a taxpayer is within the scope of an automatic procedure, the Commissioner of Internal Revenue is considered to have consented to the taxpayer’s request and no user fee is charged. See, for example, Rev. Proc. 2006-45, 2002-37 C.B. 442, or Rev. Proc. 2006-46, 2002-38 C.B. 442. A taxpayer making a change under an automatic procedure submits the Form 1128 and a short-period tax return effecting the change to the designated IRS office/processing center. Automatic procedures are under the exclusive jurisdiction of the designated IRS offices; thus, taxpayers should not send Form 1128 requesting an automatic procedure to the National Office. If the adoption, change, or retention of an accounting period is not covered by an automatic procedure, then the taxpayer’s request falls within the jurisdiction of the National Office. A taxpayer who requests a ruling must submit not only the request itself, but also a legal argument made under penalties of perjury, provide other information and affidavits as required and pay a user fee. IRS charges a user fee when the taxpayer requests a ruling from the National Office on an accounting period. If the taxpayer does not qualify for the automatic approval provisions, they are instructed to file Form 1128, Application to Adopt, Change, or Retain a Tax Year, with the Commissioner of the Internal Revenue Service in Washington, D.C. In the event the taxpayer sends Form 1128 to a campus with the payment: Receipt and Control returns the payment to the taxpayer with a Letter 2340C, Accounting Period User Fee (F1128, F2553) Received, letter of explanation. Form 1128 is sent to Entity annotated "UFR" (User Fee Returned). If the taxpayer’s check also included a tax payment, the full amount is applied to their account and the taxpayer notified via Letter 2340C, Accounting Period User Fee (F1128, F2553) Received. Any correspondence received from the taxpayer requesting a refund of the user fees is sent to CAS:AM on Form 3465. Action required: If unable to locate the payment, contact the taxpayer via phone or correspondence. Once the payment is located, issue a manual refund for the portion of the payment applicable to the user fee. If correspondence is received from the taxpayer as a result of Form 1128 being denied because it was filed late and the taxpayer requests relief under Regulations section 301.9100, cites Rev. Proc. 2023-1 or any successor, or otherwise requests granting of an extension: Forward the request to Associate Chief Counsel (Procedure and Administration): Sent via US Postal Service Sent via Private Delivery Service (e.g., UPS, FedEx, etc.) Internal Revenue Service Attn.: CC:PA:LPD:TSS, Room 7604 P.O. Box 7604 Ben Franklin Station Washington, D.C. 20044 Internal Revenue Service Attn.: CC:PA:LPD:TSS, Room 4516 1111 Constitution Avenue N.W. Washington, D.C. 20224 Advise the taxpayer of the referral via Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office. Note: Such requests are considered requests for letter rulings under Rev. Proc. 2002-39 and considered by the National Office. The taxpayer is charged a user fee for these types of requests. 21.7.4.4.4.7 (10-01-2022) Tax Computation (Corporations) Section 13001 of P.L. 115-97, Tax Cuts and Jobs Act (TCJA), replaced the graduated corporate tax structure with a flat rate of 21 percent tax rate effective for taxable years beginning after December 31, 2017. A corporation’s tax is computed by multiplying taxable income by 21 percent, Form 1120 filers compute tax on Schedule J using the Instructions for Form 1120. Most corporations figure their tax by using the tax rate schedule below. Follow the Schedule J submitted by the taxpayer, for consideration of other credits or taxes as applicable. The total tax on Schedule J is entered on the "Total tax" line on Form 1120. If taxable income is over But not over Tax is Of the amount over $0 $50,000 15 percent $0 50,000 75,000 $7,500 + 25 percent 50,000 75,000 100,000 13,750 + 34 percent 75,000 100,000 335,000 22,250 + 39 percent 100,000 335,000 10,000,000 113,900 + 34 percent 335,000 10,000,000 15,000,000 3,400,000 + 35 percent 10,000,000 15,000,000 18,333,333 5,150,000 + 38 percent 15,000,000 18,333,333 ---------- 35 percent 0 Exception: Mutual savings banks (conducting life insurance business), Subchapter L (relating to insurance companies) and Subchapter M (relating to Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs)). Corporations with a fiscal year beginning before January 1, 2018, and ending after December 31, 2017, will pay federal income tax using a blended pro-rated tax and not the flat 21 percent tax rate. To calculate the pro-rated tax, corporations must calculate their tax for the entire year twice: first using the pre-TCJA tax rates, and then using the new 21 percent rate. Then, they multiply each of these tax amounts by the fraction of the fiscal year during which the corresponding rate was in effect, and add the amounts together to produce the federal income tax for the fiscal year. For additional information on computing the corporation’s blended rate, see the table in IRM 3.12.251.33, Form 1120, Tax Rates. If the taxpayer needs further guidance refer them to the Form 1120 Instructions and Notice 2018-38, 2018-18 I.R.B. 522, for more information. For computing tax on short period returns (annualizing tax), see Publication 538, Accounting Periods and Methods. Do not annualize tax on short period initial or final returns. 21.7.4.4.4.7.1 (10-01-2019) Exceptions to the Standard Tax Rate (Corporations) For tax years beginning before January 1, 2018, exceptions apply to the use of the standard tax rates for qualified personal service corporations and members of a controlled group. For tax years beginning before January 1, 2018, the corporation should check the correct box and complete the lines on Schedule J if the exceptions apply. 21.7.4.4.4.7.1.1 (10-01-2022) Qualified Personal Service Corporations TCJA Section 12001(b)(11), amended IRC 11(b) eliminating the graduated corporate tax structure. For tax years beginning after December 31, 2017, corporations are subject to a flat tax of 21 percent of taxable income. The TCJA does not provide a special rate for QPSCs. Accordingly, they are also taxed at a flat rate of 21 percent. Prior to TCJA, a qualified personal service corporation (QPSC) (as defined in IRC 448(d)(2)) was taxed at a flat rate of 35 percent (for taxable years beginning on or after January 1, 1993) on taxable income. IRC 448(a) prohibits the use of the cash method by C corporations, partnerships that have C corporations as partners, and tax shelters. Exceptions exist for farmers, qualified personal service corporations and entities that meet the gross receipts test defined in IRC 448(c). A corporation is a Qualified Personal Service Corporation (QPSC) if: Substantially all of its activities involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial sciences, performing arts, or consulting, and Substantially all of the stock (by value) is held directly (or indirectly through one or more partnerships, S-corporations, or QPSCs) by employees performing qualified personal services, retired employees who had performed such services, the estate of any employee who had performed such services, or any other person who acquired such stock by reason of the death of an employee who performed such services -- but only for the two-year period beginning on the date of death of such individual. See IRC 448(d)(2)(A) and (B). For tax years after December 31, 2017, tax is computed at 21 percent. Tax Cuts and Jobs Act of 2017 - P.L. No. 115-97 (H.R. 1), Section 13001, provides for a 21 percent corporate rate effective for taxable years beginning after December 31, 2017. For fiscal filers (tax periods 201801 through 201811) tax is figured at a blended rate. See IRM 21.7.4.4.4.3, Personal Service Corporations, for more information on personal service corporations. 21.7.4.4.4.7.1.2 (10-01-2022) Members of a Controlled Group A controlled group is defined as a group of two or more corporations treated as one for determining the group’s tax rates. For purposes of computing the accumulated earnings credit, per the Tax Cuts and Jobs Act (TCJA) of 2017, for taxable years beginning after December 31, 2017, controlled groups are subject to a flat tax rate of 21 percent and can use only one $250,000 amount. For tax periods ending December 31, 1993 (199312), through December 31, 2017 (201712): Members of the controlled group must pay total tax in the following amounts: If taxable income is over But not over Tax is Of the amount over $0 $50,000 15 percent $0 50,000 75,000 $7,500 + 25 percent 50,000 75,000 100,000 13,750 + 34 percent 75,000 100,000 335,000 22,250 + 39 percent 100,000 335,000 10,000,000 113,900 + 34 percent 335,000 10,000,000 15,000,000 3,400,000 + 35 percent 10,000,000 15,000,000 18,333,333 5,150,000 + 38 percent 15,000,000 18,333,333 ---------- 35 percent 0 In addition to paying their regular tax, members of a controlled group with total income over $100,000 will pay an additional 5 percent tax on taxable income in excess of $100,000 (not to exceed $11,750 in tax). In addition to paying their regular tax, members of a controlled group with total income over $15,000,000 will pay an additional tax of 3 percent of its taxable income in excess of $15,000,000 (not to exceed $100,000 in tax). Corporations who are members of a controlled group must attach Schedule O (Form 1120) Consent Plan and Apportionment Schedule, to apportion tax among the members of the group. Note: Schedule O and the instructions for Schedule O were revised to reflect the replacement of the graduated corporate tax structure with the flat 21 percent corporate tax rate and the repeal of the corporate alternative minimum tax. Members of a controlled group must check the box on line 1 of Schedule J and attach Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group, to report the apportionment of taxable income, income tax, and certain benefits between the members of a controlled group. Schedule O is also used to show that all members of the control group: Are not adopting an apportionment plan Are adopting an apportionment plan Already have an apportionment plan Are amending a previously adopted apportionment plan Are terminating the existing apportionment plan Note: The taxpayer should show which of the conditions listed above apply. For tax years prior to January 1, 2018, members of a controlled group are entitled to one of each of the taxable income bracket amounts on Part II, Taxable Income Apportionment, of the Schedule O (Rev. 12-2012) in the order listed below: $50,000 $25,000 $9,925,000 Note: The Schedule O was revised for TY 2018. See Part II Apportionment (Rev. 12-2018); Part II, Taxable Income Apportionment no longer applies. When a controlled group adopts or later amends an apportionment plan each member must attach to its tax return a copy of its consent plan. The copy (or attached statement) must show the part of the amount in each taxable income bracket apportioned to that member. See Treas. Reg. 1.1561-3 for additional requirements. T.D. 9476 contains final regulations that provide guidance to members of a controlled group of corporations for determining the apportionment of tax benefit items and the amount and the type of information required to submit with their returns. Below is the tax computation worksheet for members of a controlled group. Utilize the Accounts Management Services (AMS) worksheet or the instructions for the Schedule O for the tax computation for controlled group members. In addition, use the information from IDRS and not from the taxpayers copy of the Schedule O and Schedule J. That is, back into the new numbers by taking figures from the original return, plus or minus the changes from the amended return. Note: Each member of a controlled group (except a qualified personal service corporation) must compute the tax using the worksheet below. For tax periods 201801 through 201811, the tax rate percent is pro-rated. If the taxpayer needs further guidance refer them to the Form 1120 Instructions, and Notice 2018-38, 2018 Fiscal -Year Blended Tax Rates for Corporations, for more information. This worksheet does not apply to tax returns for taxable years beginning after December 31, 2017. Worksheet for Members of a Controlled Group (keep for your records) 1. Enter taxable income (line 30, page 1, Form 1120) 1. ________ 2. Enter line 1 or the corporation’s share of the $50,000 taxable income bracket, whichever is less in Part II, Column C 2. ________ 3. Subtract line 2 from line 1 3. ________ 4. Enter line 3 or the corporation’s share of the $25,000 taxable income bracket, whichever is less in Part II, Column D 4.________ 5. Subtract line 4 from line 3 5. ________ 6. Enter line 5 or the corporation’s share of the $9,925,000 whichever is less in Part II, Column E 6. ________ 7. Subtract line 6 from line 5 7. ________ 8. Multiply line 2 by 15 percent 8. ________ 9. Multiply line 4 by 25 percent 9. ________ 10. Multiply line 6 by 34 percent 10. ________ 11. Multiply line 7 by 35 percent 11. ________ 12. If the taxable income of the controlled group exceeds $100,000, enter this member’s share of the smaller of 5 percent of the taxable income in excess of $100,000 or $11,750 in Part III, Column F 12. ________ 13. If the taxable income of the controlled group exceeds $15,000,000 enter this member’s share of the smaller of 3 percent of the taxable income in excess of $15,000,000, or $100,000 in Part III, Column G 13.________ 14. Add lines 8 through 13. Enter here and on line 2, Schedule J, Form 1120 14. ________ Members of controlled groups should attach a statement to their tax return (or amended return), showing their tax computation. 21.7.4.4.4.7.2 (05-23-2024) Form 4626, Alternative Minimum Tax - Corporations TCJA Section 12001 repealed the corporate AMT for tax years beginning after 2017. See IRM 21.7.4.4.9.3.2, Repeal of Alternative Minimum Tax (AMT), and Repeal of Corporate AMT Sequestration, for more information. For additional information on corporate AMT prior to 2018, see previous revisions of this IRM. The Inflation Reduction Act of 2022 amended IRC 55 to create a new Corporate Alternative Minimum Tax (CAMT) which imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of applicable large corporations under IRC 59(k) for taxable years beginning after Dec. 31, 2022. Form 4626, Alternative Minimum Tax – Corporations, is used to determine whether a corporation is an applicable corporation under IRC 59(k) and to calculate CAMT under IRC 55 for applicable corporations. Note: S corporations, regulated investment companies (RIC), and real estate investment trusts (REIT) are not subject to CAMT. An applicable corporation under IRC 59(k) is any corporation that satisfies the AFSI test for one or more tax years which are prior to the current tax year and which end after December 31, 2021. A corporation meets the general AFSI test for that tax year when the corporation’s average annual AFSI for the 3-tax-year period ending with the tax year exceeds $1 billion. Note: All AFSI of members of a controlled group is included in the AFSI of the corporation for AFSI test purposes. For the first tax year beginning after December 31, 2022, a corporation may choose to apply the safe harbor method (simplified method) for purposes of determining whether it is an applicable corporation. See Notice 2023-7, section 5, for additional information. If a corporation has been in existence for less than 3 tax years of the 3-tax-year period, the AFSI test is applied by averaging the tax years of the 3-tax-year period during which the corporation existed. AFSI for any tax year of fewer than 12 months shall be annualized by multiplying the AFSI for the short period by 12 and dividing the result by the number of months in the short period. Note: See Form 4626 Instructions for additional information on ASFI and the ASFI test applicable to Foreign-Parented Multinational Groups (FPMG) (FPMG AFSI Test). CAMT applies if the tentative minimum tax for the tax year exceeds the sum of the regular income tax plus the base erosion minimum tax (imposed under IRC 59A). The tentative minimum tax for the tax year is the excess of 15% of AFSI for the tax year, over the CAMT Foreign Tax Credit (FTC) for the tax year. For any corporation that is not an applicable corporation, the tentative minimum tax for the tax year is zero. See Form 4626 and the Form 4626 instructions for additional information on calculating CAMT. A corporation may take a credit against regular tax for alternative minimum tax (including CAMT) incurred in prior years. See Form 8827, Credit for Prior Year Minimum Tax—Corporations, for details. Item Reference Number (IRN) 905 is input to adjust CAMT on the master file. A new field on entity module BMFOLE and ENMOD display TCAMT for a sum total of CAMT, which updates anytime a new return with CAMT or an adjustment with IRN 905 is input. Action: Math verify Form 4626 Input IRN 905 to increase or decrease CAMT 21.7.4.4.4.7.3 (05-11-2022) CP 130 Notice, Potential Exemption from AMT CP 130 Notice, Potential Exemption from AMT, generates when taxpayer completes Form 4626, Alternative Minimum Tax-Corporation, and it appears they are not liable for the tax. The Taxpayer Relief Act of 1997 provided an exemption from AMT for certain small corporations. See IRM 21.7.4.4.4.7.2, Form 4626, Alternative Minimum Tax (Corporations), for criteria. Taxpayers should check their records to see if they meet the requirements to be considered a small corporation, and therefore, exempt from AMT. For aggregation rules and other special rules that may apply in figuring gross receipts, see IRC 448(c)(2) and (3). Taxpayer should also check prior years to determine if they were truly liable. If it is determined (by the taxpayer) they are exempt from the AMT, they should prepare a Form 1120-X to delete the AMT reported on their original return. They should mark Form 1120-X "AMT - EXEMPT " at the top of the form and mail it to the campus where the original Form 1120 was filed. See the Instructions for Form 1120, for the address for the taxpayer to send to the Kansas City or Ogden campus. Reassign Correspondence Imaging Inventory (CII) cases with the original return filed in Ogden to employee number 0445105039 or 0444105039. 21.7.4.4.4.8 (01-18-2022) Schedules, Form 1120 Series Taxpayers must complete the Form 1120 schedules as part of the 1120 tax package. The taxpayer is also required to submit various forms to substantiate credits or tax items applicable to the return. See the schedules and forms listed below: Schedule A, Cost of Goods Sold. This is only applicable through tax year 2010. For 2011 and forward, use Form 1125-A, Cost of Goods Sold, for reporting cost of goods sold Schedule C, Dividends, Inclusions, and Special Deductions Schedule D, Capital Gains and Losses Schedule G, Information on Certain Persons Owning the Corporation’s Voting Stock Schedule H, Section 280H Limitations for a Personal Service Corporation (PSC) Schedule J, Tax Computation Schedule K, Other Information Schedule K-1, Shareholder’s Share of Income, Credits, Deductions, etc. (Form 1120-S) Schedule K-2, Shareholder’s Pro Rata Share Items - International, and Schedule K-3, Shareholder’s Share of Income, Deductions, Credits, etc. - International (Form 1120-S) Schedule L, Balance Sheets per Books Schedule M-1, Reconciliation of Income (Loss) per Books With Income (Loss) per Return - is a simplified version of Schedule M-3. A taxpayer files M-1 or M-3, but not both Schedule M-2, Reconciliation of Income (Loss) and Analysis of Unappropriated Retained Earnings per Books Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More Schedule N, Foreign Operations of U.S. Corporations Schedule PH, U.S. Personal Holding Company (PHC) Tax (Every PHC must attach this schedule to its income tax return.) Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group Schedule UTP, Uncertain Tax Positions - Statement 21.7.4.4.4.9 (10-01-2009) Credits, Form 1120 Series Returns Taxpayers claim credits by submitting the required forms for substantiation. See IRM 21.7.4.4.8, Non-refundable Credits, Income Tax Returns, and IRM 21.7.4.4.9, Refundable Credits, Income Tax Returns, for more information on non–refundable and refundable credits. 21.7.4.4.4.9.1 (10-01-2022) Investment Credit, General Business Credit — Missing or Incomplete Schedules When the original return in the Form 1120 series is processed, it is analyzed for the proper schedules to support the tax credits claimed. When a form is missing or incomplete: A letter is issued to the taxpayer requesting the information needed. If the proper form is received within the suspense period, the credit is allowed. Accounts Management receives the late replies and takes the following actions: Reviews the forms and/or information received from the taxpayer and verifies the credits claimed. If you do not have a copy of the return, use CC BRTVU. (Do not request the original return unless absolutely necessary.) If And Then Credit forms/schedules are correct The credit has not previously been allowed 1. Input TC 291 to decrease the tax for the amount of credit. 2. Adjust penalties (see IRM 20.1.2.2.5, Manual Penalty Adjustments) and interest (see IRM 20.2.5.6, Restricted Interest) if restricted. 3. Notify the taxpayer of the action taken. Credit forms/schedules are correct The credit was previously allowed Attach the information to the TC 150 return. Note: If the requested forms were not received, or are incomplete, disallow the credit following disallowance procedures in IRM 21.5.3.4.6.1, Disallowance and Partial Disallowance Procedures. 21.7.4.4.4.9.1.1 (01-01-2005) Investment Credit Erroneously Computed or Claimed A taxpayer may receive and return an erroneous refund which was generated due to either: The taxpayer recomputed investment credit from the prior year and included the credit amount in the remittance submitted with the return. The taxpayer claimed unused investment credit carryover, however, the return was filed and no tax due. The refund was generated because the unused investment credit was reported on the incorrect credit line. Action required: Determine where the error occurred. (Use CFOL command codes for research. Do not request the original return unless necessary.) Review the account for the returned refund check (TC 841) and monitor until the TC 841 posts. Input TC 290 for the amount of the tax increase. 21.7.4.4.4.10 (01-25-2018) Payment of Tax (Corporations) Taxpayers required to electronically deposit all income, employment, excise, and corporate depository taxes use the Electronic Funds Transfer (EFT). See IRM 21.7.1.4.8.1, Electronic Federal Tax Payment System, for information on EFTPS. Some taxpayers remit payments for their employment or excise taxes with their tax return. See IRM 20.1.4.6, De Minimis Exception to Deposit Requirements, for employment taxes and IRM 20.1.4.10.5, De Minimis Exception to Deposit Requirements Form 720, for more information. Corporate taxpayers can also remit payment when filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. Foreign corporate taxpayers without a U.S. office can also remit through electronic funds transfer such as EFTPS. See IRM 21.7.11.4.8, CP 234 - Processing Potential ES Penalty Notices, regarding the postponement of certain corporate ES payments due to disasters or terrorist attacks. Also see the IRS Disaster Assistance Program website for the postponement due to disasters. 21.7.4.4.4.10.1 (11-13-2020) Estimated Tax Payments - Due Dates A corporation's estimated tax payments for a full 12-month period are due on the 15th day of the 4th month, 6th month, 9th month and the 12th month ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. For a calendar year filer, this is the 15th day of April, June, September and December. The payment due dates for periods less than 12 months are determined by the number of months in the short period. For more information, see IRM Exhibit 20.1.3-2, Installment Due Dates and Percentages of Estimated Taxes for Short Period Returns. Section 2006(a)(1) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the return due date for most C corporations and is effective for taxable years beginning after December 31, 2015. The federal income tax return for the Form 1120 family of returns (except Form 1120-C, Form 1120-S, Form 1120-IC-DISC), is due on or before the 15th day of the fourth month following the close of the corporation’s tax year, with one exception as follows: The income tax return of a C corporation that ends its tax year on June 30 remains due on or before the 15th day of the third month following the close of the fiscal year for tax years beginning after December 31, 2015 and before January 1, 2026. The due date for S corporation return is due on the 15th day of the third month after the year end. A possible estimated tax penalty is charged when a corporation does not pay estimated taxes when due. See IRM 20.1.3, Estimated Tax Penalties, for more information. A corporation can file Form 8842, Election To Use Different Annualization Periods for Corporate Estimated Tax, to elect different annualization periods for estimated tax. Upon receipt of Form 8842, Code and Edit inputs a TC 971 with Action Code 047 and routes the form to the Alpha File. Per Chief Counsel, the IRS will not transfer or re-designate an estimated tax payment or a portion of an estimated tax payment that was applied to a taxpayer’s account to satisfy a different liability of the taxpayer if the payment is applied according to the taxpayer's instructions. For example, taxpayer requests that we transfer an estimated tax payment from their Form 1120 account to their Form 941 account because the taxpayer believes they will have no tax liability when the Form 1120 is filed. The IRS will not transfer these payments. However, if the taxpayer designated an estimated tax payment to the incorrect form or tax period, or if the IRS applies a payment contrary to a taxpayer's instructions, the IRS will, upon request by the taxpayer, transfer the payment to the intended account. A corporation that believes it will have overpaid its estimated tax for the tax year may apply for a quick refund on Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, before the 16th day of the 3rd month after the end of the tax year at issue, but before it files its income tax return, if the overpayment is at least 10 percent of the expected tax liability and at least $500. A corporation should not file Form 4466 before the end of its tax year. Form 4466 is worked in Accounting. See IRM 21.7.1.4, Business Master File (BMF)/Non-Master File (NMF) Adjustment Procedures and IRM 3.17.79.3.11, Form 4466, Corporation Application for a Quick Refund of Overpayment of Estimated Tax, for more information on the processing of Form 4466. 21.7.4.4.4.10.2 (01-01-2005) Large Corporate Underpayments A possible 2 percent increased rate of interest may is imposed on large corporate underpayments, see IRM 20.2.5.8, Large Corporate Underpayments (LCU). A large corporate underpayment is defined as any underpayment of tax by a C corporation for any taxable period after January 1991, if the amount of the underpayment exceeds $100,000 and is not paid within 30 days of the earliest: 30-day letter, 90-day letter, or a Notice of Demand (bill). For purposes of determining if the additional 2 percent interest applies for periods after December 31,1997, any letter or notice is disregarded if the following is $100,000 or less, not taking into consideration interest, penalties, or additions to tax: The amount of deficiency; or The proposed deficiency; or The assessment; or The proposed assessment A C corporation indicator is set in the entity section of corporations defined as "C" corporations. See IRM 20.2.5.8(1), Large Corporation Underpayment (LCU) for information on determining the 2 percent start (trigger date) and computing interest. C Corporation includes corporate income, employment and excise tax returns. Restricted interest specialists must perform computations of interest on large corporate underpayments because the system cannot always determine the start date. The 30-day or 90-day letter date should be annotated on Form 3198 or correct closing document and in the file when the tax is over $100,000. 21.7.4.4.4.11 (01-01-2005) Other Form 1120 Series Returns There are various types of Form 1120 series returns filed dependent upon the type of corporation involved. 21.7.4.4.4.11.1 (05-23-2024) Form 1120-S, U.S. Income Tax Return for an S Corporation A domestic corporation can elect under IRC 1362(b)(1) to be taxed under provisions of Subchapter S of the IRC by filing Form 2553, Election by a Small Business Corporation. See the Instructions for Form 2553 for more information on filing Form 2553. An approved election is identified by TC 090 on CC ENMOD. The filing requirement code (FRC) is 02 (1120-02) and the document code is 16. Generally, an S corporation must file Form 1120-S by the 15th day of the third month after the end of its tax year. For calendar year corporations, the tax year Form 1120-S is due on or before March 15th following the end of the tax year. A corporation that has dissolved must file by the 15th day of the third month after the date it dissolved. If the due date falls on a Saturday, Sunday, or legal holiday, the corporation can file on the next day that is not a Saturday, Sunday, or legal holiday. See IRM 3.11.217-2 , Due Date Chart, for Form 1120-S due dates. If a corporation qualifies as an S corporation, its income is generally taxed to the shareholders. Shareholders are required to report their share of income (from Schedule K-1) on their income tax returns. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Follow procedures in IRM 21.5.3-2, Examination Criteria (CAT-A) - General, for returns claiming research and development credits. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Claims and/or amended returns involving Ponzi Scheme issues (including language discussing removal of phantom or fraudulent income). Route to Examination as CAT-A ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: For more information on fraudulent arrangements (aka "ponzi schemes" ) see Revenue Ruling 2009-09, Rev. Proc. 2009-20, and Rev. Proc. 2011-58 which modifies Rev. Proc. 2009-20. The new Schedule K-2, Shareholder’s Pro Rata Share Items - International, is an extension of Schedule K of Form 1120-S and is used to report items of international tax relevance from the operation of an S corporation. . The new Schedule K-3, Shareholder’s Share of Income, Deductions, Credits, etc. - International, is an extension of Schedule K-1 (Form 1120-S) and is generally used to report the shareholders share of items reported on Schedule K-2. If applicable, shareholders must include the information reported on Schedule K-3 on their tax or information returns. See the S Corporation Instructions for Schedules K-2 and K-3 (Form 1120-S). Any person that is required to file Form 1120-S, and has items relevant to the determination of U.S. tax or reporting obligations of its shareholders under the international provisions of the Internal Revenue Code must complete the relevant parts of Schedule K-2 and Schedule K-3. For more information regarding Schedules K-2 and K-3, see IRM 21.7.4.4.2.4.1, Schedule K-2, Shareholder’s Pro Rata Share Items - International and Schedule K-3, Shareholder’s Share of Income, Deductions, Credits, etc. - International. Notice 2021-39 announces transition relief for taxable years that begin in 2021 with respect to Schedules K-2 and K-3 required for Forms 1120-S. Section 2 provides background on the new schedules and the penalties that may apply for failure to file or show information on an S corporation return and failure to furnish correct payee statements. Section 3 provides transition relief from the penalties described in Section 2 if the filer establishes to the satisfaction of the Commissioner that it made a good faith effort to comply with the filing requirements. See Schedules K-2 and K-3 Frequently Asked Questions (Forms 1065, 1120S, and 8865) for more information regarding clarifications and additional exceptions for tax year 2021. See IRM 21.7.9.4.1.6, Duplicate Filing Conditions Involving Returns Prepared Under IRC Section 6020(b), when the TC 150 is a 6020(b) and the TC 976 is the taxpayer’s original return or when the TC 150 is the taxpayer’s return and the TC 976 is the 6020(b). Corporations electing consideration as an S corporation should mail their original election or fax a photocopy to the campus listed in the table below based on the taxpayer's geographical location. Business Location IRS Center Address or Fax Number Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin Department of the Treasury Internal Revenue Service Kansas City, MO 64999 Fax Number 855-887-7734 Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming Department of the Treasury Internal Revenue Service Ogden, UT 84201 Fax Number 855-214-7520 The campus notifies the corporation if its election is accepted and when it takes effect. The corporation is also notified if its election is not accepted. See IRM 3.13.2.23.10, Chief Counsel Referrals, for a list of the CP Notices sent to the taxpayer. The corporation should receive notification of acceptance or nonacceptance of the election within 60 days if mailed or faxed. If Box Q1 in Part II on page 3 is checked, a ruling letter from the IRS in Washington, DC, may take an additional 90 days for acceptance of the Form 2553. If the corporation is not notified of denial or acceptance within 120-days of the date mailed or faxed, or within 130-days if box Q1 is checked, view CC ENMOD and look for the following codes and advise the taxpayer accordingly (either by correspondence, Letter 385C, S Corporation Election (F2553) Acknowledged/ Accepted, or by telephone): TC 090 - Small Business Election accepted TC 093 - Application for Sub-Chapter S-Election Form 2553 TC 094 - Sub-Chapter S-Election denied Review the account to determine the reason the election has not posted. Research CC ENMOD for a Letter 312C, S Corporation Election (F2553), Revocation, or Termination Incomplete for Processing and/or Not Timely Filed. Instruct the taxpayer to fax the requested missing information listed in the Letter 312C. If the account shows an unpostable condition related to the processing of the election, determine what is needed to complete the processing of Form 2553. Request a copy of Form 2553 from the taxpayer if necessary and prepare a Form e-4442/4442, Inquiry Referral, to the BMF Entity unit listed in paragraph (8), including any faxed information received from the taxpayer. Although the time frames in paragraph (9) above may not have passed, if either of the time frames in paragraph (10) above has passed and no information is available, or the transaction code on the account is TC 093, prepare Form e-4442/4442, Inquiry Referral. Request a copy of the previously submitted Form 2553 from the taxpayer to attach to the referral. Mark the date the Form 2553 was faxed or mailed and advise the taxpayer they will be contacted by the end of the time period mentioned in paragraph (9) above. FAX to BMF Entity Unit in the proper campus: Ogden - 855-214-7520 Kansas City - 855-887-7734 Due to filing requirement mismatches, certain taxpayers cannot file Form 1120-S electronically. In these cases, the taxpayer has filed Form 2553 and an un-reversed TC 090 is on ENMOD. However, the filing requirements have not been updated to 1120-02. Therefore, the return is rejected. If you receive a call from a taxpayer who states that they tried to file Form 1120-S electronically but were rejected, check for an un-reversed TC 090 on the account for the tax period in question and follow the chart below: If Then If the taxpayer has a valid S Corporation election (TC 090) but their filing requirement code is 01 Inform the taxpayer of the valid election. Tell them to follow the instructions provided by their ERO/e-file provider to file their return. Note: If their ERO/e-file provider has not contacted the e-help desk unit, advise the caller that the ERO/e-file provider should call the e-help desk toll-free at 1-866-255-0654 for instructions. See IRM 3.42.7.1.1, Background. If the taxpayer has already contacted the e-help desk and they were unable to help them Tell the taxpayer to file their Form 1120-S on paper and request abatement if and when they receive a penalty notice from the IRS. Apologize for the inconvenience. Also, prepare a Form 4442 and route to Entity. Entity will input a TC 092 and then a TC 090 (a cycle later) in an attempt to re-instate the 1120-02 filing requirement. 21.7.4.4.4.11.1.1 (10-01-2024) Relief for Late S Corporate Elections IRC 1362(b)(1) provides that a small business corporation may make an election to be an "S" corporation for any taxable year: At any time during the preceding taxable year, or At any time during the taxable year and on or before the 15th day of the third month of the taxable year. Under IRC 1362(b)(3), if an S corporation election is made after the 15th day of the third month of the taxable year and on or before the 15th day of the third month of the following taxable year, then the S corporation election is treated as made for the following taxable year. If an election is made after the date prescribed in IRC 1362(b) or no election is made for any taxable year, the Secretary may determine whether there is reasonable cause to treat the election as timely. IRC 1362(b)(5) provides that if: An election under IRC 1362(a) is made for any taxable year (determined without regard to IRC 1362(b)(3)) after the date prescribed by IRC 1362(b) for making the election for the taxable year, or no election is made for any taxable year, and The Secretary determines that there was reasonable cause for the failure to timely make the election. The Secretary may treat the election as timely made for the taxable year (and IRC 1362(b)(3) shall not apply). Rev. Proc. 2013-30, 2013-36 I.R.B. 173, provides the exclusive simplified methods for taxpayers to request relief for late S corporation elections, electing small business trust (ESBT) elections, qualified subchapter S trust (QSST) elections, qualified subchapter S subsidiary (QSub) elections, and late corporate classification elections which the taxpayer intended to take effect on the same date that the taxpayer intended that an S corporation election for the entity should take effect. Generally, relief is available when all the following conditions are met: The Requesting Entity (as defined in Rev. Proc. 2013-30) intended to be classified as an S corporation, intended the trust to be an ESBT, intended the trust to be a QSST, or intended to treat a subsidiary corporation as a QSub as of the Effective Date (as defined in Rev. Proc. 2013-30). The Requesting Entity requests relief under this revenue procedure within 3 years and 75 days after the Effective Date (except in the case of corporations requesting relief where all returns filed as an S corporation). The failure to qualify as an S corporation, ESBT, QSST, or QSub as of the Effective Date was solely because the Election Under Subchapter S (as defined in Rev. Proc. 2013-30) was not timely filed by the Due Date of the Election Under Subchapter S (as defined in Rev. Proc. 2013-30). In the case of a request for relief for a late S corporation or QSub election, the Requesting Entity has reasonable cause for its failure to make the timely Election Under Subchapter S and has acted diligently to correct the mistake upon its discovery. In the case of a request for relief for an inadvertently invalid S corporation election or an inadvertent termination of an S corporation election due to the failure to make the timely ESBT or QSST election, the failure to file the timely Election Under Subchapter S was inadvertent and the S corporation and the person or entity seeking relief acted diligently to correct the mistake upon its discovery. Revenue Procedure 2013-30 facilitates the granting of relief to taxpayers that request relief previously provided in numerous other revenue procedures by consolidating the provisions of those revenue procedures into one revenue procedure and extending relief in certain circumstances. Rev. Proc. 2013-30 modifies and supersedes Rev. Proc. 2003-43, 2003-1 C.b.998; Rev. Proc. 2004-48, 2004-2 C.B. 172; and Rev. Proc. 2007-62, 2007-2 C.B. 786. See IRM 3.13.2.8.5.1, ERS Action Code 347 - Revenue Procedure 2013-30, for Entity’s procedures for processing returns requesting relief under Rev. Proc 2013-30. Rev. Proc. 2013-30 provides procedures for situations within its scope that are in lieu of the letter ruling process. Accordingly, user fees do not apply to corrective actions under this revenue procedure. Taxpayers may file the required forms under Rev. Proc. 2013-30 electronically through Modernized e-File (MeF) or on paper. Code and Edit (C and E) will edit Error Resolution System (ERS) Action Code (AC) 347 on paper returns and MeF will generate ERS AC 347 for electronically filed Form 1120-S citing Rev. Proc. 2013-30. See IRM 3.13.2.8.5.1, ERS Action Code 347 - Revenue Procedure 2013-30, for more information. An entity that does not meet the requirements for relief or is denied relief under Rev. Proc. 2013-30 may seek relief by requesting a letter ruling. The procedural requirements for requesting a letter ruling are described in Rev. Proc. 2013-1, 2013–1 I.R.B. 1, (or its successors). 21.7.4.4.4.11.1.2 (10-01-2021) Estimated Tax Payments (Subchapter S Corporations) Generally, the Subchapter S corporation must make estimated tax payments for the following taxes when the total of these taxes is $500 or more: Tax on built-in gains Excess net passive income tax Investment credit recapture tax The estimated tax is payable in four equal installments. Note: However, the S corporation may be able to lower the amount of one or more installments by using the annualized income installment method or adjusted seasonal installment method under section 6655(e). For a calendar year corporation, the estimated tax payments are due by April 15, June 15, September 15, and December 15. For a fiscal year corporation, they are due by the 15th day of the 4th, 6th, 9th, and 12th months of the year. If any date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next day that isn’t a Saturday, Sunday, or legal holiday. See the Instructions for Form 1120-S for more information regarding the payment of tax. 21.7.4.4.4.11.1.3 (01-01-2005) Required Tax Year (Subchapter S Corporations) and Exceptions Subchapter S corporations must generally use a calendar year. An exception is made when a business purpose for having a different tax year is established. An approved exception is identified by TC 054. The Subchapter S corporation can make a Section 444 election to have a tax year other than a required tax year. The election is filed on Form 8716. It is identified by TC 055. See IRM 21.7.4.4.6, Form 8716 Election to Have a Tax Year Other Than a Required Tax Year, for more information. 21.7.4.4.4.11.1.4 (01-05-2021) Refundable Credit (Form 1120-S) Form 4136, Credit for Federal Tax Paid on Fuels, is used to claim the refundable credit listed on Form 1120-S. If the taxpayer files a nontaxable return and attaches Form 4136, the refund is allowed during initial processing. If the credit is not claimed on the initial return and the taxpayer files an amended return with Form 4136 attached, follow procedures in IRM 21.7.4.4.9.1, Form 4136, Credit for Federal Tax Paid on Fuels. 21.7.4.4.4.11.1.5 (01-01-2005) Item Reference Number (IRN) 886, Form 1120-S Adjust IRN 886 when there is a change to the ordinary income (taxable income) line. See IRM 21.7.4.4.4.12, Adjusting Tax and Item Reference Number (IRN) 886, for more information on IRN 886. See IRM 21.7.4.4.4.11.1.7, Converting Form 1120 Back to Form 1120-S, regarding adjusting taxable income when converting Form 1120 back to Form 1120-S. 21.7.4.4.4.11.1.6 (10-01-2020) Form 8869, Qualified Subchapter S Subsidiary Election (Under Section 1361(b)(3) of the Internal Revenue Code) Form 8869, Qualified Subchapter S Subsidiary Election, is used by a parent S corporation to elect to treat one or more of its eligible subsidiaries (see (2) below) as a qualified Subchapter S subsidiary (QSub). The QSub election results in a deemed liquidation of the subsidiary into the parent. Following the deemed liquidation, the QSub is not treated as a separate corporation; all of the subsidiary's assets, liabilities and items of income, deduction, and credit are treated as those of the parent. Note: Because the liquidation is a deemed liquidation, it is not necessary to file Form 966, Corporate Dissolution or Liquidation. However, a final return for the subsidiary may be necessary if it was a separate corporation prior to the date of liquidation. An eligible subsidiary is a domestic corporation whose stock is owned 100 percent by an S corporation and is not one of the following ineligible corporations: A bank or thrift institution that uses the reserve method of accounting for bad debts under Section 585. An insurance company subject to tax under the rules of Subchapter L of the Code. A Domestic International Sales Corporation (DISC) or former DISC. Taxpayers should file Form 8869 at the campus where the subsidiary filed its most recent return. However, if the parent S corporation forms a subsidiary, and makes a valid election effective upon formation, taxpayers should file Form 8869 at the campus where the parent S corporation filed its most recent return. Generally, a determination as to the acceptance of the election is sent within 60 days of receipt at the campus. The election can be made at any time during the tax year. However, the effective date depends upon when it was filed. The effective date cannot be more than: Two months and 15 days prior to the date of filing the election, or 12 months after the date of filing the election. Once the QSub election is made, it remains in effect until terminated. If the election is terminated, IRS consent is required for another election by the parent corporation (or its successor) on Form 8869 for any tax year before the fifth tax year after the first tax year in which the termination took effect. See regulation section 1.1361–5(c) for more details. The following transaction codes on the entity module pertain to Form 8869. TC 082 - Acceptance of Form 8869 TC 083 - Reversal of TC 082 TC 084 - Termination of Form 8869 TC 085 - Reversal of TC 084 TC 086 - Effective date of revocation TC 087 - Reversal of TC 086 If a taxpayer contacts the IRS regarding the filing of Form 8869, research CC ENMOD for the transaction codes in paragraph (6) directly above and advise taxpayer of the status. If the account reflects that the Form 8869 is either accepted or denied and the taxpayer states they received no response from IRS, prepare Form 4442 and route to Entity. If it has been more than 60 days since the taxpayer submitted Form 8869 and they have not received a response, or the IRS has no record of receiving the form, advise the taxpayer to re-file Form 8869 at the location that they originally filed Form 8869. In addition, instruct the taxpayer to enclose an explanation regarding the re-filing of the form and to provide any proof they may have that shows they filed the form timely. See the General Instructions for Form 8869 for additional information. 21.7.4.4.4.11.1.7 (10-01-2024) Converting Form 1120 Back to Form 1120-S When a taxpayer files a Form 1120-S (Document Code 16) and does not have a valid Small Corporation Business Election, Form 2553 (TC 090 on ENMOD) on file, the TC 150 goes Unpostable Code 310 RC 4. Per IRM 3.13.222.63, Unpostable Code (UPC) 310 Reason Code 4, Entity searches for a valid election. If a valid election is not found, Entity contacts/corresponds with the taxpayer. At this point, Entity inputs a TC 971 AC 375 to show that the 1120-S has failed to post and that a phone call has been made or a letter was issued to the taxpayer. See IRM 3.13.222.63, Unpostable Code (UPC) 310 Reason Code 4, for the action Entity takes based on the taxpayer’s response. If the taxpayer does not respond to Entity’s contact, Entity converts the Form 1120-S to a Form 1120 (See IRM 3.11.16.5.2, Conversion of Form 1120-S to Form 1120). Entity inputs TC 971 AC 376 to identify the conversion from Form 1120-S to Form 1120 and that no reply was received. This action freezes the module from refunding or credit electing. If the taxpayer contacts the IRS after the return is processed as a Form 1120 and claims that they have a valid election, follow the instructions in IRM 21.7.4.4.4.11.1 (9) and (10). If a valid election (TC 090) is found on the account, the freeze is released when the TC 090 posts. If the TC 971 AC 376 was input incorrectly, input TC 971 AC 377 to reverse the TC 971, which will release the credit. When Entity determines that the taxpayer should have been classified as an S corporation and the previously converted Form 1120 should be converted back to a Form 1120-S, they prepare a Form 3465 and route it to Accounts Management stating: "REMOVE THE TAX FROM POSTED FORM 1120 – TC 150 SHOULD BE A FORM 1120-S." Entity ensures that the filing requirement of "02" is set. Accounts Management removes the tax from the account as requested. Input the adjustment using blocking series 18 so that it becomes the controlling DLN and has the original return attached to it. Only adjust taxable income if the original return is secured, is filed electronically, or if the taxpayer sends a copy or faxes a copy of their return. It is not necessary to pull the original return to adjust the taxable income. When a Form 1120 is converted back to a Form 1120-S, correct the return due date. See IRM 21.7.4.4.4.2.1.2, Correcting the Form 1120 Due Date, for the procedures to input TC 971 Action Code 358 to change the return due date on TXMOD. In addition, remove any penalties that were manually assessed since they do not apply to Form 1120-S such as ES penalty, or penalties that were manually restricted. Also, address systemic penalties if necessary. FTF and FTP will systemically abate when the tax is fully abated. Determine whether a failure to file an S corporation return under IRC 6699 penalty, or failure to file a complete return penalty as required under IRC 6037 is necessary. The penalty is based on the number of shareholders reported on the original Form 1120-S return. Entity will notate the number of shareholders on the Form 3465. See IRM 21.7.4.4.4.11.1.9 , Failure to File S Corporation Return, and IRM 20.1.2.6, Failure to File S Corporation Return - IRC 6699, for more information. If the taxpayer never filed Form 8832, Entity Classification Election, and/or Form 2553, Election by a Small Business Corporation, and intends classification as an S corporation, advise them to see Rev. Proc. 2013-30, to request relief for a late S corporation election. See IRM 21.7.4.4.4.11.1.1, Relief for Late S Corporate Elections. However, if the taxpayer never intended classification as an S corporation, advise them to file a Form 1120. 21.7.4.4.4.11.1.8 (10-01-2022) Section 13543 Modification of Treatment of S Corporation Conversions to C Corporation Effective on December 22, 2017, Section 13543(a) and (b) of the Tax Cuts and Jobs Act amended the Code to add subsection (d) to section 481, and subsection (f) to section 1371. In the case of an eligible terminated S corporation, any adjustment required by section 481(a)(2) attributable to such corporation's revocation described in section 481(a)(2) is taken into account ratably during the 6-taxable year period beginning with the year of change. Section 1371(f) provides that in the case of a distribution of money by an eligible terminated S corporation after the expiration of corporation’s post-termination transition period as defined in section 1377(b)(1), such distribution is allocated to the accumulated adjustments accounts (AAA) and chargeable to accumulated earnings and profits (AE&P) in the same ratio as the amount of the AAA bears to the amount of such AE&P. Section 481(d)(2) defines eligible terminated S corporation as any C corporation that: Is an S corporation on the day before December 22, 2017, Revokes its S-election during the 2-year period beginning on December 22, 2017, Whose shareholders, determined on the date such revocation is made, are the same shareholders (and in identical proportions) as on December 22, 2017 21.7.4.4.4.11.1.9 (03-15-2022) Failure to File S Corporation Return Penalty Section 9, Penalty for Failure to File S Corporation Returns, of the Mortgage Forgiveness Debt Relief Act of 2007, P.L. 110-142, adds section 6699, Failure to File S Corporation Return to the IRC. See IRM 20.1.2.6, Failure to File S Corporation Return - IRC 6699, for more information. An S Corporation is assessed a penalty under IRC 6699 for failure to file a timely and complete return as required under IRC 6037. The return is considered incomplete when Form 1120-S is lacking the information required by section 6037, such as Schedule(s) K-1, or a Schedule L, Balance Sheet. See IRM 3.12.217.3.15, Field 01MSC - Missing Schedule Code, for information on missing schedule codes. The incomplete return penalty is assessed with TC 240 or TC 246. The late filing penalty is assessed with TC 160 or TC 166. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Beginning in 2022, the Form 1120-S late and missing information penalties are assessed using the TC 240/246 PRN 722/723. After December 31, 2021, TC 16X will no longer be used to assess IRC 6698/6699 penalties. The penalties will be assessed as follows: TC 24X and PRN 722 = Late filing penalty TC 24X and PRN 723 = Missing/Incomplete Information Penalty These will include IRN 851, 852 and 853 as outlined in the table below: IRN 851 Meaning IRN 852 Meaning IRN 853 Meaning PRN 722 Number of shareholders for MFT 02 Number of months N/A PRN 723 Number of shareholders for MFT 02 Number of months Missing schedule code For the purpose of the penalty, a "shareholder" is any person who held any shares in the corporation during any part of the taxable year covered by the return in question. The penalty for each month is calculated by multiplying the applicable base penalty rate by the number of persons who were shareholders in the S corporation at any time during the taxable year. For manual penalty adjustments, see IRM 20.1.2.6.2, Penalty Computation, for the applicable rate. See IRM 20.1.2.6.3 , Penalty Relief, for additional abatement instructions. A CP 162 Notice, Filing Penalty - S Corporation, is sent when there is no tax owed and the taxpayer is assessed a Failure to File Penalty or an Incomplete Return Penalty. A CP 161 Notice, No Math Error, Balance Due (Except Form 1065), is issued if tax is owed and a Failure to File Penalty or an Incomplete Return Penalty was assessed. Note: Programming problems were identified with the processing of Form 1120-S returns in processing cycles 201103 through 201106. Notice Review tried to stop the notices and correct the accounts. A recovery was performed. See the prior revisions of this IRM for instructions for these tax periods. If you receive an inquiry from a taxpayer who has received a penalty notice for either filing late (TC 16X) or for filing an incomplete return (TC 24X) claiming that the number of shareholders is incorrect, perform the following research and confirm the number of Schedules K-1 filed matches number of Schedules K-1 claimed: Research IDRS command code BMFOLR, line 13, in the field that reads "1120-S SHRHLDRS" or For electronically filed returns, review the return via command code TRDBV or via the Employee User Portal (EUP). If able to verify the number of shareholders claimed by the taxpayer matches our records, adjust the penalty accordingly (≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡). The penalty is computed at the dollar amount shown in IRM 20.1.2.6.2, Penalty Computation, multiplied by the number of persons who were shareholders (during any part of the taxable year) for each month or fraction thereof that such failure continues, but not to exceed 12 months. See prior revisions of this IRM for the penalty amount for returns due before January 1, 2018. If unable to verify the accuracy of the oral statement: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, inform the taxpayer to submit a written request for penalty abatement or to file an amended return (Form 1120-S with box H (4) checked) to correct the number of shareholders and (if applicable) the schedules K-1 attached to the return and request abatement. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, adjust penalty based on number of shareholders the taxpayer claimed. If an amended return is received correcting the number of shareholders, adjust the penalty accordingly. See IRM 20.1.2.6.2, Penalty Computation, to compute the correct penalty amount. See IRM 20.1.2.6.3, Penalty Relief, for abatement guidelines. See IRM 20.1.1.3.1, Unsigned or Oral Requests for Penalty Relief, for penalty relief guidelines if the request is received either orally or in writing, (but is unsigned) and does not exceed oral statement ceiling. See IRM 20.1.1.3.6.4, Oral Statement Ceiling Exceeded, when the amount exceeds the oral statement ceiling. If the penalty is caused by IRS error, oral statement ceiling does not apply, see IRM 21.5.2.4.9.2, Oral Statement and Penalty Relief Request, for more information. 21.7.4.4.4.11.2 (10-01-2023) Form 1120-H, U.S. Income Tax Return for Homeowners Associations Homeowners associations elect to file Form 1120-H to take advantage of tax benefits provided by Section 528. These benefits allow the association to exclude exempt function income from its gross income. The filing requirement code is 10. A homeowners association as defined in IRC 528(c)(1) that is a corporation may elect to file Form 1120 because the tax may be less than that figured on Form 1120-H. The taxable income of a homeowners association that files its tax return on Form 1120-H is taxed at a flat rate of: Thirty percent (30%) for a condominium management association as defined in IRC 528(c)(2) or a residential real estate management association as defined in IRC 528(c)(3), and Thirty-two percent (32%) for a timeshare association as defined in IRC 528(c)(4). These rates apply to both ordinary income and capital gains. The association makes the election to file Form 1120-H each year: The election generally is made no later than the time, including extensions, for filing an income tax return for the year in which the election is to apply. Once Form 1120-H is filed, taxpayers cannot revoke the election that year without the consent of the Commissioner. See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-H. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-H. Estimated tax, alternative minimum tax (AMT), Investment Credit, Work Opportunity Credit, Empowerment Zone Employment Credit, and Indian Employment Credit do not apply to Form 1120-H. However, a homeowners association which does not elect to file Form 1120-H may be required to make payments of estimated tax. 21.7.4.4.4.11.3 (10-01-2023) Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations A political organization is a party, committee, association, fund (including a separate segregated fund described in IRC 527(f)(3) set up by a IRC 501(c) organization), or other organization. A political organization is organized and operated primarily for the purpose of accepting contributions or making expenditures, or both, to influence the selection, nomination, election, or appointment of any individual to any public office or office in a political organization, or the election of presidential or vice presidential electors. The taxable income of a political organization is the excess of the gross income for the tax year (excluding exempt function income) over deductions directly connected with that income. Taxable income also includes exempt function income (as defined in (4) below) for any period for which a political organization has not notified IRS that it is to be treated as such. The net operating loss deduction is not allowed, as well as other special deductions for corporations. The exempt function income is derived from: Contributions of money or other property Membership dues, fees, or assessments paid by members of a political organization Proceeds from a political fund-raising or entertainment event or from the sale of political campaign material, not received in the ordinary course of any trade or business Proceeds from conducting bingo games defined in Code Section 513(f)(2) A political organization, whether or not it is tax-exempt, must file Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations, if it has any political organization taxable income. An exempt organization that is not a political organization must file Form 1120-POL if it is treated as having political organization taxable income under IRC 527(f)(1). An organization that files Form 1120-POL can be required to file the following forms: Form 8871, Political Organization Notice of Section 527 Status Form 8872, Political Organization Report of Contributions and Expenditures Form 990, Return of Organization Exempt From Income Tax Return Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI) The return due dates, payment dates, and requests for extensions are the same as those for Form 1120. The filing requirement code is 09. See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-POL. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-POL. Ogden Submission Processing Center processes all Form 1120-POL. See IRM 21.7.7.6.5, Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations, for more information on Form 1120-POL, Form 8871, Political Organization Notice of Section 527 Status, and Form 8872, Political Organization Report of Contributions and Expenditures. Also see the General Instructions for Form 1120-POL for more specific information. 21.7.4.4.4.11.4 (10-01-2022) Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return Form 1120-PC is filed by domestic non-life insurance companies subject to tax under section 831 and by foreign corporations carrying on an insurance business within the U.S. which would qualify as a nonlife insurance company subject to tax under section 831, if they were U.S. corporations. See the Instructions for Form 1120-PC for more specific information. The return due dates, payment dates, and requests for extensions are the same as those for Form 1120. The filing requirement code is 04. See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-PC. Also, see IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns - Tax Years Beginning After December 31, 2015 and IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, for tax years beginning before January 1, 2016, for information regarding extensions for Form 1120-PC. 21.7.4.4.4.11.4.1 (10-01-2019) IRC Section 847 Payments and Requirements (Prior to January 1, 2018) For taxable years beginning after December 31, 2017, the Tax Cuts and Jobs Act of 2017 (TCJA), Section 13516, repealed IRC 847. The new law eliminated the election to apply IRC 847 additional deduction, special loss discount account, special estimated tax payment and refundable amount rules. For tax periods prior to January 1. 2018 Section 847(2) requires insurance companies to make a special estimated tax payment in an amount equal to the tax benefit derived from the additional deduction permitted under Section 847. Section 847(3) requires companies allowed the deduction to establish a special loss discount account. Form 1120-PC and Form 1120-L filers claim the credit for special estimated tax payments on a specific line. Other Form 1120 filers (consolidated Form 1120 filers with insurance companies as subsidiaries) electing the provisions under this section, write in the margin near Schedule J, Part II, line 13, "Form 8816 " and the amount. Taxpayers must attach a schedule showing their computation of estimated tax payments. See the Form 8816 instructions for more specific information. The area performing the credit transfer (determined by campus management) receives a copy of the return showing the credit, from Code and Edit. The special estimated tax payment(s) is not subject to the estimated tax penalty. The payment(s) is applied over a 15-year period against a portion of the corporation’s tax liability. In the 16th year, treat any amounts which remain in a corporation’s 15-year account as estimated tax payments for that year. Refer to IRM 3.17.243, Miscellaneous Accounting, for processing instructions. Loose Form 8816 is associated with the taxpayer's Form 1120, Form 1120-L or Form 1120-PC. Refer any issues involving Form 8816 to the Accounting Branch in Ogden Submission Processing. 21.7.4.4.4.11.4.2 (02-27-2019) Repeal of Special Estimated Tax Payments Tax Cuts and Jobs Act of 2017(TCJA), Section 13516, Repeal of Special Estimated Tax Payments, repealed Section 847 for the treatment of special loss discount accounts and special estimated tax payments for tax years beginning after December 31, 2017. An insurance company with an existing special loss discount account (SLDA) balance must report the entire balance in income for the insurance company’s first taxable year beginning after December 31,2017. The additional tax is offset by the existing special estimated tax payments. If the special estimated tax payments exceed the additional tax, the overpayment is treated as an estimated tax payment for the first quarter of 2018 tax year. Form 1120-L, Form 1120-PC and Form 1120 filers will include the SDLA balance in income and report on specific lines on the return. 21.7.4.4.4.11.5 (10-01-2019) Form 1120-L, U.S. Life Insurance Company Income Tax Return Form 1120-L is filed by domestic life insurance companies subject to tax under section 801, and foreign corporations which would qualify as life insurance companies subject to tax under section 801 if they were U.S. corporations. See the Instructions for Form 1120-L for additional information. The return due dates, payment dates, and requests for extensions use the same due date as those for Form 1120. The filing requirement code is 03. See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-L. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-L. A foreign corporation which does not maintain an office or place of business in the U.S. has until the 15th day of the sixth month after the end of the tax year to file. 21.7.4.4.4.11.6 (10-01-2024) Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return, is an informational return and is filed by domestic corporations that have elected treatment as an IC–DISC and have satisfied the requirements under IRC 992. It is also filed by a domestic corporation that is a former DISC or former IC-DISC. Generally, an IC-DISC is not taxed on its income. Shareholders of an IC-DISC are taxed on their income when the income is actually (or deemed) distributed. Form 1120-IC-DISC is due on or before the 15th day of the ninth month after its tax year ends. No extensions are allowed. To be an IC-DISC, a corporation must be organized under the laws of a state or the District of Columbia and meet certain requirements, including but not limited to having an election in place and meeting income and assets tests. See IRC 992 and the Instructions for Form 1120-IC-DISC for information on the requirements. Also, see IRC 992(d) for a list of the corporations ineligible for treatment as a DISC. To elect to be treated as an IC-DISC, a corporation files Form 4876-A , Election To Be Treated as an Interest Charge DISC. In the case of a corporation making an election to be treated as a DISC for its first taxable year, such election shall be made within 90 days after the beginning of such taxable year. For any other taxable year, the election shall be made during the 90-day period immediately preceding the first day of such taxable year. See Regulations section 1.992-2 and the Instructions for Form 4876-A for more information about the election. Form 4876-A is worked in Code and Edit. If you receive an inquiry regarding Form 4876-A follow the instructions in the if and then table of IRM 21.7.12.7.2, Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return and Form 4876-A, Election to be Treated as an Interest Charge DISC. Form 1120-IC-DISC is processed as NMF. The MFT is 23 and the tax class is 6. See IRM 21.7.12.7.2 through IRM 21.7.12.7.2.3, for more information on Form 1120-IC-DISC. Route loose Form 1120-IC-DISC to the Cincinnati Campus, Stop 6111G. If CII case, reassign to 0244374812. Instruct taxpayers to file Form 1120-IC-DISC at the Kansas City campus at the following address: Department of the Treasury Internal Revenue Service Kansas City, MO 64999 21.7.4.4.4.11.7 (10-01-2016) Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons Form 1120-ND is filed by nuclear decommissioning funds to report contributions received, income earned, the administrative expenses of operating the fund, and the tax on modified gross income. The return is also used to report and pay the initial Section 4951 taxes on self-dealing. Except for self-dealers, the due dates for filing, paying, and requesting extensions require the same date as those for Form 1120. The filing requirement code is "11" . See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Corporate Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-ND. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-ND. See the Instructions for Form 1120-ND for the return due date for self-dealers. In addition, self-dealers must file Form 7004 to request an extension of time to file. See the Instructions for Form 1120-ND, for more specific information. 21.7.4.4.4.11.8 (10-01-2018) Form 1120-F, U.S. Income Tax Return of a Foreign Corporation A foreign corporation must file Form 1120-F, U.S. Income Tax Return of a Foreign Corporation if, during the tax year, it: Engaged in a trade or business in the U.S., whether or not it had income from that trade or business. Had income, gains, or losses treated as if they were effectively connected with that U.S. trade or business. Had income from any U.S. source, only if its tax liability is not fully satisfied by withholding of tax at source. Overpaid income tax which it wants refunded. A corporation does not need to file a Form 1120-F if: It did not engage in a U.S. trade or business during the year, and its entire U.S. tax was withheld at the source. Its only income is not subject to U.S. taxation under IRC 881(c) or (d). It is a beneficiary of an estate or trust engaged in a U.S. trade or business, but would itself, otherwise not need to file. It files Form 1120-L as a foreign life insurance company. It files Form 1120-PC as a foreign property and casualty insurance company. It files Form 1120-FSC, it has filed Form 8279, Election To Be Treated as a FSC or as a Small FSC, and the election is still in effect. See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-F. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-F. A foreign corporation that does not maintain an office or place of business in the United States must generally file Form 1120-F by the 15th day of the sixth month after the end of its tax year. The MFT is 02 and the filing requirement code is "06." See IRM 21.8.2.9, Foreign Form 1120 Series Returns, for working these accounts, and the Instructions for Form 1120-F for more specific information. File these returns at the following location: Internal Revenue Service Ogden Campus P. O. Box 409101 Ogden, UT 84409 Forward all cases and correspondence to Ogden's Accounts Management at the following location: Internal Revenue Service Ogden Campus MS 6552 1973 N. Rulon White Blvd. Ogden, UT 84404 Reminder: If working a CII case, follow normal CII reassignment guidelines. See the CII Routing Guide for more information. 21.7.4.4.4.11.9 (01-25-2018) Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation Form 1120-FSC is filed to report a foreign sales corporation’s income, deductions, credits, and taxes. The MFT is 02 and the filing requirement code is "15." See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-FSC. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-FSC. See the Instructions for Form 1120-FSC for more specific information. File these returns at the following location: Internal Revenue Service Ogden Campus P. O. Box 409101 Ogden, UT 84409 Forward all cases and correspondence to Ogden's Accounts Management at the following location: Internal Revenue Service Ogden Campus MS 6552 1973 N. Rulon White Blvd. Ogden, UT 84404 Reminder: If working a CII case, follow normal CII reassignment guidelines. See the CII Routing Guide for more information. See IRM 21.8.2.9, Foreign 1120 Series Returns, for working these accounts. Also, for information on Form 8873, Extraterritorial Income Exclusion, see IRM 21.7.4.4.14. 21.7.4.4.4.11.10 (10-01-2019) Form 1120-SF, U.S. Income Tax Return for Settlement Funds Under IRC 468B, Special rules for designated settlement funds (DSFs), qualified settlement funds (QSFs) for which a grantor trust election is not made, and disputed ownership funds (DOFs) taxed as qualified settlement funds must file Form 1120-SF. In general, taxpayers create DSFs if they elect treatment as a DSF and pay the present and future claims against the electing taxpayer which arise out of personal injury, death, or property damage. QSFs are funds, accounts, or trusts that have: Ordered or approved by a governmental authority (including a court of law). Created to resolve or satisfy one or more contested claims that have resulted or may result from an event (or related series of events) that has occurred and that has given rise to at least one claim asserting liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or arising out of a tort, breach of contract, or violation of law, and A trust under applicable state law or keep its assets segregated from other assets of the transferor (and related persons). A DSF taxed as a QSF generally is an escrow account, trust, or fund that is established to hold money or property subject to conflicting claims of ownership and consists entirely of passive investment assets. Form 1120-SF is filed by DSFs and QSFs for which a grantor trust election is not made, and DOFs taxed as qualified settlement funds to report transfers received, income earned, administrative expenses of operating the fund, and the tax on its investment earnings. The income is taxed at the highest rate applicable to trusts. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the tax rate for tax years beginning after December 31, 2002 to 35 percent. For tax years beginning in 2013 the tax rate increased to 39.6 percent. For taxable years beginning after December 31, 2017, and before January 1, 2026, the tax rate is 37 percent. The filing requirement code is "16" . The return due dates, payment dates, and requests for extensions utilize the same due date as those for Form 1120. Ogden campus receives Forms 1120-SF, or based on the table located in the Instructions for Form 1120-SF. See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-SF. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-SF. 21.7.4.4.4.11.11 (05-24-2021) Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts Form 1120-REIT is filed to report the income, gains, losses, deductions, and credits of real estate investment trusts as defined in IRC 856. See IRC 856(c) for the REIT income and asset qualification tests. The return due dates, payment dates, and requests for extensions utilize the same due date as those for Form 1120. The filing requirement code is "18." See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-REIT. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-REIT. See the Instructions for Form 1120-REIT, for more information. For information on Form 8875, Taxable REIT Subsidiary Election, see IRM 21.7.4.4.13. Route correspondence requests for extension of "foreclosure property" grace period pursuant to IRC 856(e) by a real estate investment trust (REIT, Form 1120-REIT) to Ogden Accounts Management, Mail Stop 6715. If CII case re-control to 0441605253. An extension request is timely if it is filed more than 60 days before the grace period would expire. The grace period expires as of the close of the third taxable year following the taxable year in which the REIT acquired the foreclosure property (the second taxable year for qualified health care properties). Accordingly, if the grace period expires on December 31 of a particular year, the extension request must be dated and filed by October 31 of that year to be timely. See IRM 3.11.212.5, Determination of Timely Filing – General Instructions, for more information. If the deadline to date and file the extension request falls on a weekend or federal holiday, the deadline is the first business day following such weekend or federal holiday. If the request is timely filed, Ogden Accounts Management will send the taxpayer a Letter 96C, Acknowledgment Letter for General Use Inquiry. In addition, Ogden will input a CII history statement that an extension request was received and that a Letter 96C was issued. Capture the screen of the Letter 96C for a record of the paragraphs used. In the Letter 96C use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the following two bullets and follow the instructions in the third bullet: If your extension request for foreclosure property described in IRC 856(e)(3) or IRC 860G(a)(8) is timely filed (i.e., more than 60 days before the grace period expires), then the grace period shall be automatically extended: (1) in the case of qualified health care property, for 4 years less the term of any prior grace period extension, and (2) in other cases, for three years. However, if your extension request is timely filed and the IRS subsequently reviews your request and determines that it shall not be granted, then the automatic extension of the grace period set out in the preceding paragraph shall end after the 30th day after you are notified by certified mail that the request was not granted. (See Treas. Reg. Section 1.856-6(g)(5).) Attach a copy of the extension request that contains the taxpayers name, their EIN, date of request, and property description (the address) of each property that the taxpayer is requesting a foreclosure extension for. If the request is not timely filed Ogden Accounts Management will send the taxpayer a Letter 3064C, IDRS Special Letter. In addition, Ogden will input a CII history statement that an extension request was received and that a Letter 3064C was issued. Capture the screen of the Letter 3064C, for a record of the paragraphs used. In the Letter 3064C, use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the first two of the following bullets and follow the instructions in the third bullet: An extension request for foreclosure property described in IRC 856(e) or IRC 860G(a)(8) must be filed more than 60 days before the grace period would otherwise expire. Your request is untimely, since it was filed after this deadline. The property is also ineligible for the automatic extension provided for a timely filed request. See Treas. Reg. Sections 1.856-6(g) (3), (5). While your extension request was untimely filed, you may make a separate request for the IRS to treat it as timely filed, pursuant to Treas. Reg. Section 1.856-6(g) (6), by establishing that (1) there was reasonable cause for failure to file the extension request within the prescribed time and (2) you filed the separate request within a reasonable time under the circumstances. Attach a copy of the extension request that contains the taxpayer’s name, its EIN, date of request, and property description (the address) of each property that the taxpayer is requesting a foreclosure extension for. If a subsequent inquiry is received AFTER the 96C is sent (check ENMOD), advise the taxpayer that they may call the non-toll-free numbers below if they have any questions and may speak to one of the: Senior Program Specialists (Technical Tax Analysts) Internal Revenue Service LB&I, Financial Services 212-298-2171 and/or 212-298-2250 Between 8:00 AM and 4:30 PM (EST) 21.7.4.4.4.11.11.1 (08-31-2009) Form 8927, Determination Under IRC 860(e)(4) by a Qualified Investment Entity Form 8927, Determination Under Section 860(e)(4), by a Qualified Investment Entity, is filed by a RIC (Regulated Investment Company, Form 1120-RIC), or a REIT (Real Estate Investment Trust, Form 1120-REIT). Form 8927 is filed when a RIC or REIT seeks to make a determination under IRC 860(e)(4). When properly completed and filed with the Internal Revenue Service, Form 8927 is treated as a statement by the taxpayer attached to its amendment or supplement to a return of tax for the relevant tax year for purposes of IRC 860(e)(4). Generally, the date Form 8927 is mailed is the date of determination under IRC 860(e)(4). See section 4 of Rev. Proc. 2009-28, 2009-20 I.R.B. 1011, for details. Also, see the General Instructions for Form 8927 for more information. If a loose Form 8927, or correspondence citing section 860 of the IRC, or deficiency dividend procedures is received in Accounts Management, route to: Internal Revenue Service Ogden Submission Processing Center P.O. Box 9941 Mail Stop 4912 Ogden, UT 84409 If an amended return is received with Form 8927 attached or with correspondence described in the paragraph directly above, route the case to the above address. 21.7.4.4.4.11.11.2 (10-01-2021) Deficiency Dividends for Regulated Investment Company (RIC) and Real Estate Investment Trust (REIT) Filing Form 8927 - Background A Regulated Investment Company (RIC) (Form 1120-RIC) or a Real Estate Investment Trust (REIT) (Form 1120-REIT) may claim a deduction for dividends paid, including a “deficiency dividends” as defined by IRC 860(f). To claim a deficiency dividends deduction for a subject year, a RIC or REIT must: Have a "determination" that results in an adjustment for the year. This can include the filing of Form 8927 in accordance with Rev. Proc. 2009-28, 2009-20 I.R.B. 1011. See IRM 21.7.4.4.4.11.11.1, Form 8927, Determination Under IRC 860(e)(4) by a Qualified Investment Entity, for the subject year. Distribute the deficiency dividends (which may be made in cash or other property) on or after the determination date, and within 90 days after the determination date (and prior to filing Form 976). File Form 976, Claim for Deficiency Dividends Deductions by a Personal Holding Company, Regulated Investment Company (RIC), or Real Estate Investment Trust (REIT), after such distribution and within 120 days after the determination date. While the amount of the deficiency dividend deduction allowed will reduce regulated investment company (RIC) taxable income or real estate investment trust taxable (REIT) income for the subject year, the deficiency dividend deduction will generate an interest liability. For the purpose of computing interest, the amount of the deficiency dividends deduction is a deemed increase in tax, with interest due on the deemed increase in tax from the due date of the Form 1120-RIC or Form 1120-REIT of the subject year (not including extensions) to the date the Form 976 is filed (which is the date the increase in tax is deemed paid). See IRC 860(c)(1). Example: Form 8927 (with respect to a 201412 Form 1120-RIC) is sent by U.S. mail on 11/15/2016 and Form 976 is filed on 01/03/2017 claiming a deficiency dividends deduction. A notice of interest due is sent per this IRM procedure. Interest is computed only through the date Form 976 was filed (01/03/2017). If a Form 8927, Form 976, or correspondence citing IRC 860 or deficiency dividends procedures is received in Accounts Management and the taxpayer is under an examination (TC 420 or -L Freeze), route the case to the Examination Team per CC AMDISA. If a Form 8927, Form 976, or correspondence citing IRC 860 or deficiency dividends procedures is received in Accounts Management and is a CII case, reassign to IDRS number 0435504315. Otherwise, route to the Complex Interest Team in Ogden at the following address: Internal Revenue Service Ogden Accounts Management Campus (OAMC) Mail Stop 6800 Ogden, UT 84404 21.7.4.4.4.11.11.3 (11-20-2023) Deficiency Dividends Procedures and Deadlines (OAMC Complex Interest Team Only) Corporate partners in a Bipartisan Budget Act (BBA) partnership may participate in a request for modification and file amended returns to report additional taxable income. Tax attributable to corporate partners in a BBA partnership that are Qualified Investment Entities (QIE); i.e., Regulated Investment Companies (RIC) and Real Estate Investment Trusts (REIT), are subject to the procedures provided in IRC Sec. 860. A QIE is required to distribute 90 percent of its taxable income and is allowed a deduction for dividends paid. IRC Sec. 860 provides procedures for a QIE to account for income recognized after the return for the tax year has been filed. The QIE provides notice to the IRS, declares and pays a deficiency dividend to its shareholders and files Form 976, Claim for Deficiency Dividend Deductions. The QIE filing the claim is assessed statutory interest for which the QIE makes payment. The claim includes an obligation for statutory interest to the IRS. The corporate codes allow BBA-driven tax assessments and tax payments to post after the ASED has closed. The Complex Interest team in OAMC processes Form 976. If the ASED and CSED have expired, there is no longer an obligation to send the case to the Financial Products Specialists in LB&I. There is no statute of limitations bar to filing this claim. Employees will confirm the following: The deficiency dividends distribution date (reported on Form 976, line 7) is on or after the determination date (reported on Form 976, line 6) and within 90 days after the determination date (IRC 860(f)(1)). The Form 976 was filed within 120 days after the determination date (IRC 860(g)). Note: The Form 976 filing date is generally the date the form is received. If the Form 976 was received after the 120-day deadline, apply the "timely mailing treated as timely filing rule of IRC 7502." For additional information see IRM 20.1.2.2.1, When Timely Mailing Equals Timely Filing or Paying (Received Date vs. Filing/Payment Date) and IRM 25.6.1.6.15, When a Document Is Treated As Filed Under the IRC. A certified copy of the resolution of the board of directors or other authority authorizing the payment of the deficiency dividends is attached to the Form 976. (Form 976, line 7; Reg. section 1.860-2(b)(2)(x)). Note: If any required information listed above is missing, send the correct C-Letter and suspend your case for 40 days. If the missing information is not received follow the no consideration guidance found in IRM 21.5.3.4.6.3, No Consideration Procedures. Send a copy of the case and the Letter 916 using E-Fax, or mail to the Financial Products Specialists Manager address listed below. 5100 River Rd. Mail Stop 601 Schiller Park, IL 60176-1076 Attn: Subject Matter Expert RICs, REITs, and REMICs Caution: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If the above conditions are met, compute the amount of interest that is due. Interest is computed on the amount of the deficiency dividends deduction (Form 976, line 9a) from the Form 1120-RIC or Form 1120-REIT from return due date (without regard to extensions) to the date the Form 976 is filed. Example: MFT 02 TX PRD 201412 Form 976 timely received 07/19/2016 Deficiency Dividends Deduction = $3,000,000.00 = TC 971 ac 697 Interest period - 03/15/2015 (RDD) - 07/19/2016 (filed date) Debit Interest = $133,056.44 = TC 340 DB-INT-TO-DT= 07/19/2016 Action required: Input TC 290 for $.00. Use blocking series 18 to associate with the original return if a paper case. Note: If the case is scanned into CII, follow normal CII case processing procedures. See IRM 21.5.1.5, Correspondence Imaging Inventory (CII) Procedures, for additional information. Input TC 340 for the amount of the debit interest assessment ($133,056.44 for the example above). Input Reason Code (RC) 192 if the assessment of Statutory Interest is derived from RIC or REIT partner amended return, Form 976, or alternative document (including “Closing Agreement” and “Other” modification request not specifically defined) to reduce the BBA Imputed Underpayment amount. Input Reason Code (RC) 193 if the assessment of Statutory Interest derived from RIC or REIT amended return or alternative document (including “Closing Agreement” and “Other” determination under IRC Sec 860) is arising from a Form 976 claim for a deficiency dividend deduction. Input hold code 0 to allow CP 210/CP 220 Notice to generate to the taxpayer. Input TC 971, action code 697 for the amount of the deficiency dividends. (This identifies the TC 340 as a RIC/REIT interest adjustment) Send the taxpayer a Letter 3064C and include a copy of the interest computation. Note: In an open paragraph include the following: Pursuant to IRC 860(c)(1), you owe interest on the amount of the deficiency dividends deduction claimed on your Form 976. The interest owed is figured from [insert date] MM-DD-YYYY, the Form [enter form number 1120-RIC or 1120-REIT] return due date (not including extensions) to the date the Form 976 [insert date] MM-DD-YYYY, was filed. An interest computation is enclosed. Note: Notate AMS of the actions taken, as needed. Charge time to OFP 710-01053 If the dividends were not timely distributed or the Form 976 is not timely filed, issue a Letter 105C as notification that the claim is not timely. Send a copy of the case and the Letter 105C using E-Fax or mail to the Financial Product Specialist’s address above. Choose paragraph (a) or (b) below depending on which deadline is not met. Also, include appeal rights. We can’t allow your claim because the distribution wasn’t within 90 days after the determination date. We can’t allow your claim because Form 976 wasn’t filed within 120 days after the determination date. Note: If a call is received on the toll-free line regarding the 105C Letter, write a Form 4442 and tell taxpayer the case is being referred to the LB&I Financial Products Specialist area and they will respond within 45 days. Send the Form 4442 via E-Fax to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or mail to the following address: 5100 River Rd. Mail Stop 601 Schiller Park, IL 60176-1076 Attn: Financial Products Specialist area Reminder: Notate AMS of the actions taken. Employees working these cases may contact the Financial Products Specialists in the LB&I Enterprise Activities Practice Area by telephone ≡ ≡ ≡ ≡ ≡ ≡ ≡, for any questions with the deficiency dividends procedures for RICs and REITs. In addition, Financial Products Specialists may manually work these cases. 21.7.4.4.4.11.12 (10-01-2024) Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies Form 1120-RIC is filed to report the income, gains, losses, deductions, and credits of regulated investment companies as defined in IRC 851. The return due dates, payment dates, and requests for extensions use the same due date as those for Form 1120. The filing requirement code is "17" . See IRM 21.7.4.4.4.2, Form 1120 Series Due Dates - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.4.4.2.1, Form 1120 Corporate Series Due Dates - Tax Years Beginning After December 31, 2015, for information regarding the return due date for Form 1120-RIC. Also, see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax and Other Returns, Tax Years Beginning After December 31, 2015, for information regarding extensions for Form 1120-RIC. See the Instructions for Form 1120-RIC for more information. A domestic corporation that meets certain conditions must file Form 1120-RIC if it elects treatment as a RIC for the tax year (or has made an election for a prior tax year and the election has not been terminated or revoked). The election is made by computing taxable income as a RIC on Form 1120-RIC. The term “regulated investment company” applies to any domestic corporation that: is registered throughout the tax year as a management company or unit investment trust under the Investment Company Act of 1940 (ICA), has an election in effect throughout the tax year under the ICA for treatment as a business development company, or is a common trust fund or similar fund that is neither an investment company under section 3(c)(3) of the ICA nor a common trust fund as defined under IRC 584(a). In addition, the RIC must meet the (1) income test, (2) asset test, and (3) distribution requirements. See the Instructions for Form 1120-RIC for more information on these requirements. Per section 101 of the RIC Modernization Act of 2010, P.L. 111-325, there is no limit on the number of tax years that a RIC can carryover a net capital loss for tax years beginning after December 21, 2010. For more information, see IRC 1212 . 21.7.4.4.4.11.13 (10-01-2020) Form 1120-X, Amended U.S. Corporation Income Tax Return Form 1120-X, Amended U.S. Corporation Income Tax Return, is filed to correct previously filed Form 1120. To correct other types of Forms 1120, file an amended form and check the box for "Amended Return" shown at the top of the form. An amended or corrected return posts to a taxpayer’s account as a TC 976 and generates a CP/TRNS 193. Refer to IRM 21.7.9, Duplicate Filing Conditions, for information on resolving duplicate filing conditions. Submission Processing no longer works Forms 1120-X. The Image Control Team (ICT) scans all Forms 1120-X to CII. Use the proper re-file blocking series when making adjustments when the original return is secured and when the original return is not secured. See IRM 21.7.9.4, Duplicate Filing Conditions Procedures, for more information. 21.7.4.4.4.11.13.1 (04-02-2008) Pre-Adjusted Form 1120-X Procedures Submission Processing worked many Form 1120-X prior to April 2008. These adjustments were processed in the 20 through 29 blocking series. If a TC 150 with math error codes is already on the module, a TRNS 193 generates and is sent to Accounts Management for review. A TRNS 193 also generates when an adjustment in blocking series 29 (disaster claim) posts. Action required: Review Form 1120-X and TRNS 193 to verify all adjustments have posted and the refund or offset action was made. If the adjustment did not post, input the correct adjustment. Verify the taxable income was adjusted, if necessary, adjust. Math verify Form 1120-X, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and: If And Then An incorrect refund was issued The incorrect refund was due to a math error or erroneous refund 1. Use CFOL command codes to math verify the original return. 2. Refer to IRM 21.4.5, Erroneous Refunds, for information on processing erroneous refunds and IRM 21.5.4, General Math Error Procedures, for information on returns involving mathematical and clerical errors. An incorrect refund was issued The incorrect refund was not due to a math error or erroneous refund 1. Use CFOL command codes to math verify the original return. 2. Input TC 29X to correct the account using blocking series 00 or 15. 3. Send a letter to the taxpayer explaining the change. There is no change Refile using the 1120-X DLN. (If the original return is secured, input TC 290 $.00, blocking series 00 to refile the return.) 21.7.4.4.4.11.13.2 (05-05-2017) Line on Form 1120-X to Apply Overpayment as Credit Elect Form 1120-X contains a line where taxpayers can designate to have their overpayment applied as a credit elect to estimated taxes for the succeeding year per IRC 6402(b). A credit elect on a corporate income tax return is only applied to the immediately succeeding tax period and is irrevocable. Use command code ADD48 and transaction code TC 830 (debit) and command code (CC) ADC48, and transaction code (TC) TC 710 (credit) to apply an overpayment as a credit elect to the immediately succeeding tax. Command codes (CC) ADD48/ADC48 must have a BPI "0" input when applying an overpayment as credit elect. See IRM 21.5.8.4.2, Determining Correct Credit Transfer Format, for complete instructions. Example 1 - In 2017, a taxpayer files Form 1120-X correcting a 201612 tax period and requests the overpayment be applied as a credit elect to estimated tax for 201712. Transfer following the instructions in paragraph (2) directly above. An overpayment from Form 1120-X can be transferred to another MFT/tax period and is not considered a credit elect. To transfer an overpayment to another MFT/tax period, transfer with CC ADD24 and TC 820 (debit) and CC ADC24 with TC 700 (credit). See IRM 21.7.4.4.5, Estimated Tax Overpayment, Credit Elect – General, for more specific information on credit elects and due to programming issues determining the proper dates. See IRM 21.7.4.4.4.2 and IRM 21.7.4.4.4.2.1 for the correct return due date for Forms 1120 series returns since the return due date changed for tax years beginning after December 31, 2015. Also, see IRM 21.5.8.4.2, Determining Correct Credit Transfer Format, for more information on the command codes and transaction codes. 21.7.4.4.4.11.14 (10-01-2024) Form 1120-C, U.S. Income Tax Return for Cooperative Associations Effective with tax periods ending on or after December 31, 2006 (200612 and subsequent), Form 1120-C, U.S. Income Tax Return for Cooperative Associations, replaces Form 990-C, Farmers' Cooperative Association Income Tax Return. Form 1120-C is filed to report income, gains, losses, deductions, credits and to figure the income tax liability of the cooperative. Every cooperative must file Form 1120-C, whether or not it has taxable income. The MFT is 02, tax class 3, doc code 032, and the filing requirement code is 20. Generally, a farmer’s cooperative is a farmer, fruit growers, or like association organized and operated on a cooperative basis to: Market the products of members or other producers and return to them the proceeds of sales, less necessary marketing expenses, or Purchase supplies and equipment for the use of members or other persons and turn over the supplies and equipment to them at actual cost, plus necessary expenses. A member is anyone who shares in the profits of the cooperative association and is entitled to participate in the management of the association. A patron is anyone with whom or for whom the cooperative association does business on a cooperative basis, whether a member or nonmember of the cooperative association. For tax years beginning before January 1, 2016, a cooperative described in IRC 6072(d) must file its income tax return by the 15th day of the ninth month after the end of its tax year. Any cooperative not described in IRC 6072(d) must file its income tax return by the 15th day of the third month after the end of its tax year. In addition, cooperatives may file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, to request an automatic six-month extension of time to file. Form 7004 is filed on or before the original due date of the Form 1120-C that is being filed. For tax years beginning after December 31, 2015, a cooperative described in IRC 6072(d) must file its income tax return by the 15th day of the ninth month after the end of its tax year. Any cooperative not described in IRC 6072(d) must file its income tax return by the 15th day of the fourth month after the end of its tax year, unless its tax year ends on June 30 and begins before January 1, 2026, in which case its income tax return is due the 15th day of the third month after the end of its tax year. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ For tax years beginning after December 31, 2015, a cooperative may file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, to request an automatic five-month, six-month, or seven-month extension based on its fiscal year ending month, regardless of whether the cooperative is described in IRC 6072(d). The cooperative must file Form 7004 on or before the original due date of its Form 1120-C. See IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns - Tax Years Beginning After December 31, 2015, for more information. Cooperatives with a SC80 are tax-exempt under IRC 521 (type of Org. code 6) and SC93 (Type of Org. code 7) are non-exempt. If the EO status shown on CC ENMOD is 40, it is treated as SC93, non-exempt. Cooperatives must make estimated tax payments, like a regular corporation must make. Form 1120-C is filed at the Ogden Internal Revenue Service, Ogden, UT 84201-0012. Follow normal BMF CAT-A/claim procedures in IRM 21.5.3, General Claims Procedures. 21.7.4.4.4.12 (03-14-2014) Adjusting Tax and Item Reference Number (IRN) 886 Any time taxable income is changed due to an adjustment (including TC 290 $.00) to an income tax return (Form 990-T, Form 1041, Form 1120, Form 1120-C and Form 1120-S), Item Reference Number (IRN) 886 is input to correct the taxable income/ordinary income/unrelated business taxable income on the master file. Action required: Input IRN 886 to increase taxable income Input IRN 886 with a minus sign to decrease taxable income. Any time that the tax reported on a Form 990T, Form 1041 series return, or a Form 1120 series return is changed, input: TC 290 to increase the tax. TC 291 to decrease the tax. 21.7.4.4.4.13 (01-06-2004) Insolvent Financial Institutions/Failed Savings and Loans, and Failed Banks IRS is authorized to pay refunds to a statutory or court-appointed fiduciary of an insolvent member of an affiliated group filing a consolidated income tax return. Tax returns can be filed on behalf of failed savings and loans. Large accounting firms generally prepare the returns and claims. See the various ways to identify these returns/claims below: The words "Savings and Loan" or "Savings Bank" in the entity portion. PBA codes 6030, 6060, 6090, or 6120. Notations of abatement of tax or refunds based on IRC 7507 or IRC 597, Notice 89-102, or "FIRREA" . Large liabilities but no remittance. Income but not a tax liability. Asterisks on the tax due line. "RTC" or "FDIC" in the entity portion. Failed Savings and Loans accounts normally have a Large Corp indicator and Large Corp. Units work them. See IRM 21.7.1.4.11.10, Failed Savings and Loans, for more information. 21.7.4.4.4.13.1 (01-01-2005) Resolution Trust Corporation (RTC)/Federal Deposit Insurance Corporation (FDIC) Returns On January 1, 1996, RTC was taken over by FDIC. FDIC is now filing tax returns for institutions under RTC control. The entity section of the return now shows "FDIC," and the top of the return is stamped "RTC Return." RTC or FDIC returns identified by Exam use blocking series (BS) 499 or 979. For those returns which reflect income but no tax liability, the liability is computer-generated and a Math Error Notice sent to the taxpayer. C and E/ERS does not input a Taxpayer Notice Code (TPNC) if the return has a refund. If a notice is inadvertently generated, Notice Review should stop the notice. 21.7.4.4.4.13.2 (11-07-2022) Adjustment Procedures (RTCs/FDICs) Accounts Management employees must have any returns, claims, correspondence, or internally generated notices with a savings and loan, savings bank, or bank type entity as described above, classified by Exam. An LCI is normally coded on failed savings and loans accounts. Any return or correspondence not reflecting an LCI, which has a savings or bank type entity, must be reviewed by Exam before any adjustments or refunds are allowed. Suspend to Exam as CAT-A and use suspense reason HQ Reserved 5. Note: Before routing to CAT-A, reassign the case to the correct Large Corp unit based on the FDIC bank location and the Large Corp state mapping found in IRM 21.7.1.4.11, Large Corp Unit and the reassignment numbers found in IRM 21.7.1.4.11.3, Routing Large Corp Cases. If there is a clear indication the return was reviewed by Exam, do not have the return reclassified. 21.7.4.4.4.13.3 (10-01-2024) Insolvent Financial Institutions/Failed Banks Route Form 1120-X amended returns involving failed banks meeting any of the following three criteria to Exam in Ogden: Return states "Claim for Refund under IRC 6402(k) or IRC 6402(i)" . ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. FDIC files original and amended returns for insolvent banks in FDIC receivership and elect IRC 7507 to defer the assessment of tax until the bank becomes solvent. The Submission Processing accounting function assesses tax on balance due returns and provides balance due notices to the taxpayer. If correspondence is received requesting abatement of tax due to the IRC 7507 election, route to CAT-A “HQ Reserved 5”. See IRM 21.5.9.4.2.1, Carryback Applications/Claims from Financial Institutions in Receivership - Form 56-F Filed, for carrybacks application/claim received from a financial institution, and the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.4.14 (01-01-2005) Form 4466 Transcripts (Form 1120) Form 4466 transcripts generate when both a Form 1120 corporation return (TC 150) and a manual refund (TC 840 with blocking series 30 - 39) posts to MF, resulting in a zero or debit module balance. The manual refund is the result of a Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax. These transcripts show the taxpayer may have received an excessive refund of estimated tax (ES) and could have a potential ES penalty. Review the transcript to determine if the taxpayer is subject to an ES penalty. (The related return need not be secured to assess the penalty.) Resolve the transcript by following the table below. If And Then Module balance is zero No money was paid with the return (TC 610) or no subsequent payment was made after issuance of the original TC 840 Taxpayer is not subject to the penalty. Dispose of the transcript as classified waste. Module balance is zero There is a TC 610 amount and/or a subsequent payment made after issuance of the original TC 840 Taxpayer’s excessive refund of ES is the amount of the payment. 1. Compute the ES penalty based on the TC 610 subsequent payment amount from the TC 840 date to the due date of the return. 2. Input TC 170 in blocking series 15 to assess the penalty. Module balance is a debit Taxpayer’s excessive refund is the amount of the debit (except when the debit is created by previously assessed or accrued penalty and/or interest charges). 1. Combine the TC 610 payment (and similar credits) with the debit amount to determine the excessive refund. 2. Compute the ES penalty based on the excessive refund amount from the TC 840 date to the due date of the return. 3. Input TC 170 in blocking series 15 to assess the penalty. The Form 4466 refund was issued after the return’s original due date There is no penalty assessed on the excessive refund amount. ≡ ≡≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 21.7.4.4.4.15 (10-01-2024) Modernized e-file (MeF) System Functionality Overview Beginning in January 2004, IRS began accepting certain tax year 2003 electronically filed corporate (Form 1120 and Form 1120-S) and exempt organization returns. See IRM 21.7.7.5.14, Modernized Electronic Filing, for MeF for exempt organizations. This was the first phase of the rollout of the Modernized e-File Project (MeF). MeF allows taxpayers to receive refunds via direct deposit and allows e-filers to e-pay their balance due through an authorized electronic funds withdrawal. Beginning in January 2007, Form 1120-F for TY 2006 were accepted. See IRM 3.42.4.6, Modernized e-File (MeF) System Functionality Overview, for a complete list of e-file program publications and revenue procedures pertaining to the Modernized e-File Program. The MeF Project is a major modernization initiative which is developing the modernized platform for filing returns electronically. The MeF Project provides for the filing of tax and information returns electronically through the internet via registered electronic originators, or web Services. Electronic transmissions for these returns are directed to the Ogden Submission Processing Center. Beginning February 17, 2010, the Service began accepting Form 1040, U.S. Individual Income Tax Return through the Modernized e-file system. See IRM 3.42.5.14, IRS e-file for 1040 Modernized e-File (MeF), for more information on Form 1040 and the MeF system. Business taxpayers can get information electronically concerning the MeF project by going to the IRS Web site at Known Issues and Solutions. Employees can access e-filed corporate and exempt organization returns processed in MeF though the Employee User Portal (EUP) on their NT workstations. Documents display in HTML format. The retrieval, display, printing and archiving of the electronic return and up to (eventually) 700 different schedules and attachments is through Microsoft Internet Explorer via the EUP. Ogden processes electronically filed Form 1120 and Form 1120-S returns. Returns filed via the MeF system are assigned the following codes (See IRM 3.42.4.9.2.1, Researching e-file BMF Identification Codes, for more information.): Form Filing Location Code DLN Digits 1 and 2 Tax Class DLN Digit 3 Document Code DLN Digits 4 and 5 1120 88/93 (OVFL 92) 3 10 and 11 1120-S 16 1120-F 93 (92 overflow) 60 (ECI Foreign Address) 78 (ECI US Possession Address) 66 and 67 Systemically rejected electronically filed Form 1120 and Form 1120-S (MeF) returns fall-out to ERS/Rejects and must be processed as a paper return. Beginning in January 2012, rejected (MeF) Form 1120 returns will be renumbered in ERS/Rejects with FLC 91 and blocking series 960-978, and rejected (MeF) Form 1120-S returns will be renumbered with FLC 91 and blocking series 900-999. This will allow end users to identify these paper returns as originally filed electronically but were rejected and were processed as paper returns. IRS e-file providers and applicants are required to submit their IRS e-file applications online. To register for e-Services, users navigate to the e-Services page Become an Authorized e-file Provider New users must also register by creating a profile with an IRS Credential Service Provider. The IRS uses ID.me, a technology provider, to provide identity verification and sign-in services, which allow access to e-Services. More information is available on IRS.gov at Register for IRS Online Self Help Tools. Large taxpayers filing only their own return are not required to pass a suitability background check. IRS only performs the suitability checks discussed in Publication 3112 on applicants that prepare returns for profit. Taxpayers may also call the e-Help Desk toll-free at 866-255-0654 for help. To file Form 1120 series returns electronically, transmitters, and software developers MUST successfully pass Acceptance or Assurance Testing System (ATS). The ATS process tests hypothetical scenarios to ensure the participant's computer program has the correct file specifications to file returns electronically, that required fields will post to master file correctly and that Providers understand the mechanics of IRS e-file. All Transmitters must perform a Communications Test and be accepted. No further communications testing is required when adding additional forms to MeF and do not require testing each year. See Publication 3112, IRS e-file Application and Participation, and Publication 5078, Modernized e-file (MeF) Test Package Business Submissions, Assurance Testing System (ATS), for more information on the testing process for the current tax year. Taxpayers may also call the Help Desk toll-free at 866-255-0654. Testing for Form 1120 is generally available in ATS by the start of November each year. Beginning January 2019, the MeF system began accepting TY 2018 MeF filed corporate returns. The MeF system will accept corporate returns for all tax years beginning with TY 2019. Beginning with TY 2006, e-filing is required for returns, original, amended, and superseding returns, if the taxpayer is required to file electronically (Unless the taxpayer has received a waiver to file that particular tax return on paper. See IRM 3.42.4.17.3, Certain Corporations and Tax-Exempt Organizations Waiver Procedures). Only the MeF system accepts amended returns. See IRM 21.7.9.4.1.2.2, Modernized e-file (MeF) Amended Returns, for more information on filing amended returns through the MeF system. Taxpayers who filed an original return through any other system must complete an amended return on paper and file it with the campus where they would file a paper return. For carrybacks filed via the MeF system, see IRM 21.5.9.5.1.1, Carrybacks Filed via the Modernized e-File (MeF) System (Ogden AM Campus Only), for more specific information. Taxpayers do not send paper Form 8453 (signature documents) to the IRS for returns filed through MeF. Preparers must scan a signed, completed Form 8453 and attach it to the electronic return. Alternatively, most taxpayers can use a Personal Identification Number (PIN) to file their returns. Form 8879-C, IRS e-file Signature Authorization for Forms 1120, is used in the modernized e-file program. This form authorizes an officer of a corporation and an ERO to use a PIN to electronically sign a corporation's electronic income tax return and, if applicable, an Electronic Funds Withdrawal Consent. The Practitioner PIN option can only be used if the taxpayer uses an ERO. Large Taxpayers who file their returns directly with IRS must use a Form 8453 signature document. For purposes of electronic filing, the IRS defines a “Large Taxpayer” as a business or other entity with assets of $10 million or more, or a partnership with more than 100 partners, which originates the electronic submission of its own return(s). 21.7.4.4.4.15.1 (10-01-2024) Modernized e-file (MeF) - Electronic Filing of Corporate and Exempt Organization Returns Beginning in January 2004, IRS began accepting certain TY 2003 electronically filed corporate returns (Form 1120, Form 1120-F, and Form 1120-S). In addition, Form 990, Form 990-EZ, Form 1120-POL and Form 8868 for exempt organizations (See IRM 21.7.7.5.14, Modernized Electronic Filing) were also accepted. The MeF System also accepts Form 990-PF, Return of Private Foundation, and Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. See IRM 3.42.4.7.3, Business e-file Returns Processed by OSPC, for a complete listing of the corporate and tax-exempt organization forms and tax returns that can be filed electronically. Final regulations (TD 9363), released in 2007, require corporations that have assets of $10 million or more and file at least 250 returns annually, to electronically file their Form 1120 and Form 1120-S for tax years ending on or after December 31, 2006 and for returns required to be filed during calendar years ending on or before December 31, 2023. This requirement extends to foreign corporations filing Form 1120-F, who have assets of $10 million or more and who file at least 250 returns annually and is effective for tax years ending on or after December 31, 2018 and for returns required to be filed during calendar years ending on or before December 31, 2023. See Treas. Reg. 301.6011-5, IRC 6011(e). Section 2301 of the Taxpayer First Act of 2019, P.L. 116-25, enacted July 1, 2019, authorized the IRS and Treasury to issue regulations that could reduce the 250-return limit to 10. Final regulations (TD 9972) were published on February 23, 2023. The final regulations require corporations to e-file their corporate income tax returns beginning in 2024, and reduce the 250-return threshold enacted in prior regulations to generally require e-filing by filers of 10 or more returns in a calendar year (regardless of asset size). Section 3101 of the Taxpayer First act of 2019, P.L. 116-25, IRC 6033(n) enacted July 1, 2019, requires tax exempt organizations to electronically file information returns and related forms. The law affects tax exempt organizations in tax years beginning after July 1, 2019. See Treas. Reg. 301.6033-4 for more information. See the table below for threshold limits for corporations and exempt organizations. Threshold for Filing Electronically Date Mandated to File Electronically Corporations with Assets of $50 million or more and required to file 250 or more returns Taxable years ending on or after December 31, 2005 (200512). Exempt organizations with assets of $100 million or more and required to file 250 or more returns Taxable years ending on or after December 31, 2005 (200512) Corporations with assets of $10 million or more and required to file 250 or more returns Taxable years ending on or after December 31, 2006 (200612) Exempt organizations with assets of $10 million or more and required to file 250 or more returns Taxable years ending on or after December 2006 (200612) Private foundations or IRC 4947 (a)(1) trusts under IRC 6033 and required to file 250 or more returns Taxable years ending on or after December 31, 2006 (200612) Exempt organizations, private foundations or IRC 4947 (a)(1) trusts under IRC 6033 regardless of asset size or number of returns Taxable years beginning on or after July 1, 2019 (201907). Corporations required to file 10 or more returns of any type during a calendar year regardless of asset size Corporate income tax returns required to be filed on or after January 1, 2024 For returns required to be filed on or before December 31, 2023, determine an entity’s assets based on total assets at the end of the taxable year as reported on the entity’s Form 1120, Form 1120-F, Form 1120-S, or Form 990. When determining whether a corporation is required to file 10 or more returns, the 2023 final regulations (TD 9972) aggregate the number of all returns of any type, including income tax, excise tax, employment tax and information returns (including Form W-2 and Form 1099) required to be filed during the calendar year ending with or within the taxable year of the corporation. So, if a corporation is required to file 10 or more returns of any type during 2023, the requirement to electronically file its corporate tax return will apply to the corporations taxable year ending 202312 through 202411 depending on its taxable year end. All members of a controlled group of corporations are required to file their Forms 1120 electronically if the total number of returns required to be filed by the controlled group of corporations is at least 10. Under these regulations, do not include corrected or amended returns in determining the 10-return threshold. See Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-File Providers for Business Returns, for returns excluded from electronic filing and Modernized e-File (MeF) Overview. IRS e-file Signature Authorizations allow an officer of the entity to enter their Personal Identification Number (PIN) as their signature on the corporation’s or exempt organization’s electronically filed return, and if applicable, consent to electronic funds withdrawal, or authorize their EEO to enter their PIN for them. The following signature authorization forms are completed and signed but are not sent to the IRS. The ERO must retain the Form 8879 for three years from the return due date, extended due date or the IRS received date, whichever is later. Form Number Title 8879-CORP IRS e-file Signature Authorization for Form 1120 8879-CORP IRS e-file Signature Authorization for Form 1120-F 8879-TE IRS e-file Signature Authorization for a Tax Exempt Entity 8879-CORP IRS e-file Signature Authorization for Form 1120-S Corporate officers who do not use the Practitioner PIN method for signing the Form 1120, Form 1120-F, Form 1120-POL, Form 1120-S, Form 990, Form 990-EZ, Form 990-PF, Form 8453-I, Form 8879-CORP, or Form 8879-TE as outlined in paragraph (8) above, must sign, scan and submit with their electronic return in PDF format, using the proper form shown in the list below: Form 8453-C, U.S. Corporation Income Tax Declaration for an IRS e-file return Form 8453-S, U.S. S Corporation Income Tax Declaration for an IRS e-file Return Form 8453-TE, Tax Exempt Entity Declaration and Signature for Electronic Filing Form 8453-I, Foreign Corporation Income Tax Declaration for an IRS e-file Return DO NOT attach information (e.g., loose forms, schedules, and correspondence) to an electronically filed return. To identify an electronic DLN, see Document 6209, Section 4, Document Locator Number, or IRM 3.42.4.9.2.1, Researching e-file BMF Identification Codes. Use the following procedures: File the information using TC 290 $.00 with the applicable blocking series for the type of return/situation you are adjusting using the non-refile DLN. DO NOT use an "attachment" or "association form." Note: Do not use these procedures for documents scanned into Correspondence Imaging Inventory (CII). CII serves as the retention area for these documents. The 2023 final regulations generally provide hardship waivers for corporations that would experience hardship in complying with the e-filing requirements and administrative exemptions from the e-filing requirements to promote effective and efficient tax administration. Notice 2024-18, Section III provides guidance on the hardship waivers and administrative exemptions from the electronic filing requirement. In the case of undue hardship, the IRS may waive the electronic filing rules if the corporation demonstrates that a hardship would result if it were required to file its return electronically. A corporation interested in requesting a waiver of the mandatory electronic filing requirement must file a written request in advance in accordance with the procedures in the Form 1120, 1120-F, or 1120-S instructions. The 2023 final regulations also grant an administrative exemption from the requirement to electronically file returns to corporations whose use of the technology required to file electronically conflicts with their religious beliefs. Advance approval of an electronic filing administrative exemption is not required to file paper forms 1120, 1120-F, or 1120-S, due to a religious exemption. Corporations must print in bold letters “Religious Exemption” at the top of page one of the return they file in paper form. See Topic no. 803, Electronic filing waivers and exemptions and filing extensions, for additional information. 21.7.4.4.4.15.2 (10-01-2024) Corporate and Exempt Organization Penalty for Failure to File Electronically Per IRS Temporary Regulation T.D. 9175, 2005-10 I.R.B., beginning January 1, 2006, certain corporations and exempt organizations are required to file electronically if they meet certain thresholds. Treasury Decision T.D. 9363 extended the requirement to e-file to all filers of a Form 1120 series original return reporting over $10 M in assets for a fiscal or calendar year that began after December 31, 2006. See IRM 21.7.4.4.4.15.1 directly above to identify those corporations and exempt organizations mandated to file electronically beginning in 2005. New Treasury regulations were issued which modified electronic filing requirements for corporate returns and clarified the mandatory e-filing rules for exempt organizations set forth in section 6033 and for entities that owe Unrelated Business Income Tax (UBIT). See T.D. 9972. Under the new regulations for corporations, which apply to returns due to be filed in calendar years beginning after December 31, 2023, corporations are required to file electronically, regardless of assets reported, if they are required to file 10 or more returns of any type during the calendar year ending with, or within the taxable year of the corporation. The new regulations for exempt organizations and returns reporting UBIT are effective for returns required to be filed during calendar years beginning after February 23, 2023. 21.7.4.4.4.15.3 (11-13-2018) Known e-file Issues and Solutions - Form 1120 Periodically, problems arise that prevent taxpayers from being able to file electronically through the Modernized e-file (MeF) System. When this occurs, e-File Services (eFS), LB&I, or Submission Processing will issue a work-around to taxpayers by posting information on the IRS Web site. Go to Known Issues and Solutions for more information. The e-help unit will direct taxpayers with processing problems to this site. In addition, Accounts Management will issue SERP Alerts or IPUs if the situation warrants. For example, an Alert was issued due to a problem with name control mismatches on Form 1120 and Form 1065 MeF returns. For calls received from taxpayers stating they are having problems e-filing, research the webpage. If unable to find any information, refer the caller to the e-help desk unit toll-free at 866-255-0654. See IRM 3.42.7.1.1, Background. 21.7.4.4.4.16 (05-08-2019) Failure to File Form 1120, with a Form 5471 or a Form 5472 Penalty Beginning January 2009, master file systemically assesses IRC 6038 penalties on Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, attached to a late filed Form 1120. Beginning in 2013, master file also systemically assesses IRC 6038 penalties on Form 5472, Information Return of a Foreign Owned Corporation, attached to late filed Form 1120 returns. The penalty is $10,000 per Form 5471 or Form 5472 attached to the late filed Form 1120. The systemically assessed Form 5471 penalty appears on MFT 13 as a TC 240 with Penalty Reference Number (PRN) 623 for 2009 and as PRN 599 for 2010 and subsequent years. See IRM 20.1.9.3, IRC 6038 - Information Reporting With Respect to Foreign Corporations and Partnerships, for more information. The systemically assessed Form 5472 penalty also posts to MFT 13 as a TC 240 but with PRN 711. See IRM 20.1.9.5, IRC 6038A(d) - Information Reporting for Certain Foreign-Owned Corporations, for more information. Both penalties carry doc code 54, and 00 as the first two digits of the blocking series. Exam posts manually assessed penalties as TC 240 with PRN 623 for failure to file Form 5471, or with PRN 625 for failure to file Form 5472. The doc code is 54 (or 51, if it’s a quick or prompt assessment). BMFOLA will show that the input employee is in one of the Exam CCP teams in Cincinnati, Memphis, or Ogden. Accounts Management (AM) does not consider penalty abatement requests for the penalties assessed by Exam. Exam will consider all penalty abatement requests for Exam (manually) assessed Form 5471 and/or Form 5472 Failure to File (FTF) penalties. A CP 215 Notice, Civil Penalty - 500 and 600 Series, generates as a result of the TC 240 penalty assessment on the MFT 13 module. The CP 215 notice instructs the taxpayer to send penalty abatement requests to Accounts Management’s International Unit in the Ogden campus. Ogden and Cincinnati International work the requests using instructions in IRM 21.8.2.20.2, Form 5471 Penalties Systemically Assessed from Late-Filed Form 1120 Series or Form 1065, and in IRM 21.8.2.21.2, Form 5472 Penalties Systemically Assessed from Late-Filed Form 1120 Series. Chief Counsel has determined that the same reasonable cause criteria is used for the systemically assessed Form 5471 and Form 5472 penalties and the FTF penalties assessed on late filed Form 1120. Since the late filed Form 1120 penalties generate a CP notice from MFT 02, requests for abatement will instruct the taxpayer to reply to either the Cincinnati or Ogden campus. Cincinnati and Ogden work cases where the taxpayer is only requesting abatement of the Form 1120 FTF penalty. Either campus may receive abatement requests for the Form 1120 FTF penalty and a Form 5471 or Form 5472 FTF penalty. Follow the table below. If And Then Taxpayer is only requesting abatement of a late filed Form 1120 penalty (Research to determine if all required Form 1120 have been filed (or have a valid extension) for all years not on retention.). Not all required returns have posted at master file (BMFOL). Contact the corporation regarding the status of the missing returns: If the taxpayer states that they have not filed the required forms, advise the corporation that the abatement request cannot be considered until the missing return(s) have been filed, and to submit a request at that time. If the corporation states that they have filed the missing returns, suspend the request for 40 days until all returns have posted. If the missing returns do not post in the time frame given, follow (a) above. All required returns have posted at master file Consider abatement based on “normal” reasonable cause criteria in IRM 20.1.1.3, Criteria for Relief from Penalties, for the failure to file penalty. Do not consider First-Time Abatement unless only a single year is involved and there is no prior penalty history. Penalty relief for all subsequent tax periods is based on the showing of reasonable cause. See IRM 20.1.1.3.6.1, RCA and First-Time Abate (FTA) Consideration. Taxpayer requests abatement of both penalties Consider the request for the late filed Form 1120 penalty only. Follow the instructions in the two rows directly above. If all returns have posted, process the FTF penalty abatement request. Before closing the CII case, take the following actions to ensure the Form 5471 or 5472 civil penalty is processed: Print the pages relevant to the civil penalty abatement request Notate “Scan to INTL MFT 13” in the top right corner of the first page of the civil penalty case Send the case for exception scanning as a new International case following the sites normal exception scanning procedures Leave a CII case note explaining the actions taken and close the CII case If you determine that you need to reprocess a TC 150 return where a Form 1120 FTF penalty and either a Form 5471 or a Form 5472 FTF penalty were assessed, take the following action: Abate the tax. Systemic abatement is possible for the FTF and FTP penalties if the account is not restricted. Any interest charged on the unpaid tax and any interest assessed on the FTF and/or FTP penalties is also systemically abated. Manually abate any penalties (See IRM 20.1.2.2.5, Manual Penalty Adjustments) and/or interest (see IRM 20.2.1.4, Normal and Restricted Interest) that are systemically restricted from re-computing by a restricting (manual) transaction code. Use the proper hold code to hold any money/credit and to prevent a CP 210 Notice or a CP 220 Notice from generating. Send a request to the address in the "then" box in the third row of paragraph (5) directly above, and request that they remove the Form 5471 penalty. Explain that you have reprocessed the return. Reprocess the return to the correct EIN/tax period following normal procedures (see IRM 21.7.9, Duplicate Filing Conditions). master file determines the assessment of penalties when the return posts. 21.7.4.4.4.17 (01-31-2012) Form 1120 and Reinstated Exempt Organization Determination Per the Pension Protection Act of 2006 (PPA), if an organization does not submit the annual electronic notice (Form 990-N) or does not file Form 990, Form 990-EZ, or Form 990-PF as required, for three consecutive years, its tax-exempt status is revoked as of the submission/filing due date of the third year. The system will put the organization in status 97 if no TC 150 (or other satisfying transaction) has posted for three years and one month. The system updates the filing requirements to Form 1120-01. Many of these taxpayers will seek reinstatement. It is also possible that some taxpayers may file Form 1120 while they seek a retroactive reinstatement. If you receive an inquiry from a taxpayer who filed Form 1120 while awaiting reinstatement and was subsequently reinstated, advise them that if the reinstated exemption covers the period for which they filed the Form 1120, then they must file an amended return (Form 1120-X), an explanation or cover letter of the situation, and a copy of the determination letter stating the exemption was reinstated and the effective date of the exemption. If the taxpayer submits the proper documentation, process the amended return that covers the period that the taxpayer filed the Form 1120 for and adjust the account. For example, a calendar year taxpayer's exempt status is revoked effective May 15, 2010. Taxpayer files a 201012 Form 1120 to cover the short year return for the remainder of 2010. If the proper documentation is submitted, abate the tax. Manually abate any penalty and/or interest that is restricted from re-computing by a manual penalty transaction code (see IRM 20.1.2.2.5, Manual Penalty Adjustments) or restricted interest transaction code see IRM 20.2.5.6, Restricted Interest. Unrestricted penalties and interest will systemically re-compute when the tax is abated. If the proper documentation is not submitted, send a Letter 916C, No Consideration Letter, and advise the taxpayer of what is needed. 21.7.4.4.4.18 (10-01-2023) Forms 1120 Series and Form 1120-S - Potential Frivolous Refunds/Possible ID Theft or RICS Involvement Forms 1120 and Forms 1120-S that meet certain criteria require a review ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ A systemic TC 570 is placed on the tax module to set the –R freeze to hold any refund until the return and related information is reviewed. Identify these accounts by a TC 570 with all fives in the blocking series and serial number of the Document Locator Number (DLN), i.e., XXXXX-XXX-55555-X. If an inquiry is received from a Form 1120 or Form 1120-S filer inquiring about the expected refund, research the account for a TC 570 posted to the account as described in the paragraph above. If the tax module contains a TC 570 with all fives, prepare a Form 4442 and notate "unreversed TC 570" , and leave a history item on IDRS of "TC570ALL5S" and "ROUTETOFRP" , and route to: Internal Revenue Service Attn: FRP M/S 4450 1973 N. Rulon White Blvd. Ogden, UT 84404 Advise the taxpayer that their inquiry is being forwarded to another department for resolution and apologize for the delay in resolving the issue. Effective January 1, 2017, Computer Condition Code "E" is edited on Form 1120 or Form 1120-S (any year) if it is determined that the return is a potential identity theft filing. See IRM 3.11.217.14.3, CCC "E" – Potential ID Theft Filing, for additional information. If a tax examiner in Submission Processing (SP) Code and Edit (C and E) finds a case with attachments or correspondence indicating the taxpayer is a victim of ID Theft, the case is referred to one of the SP BMF ID Theft liaisons. If the SP BMF Theft Liaison says the return is ID Theft, the tax examiner will edit CCC E. See IRM 25.23.11.6.3, BMF Returns Selected for RICS Review, for additional information. When CCC "E" is edited on a return a TC 971 AC 711 will post to IDRS master file. This TC 971 code will cause the return to post as a TC 973 instead of a TC 150. In addition, Letter 5263C or Letter 6042C is sent to the taxpayer requesting them to validate the filing of the return. Caution: Only RICS can reissue this letter. If the taxpayer contacts the IRS by telephone and the criteria above is met, follow the guidance in IRM 25.23.11.6.3. If correspondence is received responding to the Letter 5263C, Entity Fabrication, or Letter 6042C, Entity Verification for Business, route to: RICS Unit, OSC Mail Stop 9002 Ogden, UT 84401 For more information on potential BMF identify theft, see IRM 25.23.11.4, Business Master File (BMF) Identity Theft Research. 21.7.4.4.4.19 (03-09-2020) Form 966 - Corporate Dissolution or Liquidation A corporation or farmer’s cooperative must file Form 966, Corporate Dissolution or Liquidation, if it adopts a resolution or plan to dissolve the corporation or liquidate any of its stock. Form 966 is filed within 30 days after the resolution or plan is adopted to dissolve the corporation or liquidate any of its stock. If the resolution or plan is amended or supplemented after Form 966 is filed, the taxpayer is required to file another Form 966 within 30 days after the amendment or supplement is adopted. If a loose Form 966 is received in Accounts Management, associate the Form 966 with the entity referred to in the Employer Identification Number box on the top of the form. If box 7b is checked yes because the taxpayer filed as part of a consolidated group, associate the form with the entity’s EIN listed in box 7d. Associate with the tax period listed in box 7a. If working a Form 966 scanned into CII, the CII image is the source document and it remains in CII for further recall. If TC 150 has not posted and working a paper Form 966 case (non-CII), input TC 930 push code to have Form 966 attached to Form 1120 after the return posts. If a loose Form 966 is received in Accounts Management with a CP 259 Notice or a CP 518 Notice, route as follows: If Then Received in Cincinnati Route to Brookhaven CSCO Stop 661 Received in Ogden Route to Memphis CSCO Stop 811 Received in any other site Refer to Form 966, Line 7e for the BMF site where the return was filed and follow the guidelines in the two bullets above by referring to either Brookhaven or Memphis Return is electronically filed Route to Memphis address above If Form 966 is received with "Filed pursuant to Notice 97-4" written across the top and "Section 1361(b)(3)(B)" is entered on Line 10 of Form 966, route to BMF Entity address below based on where the original return was filed: KCSPC - Stop 6055 OSPC - Mail Stop 6273 21.7.4.4.4.20 (11-20-2023) Micro-Captive Insurance Amended Returns Recent U.S. Court decisions confirmed that certain micro-captive insurance arrangements are not eligible for claimed federal tax benefits. Taxpayers who took a deduction or other tax benefit on a prior year Form 1120, or Form 1065 tax return related to micro-captive insurance can amend their returns to remove these benefits. Taxpayers filing a paper amended return must write “Microcaptive” at the top of the first page of the amended return and mail the amended return to the address listed in the instructions for the return. If filing electronically, the return will include “Microcaptive” when explaining the reason(s) for the change(s). ICT scans BMF amended returns into CII under category code SPC0. Upon receipt of the amended return, if it is not controlled with the correct category code, employees must change it to SPC0 prior to closing. See IRM 21.3.1.6.58, Micro-Captive Insurance Amended Returns, for more information regarding IMF amended returns. For instructions on adjusting these cases, see IRM 21.5.3, General Claims Procedures. 21.7.4.4.5 (10-01-2020) Estimated Tax Overpayment, Credit Elect - General Per IRC 6402(b), the IRS is authorized to credit an overpayment against estimated tax for the succeeding taxable year. A credit under IRC 6402(b) is referred to as a "credit elect overpayment" or simply a "credit elect." Once the taxpayer makes the election to have the overpayment applied to their next year’s estimated taxes (credit elect), it cannot be revoked. Overpayments will offset to BMF balance due accounts, then to DMF accounts, before the credit elect is applied to the next year’s estimated taxes. Pursuant to Treas. Reg. 301.6402-3(a)(5) and Treas. Reg. 301.6611-1(h)(2)(vii), credit (overpayment) interest is never allowed when an overpayment is applied as a credit elect to estimated taxes for the immediately succeeding tax period. A systemic credit elect by master file appears on IDRS with transactions code TC 836 (debit) and transaction code TC 716 (credit). A credit elect is input manually to IDRS via command code (CC) ADD48 with TC 830 and via CC ADC48 with TC 710. Employees must input CC ADD48/ADC48 with BPI 0. See IRM 21.5.8.4.2, Determining Correct Credit Transfer Format, for complete information. Current master file programming for credit elect on Form 1120 series returns incorrectly calculates the installment due date as the return due date plus one month. While the result is technically correct when transferring a timely overpayment from a period beginning before 1/1/2016, it is no longer correct for periods beginning after 12/31/2015, because the due date of most Form 1120 returns is now equal to the due date of the first installment of estimated tax for the succeeding period. Therefore, adding one month is incorrect. However, even though master file uses the incorrect date, there is no harm to the taxpayer because the credit elect is considered timely for the first installment of the succeeding year in the current estimated tax penalty programming. In the case of a subsequent assessment, there can be debit (underpayment) interest implications: The systemic credit transfer will need a reversal and input using the correct date when making an assessment of tax on MFT 02 for periods beginning after 12/31/2015, unless the period ends in 06. See IRM 21.7.4.4.4.2 and IRM 21.7.4.4.4.2.1 for the return due dates for Forms 1120 series returns. EXAMPLE: The entire overpayment from the Form 1120 module for the period 201612 is applied as a credit elect to the estimated tax account of Form 1120 for 201712. master file incorrectly posts the TC 836 and TC 716 with a date of 05/15/2017, instead of the proper date of 04/15/2017. Although master file used the incorrect date, the credit side of the transfer (TC 716) is still considered timely for estimated tax purposes. If, however, a subsequent assessment is made on the 201612 tax module, debit (underpayment) interest will be computed incorrectly. Reverse the credit elect dated 05/15/2017 with command code ADD48 with TC 832 and CC ADC48 with TC 712. Re-input via CC ADD48 with TC 830 and CC ADC 48 with TC 710 with the correct date of 04/15/2017. Use CC ADD48 and TC 830 (debit), and CC ADC48 with TC 710 (credit) to apply an overpayment as a credit elect to the immediately succeeding tax period. See the chart below: If Then Credit elect overpayment transfer consists of credits dated by the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ Transaction date of the TC 830 (debit) and TC 710 (credit) is the due date of the first installment of estimated tax for the succeeding year (see IRM Exhibit 20.1.3-2). Credit elect overpayment transfer consists of a credit or partial credit dated after the due date of the return ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ Transaction date of TC 830 (debit) and TC 710 (credit) is the 23C date of the payment. Note: Input separate transfers to accommodate multiple late payments, or when an overpayment is comprised of both timely and late payments/credits. For each transfer use the later of the first installment due date or the transaction date of the payment creating that portion of the overpayment being transferred. EXAMPLE 1: In 2017, a taxpayer files Form 1120-X correcting a 201612 tax period and requests the overpayment applied as a credit elect to estimated tax for 201712. Since the entire overpayment is applied as a credit elect, input TC 830 and TC 710 with the due date of the first installment of estimated tax for the succeeding year, 04/15/2017. EXAMPLE 2: The scenario is the same as in Example 1 directly above except the overpayment is comprised entirely of a subsequent payment dated June 2, 2017. TC 830 and TC 710 will both carry a date of June 2, 2017. Only transfer an overpayment applied as a credit elect to the immediately succeeding tax period. For example, an overpayment from a 201412 Form 1120 cannot be transferred as a credit elect to the estimated tax for the 201612 Form 1120. However, a taxpayer may make a written request to apply an overpayment to another MFT/tax period. To transfer an overpayment to another MFT/tax period, transfer with CC ADD24 and TC 820 (debit), and CC ADC24 with TC 700 (credit) using the same dates as in the examples above. See IRM 20.2.4.7.2, Rules for Applying Offsets Under Section 6402, for instructions, including payment of credit (overpayment) interest on the offset when applicable. While interest is prohibited when applying an overpayment as a credit elect under IRC 6402(b), employees may allow interest when an overpayment is applied to an outstanding liability under IRC 6402(a). See IRM 20.2.4.7, Offsets, and IRM 20.2.4.7.1, Interest on Offsets, for additional information. Per the Surface Transportation and Veterans Health Care Choice Improvement Act, for tax years beginning after December 31, 2015, the return due date for most Form 1120 series returns has changed from the 15th day of the third month, to the 15th day of the fourth month. See IRM 21.7.4.4.4.2 and IRM 21.7.4.4.4.2.1 for the return due dates for Forms 1120 series returns. See IRM 21.7.4.4.5.1, Credit Elect Computer Programming on Certain Income Tax/EO Returns, for special computer capabilities on certain income tax and EO returns. 21.7.4.4.5.1 (01-01-2005) Credit Elect Computer Programming on Certain Income Tax/EO Returns The computer automatically generates credit elect for subsequent overpayments on accounts where the amount of credit elect posted is less than shown on the original forms below: Form 1120 Form 1041 Form 990-C/1120-C Form 990-T Form 990-PF This capability only exists until the end of the year from which the credit elect originated. For instance, the computer-generated credit elect capability: For a 201603 return, ends on March 31, 2017 For a 201612 return, ends on December 31, 2017 Example: A taxpayer files Form 1120 for 201612 on March 15, 2017. The return reflects a credit elect amount of $1,500 to be applied to 201712. However, for some reason, the amount available for credit elect is only $1,000. The computer stores a figure of $500 as a reference for any subsequent credit which becomes available on the 201612 account. The taxpayer files a claim for a $600 decrease on June 15, 2017. The only action required is input of the proper TC(s) to allow the credit. The computer generates a refund of $100 from the 201612 account and credit elect of $500 to 201712. Hold codes do not prevent computer-generated credit elect offsets during the year. Exercise care at the end of the year when adjusting an account. If an additional amount should go to credit elect and the adjustment may not post until after the automatic offset expiration, use the appropriate HC and manually transfer the credit elect using TC 830/710. Manually transfer the credit elect if the taxpayer files an amended return or claim requesting credit elect on the overpayment after the computer-generated credit elect capability expires. The computer does not generate a secondary TC 836 if a TC 832 was input and the mathematical/clerical error indicator is present in the module. 21.7.4.4.6 (10-01-2007) Form 8716, Election to Have a Tax Year Other Than a Required Tax Year Eligible partnerships, subchapter S corporations, and personal service corporations (PSC) that do not qualify to adopt or retain a fiscal year based on business purposes (See Rev. Proc. 2002-39 and Rev. Proc. 2006-46) can file Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to use a tax year other than the required tax year. Generally, the tax year is a fiscal year month (FYM on ENMOD) ending in September, October, or November. Under the election, the required payment is reported on Form 8752, Required Payment or Refund Under Section 7519. Use the following transaction codes (TC) to post the election: 052 - Reversal of posted TC 053, TC 054, or TC 055 053 - Change in accounting period Form 1128 054 - Retain FY (Rev. Proc. 2002-38) 055 - Adopt or change FY per IRC 444 election 057 - Reversal of IRC 444 election 058 - Rejection of Form 8716 059 - Rejection of Form 1128 CC ENMOD displays the TCs with the effective date of the election. TC 057 shows a computer-generated termination of a Section 444 election when a calendar year return is filed. Forward any unprocessed Forms 8716 or requests for accounting period changes to Entity Control. Follow normal procedures for any adjustment requests received. The Internal Revenue Service no longer mails out blank Forms 8752. Instruct taxpayers to download the form from the IRS Web site at www.irs.gov, or by calling the forms number at 800-829-3676. 21.7.4.4.7 (03-14-2024) Form 8752, Required Payment or Refund Under Section 7519 Form 8752, Required Payment or Refund Under Section 7519, is filed by partnerships and S corporations who made the Section 444 election to file their income tax return on a fiscal year rather than a calendar year basis. The Form 8752 is used to remit the required payment. The required payment is intended to represent the value of the tax deferral by the owners of those entities through the use of a taxable year other than the required year. Generally, the tax year is a FY ending in September, October, or November. The required payment is considered a deposit. The deferral period cannot exceed three months and cannot increase the deferral period of the taxable year that is being changed. Therefore, a taxpayer with a required taxable year ending December 31, can only adopt a FY ending in September, October, or November. Taxpayers electing Section 444 are not required to remit a payment until a liability in excess of $500 has been incurred. Thereafter, the taxpayer must continue to make the required payment even when the amount due is below the $500 threshold. Forms 8752 post to MFT 15, document code 23, and tax class 2. See the General Instructions for Form 8752 for line by line computation instructions. They are annual returns due by May 15 of each year in which the election is in effect. Use blocking series 00 when making adjustments when the original return is secured and blocking series 17 without the original return. Personal service corporations do not file Form 8752 even though they are subject to Section 444 and must file Form 8716. The required payment module has some of the same characteristics as other tax modules, but use caution when adjusting the accounts and performing credit transfers. Form 8752 accounts can be very complex. Although these accounts have some of the same characteristics as other tax modules, extreme caution must be used when adjusting the accounts and performing credit transfers. The TC 150 amount is not a tax, it is considered a deposit and is referred to as the "required payment." The moving of payments, and the abatements and additions to the required payment have a rolling effect on multiple modules. Payments roll forward from one tax period to the next as a TC 766 credit. Adjustments to one tax period can affect the TC 766 on multiple periods. Specialists in the Cincinnati campus and by the Restricted Interest Team in Ogden Accounts Management work these cases. See below for referral information: Ogden AM - If a call or correspondence is received concerning Form 8752, or IRC 7519, Do Not take any action on the account. Complete Form 4442, Inquiry Referral, and fax or route regardless of the notice status to ATTN: Form 8752, M/S 6276, EEFAX (855) 371-8560. Reassign correspondence CII cases to 0437305333. Cincinnati AM - If a call or correspondence is received concerning Form 8752, or IRC 7519, Do Not take any action on the account. Complete Form 4442, Inquiry Referral, or Form e-4442, Electronic Inquiry Referral, and route to M/S B504, or EEFAX to (855)-737-6644. Reassign correspondence cases in CII to 0231092337. Correspondence Letter 4501C, Form 8752, Required Payment or Refund Under Section 7519, is used to respond to all taxpayer inquiries and IRS initiated action involving Form 8752. 21.7.4.4.7.1 (01-01-2005) Election Year, Base Year, Required Tax Year (Form 8752) The election year is the taxable year of a partnership or S corporation with respect to which an election is in effect under Section 444. The base year is the taxable year (the taxable year is not the same thing as the required tax year mentioned in (3) below) of the partnership or S corporation preceding the applicable election year. The required tax year is a calendar year. Example: If the taxpayer has decided to continue with a FY ending of October (201610) and previously filed and received approval via the Form 8716 election, the taxpayer’s current election year is November 1, 2015 - October 31, 2016. The base year is November 1, 2014 - October 31, 2015. The required tax year remains the calendar year (201512, 201612, etc.). 21.7.4.4.7.2 (10-01-2020) Penalties (Form 8752) IRC 7519(f)(4)(a) provides for a 10 percent underpayment penalty on payments made after the payment due date of May 15. Identify these penalties by TC 246, reference code 684. The penalty may be abated for reasonable cause. See IRM 20.1.1, Introduction and Penalty Relief and IRM 20.1.10.20, IRC 7519, Required Payment for Entities Electing Not to Have Required Taxable Year, for more information. Failure to File (TC 16X) and Failure to Pay (TC 27X) penalties under IRC 6651 do not apply to Section 7519 underpayments. If either penalty has been manually assessed on a Form 8752 account, abate the penalties. First-time abatement does not apply to the 10 percent underpayment penalty. Also, lack of funds is never grounds for abating the penalty. If the taxpayer is experiencing a lack of funds, they should consider terminating the election and adopting the required calendar year. In addition, the fact that the taxpayer would have received a refund in the year following the year they owed the deposit, does not establish reasonable cause for the abatement of the penalty. For example, taxpayer filed Form 8752 for MFT 15 tax period 201512 for $10,000 and did not make the payment. On the 201612 Form 8752 return the taxpayer had zero liability. The fact that the taxpayer would have received a refund of the $10,000 on the 201612 return does not establish reasonable cause for the abatement of the penalty on 201512. See IRM 20.1.1.3, Criteria for Relief from Penalties, for reasonable cause criteria for penalty abatement. 21.7.4.4.7.3 (01-01-2005) Posting of the Payment (Form 8752) The required payment (line 9a) posts as the TC 150 amount. The system credits the payment and automatically rolls that amount forward to the following year’s account. It posts on the following year’s account as a TC 766. (There will not be a corresponding debit for that amount.) When the following year’s return posts, one of three situations occur. See the examples below. Example: Excess credit: TC 150 is $5,000. TC 766 is $8,000. The system rolls over $5,000 to the following year and issues a refund of $3,000. Example: Balance due: TC 150 is $8,000. TC 766 is $5,000. If Then Balance due is paid with the return (TC 610 for $3,000) The system rolls over credit of $8,000. Balance due is not paid with the return A balance due notice is issued for $3,000 plus penalty and interest. The system rolls over the credit of $5,000 and, when paid, an additional credit of $3,000 rolls over. Example: Zero balance: TC 150 is $5,000. TC 766 is $5,000. The system rolls over $5,000. 21.7.4.4.7.4 (01-01-2005) Form 8752 Credit Transfers The following procedures describe credit transfers on Forms 8752. It is very important to understand the application of credits and the effect a change in credits has on each account involved before an attempt is made to move payments. Once a liability is assessed, credits are frozen on the account up to the TC 150 amount. Do not try to adjust the posted credit below the assessment amount. If so, the adjustment unposts because the system has already used the credit in the automatic roll over program. Therefore, it is not available, unless the liability is reduced first. Example: Form 8752 for 201612 posts with a TC 150 of $2,000. Credits up to the $2,000 assessment are frozen from being transferred out of the account. Attempts to transfer the credit go unpostable. Any adjustments to the existing credits affect all subsequent year accounts by amounts corresponding to any credit transfer from a prior year. Example: TC 291 for $2,000 is input to a fully paid 201412 account. The system pulls credits which rolled to subsequent Form 8752 accounts (201512 and 201612) back to the period adjusted to compensate for the tax decrease. The necessity to move payments from one account to another can occur when working Form 8752 accounts. The most common credit transfer on these types of cases is when a payment is applied to the incorrect period with a return present on the account from which you are moving the credit, and the payment belongs on another account. Action required: Input TC 291, HC 4, in blocking series 17 and reduce the tax liability to zero. Input a credit transfer with the date of your payment and use TC 570 on the debit side to create an -R freeze. Input TC 290, HC 4, in blocking series 18 with your documentation for the credit transfer. Use a posting delay code 1 to allow your credit transfer to post. Example: The accounts involve Form 8752 accounts for 201512 and 201612. The 201512 account has a liability of $10,000 and a TC 766 of $5,000. This leaves the account in balance due of $5,000 plus penalty and interest. The 201612 account has a liability of $10,000, a TC 766 of $5,000, and a TC 670 for $5,000. The timely TC 670 was intended for 201512. Input TC 291 on 201612 for $10,000, HC 4, blocking series 17. Input credit transfer for $5,000 to move the TC 670 to 201512 using TC 570 on the debit side to create an -R freeze. Input TC 290 for $10,000, HC 4, blocking series 18, and posting delay code 1 on 201612 to reassess the liability and allow your credit transfer one cycle to post. Both the 201512 and 201612 accounts will be in zero balance after the TC 670 for $5,000 posts to 201512. An additional TC 766 will post to 201612, and then another TC 766 for $5,000 will roll (post) to 201712. Creating a total credit balance of $10,000 on 201712. Note: Never move a TC 766 at any time. Form 8752 accounts are not subject to offset-in/offset-out criteria. 21.7.4.4.7.5 (01-01-2005) Form 8752 Tax Adjustments The necessity to adjust tax on Form 8752 can arise due to any of the situations described in the following subsections. These instructions are intended to cover the most common cases and not intended to cover every situation. 21.7.4.4.7.5.1 (01-01-2005) Incorrect Percentage Used (Form 8752) If the incorrect percentage was used to compute the tax liability and the taxpayer has not terminated the Section 444 election, take the following action: Analyze the taxpayer’s account to determine the correct tax period and percentage. Edit the correct percentage onto the Form 8752 and recompute the liability. Input the necessary adjustment to correct the assessment and send a closing letter to the taxpayer explaining the action taken. 21.7.4.4.7.5.2 (07-09-2009) Form 8752 Posts to Incorrect Period, Correct Return Unavailable If a return posts to an incorrect period and you do not have the correct return for that period, contact the taxpayer by phone or C-Letter to secure the necessary return. If unable to secure the return, take the following action: Prepare the return for re-input by completing Form 13596, Reprocessing Returns, and attaching it to the return. Input TC 291 for the amount of the TC 150, HC 4, and blocking series 17. Transfer any credits received with the return or identified by the taxpayer to be applied to this liability. Caution: Never move TC 766 credits. The computer will automatically move the credit forward when necessary. lnput TC 290, HC 4, posting delay code 1, and blocking series 18 to reassess the posted liability and prevent the TC 766 from refunding. Open a monitor base and wait for the TC 766 to post. When the TC 766 posts, input TC 291, HC 4 to reduce the tax liability to zero. (This creates a "-K" freeze to hold the credit until the taxpayer files a return.) 21.7.4.4.7.5.3 (04-23-2009) Form 8752 Posts to Incorrect Period, Return Available If able to secure the return for the period needing reprocessing of the TC 150 return, take the following action: Prepare the TC 150 document for re-input by preparing Form 13596, Reprocessing Returns, and attaching it to the return. See IRM 21.7.9.4.1.1, TRNS 193s Involving Reprocessing Returns, for more information. If a payment was received with the return, an adjustment to release the credit transfer freeze must be done before transferring the credit. Input TC 291 for the original TC 150 amount using HC 4. Input your credit transfer to move the credit to the prior period. (Since there is no return on the period to which your credit transfer is posting, a TC 570 is not needed on the debit side in this instance.) Input TC 290 for the correct liability assessment (based on the correct return for the period involved), HC 4, blocking series 00, and posting delay code 1. 21.7.4.4.7.6 (07-11-2013) Form 8752 Overpayments Consider Form 8752 overpayments a return of a deposit, not an overpayment of tax. No legal basis exists for offsetting the overpayment to any outstanding balance due. Accounts with a TC 130 posted are frozen from refunding and will require a manual refund of the overpayment to bypass the V- freeze. There is no line on Form 8752 to designate a credit elect of the overpayment. Overpayments on original returns automatically refund if the credit(s) TC 766 and/or payment(s) exceed the required payment amount. Overpayments resulting from tax adjustments can be held and applied per the taxpayer’s request as a convenience to the taxpayer. A held overpayment can be applied to pay penalty and interest on other Form 8752 modules only. Inform the taxpayer of this action. Overpayments on modules from the result of a posted TC 766 amount cannot be applied to prior year returns. Doing so may double credit the accounts and generate erroneous refunds. Use caution whenever moving an overpayment from one tax period to another. Rarely will this occur. The only time an overpayment is moved from one module to the next is when the payment(s) and TC 766 credit exceed the posted TC 150. For example, TC 150 posts to 201612 for $3,000 with a TC 766 in the amount of $2,500, payment of $600, creating an overpayment of $100. Normally this overpayment will refund. However, if an overpayment can be held on a subsequent tax adjustment the money can be moved forward. Overpayments from the result of a payment (TC 610/TC 670) can only be applied to prior year(s) to pay penalty and interest after all of the tax has been paid or netted out. Use extreme caution when transferring overpayments with a TC 700 or TC 710. Moving overpayments backwards or forwards can cause erroneous refunds. You must have a true understanding of the rolling effects of credits transfers and abatements/additions to the required payments on these accounts before taking any action. Contact the manager or lead of a Form 8752 specialist in the Cincinnati or Ogden campus when in doubt. 21.7.4.4.7.7 (10-05-2022) Form 8752 Refunds IRC 7519(c)(3), requires the IRS to hold any refund of the required payment until the later of the applicable April 15 date or 90 days after the day on which the claim is filed with the IRS. Since this requires extensive programming to detain the taxpayer’s refund until the 90th day, a waiver to the above requirement was approved. The waiver permits the IRS to pay the refund as soon as practical, but not earlier than April 15 and not later than the 90th day after the claim is filed. A request to obtain a refund of an over-deposit under IRC 7519 is treated as a return of a deposit general claim against the government (although IRC 6603 is not applicable). Section 7519 requires a running deposit balance that is adjusted each year. An entity’s required payment may increase, decease, or stay the same from any one year to the next, depending on the entities base year income and the applicable tax rates. See IRM 21.7.4.4.7.8.1, Section 7519 Statute of Limitations, Period for Claiming a Refund of a Payment, regarding any period of limitation for obtaining a refund of an over deposit of IRC 7519 payments. Request filing of all delinquent Form(s) 8752 for all prior applicable election years before processing a request for a refund of IRC 7519 payments. If the taxpayer does not file prior years’ returns or files such returns late and the information cannot be verified, any overpayment shown on the pending claim for refund may be rejected. Issue a notice of disallowance as described in IRC 6532(a), and the taxpayer will have two years to file suit. Note: The taxpayer’s election is generally not terminated for the failure to file Form 8752. The following is an example of a Partnership electing to file Form 8752 under IRC 444 election but thereafter failing to file annually. In extreme instances, an entity might fail to file Forms 8752 after making the IRC 444 election until it liquidates or terminates its IRC 444 election. Example: Assume Partnership’s tax year ends on 9/30. On 5/15/2012, Partnership timely files an initial Form 8752 for its tax year ending 9/30/2011, making a required payment of $650. Partnership timely files its Forms 1065 each year, but does not file any additional Forms 8752 or make any required payments until 2016. On 5/15/2017, Partnership files a 201612 Form 8752 seeking a refund of the $650. Assuming Partnership had an IRC 444 election in effect for the years 2011 through 2016, Partnership’s claim for refund on the Form 8752 filed on 5/15/2017 is timely because the $650 required payment Partnership made in 2012 is, in effect, a deposit, it rolls forward into 2016. In order to determine the proper amount of any refund, the IRS generally requires all delinquent Forms 8752 to be filed before processing Partnership’s 2016 Form 8752. Once the Forms 8752 that were due on 5/15 of each intervening year (2012 through 2015) are filed and an entry is made on the module for each period, the IRS determines whether the $650 required payment made in 2012 (which rolled forward into each of the succeeding years) was sufficient for those years. If the amount that Partnership was required to have on deposit for each of the succeeding years was zero, and if in 2016 the amount of the liability is zero, then the Partnership is entitled to the $650 refund. However, if the Form 8752 reflects a liability in 2013, 2014, or 2015, then the appropriate 10-percent underpayment penalty and interest should be assessed and collected. See IRM 3.12.38.5.6, Manual Refunds, for more information regarding manual refunds issued for Forms 8752. 21.7.4.4.7.7.1 (01-01-2005) Refunds Involving Termination of Section 444 Election In the case of a refund resulting from the termination of the Section 444 election, the term "applicable calendar year" means the calendar year following the calendar year in which the final applicable election year ends. In order to claim the refund, the taxpayer must: File a final Form 8752 Check box C on Form 8752 or write at the top "Termination of Section 444 Election" Complete lines 10 - 12 Example: The taxpayer FYM is 09. Taxpayer decides to adopt the calendar year. Taxpayer files short period Form 1120-S return for the period 10/1/2015 - 12/31/2015, thus terminating the election effective 9/30/2015. A final Form 8752 for the period January 2015 – December 2015 stating the Section 444 election was terminated and requests a refund of the required payment. The taxpayer is entitled to a refund not earlier than April 15, 2016, nor later than the 90th day after the date the final return for January - December 2015 is received. 21.7.4.4.7.7.2 (01-01-2005) Refunds Involving Continuation of Section 444 Election The steps below illustrate how a refund is issued when the taxpayer continues a Section 444 election. The taxpayer files a Form 8752 for the period January - December 2014 on May 15, 2015 for $10,000. The taxpayer files a Form 8752 for the period January - December 2015 on January 15, 2016 for $7,000. On April 15, 2016, the taxpayer will receive a refund in the amount of $3,000 for the excess credit from the 201512 return over the 201412 return. In other words, if the liability on the 201512 return is less than the liability on the 201412 return, then the taxpayer is entitled to a refund of the difference. 21.7.4.4.7.7.3 (10-05-2022) No Interest on Section 444 Refunds The statute does not provide for issuance of credit interest with respect to any refund made under this section under authority of Treasury Regulation section 1.7519-2T(a)(6)(iii). IDRS is programmed to not allow credit interest on such overpayments. See IRM 3.12.38.5.6, Manual Refunds, for more information regarding manual refunds issued for Forms 8752. 21.7.4.4.7.8 (10-01-2008) Section 7519 Statute of Limitations, Period for Assessment A required payment is due only for a limited time, e.g., 5/15/YR1 to 5/15/YR2. Once the subsequent election year begins, a new required payment is computed and due. If a prior required payment was not made, the IRS does not try to collect it; instead, interest and a possible penalty is assessed under IRC 7519(f)(4). Treat required payments as employment taxes for the purpose of the statute of limitations on assessment. Per IRC 7519(f)(1), the interest and any penalty described in (1) above may be assessed under IRC 6201 through 6207, subject to the period of limitations in IRC 6501 (and collected under IRC 6301 through 6306, subject to the period of limitations in IRC 6502). The deficiency procedures do not apply to required payments because they are treated as employment taxes and not as income taxes for assessment purposes. If a taxpayer filed Form 8752 for a prior period and the three-year assessment period in IRC 6501(a) expires for that period (with no exceptions that would extend it), the IRS can no longer examine the Form 8752, adjust the payment, and assess interest and penalties on the shortfall for that period. If the taxpayer has not filed for a prior period, the IRS may determine the proper payment and assess interest and penalties at any time. 21.7.4.4.7.8.1 (10-01-2008) Section 7519 Statute of Limitations, Period for Claiming a Refund of a Payment. A request to obtain an over-deposit of the IRC 7519 amounts is treated as the return of a deposit, and not a tax. See IRM 25.6.1.10.2.12.8, Claim for IRC 7519 Payment Made in Connection with a Section 444 Election, regarding the lack, at the present time, of any period of limitations on filing a claim requesting a return of a IRC 7519 payment. 21.7.4.4.8 (05-11-2012) Non-refundable Credits, Income Tax Returns A non-refundable credit is a credit claimed to reduce tax liability. These credits, subtracted from the tax amount, are limited to the amount of tax liability. Any excess credit is non-refundable, but, generally, still available if the tax liability increases at a later date or can be applied against tax liabilities in other periods (carryback/carryforward). See IRM 21.5.9, Carrybacks, for more information on carrybacks. Also, see the applicable subsection for information on each specific credit to determine if it is available for carryback/carryforward. Take the following action: When allowing a credit or an additional credit amount, input a TC 291 up to the amount of tax that has posted to the module. Input a TC 290 for the amount of change when decreasing the credit. Input a TC 290 for $.00 when a claim is received to increase a credit and the tax on the module is zero. Send a L 916C, No Consideration letter. 21.7.4.4.8.1 (10-01-2024) General Business Credit, Form 3800 Form 3800, General Business Credit, is required to claim any of the general business credits. See the Instructions for Form 3800, for instructions on computing the tax credits. Taxpayers must attach the correct credit form and the total credit is summarized on Form 3800. If only one of the credits in IRM 21.7.4.4.9, Refundable Credits Income Tax Returns, apply, the Form 3800 is not necessary. The taxpayer should only file the correct credit form. Current year general business credits in excess of the current year limitation can be carried back one year preceding the unused credit year and carried over 20 years. Carry back credit from oil and gas production from marginal wells 5 years. Carry credits that are “applicable credits” as defined in IRC 6417(b) back 3 years and forward 22 years. See IRC 39(a). For the treatment of any unused general business credits, see IRM 21.7.4.4.8.1.4, Carryback/Carryforward of Excess Credits 21.7.4.4.8.1.1 (10-01-2024) Priority of Credits Treat General Business Credits reported on Form 3800, General Business Credit, as used on a first-in, first-out basis by offsetting the earliest-earned credits first. Therefore, the order in which the credits are used in any tax year is: Carryforward to that year, the earliest ones first, as of the close of the tax year in which the credit is earned: The general business credit earned in that year, and The carryback to that year. Use the components of the general business credits reported on Form 3800 in the following order: Rehabilitation Credit, Form 3468, Investment Credit, Part VII Energy Credit, Form 3468, Investment Credit, Part VI Qualifying Advanced Coal Project Credit, Form 3468, Investment Credit, Part II Qualifying Gasification Project Credit, Form 3468, Investment Credit, Part II Qualifying Advanced Energy Project Credit, Form 3468, Investment Credit, Part III Qualifying Therapeutic Discovery Project Credit, (carryforward only) Advanced Manufacturing Production Credit, Form 3468, Investment Credit, Part IV Clean Electricity Investment Credit, Form 3468, Investment Credit, Part V Work Opportunity Credit, Form 5884 Biofuel Producer Credit, Form 6478 Credit for Increasing Research Activities, Form 6765 Low-income Housing Credit, Form 8586 Enhanced Oil Recovery Credit, Form 8830 Disabled Access Credit, Form 8826 Renewable Electricity Production Credit, Form 8835 Empowerment Zone Employment Credit, Form 8844 Renewal Community Employment Credit (carryforward only) Indian Employment Credit, Form 8845 (carryforward only) Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, Form 8846 Orphan Drug Credit, Form 8820 New Markets Credit, Form 8874 Credit for Small Employer Pension Plan Start-up Costs, Form 8881, Part I Credit for Employer-Provided Childcare Facilities and Services, Form 8882 Qualified Railroad Track Maintenance Credit, Form 8900 Biodiesel, Renewable Diesel, Form 8864 Low Sulfur Diesel Fuel, Production Credit, Form 8896 Credit for Oil and Gas Production From Marginal Wells, Form 8904 Distilled Spirits Credit, Form 8906 Advanced Nuclear Power Facility Production, Form 7213, Part I Nonconventional Source Fuel Credit, (carryforward only) Energy Efficient Home Credit, Form 8908 Energy Efficient Appliance Credit, (carryforward only) Alternative Motor Vehicle Credit, Form 8910, Part II Alternative Fuel Vehicle Refueling Property Credit, Form 8911, Part II Mine Rescue Team Training Credit, (carryforward only) Agricultural Chemicals Security Credit, (carryforward only) Credit for Employer Differential Wage Payments, Form 8932 Carbon Oxide Sequestration Credit, Form 8933 Qualified Plug-in Electric Vehicle Credit, (carryforward only) New Clean Vehicle Credit, Form 8936, Part II Credit for Small Employer Health Insurance Premiums, Form 8941 Employee Retention Credit for Employers Affected by Qualified Disasters, (carryforward only) Employer Credit for Paid Family and Medical Leave, Form 8994 Credit for Auto-Enrollment, Form 8881, Part II Zero-emission Nuclear Power Production Credit, Form 7213 Part II Sustainable Aviation Fuel Credit, Form 8864, line 8 Clean Hydrogen Production Credit , Form 7210 Qualified Commercial Clean Vehicle Credit , Form 8936, Part V Clean Electricity Production Credit , Form 7211 Clean Fuel Production Credit, Form 7218 Advanced Manufacturing Production Credit, Form 7207 Military Spouse Retirement Plan Credit, Form 8881, Part III General Credits from an Electing Large Partnership, (carryforward only) Note: Due to the limitations of the Arbortext software, the letters listed above do not necessarily correspond with those on Form 3800. Note: For a list of expired or repealed general business credits for which only a carryforward may be possible, see Form 3800 Part IV, Line 2. See Form 3800 and the Instructions for Form 3800 for more specific information. The IRS created pages on www.irs.gov for information on various forms as they are being updated. The site contains information regarding any future developments to the form such as legislation enacted after the form is released. Use the following format to check to see if a form has updated information; www.irs.gov/formXXXX. For example, to check to see if Form 3800 has any updates, input www.irs.gov/form3800, or for Form 6478 input www.irs.gov/form6478. 21.7.4.4.8.1.2 (10-01-2024) Use of Other Credits Prior to Allowance of General Business Credit The tax liability must be reduced by the following other credits not taken on Form 3800, before the General Business Credit: Foreign Tax Credit, Form 1116, see IRM 21.8.2.10, Foreign Tax Credit (Form 1116 and Form 1118), for more information. American Samoa Economic Development Credit, Form 5735. See IRM 21.8.2.2.2, BMF/NMF Forms, for more information. Nonconventional Source Fuel Credit (taxpayers must attach a separate schedule). Qualified Electric Vehicle Credit, Form 8834. Credit for Prior Year Minimum Tax - Corporations, Form 8827. Credit to Holders of Tax Credit Bonds , Form 8912. See Form 3800 and the Instructions for Form 3800 for more specific information. 21.7.4.4.8.1.3 (10-01-2023) Form 8844, Empowerment Zone Employment Credit The Revenue Reconciliation Act of 1993 amended IRC 38 and added new section 1396 and section 1397 to the Internal Revenue Code to allow a business credit for qualified wages and certain training and educational expenses paid or incurred on behalf of qualified zone employees. IRC 1391(d)(1) provides designations for empowerment zone to remain in effect until the earliest of: December 31, 2025, or the termination date designated by the state and local governments as provided for in their nomination, or the date the secretary revokes the designation. IRC 1391(d)(1)(B) does not apply with respect to such designation if, after the date of the enactment of this section, the entity which made the nomination amends it to provide for a new termination date in such manner as the Secretary of the Treasury (or the Secretary’s designee) may provide. Only certain organizations must claim the Empowerment Zone Employment Credit (EZEC) on Form 8844 (i.e., partnerships and S corporations). Other taxpayers are generally not required to complete or file Form 8844 to claim the EZEC. See the Instructions for Form 8844. (Section 753(a)(1), of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, repealed the renewal community employment credit for calendar years after 2009). The empowerment zone employment credit is 20 percent of the employer's qualified wages (up to $15,000) paid or incurred during the calendar year for qualified empowerment zone employees. The empowerment zone employment credit has been changed by various legislation. Below is a listing of the legislation that has extended the empowerment zone employment credit: Section 753(a)(1), of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, extended the credit to December 31, 2011. Section 327(a), of the American Taxpayer Relief Act of 2012, P.L. 112-240, extended the credit for two years and is effective after December 31, 2011 and on or before December 31, 2013. See Notice 2013-38, 2013-25 I.R.B. 1251, for more information. Section 139, of the Tax Increase Prevention Act of 2014, P.L. 113-295, extended the credit for one year and is effective after December 31, 2013 and on or before December 31, 2014. See Notice 2015-26, 2015-13 I.R.B. 814, for more information. Section 171 of the Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113, extended the credit for two years and is effective on or before December 31, 2016. See Notice 2016-28, 2016-15 I.R.B. 576, for more information. Section 40311 of the Bipartisan Budget Act of 2018, extended the credit to taxable years beginning after December 31, 2016 through December 31, 2017. See Notice 2018-47, 2018-21 I.R.B. 621, for more information. Section 118 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019, P.L. 116-94, extends the credit to taxable years beginning after December 31, 2017 through December 31, 2020. See Rev. Proc. 2020-16, 2020-27 I.R.B. 10, for more information. Section 118 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, extends the credit to taxable years beginning after December 31, 2020, through December 31, 2025. A qualified empowerment zone employee is any employee (full-time or part-time) of the employer who: Performs substantially all of the services for that employer within an empowerment zone in the employer's trade or business, and Has their principal residence within that empowerment zone while performing those services (Employees who work in the Washington, DC empowerment zone may live anywhere in the District of Columbia). Note: The Washington, D.C. empowerment zone expired in 2011. See IRC 1400(f)(1)(repealed 2018 by P.L. 115-141). Beginning with wages paid after December 31, 2015, Section 171 of the Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113, an employee is treated as a resident of an empowerment zone if the employee is a resident of an empowerment zone. A qualified renewal community employee is any employee (full-time or part-time) of the employer who: Performs substantially all of the services for that employer within a renewal community in the employer's trade or business, and Has their principal residence within that renewal community while performing those services. Note: Although the renewal community credit may be carried forward 20 years like other general business credits, the renewal community designations expired in 2009. See IRC 1400E(b)(1)(A) (repealed 2018 by P.L. 115-141). The credit is a component of Form 3800, General Business Credit, however, IRC 38 provides a special tax liability limitation for the credit. For 2007 and prior, the credit is figured separately and is never carried to Form 3800. For 2008 and subsequent, the allowable credit is figured in Part II of Form 3800. Publication 954, Tax Incentives for Distressed Communities (Obsolete 3/18/2011) advises taxpayers of the tax incentives available for businesses located in empowerment zones and enterprise communities. For prior years, see the General Instructions for Form 8844 for more specific information, and for a listing of the Urban Areas, Rural Areas, and parts of Washington, DC that make up the Empowerment Zones and for a listing of the Renewal Communities. This information is found by using the address locator at the U.S. Department of Labor’s Empowerment Zone (EZ) Address Locator. 21.7.4.4.8.1.4 (10-01-2024) Carryback/Carryforward of Excess Credits In general, if the sum of the business credit carryforwards to the taxable year plus the amount of the current year business credit for the taxable year exceeds the limitation under IRC 38 (c) for such taxable year (the unused credit year), such excess to the extent attributable to the amount of the current year business credit is carried back to the taxable year preceding the unused credit year and then carried forward to the 20 taxable years following the unused credit year. However, the marginal oil and gas well production credit is carried back 5 years, and “applicable credits” as defined in IRC 6417 (b) are carried back 3 years. See IRC 39 (a). See IRM 21.5.9, Carrybacks, for more information on carrybacks. See IRM 21.5.9-1, General Business Credits, Foreign Tax Credit, and Other Non-Refundable Credits - Availability for Carryback/Carryforward, for a list of non-refundable credits other than general business credits for carryback/carryforward. For a complete listing of general business credits, and additional information, see Form 3800, General Business Credit. Also see the Instructions for Form 3800, General Business Credit, which requires a computation statement only when the taxpayer is changing or revising the original credit amount. 21.7.4.4.8.2 (01-01-2005) Expiration of Credits When credits expire, the date they expire may not coincide with the return period ending date for which they are valid. Example: If a credit expires December 31, 2014, the credit is valid on returns through period ending 201511. The taxpayer could have activity during December 2014 (when the credit was still available) which is included on the 201511 return which includes the December 2014 period. 21.7.4.4.8.3 (01-01-2005) Information on Specific Non-Refundable Credits The sections in this subsection contain information on various non-refundable credits. See IRM 21.8.2.10, Foreign Tax Credit (Form 1116 and Form 1118), for information on the foreign tax credit. 21.7.4.4.8.3.1 (10-01-2024) Form 3468, Investment Credit Form 3468, Investment Credit, is used to claim investment credit. The investment credit consists of the rehabilitation credit, the energy credit, the qualifying advanced coal project credit, the qualifying gasification project credit, the qualifying advanced energy project credit, the advanced manufacturing investment credit, and the clean electricity investment credit. Taxpayers are allowed a credit on Form 3468 for qualified rehabilitation expenditures made for any qualified rehabilitated building. See the Instructions for Form 3468 for specific information. For additional information, see section 13402(c)(2) of P.L. 115-97. On December 22, 2017, the rehabilitation credit was amended by Public Law No. 115-97, 131 Stat. 2054, commonly known as Tax Cuts and Jobs Act of 2017, (TCJA), section 13402. Section 13402(a) of the TCJA repealed the 10-percent rehabilitation credit for pre-1936 buildings and changed the rules for claiming the 20-percent rehabilitation credit for certified historic structures. The rehabilitation credit provides that for purposes of the investment credit, the rehabilitation credit is claimed ratably over a 5-year credit period. The TCJA amendments apply to qualified rehabilitation expenditures paid or incurred after December 31, 2017, but some taxpayers may qualify for a transition rule. See the Instructions for Form 3468 for specific information. Section 1307(b), of the Energy Tax Incentives Act of 2005, P.L. 109-58, added the qualifying advanced coal project credit under IRC 48A, and the qualifying gasification project credit under IRC 48B, to the investment credit. See IRM 21.7.4.4.8.3.1.2 for more information on the qualifying advanced coal project credit and the qualifying gasification project credit. Section 1302(b), Div. B Title I, Credit for Investment in Advanced Energy Facilities, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, added IRC 48C, Qualifying Advanced Energy Project Credit to the Investment Tax Credit under IRC 46. See IRM 21.7.4.4.8.3.1.3, Credit for Investment in Advanced Energy Facilities, for more information on the qualifying advanced energy project credit. The sections listed below of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, added or extended the credits on Form 3468. The table also addresses extensions and modifications made by P.L. 116-260, Consolidated Appropriations Act, 2021, to the section 48 energy investment tax credits claimed on Form 3468: Note: For changes in credit calculations based on The Inflation Reduction Act of 2022, Pub. L. 117-169, see guidance beginning in Paragraph 14 below. Type of Energy Property Credit Percentage Construction Begun Placed in-service Solar energy property 30 percent Before 01/01/2020 Before 01/01/2026 Solar energy property 26 percent After 12/31/2019 and before 01/01/2023 Before 01/01/2026 Solar energy property 22 percent After 12/31/2022 and before 01/01/2024 Before 01/01/2026 Solar energy property 10 percent Before 01/01/2024 On or after 01/01/2026 Fiber-Optic Solar Property 30 percent Before 01/01/2020 Before 01-01-2026 Fiber-Optic Solar Property as defined in IRC 48(a)(3)(A)(ii) 26 percent Before 01/01/2023 Before 01/01/2026 Fiber-Optic Solar Property as defined in IRC 48(a)(3)(A)(ii) 22 percent Before 01/01/2024 Before 01/01/2026 Fiber-Optic Solar Property as defined in IRC 48(a)(3)(A)(ii) 0 percent Before 01/01/2024 Before 01/01/2026 Qualified fuel cell 30 percent Before 01/01/2020 Before 01/01/2026 Qualified fuel cell 26 percent After 12/31/2019 and before 01/01/2023 Before 01/01/2026 Qualified fuel cell 22 percent After 12/31/2022 and before 01/01/2024 Before 01/01/2026 Qualified fuel cell 0 percent After 12/31/2019 and before 01/01/2024 On or after 01/01/2026 Equipment used to produce electricity from geothermal deposits 10 percent N/A N/A Equipment which uses ground or ground water to heat (or cool) a structure (heat pump) 10 percent Before 01/01/2024 See Notice 2018-59 Equipment which uses ground or ground water to heat (or cool) a structure (heat pump) 0 percent After 01/01/2024 Before 01/01/2026 Waste energy recovery 26 percent After 12/31/2020 and before 01/01/2023 Before 01/01/2026 See Notice 2018-59 Waste energy recovery 22 percent After 12/31/2022 and before 01/01/2024 Before 01/01/2026 See Notice 2018-59 Waste energy recovery 0 percent After 12/31/2020 and before 01/01/2024 On or after 01/01/2026 Qualified microturbine property 10 percent Before 01/01/2024 N/A Combined heat and power system property 10 percent Before 01/01/2024 N/A Combined heat and power system property 0 percent On or after 01/01/2024 N/A Qualified offshore wind facility (located in the inland navigable waters of the United States or in the coastal waters of the United States) 30 percent reduced by phaseout percentage (0%) = 30 percent Before 01/01/2026 See Notice 2018-59 Small wind energy property 30 percent On or before 12/31/2019 Before 01/01/2026 Small wind energy property 26 percent After 12/31/2019 and before 01/01/2024 Before 01/01/2026 Small wind energy property 22 percent After 12/31/2022 and before 01/01/2024 Before 01/01/2026 Small wind energy property 0 percent After 12/31/2019 and before 01/01/2024 On or after 01/01/2026 See the phaseout table below for Investment Tax Credit (ITC) large wind facility: Type of Qualified Facility for Which Election Made to Claim ITC in Lieu of PTC Phaseout Reduction of Credit Percentage Construction Begun Placed In-Service Wind facility other than small wind 0 percent Before 01/1/2017 N/A Wind facility other than small wind 20 percent Construction began after 12/31/2016 and before 01/1/2018 N/A Wind facility other than small wind 40 percent Construction began after 12/31/2017 and before 01/1/2019 N/A Wind facility other than small wind 60 percent Construction began after 12/31/2018 and before 01/1/2020 N/A Wind facility other than small wind 40 percent Construction began after 12/31/2019 and before 01/1/2022 N/A Offshore wind facility (other than small wind) N/A Begins before 01/01/2026 N/A See the table below that addresses the section 45 renewable energy production tax credits claimed on Form 8835: Type of Production Facility Credit Period Construction Began Placed-in Service Indian Coal N/A N/A Wind Facility 10 years Before 01/01/2022 N/A Closed Loop Biomass Facility 10 years Before 01/01/2022 N/A Open Loop Biomass Facility 10 years Before 01/01/2022 N/A Geothermal Energy Facility 10 years Before 01/01/2022 N/A Landfill gas Facility 10 years Before 01/01/2022 N/A Trash Facility 10 years Before 01/01/2022 N/A Qualified hydropower Facility 10 years Before 01/01/2022 N/A Marine and hydrokinetic Facility 10 years Before 01/01/2022 N/A Section 1102(a), Division B, Title I, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, added an Election of Investment Credit in Lieu of Production Tax Credit that allows a taxpayer to make an election on Form 3468 for renewable energy facilities placed in-service after 2008 and the construction of which begins before 2017 in lieu of the tax credit for producing electricity from renewable resources on Form 8835. Notice 2009-52, 2009-25 I.R.B. 1094, provides a description of the procedures that taxpayers are required to follow to make an irrevocable election to take the investment tax credit in lieu of the production tax credit. Section 1103, Division B, Title I, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, Repeal of Certain Limitations on Credit for Renewable Energy Property, repeals the $4,000 limitation on the energy tax credit for qualified small wind energy property placed in-service during the taxable year. This section also repeals limitations on property financed by subsidized energy property under IRC 48, (energy tax credit), and in certain circumstances the credits under IRC 25C, (non-business energy credit property) and IRC 25D, (residential energy efficient property). The provision is effective for qualified property placed in-service after December 31, 2008. Notice 2009-52, 2009-25 1095, provides guidance regarding the conditions under which taxpayers may rely on a manufacturer's certification. Section 302, Div. P., Title III, of the Protecting Americans from Tax Hikes Act of 2015, P.L. 114-113 (PATH Act), significantly extended the election for a taxpayer that owns a wind facility to elect to claim the investment tax credit under section 48 in lieu of the production tax credit under section 45. Additionally, section 303 of the PATH Act extended the credit for solar energy facilities and provided that the credit will phase down in increments to 10 percent for facilities placed in-service after January 1, 2024. Section 40409 of the Bipartisan Budget Act of 2018 extends the credit through December 31, 2017. Section 127 further extended the election to treat qualified facilities as energy property (the investment tax credit under IRC Sec. 48) as long as construction began before January 1, 2020 to January 1, 2022. The act further allows a phaseout percentage which reduces the amount of credit allowed by 40 percent for either a wind energy facility production credit under IRC Sec. 45(b)(5) or the investment credit facility under IRC Sec. 48(a)(5)(E) if the property began construction by December 31, 2019. Both the section 45 and section 48 credits were reduced by 60 percent for projects that began construction after December 31, 2018, and before January 1, 2020. After the PATH Act amendments, projects that did not begin construction before January 1, 2020, were not eligible for either the section 45, or section 48 credits. However, P. L. 116-260, Consolidated Appropriations Act, 2021, amended section 45 and section 48 by providing another extension of both credits for projects the construction of which began after December 31, 2019, and before January 1, 2022, with a 40 percent reduction of the credit amount. Section 127 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019 extends the election to treat qualified facilities as energy property under Section 48(a)(5)(C)(ii) taking effect on January 1, 2018 through January 1, 2021. This is an investment tax credit (ITC) based on the amount of qualifying basis in the facility. This is distinct from a production tax credit (PTC) which is based on the amount of electricity or other product (such as Indian coal or refined coal) produced. However, the same facility regardless of type may not be used to claim both an investment tax credit and production tax credit. See IRC Sec. 45(a)(5)(C). The Inflation Reduction Act of 2022, Pub. L. 117-169, August 16, 2022, 136 Stat 1818 (IRA) made changes to section 48. Among these changes are adding additional properties as energy property and changing the calculation of the credit. For property placed in service after December 31, 2021, the IRA modified the credit rate structure, creating a base credit rate and an increased credit rate. The base credit rate is 6 percent (2 percent in the case of microturbine property). Under section 48(a)(9), the increased credit rate is 30 percent (10 percent in the case of microturbine property). The increased credit rate is available with respect to energy projects that have a maximum output of less than one megawatt of electrical (as measure in alternating current) or thermal energy and for energy projects that meet certain prevailing wage and apprenticeship requirements (or for which construction began before January 29, 2023 which is the date that is 60 days after the Secretary published guidance with respect to the requirements of paragraphs sections 48(a)(10)(A) and (11)). Therefore, the credit is 6 percent in the case of: (I) Qualified fuel cell property, (II) Energy property described in (3)(A)(i) which is equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool, but only with respect to property the construction of which begins before January 1, 2025, (III) Energy property described in (3)(A)(iii) which is equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage, but only with respect to property the construction of which begins before January 1, 2025, (IV) Energy property described in (3)(A)(ii) which is equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, or electrochromic glass which uses electricity to change its light transmittance properties in order to heat or cool a structure, but only with respect to property the construction of which begins before January 1, 2025, (V) Qualified small wind energy property, (VI) Waste energy recovery property, (VII) Energy storage technology, (VIII) Qualified biogas property, (IX) Microgrid controllers, (X) Energy property described in (3)(A)(v) which is combined heat and power system property, (XI) Energy property described in (3)(A)(vii) which is equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to property the construction of which begins before January 1, 2035. The credit is 2 percent in the case of microturbine property. For property placed in service after December 31, 2021, the IRA extended the energy credit and for each of the qualified energy properties, they must begin construction before January 1, 2025, except for geothermal heat pump property under 48(a)(3)(A)(vii), which is extended for property that begins construction before January 1, 2035. The IRA also modified the credit rate phase-down rules. In the case of qualified fuel cell property in section 48(a)(3)(A)(iv), qualified small wind property in section 48(a)(3)(A)(vi), qualified solar energy property in section 48(a)(3)(A)(i), and qualified solar fiber optic property in section 48(a)(3)(A)(ii), the credit rate is 26 percent for property the construction of which begins after December 31, 2019, that is placed in service before January 1, 2022. For geothermal heat pump property, the base credit rate phases down. The increased credit rates for geothermal heat pump property during the phase-down period are 26 percent for property the construction of which begins in calendar year 2033 and 22 percent for property the construction of which begins in calendar year 2034. Additionally, the IRA also added bonus credit amounts with respect to qualified energy property that meets domestic content requirements under section 48(a)(12) or energy community requirements under section 48(a)(14). The domestic content and energy communities bonus credits are effective for property placed in service after December 31, 2022. The IRA also modified the section 48 energy credit to add a bonus credit under section 48(e) for certain qualified solar and wind facilities placed in service in connection with low-income communities. This is an application program for which eligible taxpayers may apply for an allocation of capacity. If a taxpayer receives an allocation, it can later claim an increased credit (either 10 or 20 percent) when the qualified property is placed in service. The IRA added additional properties as energy property. These are energy storage technology, qualified biogas property, and microgrid controllers. Additionally, the IRA modified the eligibility requirements of certain other qualified property. Specifically, the IRA modified the definition of qualified fuel cell property in section 48(c)(1) to include linear generator assemblies. Linear generator assemblies generate electricity using an electromechanical process. Linear generator assemblies do not include any assembly which contains rotating parts. Additionally, the IRA modified the definition of fiber optic solar property in section 48(a)(3)(A)(ii) to include electrochromic glass, which uses electricity to change its light transmittance properties in order to heat or cool a structure. The IRA also provided that qualified energy property includes amounts paid or incurred by a taxpayer for qualified interconnection property in connection with the installation of certain energy property (as defined in section 48(a)(3)). Section 48(a)(8) describes definitions and rules that apply for qualified interconnection property. For the new types of qualified property (energy storage technology, qualified biogas property, microgrid controllers, linear generator assemblies, dynamic glass, and interconnection property), the provision is effective for property placed in service after December 31, 2022. The IRA also updated section 48(a)(5) to provide that it is available for facilities which are placed in service after 2008 and the construction of which begins before January 1, 2025. The Creating Helpful Incentives to Produce Semiconductors Act of 2022 (CHIPS 2022) added a new investment credit equal to 25% of the qualified investment in any advanced manufacturing facility for the primary purpose of the manufacturing of semiconductors or semiconductor manufacturing equipment under IRC 48D. This credit applies to property placed in service after 2022, and, for any property that construction of which begins prior to 2023, only to the extent of the basis attributable to the construction, reconstruction, or erection after August 9, 2022, see IRM 21.7.4.4.8.3.1.5, Form 3468, Advanced Manufacturing Investment Credit Under IRC 48D, for additional information. Under IRC 46 and the general business credit rules of IRC 39, any unused portion of these credits remaining (after the application of the limitations in IRC 38(c)), after all of the credits that can be used in the current year are used, can be carried back one year and carried forward 20 years to reduce taxes for that taxable year. “Applicable credits” as defined in IRC 6417(b) are carried back 3 years. See Form 3468 and the Instructions for Form 3468 for specific information on claiming the investment credit and see Form 4255 and the Instructions for Form 4255 for specific information on the recapture of the credit. For recapture in the case of dispositions, or of property ceasing to be investment credit property, or ceasing to qualify for progress expenditures, see IRC 50(a). Also, see Notice 2015-4, 2015 I.R.B. 407 and Notice 2015-51, 2015-31 I.R.B. 133, which provides performance and quality standards that small wind energy property must meet to qualify for the energy credit under section 48. Notice 2015-51 modifies Notice 2015-4 by providing a revised effective date for certain small wind energy property that meets the performance and quality standards of International Electrotechnical Commission 61400-1, 61400-12, and 61400-11. Process Form 3468 as follows: Math verify Form 3468 Input TC 291 to increase the credit or TC 290 to reduce the credit 21.7.4.4.8.3.1.1 (10-01-2023) Carryforward of Investment Credit If the investment credit claimed is a carryforward of a credit determined under IRC 48, IRC 48C, or IRC 48E, request records of the account for the three tax years preceding the year the credit originated. For carryforward of other investment credits, request records of the account for the tax year preceding the year the credit originated. See the chart below for carryforward of investment credit instructions. If Then The credit can be applied to tax owed for preceding years 1. Reject the claim. 2. The taxpayer must show if recaptured investment credit or alternative minimum tax is included in the TC 150 amounts. Do NOT secure the original return to verify. 3. Instruct the taxpayer to re-file and follow carryback procedures or Form 1120-X instructions. There is no tax to be reduced on the preceding year(s) as applicable Allow the carryforward claim. 21.7.4.4.8.3.1.2 (03-11-2024) Form 3468, Credit for Investment in Clean Coal Facilities Section 1307(b) of the Energy Policy Act of 2005, P.L.109-58, creates two new investment tax credits: The Qualifying Advanced Coal Project Credit, and The Qualifying Gasification Project Credit The first credit, the Qualifying Advanced Coal Project Credit under IRC 48A of the Code, established a program to allocate an investment tax credit in the amount of 20 percent of eligible basis for projects using integrated gasification combined cycle "IGCC" and 15 percent for projects using other advanced coal-based electricity generation technology. IRS Notice 2006-24, 2006-11 I.R.B. 595, establishes the qualifying advanced coal project program. See the following announcements for more information: Announcement 2010-56, 2010-39 I.R.B. 398, discloses the results of the 2009-10 allocation round under IRC 48A. Announcement 2011-62, 2011-40 I.R.B. 483, discloses the results of the 2010-11 allocation round under the qualifying advanced coal project program of IRC 48A of the Internal Revenue Code. This announcement also serves as notice to applicants that a 2011-12 allocation round under the qualifying advanced coal project program is currently open pursuant to Notice 2009-24, 2009-16 I.R.B. 817. Announcement 2013-2, 2013-2 I.R.B. 271, discloses the results of the 2011–12 allocation round which is the final allocation round under phase II of the qualifying advanced coal project program of IRC 48A of the code. Announcement 2013-43, 2013-46 I.R.B. 524, discloses the results of the 2012-13 Phase III allocation round under the qualifying advanced coal project program of IRC 48A of the Internal Revenue Code. Announcement 2016-33, 2016-39 I.R.B. 422 announces the certifications resulting from the results of the 2012-2013 Phase III allocation round under the qualifying advanced coal project program of IRC 48A. In addition, see the following IRC 48A notices for more information: Notice 2007-52, 2007-26 I.R.B. 1456 which clarifies, modifies, amplifies and supersedes Notice 2006-24, 2006-11 I.R.B. 595 Notice 2008-26, 2008-9 I.R.B. 487, which updates and amplifies Notice 2007-52, 2007-26 I.R.B. 1456 Notice 2008-96, 2008-44 I.R.B. 1077, which updates and amplifies Notice 2007-45, 2007-22 I.R.B. 1456 Section 111 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, increases to 30 percent the investment tax credit under IRC 48A. It also added a requirement for projects receiving IRC 48A credits to capture and sequester at least 65 percent of such project’s total carbon oxide emissions. IRS Notice 2006-24, 2006-11 I.R.B. 595. Additionally, Act section 115 creates a new tax credit for carbon oxide sequestration under IRC 45Q. See IRM 21.7.4.4.8.3.37, Carbon Oxide Sequestration Credit, Form 8933, for more information. Notice 2009-24, 2009-16 I.R.B. 817, updates the procedures for the allocation of credits for the qualifying advanced coal project program under IRC 48A. The notice also announces the beginning of an allocation round of credits in the amount of $1.25 billion for qualifying advanced coal-based generation technology projects under Phase II of the qualifying advanced coal project program. Notice 2009-24 clarifies, modifies, and amplifies Notice 2007-52. Notice 2011-24, 2011-14 I.R.B. 603, modifies Notice 2009-24 by updating the rules relating to the qualifying advanced coal project program under IRC 48A. Specifically, this notice updates the rules regarding the separation and sequestration of carbon dioxide emissions for Phase II of the qualifying advanced coal program and provides for the annual measurement of separated and sequestered carbon dioxide by applying the recapture rules of IRC 50(a) in the event that a taxpayer does not attain or maintain the carbon dioxide separation and sequestration requirements of IRC 48A. Except as specifically provided in this notice, the qualifying advanced coal project program will be conducted in the manner and under the procedures provided in Notice 2009-24. See Notice 2012-51, 2012-33 I.R.B. 150, which discloses the result of the review of the credits allocated under IRC 48A Phase I program and establishes an additional program. (“the IRC 48A Phase III program”) to reallocate the remaining credits of IRC 48A Phase I program (“the section 48A Phase III credits”). The procedures in this notice apply only to IRC 48A Phase I credits available for reallocation under the IRC 48A Phase III program. Notice 2012-51, 2012-33 I.R.B. 150 amplifies Notice 2009-24, 2009-16 I.R.B. 817. Notice 2015-14, 2015-10 I.R.B. 722, updates and amplifies the procedures for the allocation of credits under the qualifying advanced coal project program of IRC 48A by announcing the immediate beginning of the 2015 reallocation round (“Round 2”) of the IRC 48A Phase III program. This Notice updates and amplifies Notice 2012-51, 2012-33 I.R.B. 150.” Notice 2020-88, 2020-53, I.R.B. 1795, updates and amplifies the procedures for the allocation of credits under the qualifying advanced coal project program of IRC 48A by announcing the immediate beginning of the 2020 reallocation round (Round 3) of the IRC 48A Phase III program. This Notice updates and amplifies Notice 2012-51, 2012-33, I.R.B. 150 and Notice 2015-14, 2015-10, I.R.B. 722. The second credit, the Qualifying Gasification Project Credit under IRC 48B of the Code, authorizes the allocation of an investment tax credit in the amount of 20 percent of eligible basis for certain gasification projects. Qualified gasification projects convert a solid or liquid produced from coal, petroleum residue, biomass, or other material recovered for their energy or feedstock value into a synthetic gas composed primarily of carbon monoxide and hydrogen for direct use of subsequent chemical or physical conversion. IRS Notice 2006-25, 2006-11 I.R.B. 609, establishes the qualifying gasification project program. See Notice 2006-25 for the requirements for the project. See Announcement 2010-56, 2010-39 I.R.B. 398 for the results of the 2009-10 Allocation Round of the Qualifying Advanced Coal Project Program and the Qualifying Gasification Project Program for more information. See the following IRC 48B notices Notice 2007-53, 2007-1 I.R.B. 1474 Notice 2006-25, 2006-1 I.R.B. 609 Notice 2008-97, 2008-44 I.R.B. 1080 Section 112 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, increases to 30 percent the investment tax credit for certain gasification projects. It also added a requirement for projects receiving IRC 48B credits to capture and sequester at least 75 percent of such project’s total carbon dioxide emissions. See IRM 21.7.4.4.8.3.1, Form 3468, Investment Credit, and the Instructions for Form 3468, for more specific information. See the following IRC 48B Notices: Notice 2009-23, 2009-16 I.R.B. 802 Notice 2007-53, 2007-26 I.R.B. 1474 Notice 2011-24, 2011-14 I.R.B. 603 Announcement 2010-56, 2010-39 I.R.B. 398, discloses the results of the 2009-10 allocation round under the qualifying advanced coal project program of IRC 48A and the qualifying gasification project program of IRC 48B. This announcement also serves notice to applicants that no allocation round is conducted under the qualifying gasification project program. Announcement 2016-34, 2016-39 I.R.B. 422, which discloses the results of the Phase III allocation round under the qualifying gasification project program of IRC 48B. This announcement also serves as notice to applicants that no additional allocation round is conducted under Phase III of the qualifying gasification project program. Announcement 2017-6, 2017-24 I.R.B. 1262, which modifies and supersedes Announcement 2016-34, 2016-39 I.R.B. 422. Notice 2014-81, 2014-53 I.R.B. 1001, establishes the IRC 48B Phase III program of the qualifying gasification project program to reallocate the IRC 48B Phase I credits available for allocation after the conclusion of the IRC 48B Phase I program. The IRC 48A and IRC 48B credits apply to periods after August 8, 2005, the date of the enactment of the Emergency Economic Stabilization Act of 2008. Taxpayers claim both credits on Form 3468, Investment Credit. See IRM 21.7.4.4.8.3.1, Form 3468, Investment Credit, for more information. Section 111(d), Div. B., Title I, of the Energy Improvement and Extension Act of 2008, P.L. 110-343, amended IRC 48A (and by reference IRC 48B) by allowing the Competitive Certification Awards Modification Authority to allow the Secretary to change the terms of any competitive certification award and any associated closing agreement where such modification (unless the Secretary determines that the dollar amount of tax credits available to the taxpayer under such section would increase as a result of the modification or such modification would result in such project not being originally certified: Is consistent with the objectives of such section Is requested by the recipient of the competitive certification award, and Involves moving the project site to improve the potential to capture and sequester carbon dioxide emissions, reduce costs of transporting feedstock, and serve a broader customer base) Action required: Math verify Form 3468 Input TC 291 to increase the credit and TC 290 to decrease the credit 21.7.4.4.8.3.1.3 (03-11-2024) Form 3468, Qualifying Advanced Energy Project Credit Under IRC 48C Section 1302(b), Division B, Title I, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, added IRC 48C, Qualifying Advanced Energy Project Credit, to the Investment Tax Credit under IRC 46. The provision is effective with respect to qualified progress expenditures made after February 17, 2009. P.L. 117-169, commonly known as the Inflation Reduction Act (IRA) of 2022, modified and extended IRC 48C, which became effective January 1, 2023. Under IRA 2022, the qualifying advanced energy project credit provides a tax credit up to 30% of the qualified investment in an advanced energy project that meets prevailing wage and apprenticeship requirements. (See Notice 2022-61) IRA 2022 also provides $10 billion of allocations, directs a minimum share to IRC 48C(e) energy communities census tracts, and expands eligibility to new types of qualifying advanced energy projects. A qualified investment for any taxable year is the basis of eligible property placed in service by the taxpayer during such taxable year which is part of a qualifying advanced energy project. An eligible project is one that: Is a qualifying advanced energy project because it: a) Re-equips, expands, or establishes an industrial or a manufacturing facility for the production or recycling of specified advanced energy property, b) Re-equips any industrial or manufacturing facility, with equipment designed to reduce greenhouse gas emissions by at least 20 percent through the installation of: (i) Low or zero carbon process heat systems, (ii) Carbon capture, transport, utilization, and storage systems, (iii) Energy efficient and reduction in waste from industrial processes, or (iv) Any other industrial technology designed to reduce greenhouse gas emissions; or c) Re-equips, expands or establishes an industrial facility for the processing, refining or recycling of critical materials. The Secretary certified pursuant to IRC 48C(e)(3) that the qualified investment in the qualifying advanced energy project is eligible for IRC 48C(e) program, and Does not include any portion of a project for the production of any property that is used in the refining or blending of any transportation fuels (other than renewable fuels). Specified Advanced Energy Property means any of the following: Property designed for use in the production of energy from the sun, wind, geothermal deposits (within the meaning of IRC 613(e)(2)), or other renewable resources Fuel cells, microturbines, or an energy storage system and components Electric grids modernization equipment or components Property designed to capture, remove, use, or sequester carbon oxide emissions Equipment designed to refine, electrolyze, or blend any fuel, chemical or product which is renewable, or low-carbon and low-emission Property designed to produce energy conservation technologies (including residential, commercial, and industrial applications) Light-, medium-, or heavy-duty electric or fuel cell vehicles, as well as technologies, components, or materials for such vehicles, and associated charging or refueling infrastructure Hybrid vehicles with a gross vehicle weight rating of not less than 14,000 pounds as well as technologies, components, or materials for such vehicles, or Other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary. Eligible property is any property that meets the following requirements: The property is necessary for the production or recycling of specified advanced energy property described in IRC 48C(c)(1)(A)(i), re-equipping an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent as described in IRC 48C(c)(1)(A)(ii), or re-equipping, expanding, or establishing an industrial facility for the processing, refining or recycling of critical materials described in IRC 48C(c)(1)(A)(iii). The property is: (a) Tangible personal property, or (b) Other tangible property (not including a building or its structural components) that is used as an integral part of the qualifying advanced energy project. Depreciation (or amortization in lieu of depreciation) is allowable with respect to the property. To be eligible for the credit, some or all of the qualified investment in the qualifying advanced energy project must be certified by the IRS under IRC 48C(d). See Notice 2023-18 and Notice 2023-44 for more information. S Corporations or Partnerships may make an elective payment transfer under IRC 6418. See IRM 21.7.4.4.9.5, Inflation Reduction Act (IRA), Superseding and Amended Return Processing Elective Payment Elections (EPE) or Transfers, for additional information on facility registration requirements for making an elective payment transfer. In addition to completing Form 3468, when making an elective payment transfer, the total credit amount must also be reported on the applicable line of Form 3800, Part III, column g (Form 3468, Part III). See Form 3468 instructions for more specific information. Action required: Math verify Form 3468 Input TC 291 to increase the credit and TC 290 to decrease the credit 21.7.4.4.8.3.1.4 (10-01-2017) Form 8942, Application for Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Therapeutic Discovery Project Program Section 9023, Qualifying Therapeutic Discovery Project, of the Patient Protection and Affordable Care Act, P.L. 111-148, added section 48D to the Internal Revenue Code (IRC). IRC 48D, provided for a 50 percent non-refundable investment tax credit up to a maximum credit of $5 million per firm and $1 billion overall, for qualified investment in qualified therapeutic discovery projects made in 2009 and 2010. See IRM 21.7.4.4.8, Non-refundable Credits, Income Tax Returns, for more information on non-refundable credits. See the October 1, 2016 revision of IRM 21.7.4 for more information when working a case involving the qualifying therapeutic discovery project. 21.7.4.4.8.3.1.5 (03-11-2024) Form 3468, Advanced Manufacturing Investment Credit Under IRC 48D The Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022, added a new investment credit under IRC 48D equal to 25% of the qualified investment in any advanced manufacturing facility for the primary purpose of manufacturing of semiconductors or semiconductor manufacturing equipment. This credit applies to property placed in service after 2022, and, for any property that construction of which begins prior to 2023, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after August 9, 2022. The advanced manufacturing investment credit is equal to 25% of the qualified investment in any advanced manufacturing facility placed in service by an eligible taxpayer in the tax year. An advanced manufacturing facility means a facility whose primary purpose is the manufacturing of semiconductors or semiconductor manufacturing equipment. The qualified investment for any advanced manufacturing facility is the basis of any qualified property placed in service by the taxpayer during the tax year and after 2022 that is part of an advanced manufacturing facility. Qualified property includes any building or its structural components and all of the following: Property that is tangible property, Property that is allowed depreciation or amortization, Property that is constructed, reconstructed, or erected by the taxpayer or acquired by the taxpayer if the original use of the property commences with the taxpayer, and Property that is integral to the operation of the advanced manufacturing facility. Exception: Qualified property doesn't include a building or a portion of a building used for offices, administrative services, or other functions unrelated to manufacturing. An eligible taxpayer is a taxpayer who isn't a foreign entity of concern (as defined in section 9901(6) of P. L. 116-283), and hasn't made an applicable transaction (as defined in IRC 50(a)) during the tax year. S Corporations or Partnerships may make an elective payment election (EPE) under IRC 6417. In addition to completing Form 3468, when making an EPE, the credit amount for each facility must also be reported on the applicable line of Form 3800, Part III, column i, (Form 3468, Part IV).See IRM 21.7.4.4.9.5, Inflation Reduction Act (IRA), Superseding and Amended Return Processing Elective Payment Elections (EPE) or Transfers. See Form 3468 instructions for more specific information. Action required: Math verify Form 3468 Review Part III of Form 3800 to determine if the taxpayer reported an elective payment election (EPE) for Form 3468, Advanced Manufacturing Investment Credit (IRC 48D). If so, see IRM 21.7.4.4.9.5, Inflation Reduction Act (IRA) Superseding and Amended Return Processing; Elective Payment Elections (EPE) or Transfers, for processing information and to verify if adjustment is allowable. If no elective payment election (EPE) has been made: Input TC 291 to increase the credit or TC 290 to reduce the credit. 21.7.4.4.8.3.1.6 (03-11-2024) Form 3468, Energy Credit Under IRC 48 P.L. 117-167, commonly known as the Inflation Reduction Act (IRA) of 2022, modified the energy credit under IRC 48, which includes new credits for the following: energy storage technology property, qualified biogas property, micro-grid controller property, and the election to treat clean hydrogen production facilities as energy property. Under IRC 48(a)(9), the base credit can be increased by five times for projects meeting prevailing wage and apprenticeship requirements; or projects which began construction before January 29, 2023; or projects with a maximum net output of less than 1 megawatt of electrical or thermal energy. IRC 48 also provides three bonus credits: The energy credit is increased by up to 10% for projects meeting certain domestic content requirements for steel, iron, and manufactured products. The energy credit is increased by up to 10% if located in an energy community. The energy credit is increased by up to 20% on certain solar and wind facilities placed in service in connection with low-income communities. The energy credit is equal to the energy percentage of the basis of each energy property placed in service during the tax year, and is reported in Part VI of Form 3468. Energy Properties include the following: Geothermal energy property Solar energy property to generate electricity, to illuminate, or heat or cool Qualified fuel cell property Qualified micro-turbine property Combined heat and power system property Qualified small wind energy property Waste energy recovery property Geothermal heat pump system property Energy storage technology property Qualified biogas property Micro-grid controllers property Qualified investment credit facility property (if an election is made under section 48(a)(5)) Clean hydrogen production facilities as energy property (if an election is made under section 48(a)(15)) To qualify as an energy property, the property must: Meet the performance and quality standards, if any, that have been prescribed by regulations and are in effect at the time the property is acquired; Be property for which depreciation (or amortization in lieu of depreciation) is allowable; and Be property either: The construction, reconstruction, or erection of which is completed by the taxpayer; or Acquired by the taxpayer if the original use of such property commences with the taxpayer. Note: Property does not include any property that is part of a facility which it is allowed a production credit under IRC 45, for the tax year, or any prior tax year. Energy property doesn't include any property acquired before February 14, 2008, or to the extent of basis attributable to construction, reconstruction, or erection before February 14, 2008, that is public utility property, as defined by IRC 46(f)(5) (as in effect on November 4, 1990), and related regulations. The basis of the energy property must be reduced by 50% of the energy credit determined. The basis must also be reduced by any amount attributable to qualified rehabilitation expenditures. See Form 3468 instructions for additional information on determining the basis of properties. S Corporations or Partnerships may make an elective payment transfer under IRC 6418. See IRM 21.7.4.4.9.5, Inflation Reduction Act (IRA), Superseding and Amended Return Processing Elective Payment Elections (EPE) or Transfers, for additional information on facility registration requirements for making an elective payment transfer. In addition to completing Form 3468, when making an elective payment transfer, the total credit amount must also be reported on the applicable line of Form 3800, Part III, column g (Form 3468, Part VI). See Form 3468 instructions for more specific information. Action required: Math verify Form 3468 Input TC 291 to increase the credit and TC 290 to decrease the credit 21.7.4.4.8.3.2 (10-01-2024) Form 5884, Work Opportunity Credit The Work Opportunity Credit, or Work Opportunity Tax Credit (WOTC) replaced the Targeted Jobs Credit when it expired December 31, 1994. In general, the amount of the credit is 40 percent of qualified first year wages. The work opportunity credit has been changed by various legislation. See the 08/22/2016 revision of this IRM for a complete list of legislation that extended the work opportunity credit before 2014. Below is a listing of the most recent legislation that has extended the work opportunity credit: Section 119, of the Tax Increase Prevention Act of 2014, P.L. 113-295, extended the credit for one year for qualified individuals who begin work for the employer after December 31, 2013 and on or before December 31, 2014. See Notice 2015-13 for guidance on claiming the credit under section 119 of the act. Section 142 of the Protecting Americans from Tax Hikes Act of 2015, P.L. 114-113, extended the work opportunity tax credit for five years for qualified individuals who begin work for the employer after December 31, 2014 and on or before December 31, 2019. In addition, the Act added a new targeted group, qualified long-term unemployment recipients who begin work after 2015. Section 143 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019, P.L. 116-94, amends Section 51(c)(4), of the work opportunity tax credit, and applies to individuals who begin work for the employer after December 31, 2019 and before January 1, 2021. Section 113 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, P.L. 116-260, extends the work opportunity tax credit for qualified individuals who begin work after December 31, 2021 and before December 31, 2025. Qualified first-year wages are considered wages paid or incurred for work performed during the one-year period beginning on the date the certified individual begins work for the taxpayer. The amount of qualified wages taken into account for a qualified employee is generally limited to $6,000 or $3,000 for a qualified summer youth employee. See IRC 51(b)(3) for more information. To claim the credit, taxpayers must request and be issued a certification for each employee from the state workforce agency (SWA) to prove that the employee is a member of a targeted group. Taxpayers must receive the certification by the day the individual begins work, or they must complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, on or before the day the taxpayer offers the individual a job. Employers use Form 8850 to pre-screen and to make a written request to the SWA of the state in which their business is located (where the member of the targeted group works), to certify an individual as a member of a targeted group for purposes of qualifying for the work opportunity credit, no later than the 28th calendar day after the date the member of a targeted group begins working for the taxpayer. Note: Submitting Form 8850 to the SWA is listed in Rev. Proc. 2018-58, section 15, item 12, as an act that may be postponed for taxpayers affected by a federally declared disaster. Taxpayers claim the credit as a general business credit on Form 3800, General Business Credit. Tax exempt employers report the WOTC on Form 5884-C. Partnerships, S corporations, cooperatives, estates, and trusts must file Form 5884 to claim the WOTC. Any unused portion of this credit remaining, after the tax is reduced to zero, can be carried back one year to reduce taxes for that year and also carried forward 20 years. See the General Instructions for Form 5884, Form 5884-C and Form 8850 instructions which have more specific information on the targeted groups, rules concerning qualified wages, and specific instructions for completing the forms. Action required: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ math verify the form. Input TC 291 to increase the credit or TC 290 to reduce the credit. 21.7.4.4.8.3.2.1 (10-01-2020) Form 8884, Expanded Work Opportunity Credit, New York Liberty Zone The New York Liberty Zone was repealed. See IRC 1400L, P.L. 115-141, effective March 23, 2018. See the October 1, 2014 and previous revisions of this IRM for information on the Work Opportunity Credit, New York Liberty Zone. 21.7.4.4.8.3.2.2 (10-01-2019) Form 5884, Work Opportunity Credit, Hurricane Katrina Employees Section 201, of the Work Opportunity Tax Credit for Hurricane Katrina Employees, Katrina Emergency Tax Relief Act of 2005, P.L. 109-73, provides for a credit for hiring qualified Hurricane Katrina employees as defined directly below. A Hurricane Katrina Employee is: Any individual who on August 28, 2005, had a main home in the core disaster area and who is hired during the two-year period beginning August 28, 2005 (P.L. 110-343 modified this in 2008 to be a four-year period), for a position in which the principal place of employment is located in the core disaster area, or Any individual who on such date had a main home in the core disaster area, who is displaced from such residence by reason of Hurricane Katrina, and who is hired on or after August 28, 2005 and on or before December 31, 2005. See the October 1, 2014 and previous revisions of this IRM for information on the Work Opportunity Credit, Hurricane Katrina Employees. 21.7.4.4.8.3.2.3 (10-01-2015) Employee Retention Credit for Employers Affected by Hurricane Katrina, Rita, and Wilma (Form 5884-A, Credit for Employers Affected by Hurricanes Katrina, Rita, and Wilma) Section 202, of the Employee Retention Credit for Employers Affected by Hurricane Katrina, Katrina Emergency Tax Relief Act of 2005, P.L. 109-73, provides for a credit against tax in an amount equal to 40 percent of the qualified wages for each eligible employee of such employer. The amount of qualified wages applicable to any individual cannot exceed $6,000 paid or incurred for each employee during the period August 28, 2005 through December 31, 2005. Section 201, of the Gulf Opportunity Zone Act of 2005, P.L. 109-135, extended the Employee Retention Credit for Employers affected by Hurricane Katrina, to victims of Hurricane Rita and Hurricane Wilma beginning with the dates shown in the chart below and ending on December 31, 2005. Specific Hurricane Beginning After Katrina August 28, 2005 Rita September 23, 2005 Wilma October 23, 2015 See the October 1, 2014 and previous revisions of this IRM for information on the Employee Retention Credit for Employers Affected By Hurricane Katrina, Rita, and Wilma. 21.7.4.4.8.3.2.4 (10-01-2015) Form 5884-A, Hurricane Katrina Housing Credit Form 5884-A, Credit for Employers Affected by Hurricanes Katrina, Rita, and Wilma, is also filed to claim the Hurricane Katrina Housing Credit. The credit is equal to 30 percent of the value (up to $600 per month, per employee) of in-kind lodging furnished to a qualified employee from January 1, 2006 through July 1, 2006 and which is excluded from the employee’s income. See the October 1, 2014 and previous revisions of this IRM for information on the Credit for Employers Affected by Hurricanes Katrina, Rita, and Wilma. 21.7.4.4.8.3.2.5 (10-01-2020) Form 5884, Work Opportunity Credit - Incentives to Hire Unemployed Veterans and Disconnected Youth Section 1221, Incentives to Hire Unemployed Veterans and Disconnected Youth, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, adds new paragraph (14) to IRC 51(d). The provision allows for a credit for unemployed veterans and disconnected youth hired in 2009 or 2010. Any unemployed veteran or disconnected youth who begins work for the employer during 2009 or 2010 is treated as a member of a targeted group for purposes of the work opportunity credit. See the October 1, 2016 and prior revisions of this IRM for information on the - work opportunity credit - incentives to hire unemployed veterans and disconnected youth. An individual is a member of a targeted group if such individual is a: Qualified IV-A recipient Qualified veteran Qualified ex-felon Designated community resident Vocational rehabilitation referral Qualified summer youth employee Qualified supplemental nutrition assistance program benefits recipient Qualified SSI recipient Long-term family assistance recipient Qualifie